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

Much has been made recently of the Case Schiller data showing the real estate market is stabilizing, including the recent gain of 0.3% in New York. You can track the Hoboken MLS market every Wednesday, breaking down the #s into different size categories. There has been recent controversy about shadow inventory (ie. owners who want to sell but haven’t listed their units). Forget about hypothetical #s: what about the owners who are actively trying to sell on their own, or my FSBO compatriots?

Over the last six months, I have setup websites for four Hoboken moms selling their 2BR units, as well as helping a local developer market a 4BR. I am pleased to report that the 4BR is in contract for close to the asking price (about 4% under asking), scheduled to close at the start of the new year, and one of the 2BRs sold at the asking price after the owner listed it with a realtor. However, the news is dire for the other three 2BR units. One owner gave up on trying to sell and rented out her 2BR, and the other two are sitting on the market (one studio and one 2BR). There have been a few serious nibbles, with one potential offer but long dry spells in between spurts of activity.

I reached out to the owner of the recently sold 2BR and asked for her feedback on the sale process. She wrote:

We did sell our apartment. We ended up going through a realtor and sure enough she got it sold for asking price. We still lost money because we did sell for only slightly less than we bought it and then minus the 5% commission but all in all we are glad that that part is over. It worked out well because the woman who bought our place bought it as an investment to rent. We immediately started renting from her so our money is out and we can look for a house without the stress of having to coordinate closings etc.  We got the offer the end of August. We put an offer in on a house out in Millington in Long Hill Township it got accepted. We are set to close on Nov. 20 but the inspection turned up a few issues so it may be pushed back.  Thanks for checking in and I hope all is well with you.

D.

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From: Katherine Zucker
Sent: Tuesday, October 27, 2009 12:37 AM
To: D

Hmm, that kind of sucks. But at least you sold. Makes me wonder if my other friends w/2BRs should do a flat-fee MLS listing so they can save on the commission. Their craigslist ads have been getting flagged and removed every week, we think by a broker who wants their listings.

Thanks for sending me the update, do you mind if I post your email? I am planning to write a blog post about the status of the moms I have been helping (you are the only one who sold, groan). The developer’s 4BR near my building did sell, so not sure if that means the 2BR market sucks (which it does, but that might not be the only reason why these units aren’t selling -I think location and not being on the MLS play a big part).

Congrats on the upcoming purchase, and fingers crossed that all goes smoothly on that front! I am sorry to see you leave Hoboken but know staying isn’t an option for everyone. Stay well.

Kathy

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From: D
Sent: Tuesday, October 27, 2009 1:45 PM
To: Katherine Zucker

I don’t mind if you post my email.  I think purchasing an mls listing would really help. I also think many buyers especially first time buyers feel safer when a place is listed with a realtor. There is no real reason for it but I think they are scared and don’t know the process and tend to go with realtor listings that was just the feedback we got.

Thanks again for all the help you provided for us.

D.

My husband and I had our first child right around our tenth anniversary. We had owned our 2BR for about three years at that point and had never really used the second bedroom, so incorporating our daughter into our lives was seamless, like the extra room had been waiting for her. She was such a joy that we decided to make it a twofer, and our son was born 18 months later. And that’s when our lives went to hell.

We always thought we could manage two kids in our 1,050SF 2BR. After all, we had an 800SF private patio, two large bedrooms, and two bathrooms. I grew up sharing a room with my sister, so our kids could share a room for at least a few years, right?

Wrong. My little son is incapable of sharing a room with anyone because he is an incredibly light sleeper. I wound up giving the master bedroom to him and sleeping in the living room (his father slept on the queen bed in his sister’s room) because any noise after midnight would cause him to stand up in his crib and scream for hours. I tried CIO, total failure.

10 months of sleep deprivation along with having to tiptoe around the living room after 8PM every night took a serious toll on my marriage. No amount of outdoor space could make up for the fact that our floorplan ensured that no matter where we were in the living room, one of our children could hear us making noise and would wake up if we tried to do something noisy like watch TV or type on a computer.

It’s a cliché to buy a bigger home to save your marriage, but in our case, almost all of our problems were caused by the fact that we didn’t have enough space. Our living room was carpeted in toys and cheerios, I was sleeping on the living room floor on an air mattress, and my husband and I never talked (see aforementioned floorplan problem). So I listed our 2BR for sale by owner and started looking online for a bigger place to buy, both in the suburbs and in the Hoboken area.

The timing was good in that the crash of Lehman Brothers brought the prices of large Hoboken units down into our price range. There were serious issues with all the suburban properties (sky high property taxes, no central air, not walkable from the downtown area) and we weren’t thrilled about moving to Weehawken. We knew we loved living in Hoboken, so we were ecstatic when we found our 4BR only three blocks from our 2BR. It was the best of both worlds, familiarity along with enough space to last us a very long time.

