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

This question is largely moot for me because I have already purchased my lifetime home. We are not planning on moving anytime soon, so the potential sale price for our apartment is irrelevant. However, I like to stay informed on the market even if we are not going to be active players anytime soon.

I am very confused -are we having an L-shaped or U-shaped recovery? The L-shaped recovery crowd is showing prices are largely stable and sales volume is about 70% of where it was a year ago. The U-shaped crowd says we are looking at 28% price drops, driven by 10% unemployment, increasingly difficult financing and a weak dollar. Huh?

If you listen to the sky is falling crowd, you will never buy. I have owned three homes since 1999, and at every step along the way, I have encountered doomsday people who cannot believe the prices we have paid for our homes. Short of moving to Bali and living in a grass hut, I don’t think I could ever get my real estate costs low enough that I would receive universal approbation.

What do I look at when I buy? Here are the items at the top of my list:

1. How much will it cost us to rent a comparable apartment?
2. How stable is my husband’s employment and where do I see our income going for the foreseeable future?
3. How easy is it for us to rent or buy a home that that has the characteristics we are looking for?
4. How long do I expect to stay in an area?
5. Is there a lot of supply where I am looking to buy? Can I expect a lot of new supply to come online in the near future? If yes, how does the value of new construction compare to 100% sold buildings?
6. Are there major improvements slated for the area where I am buying, such as a park?

Six months into owning our 4BR, assumptions 1-4 are playing out in our favor. It’s too early to call #s 5 & 6. The thing I keep saying to people is that the value of my apartment is not going to go down to zero. It has to bottom out somewhere eventually, and then it will drift up and down because that is the nature of home values. If it costs me the same on a monthly basis to own as to rent, and the rental stock is not as nice or large as the apartment I can buy, then I am going to buy. I don’t like moving at any time, but moving with two children and a dog is a delight that I would prefer never to repeat in this lifetime. You also have to look at the opportunity cost of instability. My personal and professional lives tend to flourish when I own because of the stability of staying in one place for extended periods of time. Heartbroken as I was to have to sell our too-small 2BR and leave our neighbors and wonderful building staff, I am beyond relieved to pick up the largely unbroken threads of our lives several blocks away in our new 4BR.

Have you ever tried to buy something when everybody else wants the same thing? A Wii, the it designer handbag of the season, a pair of cute kid’s shoes, we’ve all been there. It’s classic supply and demand -the more people want something, the more it costs. That is why I like to make my major purchases counter to the cycle; so I get more bang for my buck.

Over the last five years I have been watching the Hoboken real estate market with dismay. Sure, our 2BR went up in value, but so did all the 3BR units in the area. I seriously thought we were going to have to pay $1MM for a 1,700 SF 3BR. That is why I saved so stringently -because I thought our next foray into real estate was going to be extremely painful.

We paid $787k for our 2,111 SF 4BR in March. Have prices gone down since then? Sure. Could we have held out for a much better price on a Hoboken condo? Definitely. There were two reasons for our purchase: 1)  we had a lot fewer options than we would have liked, and 2) we already owned a 2BR.

Let’s talk about reason #1. There are some incredible deals out there right now. Why didn’t we go for one of them? Because we didn’t find exactly what we were looking for in the discount bin. Rule #1 to bargain hunting is that an item is not truly a bargain if you don’t need it. And 1,500 SF is just too small for a family of four plus a dog to live in for the next 10 years. Picture yourselves in a place with two teenagers. Can’t imagine it? Then it’s too small for you.

Our original budget was $740k, and we wanted to spend under $700k.  We looked at houses in Willow Terrace and we looked at large 3BR units. None of them were quite right, although we liked one of the houses but couldn’t deal with the lack of public transportation and distance from the PATH.

When we saw our 4BR, we knew it was perfect. It was $100k more than we wanted to spend, but we knew it was a decent price for the unit and was worth it because it was exactly what we were looking for. Lots of space all on one level, a smart layout with little wasted space, good separation of the bedrooms, a huge living room, and the central air and gorgeous floors of new construction.

