Hoboken Mom Condo Living
Planning the long-term & juggling the everyday

I recently got into a spirited discussion about whether people can afford to buy apartments in Hoboken. Everyone has different comfort levels with what they can afford, as well as vastly different spending priorities.

I am extremely frugal and an excellent shopper. That means that the food budget for my family of four is extremely low, and our entertainment budget is virtually nonexistent. That is how we were able to save enough to put 30% down on our 4BR. We have a relatively low family income for Hoboken, in the low $100k range. I know the purchase price for our 4BR is a scarily large # for most people, but I focused on the monthly costs rather than the size of the loan. Our 4BR costs us $4,200/month to own because we got a 4.5% rate on a jumbo mortgage, which is manageable (barely).

My husband’s career is fairly stable and I expect our earnings to increase over time. If/when I go back to work full-time, it will be incredibly easy for us to cover our monthly nut. And I believe that is the key to building wealth over time; stability. Worst case scenario, we could easily rent out our apartment to cover the mortgage, maintenance and taxes.

We pay about 30% total income tax for federal and state taxes (we paid 40% when we lived in NYC. Ouch). You are also going to have variable expenses like 401k contribution, health insurance premium, plus if you have kids, life insurance and disability premiums. We have no car payment or student loans since we paid them off before buying our condo.

They key to our current healthy financials was the purchase of our 2BR in 2004. Here is a summary of my family’s monthly expenses for our 1,050 luxury 2BR. We are a family of four (two toddlers), one parent working out of the house.

Maintenance $479
Car Insurance $67
Food $560 (I highly recommend the JC A&P for great food prices)
Travel/Entertainment $500
PATH/Metrocard $80 ($112 pre-tax Transitchek)
Cable/Utilities/Phone $300
Homeowners insurance $42
Mortgage $1,710 ($270k mortgage at 5.73%)
Taxes $500

TOTAL $4,238

We wound up getting about $600/month back in federal and state tax refunds, so our net monthly cost was $3,638.

I didn’t include any repairs or upgrades since we had almost no issues with our condo during the five years we lived there. I think we paid for two plumber visits and one HVAC cleaning, so that came to about $100/year. Not worth including in the overall budget.

The NYTimes reports that a Weehawken waterfront development is receiving a strong response, with sales the most brisk of the largest and most expensive units (3BR corner units with views). The article states:

“The Hudson County condo market has been slowly improving since January, according to the latest data. Sales prices have held fairly steady this year, down by less than a percentage point. And Jeffrey Otteau, whose company, the Otteau Valuation Group, analyzes residential sales statistics for brokers, said that in downtown Jersey City, the site of Crystal Point, the pace of condo sales had more than doubled since January.”

That is not to say a recovery is imminent. Hudson County has approximately 13 months of inventory on the market, never a good sign. We bought our apartment because of the extremely rare fourth bedroom -fingers crossed for the long-term bet.

For the last six months, I have been hearing the same thing from realtors -sellers are being unrealistic and as soon as they drop their prices, their properties will sell. I don’t think it’s quite that simple.

I tend to take a pragmatic approach to real estate. I think there are three major factors: 1) not every neighborho0d is going to be impacted by price appreciation/depreciation to the same degree, 2) how easy is it for buyers to get mortgages (and the down payments are a huge factor here because most people don’t have the cash on hand to put 25% down), and 3) how stable are people’s jobs and incomes.

#2 & #3 are big factors right now because I think the pool of buyers is much, much smaller now than it was a year ago. I think a lot of people simply don’t qualify for mortgages right now because they don’t have the down payments and/or their credit isn’t good enough. And #3 is a problem because psychologically nobody wants to commit to a huge mortgage if they think they’re going to lose their job. Or any mortgage, for that matter.

With inventory building up I think a lot of units are simply not going to sell. It doesn’t matter how low the prices go, if the buyers aren’t out there then who are you going to sell to? I know there are a lot of buyers sitting on the sidelines right now waiting for prices to go down, but it’s not like they’re going to buy any 2BR as soon as it gets cheap enough. It also has to have all the attributes they are looking for.

For a town that is a mile square, it never ceases to amaze me how different the various parts of town are. Even though I have lived here for seven years, I am constantly finding out about new buildings/areas that I had no idea even existed. Here are my very unscientific impressions of Hoboken.

Since Hoboken is square, it makes sense to divide the town up into quadrants: NE, where the rich people live (Maxwell Place, Hudson Tea & Garden Street Lofts) and you have the ferry, SE, where the PATH, ferry terminal & City Hall are located, SW (Sky Club), where you have the Light Rail and the most direct access to the Holland Tunnel & NJ Turnpike, and NE (Metrostop), where you are one stop further on the Light Rail and have access to the Lincoln Tunnel.