It has now been seven months since we moved into our 4BR, and I recently got my husband to admit that I was right, buying this apartment solved all our problems. Having the extra den/bedroom has been worth the extra $100k because when one of us has to work, we go in there and shut the door, and it’s like we’re not in the house. If we had bought a 3BR like we initially planned, we would still be tiptoeing around at night. But now I can go in the den, talk on the phone, watch TV and play music videos to my heart’s content without worrying about waking the kids.  I think Hoboken is a good long-term bet, but our immediate quality of life (Daddy has a 35 minute commute door to door) makes the financial sacrifice completely worthwhile.

One of my favorite readers sent me the following question:

Kathy:  You’re pretty savvy, so let me ask you, if we plan to only stay in the house 5 yrs, should we do an ARM (1% difference only)?  My friend (in atty review for a 2BR (529K) in the Huntington) is doing an ARM and insists that it’s better because she’s saving $375 per month on mortgage payments (4.5% v. 5.625%) and will pay some add’l $ on the ARM mortgage to get more equity…

Sounds good to me…but my fear is what happens if your 5 year plan doesnt work out?  On the other hand, I don’t think (i know…) we can fit in that condo w/ two kids…

Any thoughts?

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My response:
That’s really the $64k question. You have to look at the price spread and your risk. What happens after the fifth year? My brother-in-law has a 5-year ARM with Citi that is due to reset this year, but he has not refinanced despite having a ton of equity because he has one-year extension options at the rate of 10-year treasury + 1.25% (about 4.75%).

People are frequently stunned when they find out how much my husband and I recently paid for our 4BR and how much we make (low $100k range). The #s don’t add up, I agree.  I would not ordinarily recommend for people to buy with those kinds of #s. So what made it okay for us to do so?

Sometimes data does not tell the full story. We are low income for recent Hoboken residents, no question about it. But my husband and I have been together for 14 years, married for 10. We were dual income for the vast majority of those 14 years, and we have always had the same financial mindset and goals. Two people can live as cheaply as one, so we bought our first apartment together in 1999 to provide stability in our careers and finances.

About eight years ago I met with a financial advisor to create a long-term projection of our income and expenses and discovered our income was always going to be below what we needed to buy a family-sized home in the NYC area. That meant we would need a huge down payment to bring our monthly costs down to a manageable level. I didn’t know where housing costs and interest rates were going to go, so I aimed high, figuring we would need close to $500k in cash.

Establishing goals and meeting them was made easier by the commingling of our assets. In the early days of our marriage, I was the major wage-earner, bringing home about 4x as much as my husband made. Our incomes equalized in our late twenties, and then the trend reversed in our early thirties once I became pregnant and started working from home. Now my husband is the one earning 4x as much as I do, and I am fine with that.

Because all our income gets dumped into one common account and then is allocated to different buckets (retirement, savings, etc), we don’t have to worry about minimum account balances (we have to maintain a minimum $10k balance to qualify for Citibank’s Everything Counts, which gives us free checks, cashier’s checks, notary services, and a variety of small services that save us easily $100/year in fees). It also means we have fewer accounts to keep track of, although we are still dealing with a dozen or more (groan).

We also don’t have to hold reconaissance meetings to bring each other up to date on our personal finances, which saves a lot of time (since having kids, our free time is precious and tightly rationed). We are lucky that one of us (guess which one!) is very interested and educated about personal finance, and the other one doesn’t want to deal with the details, so there is no conflict. What I do for one of us I do for both, which unintentionally led to stratospheric credit scores.

Our commingled finances and similar financial mindset make it easy for us to turn on a dime when it comes to big decisions. When real estate prices started dropping after Lehman Brothers crashed in October 2008, my husband and I both knew the time had come to strike. Everyone trading up wants to sell high and buy low, which is almost impossible to accomplish. Because the market was paralyzed in the winter of 2008, we knew we had a window to get reasonable prices on our 2BR sale and 4BR purchase.

I am confident about our long-term ability to cover our mortgage because our earning potential is signficantly higher than our current income.  If our current income is established as our baseline, then once I work more or my husband gets the promotion he has been due for the last year or two, all our extra income can go toward retirement, college and emergency funds. In 16 years, when our oldest child goes to college, we will have significant equity and savings that will help us weather any financial storm (I hope).

I recently helped facilitate the sale of a 4BR unit here in Hoboken, and by the time the unit went into contract, I felt like I had just finished running a marathon.

Communication is key in this environment. It’s not just about the purchase price, although it takes a lot of work to get the buyer and seller on the same page. The real work is hammering out all the tiny details specific to the buyer’s and seller’s individual circumstances.

The buyers of this unit are a couple with a toddler and another baby on the way who are relocating to the NYC area from Europe.  They had temporary corporate housing for one month, a storage container of furniture arriving then, a toddler to place in school, and a desire to make sure the unit had the appliances and finishes they prefer.

On the seller’s side, he had four single guys renting the unit who had to make four separate move-outs, the fear that they would fight their notice to vacate, and a timing problem with getting the unit in pristine condition before the closing.

We solved the problem with a rental unit owned by the seller. The buyers moved in there to have a place to put their furniture and an address to register their son in the excellent Hoboken Abbott pre-k, and no time pressure to close and move into the 4BR. We all hope and assume it will happen on schedule and that the wife will not give birth in the rental unit, but there are worse things in life.