We also really like the building, which has a grassy gated courtyard on a quiet street with lots of trees and street parking. Sometimes you can’t have everything. In this case, we could either have had an acceptable apartment at a great price, or an apartment that we really loved at a decent but not spectacular price. We chose the latter and have not regretted the decision.

We also bought into a building that is 90% owner-occupied and where the large unit owners have put down most or all cash. Knowing our property value is secure because a speculator isn’t going to dump his unit at a bargain basement price is also worth something. That is the problem with short sales and foreclosures; they tend to cluster together.

When I picture life in the suburbs, my mind fills with a pastoral scene of wide streets lined by leafy trees and green lawns, birds chirping, attractive school buildings and soccer fields. My dream suburb looks a lot like Summit, NJ.

Right after the verdant pictures, dollar signs start making my stomach clench. Summit is not cheap to live in. In 2006, the median home price was  $797k and property taxes were $11,500 -amazingly almost exactly the same as the #s for my Hoboken 4BR.

Add on two car payments  (possibly three once my kids start driving -the thought of them driving and the insurance payments REALLY makes my stomach clench) plus the horrendous commute to Manhattan and all of a sudden my suburban dream starts looking like a nightmare.

But that isn’t even the main reason why we bought our Hoboken 4BR. The fourth bedroom has a separate entrance next to the elevator. The previous owner used it as a home office, and when I saw his setup, visions started dancing in my mind of expanding my business. I have been able to conduct business meetings by having visitors come and go via that entrance. And the fact remains that Hoboken is considered by marketing firms to be the most wired community in New Jersey. It is very comparable to Park Slope, with the 3,000+ members of HobokenMoms, 20,000 readers of Hoboken411 (a great site as long as you stay away from the political posts) and the heavily trafficked HobokenRealEstateNews. Not bad for a town of 30,000.

I have picked up marketing clients just by randomly talking to neighbors and business owners or working together on volunteer projects. Because Hoboken is so densely populated and very electronically wired, if you are a mom like me who is trying to keep her career alive while staying home with the kids, this is a great place to live.  If we decide to have another child, I can easily get a babysitter to watch him/her a couple of days each week. My suburban friends have a much smaller pool of babysitters (doesn’t help that they need driver’s licenses, not to mention a car). More opportunities plus our 4.5% interest rate made me feel a lot better about taking the plunge on our 4BR purchase.

It is really easy to get detached from a real estate purchase. Between the lawyers, real estate agents, mortgage brokers, lenders, and appraisers, your average buyer and seller are kept very personally detached from the process. With our first two real estate purchases (our 1BR and 2BR) we never interacted directly with the sellers, and didn’t even meet them at the closings because they signed powers of attorney to their closing attorneys.

When everything goes right, that is all well and good. But in today’s real estate environment anything goes (and everything keeps changing), so I think buyers and sellers need to get intimately involved in understanding and managing their real estate transactions. Anything can go wrong, from a lender holdup leading to the buyer running past his mortgage rate lock end date and having to pay to float the rate, to a low appraisal threatening the deal at the eleventh hour. Wouldn’t it have been better for the buyer and seller to be communicating during the process to help get past these issues, and in many cases, past less than helpful attorneys/real estate agents/lenders? After all, it is their money on the line. If you want something to go smoothly, then you cannot take a hands off approach. Sure, you might get lucky and encounter no problems, but if something happens, you are looking at serious implications (inability to buy another home, take a job offer in another city, you get the idea).

I recently wrote about how lenders are now the only ones able to order an appraisal and how this has been decreasing appraisal quality. The appraisal industry is turning into a chop shop, where the appraisal management companies have an increasing amount of power because they have exclusive contracts with lenders. It’s bad in theory to have low-quality appraisals, right? But it gets worse. When an appraisal comes back low, the buyer can theoretically back out of the deal, or in many cases, try to renegotiate the sale price.