The quadrants tend to be priced clockwise (high to low) -NE, SE, SW, NE. Current prices for a 2BR can range anywhere from $400k to $1.1 million. There is very little new construction in the NE and SE sectors but a decent amount in the SW and NW. Parking is a constant problem but I have found it fairly easy for my family to find street parking in SW Hoboken. I have a $25 resident parking pass, so sometimes I will park on the street and let a family member park in my indoor spot.

In addition to the quadrants, there are also a couple of smaller neighborhoods; Castle Point near Stevens Institute and the Willow Terrace area near Church Square Park. Both date back to the Stevens Family (the Willow Terrace houses used to be servants’ quarters -they are very quaint but have all sorts of weird corners and layouts, and the ceilings are too low for my 6′3″ husband).

As far as demand goes, according to a local realtor, “demand is first for waterfront, followed by units east of Willow, units very near the PATH (bet./ Observer & 2nd east of Clinton) and units along 9th street. There is a ‘dead zone’ in the center of town that’s not near the PATH, too far from the bus lines and the light rail that makes properties less valuable.”

We have lived in SE and SW Hoboken. I think a lot of New Yorkers gravitate to SE Hoboken first because they want to be near the PATH train. Once we started a family, we moved to SW Hoboken because we were really tired of the party atmosphere of Washington Street spilling over to the surrounding streets and the really bad parking and traffic (it used to take me 20 minutes to get out of Hoboken during the morning rush hour). We drive a lot, and SW Hoboken is the best part of town for quick access to stores and the highways. We like Hoboken and are betting that it will be a good long-term choice.

I have stated before that if you are trading up or down, you can’t time the purchase market because the value of your property will also be impacted. So what about first time buyers? With rents so low and property values going down, wouldn’t it make sense for them to wait another year or two to swoop in on their dream property?

When I was selling my 2BR, one of my buyers said something about how much he paid for his 1BR, and how “I thought I overpaid at the time.” Every buyer I have ever spoken with has been convinced that they could have gotten a better deal, and every seller thinks they could have held out for more money. No matter what the circumstances, whether they bought or sold 10, 5 or 2 years ago, they all think that. When I bought my 1BR in Brooklyn Heights back in 1999, I paid $110k and was stressed about the mortgage payments ($700/month. Those were good times).

I also thought back to why I bought in the first place. We have a dog (same dog back then) and it was not easy to rent with him in tow. We also had been renting in Morningside Heights and hated the neighborhood and our apartment (mice everywhere, neighbors yelling in the street at all hours) -for the same monthly payment as our rent we could own a really nice apartment. We also paid a fat 15% realtor’s fee and then had the owner decline to renew the yearlong lease because she was going to sell the unit. And that was for a rent-stabilized apartment!

I couldn’t face the uncertainty and the big chunks of cash it cost every time we moved, plus the threat of rent increases. Once we like a place, we tend to stay put since it is such a pain to move. And since our investment track record isn’t so stellar, we don’t mind locking up our down payment in exchange for the privilege of having a home that is exactly right for us located in an owner-occupied building (renters = vomit in the elevator).

As long as you are planning to keep a property for at least three years (preferably five) and have stable employment, I don’t see the downside to owning. I tend to get good buys on our properties and always go into a purchase confident that I will be able to sell it for the same as I paid.  When we have appreciation, it is always a nice bonus but not something I count on.

We also tend to do much better financially when we own vs. rent. Every year I get a big tax refund (we are in the 28% tax bracket, so we get almost a third back of our monthly payments) and that goes right into savings. My husband and I tend to burn through a lot less cash when we own versus when we rent. You can point to any # of reasons why (we cook more because we have nicer kitchens, don’t have to pay for moving costs every year or two, don’t have to deal with rent increases) but owning just works better for us. That is why we are in our early 30s and have been owners three times already.

It took me three months to schedule (my hitherto incredibly dependable) a faucet repair with my plumber. When I finally saw him (hey, Patrick from JL Plumbing!) he explained that he has been booked solid on installing plumbing in new construction. Does this  mean the real estate market is turning around?

Probably not so fast, but it does seem that the real estate bottom is here. With rising interest rates and high unemployment, especially among recent graduates, the bottom may linger for a while. But it’s good to know that I made the right bet when we bought our 4BR at the end of February.