I can hear you asking, how is this a bad thing? The appraisal reflects comparables that show what the property is really worth, right? Well, there are a number of ways appraisals can be wrong. The simplest way is for the appraiser to use bad comparables (ie. properties that are much smaller, older, or my favorite, short sales/foreclosures.) If an appraiser does not know the area, then they don’t know how much a  property should be worth based on recent trends and doesn’t take the time to look for comparables that make sense.

This happened to me when I sold my 2BR and purchased my 4BR. Because I trusted in the system, I allowed the appraisals to go forward without any involvement from me, and the lenders (Countrywide, and another, smaller lender) used appraisers from South Jersey. North Jersey is much more expensive than the south, and it was clear the appraisers did not know the area. I compared notes with my neighbors after receiving the very low appraisals on both properties, and discovered mistakes like a $2k credit for my 800SF outdoor space (my neighbor received $25k for her refi appraisal) because according to the appraiser, outdoor space isn’t valuable in Hoboken. Um, what?

The best advice I can offer is to come prepared with comparables for your appraiser. They can only use sales that have closed in the last three months, but you can find data on Zillow (when you look up a property, click on “Nearby Similar Sales”) or from the MLS if you are working with a realtor. Make sure you are present when the appraisal takes place, and tell the appraiser your purchase price so he knows more or less what to look for in comparables. I did this when we applied for a home equity loan and the appraisal came back $125k higher than our purchase price three months earlier (for those keeping track, that would be $160k higher than the first appraisal).

You are your own best advocate in real estate. Taking a personal hand in this critical step can save you a lot of grief later on. And to answer the question I know you are all asking, no, I did not renegotiate the price of my 4BR when the first appraisal came back low. I felt the price we had negotiated was a very fair one, and fortunately we were putting down a lot of cash (30%) to keep our monthly payment low so it had no impact on our mortgage.

I am an indifferent cook. I never learned how to cook when I was a kid because my mother got impatient with my slowness, so everything I know, I learned as an adult. And I have discovered it’s not as big a deal as I thought. I cook the kind of stuff you stick in a pot or the oven and forget about for an hour while I go work on my laptop. And I love my slow cooker -I don’t even bother to brown meat before putting it in there because I haven’t noticed an appreciable difference in the taste.

The NYTimes magazine states that American cooking has become a spectator sport. Judging by the number of Manhattanites I know who use their ovens for clothing storage and the ubiquitousness of Chinese takeout, I am not surprised by that statement.

Cooking has become a luxury, something people do on weekends when they have chunks of free time. Food is something that we grab -working lunches eaten at our desks, with the occasional cookies for lunch, hurried dinners in between going to the gym and getting some more work done before bedtime. Cooking takes too long and requires too much advance planning.

The thing is, do we really know what is in all that takeout and frozen food? Even though I come from a family of doctors, I never truly paid attention to ingredient lists until I became pregnant with my oldest child. And I also never connected the dots until then: 21% sodium for a frozen entree is a big no no for someone with pregnancy-induced hypertension.

So I started cooking. And I discovered that I can make meals at home that are very healthy and taste pretty good. After a lot of trial and error I developed a weekly grocery list that has enough food for a family of four (albeit with two toddlers) and allows for a variety of fast meals (yogurt, salad, omelettes, sandwiches) and a couple of cooked meals that last several days (stews, soups, casseroles). I also try to bake once a week -chocolate chip cookies, sugar cookies, stuff to give the kids for dessert. When I cook or bake, I put about 40% in a tupperware and stick it in the freezer for a week I don’t feel like cooking. I always cut the sugar in recipes by about 25% because I find American baked goods to be too sweet, plus I know there are no preservatives, trans fats, or high fructose corn syrup in my baking.

I have also learned not to overbuy. My husband and I tend to forget we have food, which leads to disgusting science experiments in rotted meat, fruit and vegetables. I buy food I know my husband likes so that I can be confident he will finish it off, and I also have substitute items in mind when my first choice isn’t available/is too expensive/looks withered/has flies buzzing all over it at the grocery store.

The local A&P has excellent sales on Wednesdays. I have bought large rump roasts there for $1.49/lb. I keep my bonus savings card in my wallet since many of the in-store savings are tied to the card. They also occasionally have excellent promotions designed to encourage shoppers to come regularly (not an issue for me). And on weeks when I just can’t make it to the store, Freshdirect has excellent fresh produce, frozen pizza and prices that aren’t too much more than I would normally pay.

Buyers these days have a real bargain-hunting mentality, stoked by media reports about the dire state of real estate. A year ago everyone was chasing the market up, which contributed to the real estate bubble. Now everyone is chasing the market down, trying to get a big discounts to get ahead of future price drops, which artificially drives the market down.

What it really comes down to is how much (or little) the seller is willing to take. And that depends entirely on how badly they need to sell. Sellers generally need to sell because they can’t get a mortgage on another property as current owners, or else because they are moving (job loss, need more space, or relocation).

Trust is a highly underrated element of real estate purchases. The way we purchase real estate, with attorneys and real estate agents acting as intermediaries between the buyer and seller, makes for a very sterile process. That’s fine for strong markets when there is plenty of profit to go around, but right now, I find it invaluable for trust to exist between both the buyer and seller so they can work together to finalize the deal.  The seller trusts that the buyer will follow through and finalize the purchase and the buyer trusts that the seller won’t take every light bulb and fixture with them. Buyer-seller communication also helps navigate the frequent mortgage hurdles as lenders ask for more and more paperwork. The seller frequently has more leverage than anyone else in getting documents from the property management company.

When I was selling my 2BR in late 2008, everyone warned me to watch out for lowball offers, especially since I was selling FSBO. And sure enough, that’s what I got. My buyer’s original offer was $100k below my asking price. It took every ounce of willpower I possessed to not walk away from the offer, and more to the point, to not let the buyer know just how offended I was by that offer (the rationale was that a 2BR short sale in my building had just gone into contract for that amount). It took about five rounds of negotiation to get to the final purchase price of $460k, and both sides had to make serious mental adjustments before we were okay with that #.

When you are making an offer on a property, you need to consider two things: 1) how low is the seller likely to go? and 2) at what point am I prepared to walk away from this property?

No matter what you offer, be prepared to back your # up with data. When we went to see our 4BR, it was listed at $824k. It originally went on the market about nine months before at $924k, then had several price drops all the way down to $799k before it went back up to $824k. We offered $750k because that was the maximum we had been approved for a mortgage, plus we really didn’t have enough income to support a larger purchase price.

Our seller countered at $799k, and told us he would try to work with us on the price (he deducted $12k in savings he was able to wring out the realtors and the seller of his next property) because he knew we were doing the best we could with the $750k offer. We all knew the apartment was worth over $800k, but circumstances conspired to make it worthwhile for our seller to accept less. He would have lost his dream home if he didn’t sell his 4BR. Also, I pulled comparable #s from 2004 to back up our offer. Townhouses in SW Hoboken were selling for $650k in 2004, so our offer of $750k was a fair one by those parameters.

I believe our seller was willing to come down below his final # of $799k because he liked us and we didn’t insult him by placing a lowball offer. It was very obvious that we were genuinely making the best offer we could afford. And we were extremely lucky that our interest rate wound up being even lower than I expected (we were quoted 4.875% by several lenders but wound up getting 4.5%.)

My point is that by making the best offer we could, we wound up getting a better price than if we had bargained hard and fought for every dollar. The longer a property has been on the market, the more likely you are to get a good price on it, especially if there have been multiple price drops.