When we were selling our 2BR and buying our 4BR, the mantra we kept hearing from everyone (attorneys, mortgage processors, appraisers) was that our kind of deal is the only one that is happening right now. Namely, that every transaction is tied to at least one other (multiple sale contingencies) and when one falls apart, they all fall apart.

In the chaos of multiple closings and moving, I dismissed the comments, but now that the dust has settled, I am starting to think there is something to them. Everyone I have been talking to and reading keeps talking about sales as if they are taking place in a vacuum, and how both buyers and sellers are being unrealistic. And then I got a comment about how unusual it was for us to drop our price $50k in a three-week period, and my response was, “It wasn’t my idea.”

I think that is the key to the disconnect taking place right now between buyers and sellers. With the exception of first-time buyers, everyone who is trading up or down has skin in the game. As I have said before, once you own real estate, you do not exist in a vacuum. You cannot expect the price of your 2BR to stay high and the prices to drop on 3BR units in the same area.

I know the value of my 4BR has probably dropped since I closed in late February, but I also have to consider two factors: 1) We could not have stayed in our 2BR without a homicide taking place (4 people in 1,050 sf = homicide), and 2) How much has our 2BR have dropped by now? The same amount? A little more?

When you consider that we made $70k on the 2BR sale and were able to buy our 4BR at a price everyone agrees was a good one, it makes selling at a price that really hurt a whole lot more palatable.

When I first started seriously looking to buy a 3BR condo, I expected my search to be easy. After all, the media keeps blaring the message that the real estate market is going down, down, down. So it should be really easy to go out there and buy my dream property at a sweetheart price, right?

Apparently sellers have not gotten the message. Week after week I kept checking the listings, waiting for our dream home to appear in our price range. And even though there is a lot of inventory on the market, it was not what we were looking for. There were only about ten properties in our price range, and every week it was the same damn ten properties. And when I expanded the price range upward, most of the new homes that showed up were completely unsuitable (walls that open out onto a deck are pretty awesome, but not when you have two toddlers).

In the end there were only two properties that were right for us, and both of them sold in the three months that we were in the market (we bought the more expensive one. Of course.) We got a good price but not a spectacular one. My seller sold to us for virtually the same price he paid in 2007. We know he would not have gone down any further, and we didn’t want to walk away from this apartment when there just weren’t any reasonable alternatives on the market.

Yeah, we could have rented and waited out the market, but there was no guarantee that we would find another apartment we liked as much for substantially less. And I would feel pretty damn stupid if we waited two years and then wound up buying a similar condo for $20k less but at a percentage point higher interest rate. Worth all the hassle and expense of renting for two years? Definitely not.

A commenter on my post about selling high but buying low had the viewpoint that anyone who bought from 2005-2007 should automatically be selling at a loss. Given how easy it is to access NJ property tax records, which include a unit’s purchase price, I think this is a case of how a little information can be a dangerous thing.

I am generally not a fan of blanket statements. Were market values high from 2005-07? You betcha. Was credit ridiculously easy to come by, thereby artificially inflating said market values? Right again. But to make a statement across the board that anyone who bought in that timeframe should automatically take a loss does not take the individual circumstances of each unit into account.

We bought our 2BR from a distressed seller. We paid $392k for our 2BR in February 2004. A very similar unit sold a year later for $489k. Clearly, our unit did not appreciate $100k in 12 months. We got a very good buy, and that is why we were able to sell at a decent profit in late February.

When you are looking to buy a property, you have to consider what is a fair price for it right now based on recent (last three months) comparable sales, not based on what the owners paid. What if, like my parents, a house had been bought back in the 1940s for $20k and had no mortgage on it? Would the correct price be $25k? The timing and amount of the last purchase price should be irrelevant. What matters if how much a property is worth right now.

On the flip side of that argument, it is also illogical to price a property based on what you think it will be worth in six months. What about in 12 months or 2 years? If you are not planning to sell in any of those timeframes then the value at that time is irrelevant.  What matters is the here and now. That is the only thing we know to be correct.

Apparently a lot of the subprime mortgage brokers who landed us in the current housing bust are moving over to underwriting FHA loans (read -this means extra fees). That stinks because an increasing proportion of mortgages these days are FHA, 20% in 2009 versus 2% in 2006. Since they only require a 3.5% down payment, they are a very attractive way to become a homeowner.

To protect yourself from predatory lenders, you should “ask lenders how long they have been approved to offer such loans and go to the Web site of their state banking departments to verify the lenders’ licenses.” The federal government has a online list of denied lenders and a list of sanctioned lenders to help steer clear of the bad apples.