Another Hoboken mom and I recently collaborated on our experiences getting our toddlers stitched up, to the tune of $1,690 at the ER vs. $279 at PromptMD. I thought it might be helpful to post our actual emails so readers can get a sense of the personal situations of the people behind the numbers. I developed my ER vs. PromptMD case study as if neither J nor I had health insurance because there is too much variation in copays and coverage. $1,690 is what those healthcare providers actually bill, the amount they get paid depends on their arrangements with health insurers.

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From: J
Subject: ER visit
Date: Wednesday, August 26, 2009, 12:42 PM

Kathy,

My insurance covered all but 10% of the hospital visit so I paid $95.  Then 2 visits to pediatrician with copays of $15 each and another 10% on top which was only another $20 so total looked like $145.  I was “lucky” that my son’s accident happened at daycare and the ambulance was called to attend to him first which I didn’t have to pay for (not sure how much that would have been).  You can claim the Prompt MD visit with your regular insurance, they should have given you forms.  When I have done this for my husbands recent visits I have received a significant portion back.

Despite the fact my son needed stitches, I did wait a while at the ER because we had to wait for the pediatrician who was busy upstairs in the childrens ward.  I think I would probably do Prompt MD next time too, my husband raves about their service and I am tired of going to the ER (although haven’t been since the new one opened).  My son has had his fair share of “incidents” in his short life

J

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From: Kathy Zucker
Sent:Wednesday, August 26, 2009 1:31:31 PM
Subject:Re: ER visit

Thanks for the info, it sounds like you have much better insurance than we do. We used to have UnitedHealth (loved them) but my husband’s employer switched to Anthem Blue Cross this year to save money and they are horrible. We have the most expensive plan they offer, but we still have a $600 deductible (so we didn’t get anything back from my husband’s recent PromptMD visit for an infection) plus they only cover 70% after that.

It sounds like the total cost of your son’s stitches was about $950 for the ER plus the ambulance and the two ped visits. Yikes, that’s close to $2k in bills. When you compare that to the $279 PromptMD is charging, no wonder our healthcare system is going bankrupt.

Do you mind if I post your email (and mine) on my blog? I like to provide data whenever possible about ways to save money and time, and this is a biggie.

Kathy

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From: J
Subject: ER visit
Date: Wednesday, August 26, 2009, 2:00PM

That is fine with me Kathy.  My son’s accident was in Nov last year and we had another big yr of medical expenses so had already met our $500 deductible and $2,000 out of pocket max by then.  We are lucky with insurance through my job but am considering staying home next yr when #2 arrives and then we will be up for a lot more expense through my husbands job - yikes!  My son just had his tonsils/adenoids out last week so think we are over the deductible/out of pockets again this year.  Hoping #2 is a LOT healthier than #1.

I have tweeted recently about my family’s experiences with urgent medical care at PromptMD on 1st and Willow, six blocks from the PATH train. I have walked by their office many times over the past year but haven’t had the opportunity to check it out myself until this summer. Thanks to my husband’s infected cyst and my baby son’s cut foot, I have had lots of up close and personal interaction with them and their very interesting healthcare model.

US healthcare costs are through the roof but our outcomes suck. You may not be paying these costs upfront but one way or another the money comes out of our pockets, through increased premiums, limited coverage and higher state taxes to cover reimbursing hospitals millions of dollars to cover the massive amount of charity care they provide. Where do you think people go when they don’t have health insurance? The local ER, and they go for all sorts of ailments that could be treated much more cheaply outside of an emergency room setting (flu, diabetes, stitches).

So why do I think PromptMD is the healthcare model of the future? First off, they are cheap. Very, very inexpensive. As a former hospital administrator, I know healthcare costs range widely without rhyme or reason, and $279 for an initial visit plus two followups (one to make sure the laceration is healing properly and the other to remove the stitches) is an incredible deal. Add in the convenience of not having to make an appointment plus the fact that I can get reimbursed for the visit from my health insurance/flexible spending, and I am seriously considering going there for everything possible for my family of four. I like knowing we will have the same primary care physician regardless of what health insurance my husband’s employer provides (they have changed our insurer three times in three years). They are open seven days a week (from 8am-8pm Mon-Fri), so that works really well for our schedule (my husband stops by before and after work, I go before naptime at around 11AM).

The facility is also quite nice, with six exam rooms, an onsite lab to process strep tests and bloodwork, very hygenic with sterile procedures practiced at all times. The staff is really nice and did their best to adapt to a screaming one-year old with blood streaming from his foot. I got there 45 minutes after my son cut his foot and we were out of there within 45 minutes, which was well within medical guidelines to ideally treat lacerations.

I compared notes with another mom whose son recently went to the ER for stitches in his hand, and here were our side-by-side experiences:

The PromptMD visit cost 17% of what the ER trip cost. Even though I have insurance, I still have a $600 deductible and then 70% out-of-network coverage (in-network hospital stays are 80%). The best case scenario I would have been looking at would have been $935 out of pocket ($600 deductible + $255 after 70% coverage on the ambulance and stitches + $80 copays). Fortunately I have flexible spending dollars left, so I won’t have to pay a penny out of pocket for the PromptMD visit, but I would definitely have gone over my limit for the ER visit.

For this and for so many other reasons, I am adding PromptMD to my list of reasons to live in Hoboken.

According to the NYTimes, Fannie Mae and Freddie Mac consider home borrowers with good credit who put down 25% to be riskier than those  who put down 5% because they do not carry private mortgage insurance (PMI). Borrowers with down payments ranging from 5%-20% are getting interest rates of 4.875% while the 25% crowd got 5.375% (half a percentage higher).

That is completely counterintuitive. So to those of you with high incomes but little in savings, I say, full steam ahead! I am mentally wiping my brow and saying whew, good thing we put down 30% on our home and qualified for a 4.5% rate on our jumbo loan. Who knew that extra 5% more (or less) made such a difference?

There is a standard progression to life in Hoboken. Swinging singles move here because of the PATH, lower taxes, and great bars and restaurants. They shack up, buy a 2BR and get married.  Then they have a kid or two and move out to the suburbs. Rinse, repeat.

That script seems to have a new act, however. Many of the couples who live in the very large units in my building in southwest Hoboken (3BRs range from 1,800SF to 2,111SF) have actually returned from raising families in the suburbs. They bought into the premise that you are supposed to raise a family in the suburbs (Summit and South Orange for two of these couples), but the commute drove them crazy. So they sold their houses and bought units in my new construction building.

One couple kept mopeds to get to the train station (that must have been fun in the rain or snow), where they took the train to Hoboken, got on the PATH and then took the subway in Manhattan. Basically, they had already been commuting for an hour by the time they got to the start of my commute.

When I hear stories like that, I breathe a sigh of relief that my family skipped over an exhausting and potentially costly middle act. During the real estate boom the couples who sold their houses and moved into my building were able to sell easily at a profit; that would probably not  happen today. I also know my husband (and myself) very well regarding time, and neither one of us can handle exhaustive commuting. 45 minutes door to door is about right for us; under an hour is ironclad.

When we were looking to buy back in December 2008, we figured out there was about a $100k price difference between our 2,100 SF 4BR and a similar new-construction house in Montclair -what I also learned is that the property taxes are twice as much ($20k in Montclair vs. $11k in Hoboken). Given that municipalities all over New Jersey are hurting financially right now, the suburbs are not automatically the right economic choice since their tax base is primarily residential.

I can stomach paying high taxes as long as I have kids in the school system, but who wants to pay $20k property taxes when you are facing huge college bills and retirement? It’s not like we would sell the house the instant our last kid graduates high school, so I would rather pay $13k tuition at an ethnically mixed private school instead of having high fixed costs. I am not worried about my kids’ future success.

I may not have a backyard for my kids, but I have a decent terrace and all of Hoboken to take them on daily walks, plus Liberty Science Center on the light rail steps away from our apartment and NYC museums. I think it’s a fair trade.