When you have a motivated buyer and a motivated seller, you usually can find a way to manage the myriad secondary details that threaten to derail the deal. In this case, I was the person with the time and temperament to talk to all sides and help them bridge the gap. I think it is important for sellers to recognize this need in the current buyer’s market. It is fast and easy to walk away from a deal, but qualified buyers do not exactly grow on trees.

One of the main premises behind this blog is that I am extremely frugal. I feed my family on $20/day, salvage and reuse items, and buy reusable swim diapers so I can cut out recurring costs. However, there are some things you really cannot cut corners on.

One of those things is homeowners insurance. This is an area where if you make a mistake you could wind up paying for it for a very long time. Just like with individual health insurance, whenever you apply for homeowners insurance you get asked if you have ever been denied coverage before (and why), and you also get asked if you have had any losses over the last three years.

The name of the game with insurance companies is that they want to collect more than they pay out (loss ratio). So if you start making claims an insurer can raise your premium or not renew your policy. At that point, you are really screwed because you have to shop for a new policy with huge black marks on your record.

I have run the full gamut of homeowners insurance with my 4BR. I went on autopilot when we moved from our 2BR and stayed with our old insurer. When they canceled our policy because they don’t insure buildings like ours, I changed policies twice more before settling on Franklin Mutual Insurance.

Kathy’s Adventures in Homeowners Insurance

* Note: All insurers had $200k loss/damage limit and $1,000 deductible except Chubb ($250k loss/damage and $5k deductible)

Not bad for only owning our condo for six months, right?

When I closed on my 4BR in March 2009, I had to acquiesce to an escrow account in order to qualify for my very low 4.5% interest rate. I have never had an escrow account before for either my 1BR or 2BR, but it was a no-brainer when it translated to a 0.375% lower rate.

The mortgage banker I was working with told me I could cancel the escrow account after the loan was six months old, so I figured it was worth the hassle to get the lower interest rate for the next 30 years.  I canceled escrow over the phone when the loan was eight months old, but found out that it is generally not easy for others to do the same.

When I was on the phone with the Bank of America rep, I could hear her running through the checklist. Yes, my loan was less than 80% loan to value, it was more than six months since it had opened, the flood and hazard insurance escrows were not being collected since they are paid by my condo association, and my payments were current. The only thing holding up the cancellation was that I had a property tax payment due at the end of the month, so I authorized immediate disbursement of the payment to be followed by cancellation of escrow.

What does this mean? #1, I am getting a refund of $2,500 that represented the surplus money BofA was so kindly keeping safe for me. #2, I have peace of mind if the City of Hoboken loses a property tax payment because I have copies of all the checks written to them, and #3, my monthly mortgage payments are going down by $1k/month, which improves my cashflow and means I get to keep the interest on the cash instead of my lender.

I have known people in NYC who had to deal with the city misplacing their tax payments, making a second payment to avoid their property being auctioned off, and having to jump through hoops to prove they made the initial payment and getting the extra payment refunded. I don’t want to have to deal with the hassle of getting proof from Bank of America that my taxes were paid. Worse, when I contacted them about canceling escrow, they had to ask me how much my upcoming payment was since they “didn’t have a copy of my tax bill.” How’s that for inspiring confidence in the system?

There is a fencing club about two blocks away from the line between Hoboken and Jersey City. It’s less than 10 blocks away from my 4BR, easy walking distance.  My husband and I think we have died and gone to heaven.

I met my husband on our college fencing team. I was a walk-on, but he was already a celebrated athlete, earning four-time All-Ivy and two-time All-American awards. We both kept training in Manhattan after college and he has medalled repeatedly in Division I individual and team National Championships.

So what has this gotten us, aside from lots of frequent flyer miles and buckets of medals underneath our bed? Fencing has kept both me and my husband trim and healthy. When we underwent physical exams for life insurance after our daughter was born, the physician said my husband’s heartrate is so low that he is either on beta blockers or else is an elite athlete. For a few hundred dollars a year on club membership fees (the minimum you are going to spend), I estimate we have avoided thousands in medical expenses.

Plus there is the mental health benefit. I found fencing provided a welcome distraction after a long day in the office. I would walk crosstown and enter a wholly different world where all my work stresses would instantly cease to exist. It is also a sport where you can take part for your entire life -there was a constant contingent of elderly foil fencers at my old club whacking away at each other. I look forward to reentering the sport in a few years when my children are old enough to take lessons, and reconnecting with the girlfriends whom I miss seeing regularly.

We happen to be very lucky to live across the river from a city that is the absolute epicenter of the sport in the United States. Over half of the Olympic and World Championship team members traditionally come out of NYC, and there are elite clubs clustered around lower Manhattan (Empire United, Fencers Club, Manhattan Fencing, NYAC).

Because NYC is so expensive to live in, there is a good-sized contingent of current and former elite fencers right here in Hoboken/Jersey City. The owner and main coach, Steve Kaplan, has kindly organized a weekly elite practice where former All-Americans can reprise championship bouts for two hours before walking back home to diaper duty.

I have often heard the expression that where you meet your spouse is a good indicator for the course of your future together (ie. meet in Vegas, big surprise when you wind up with gambling debts). In my case, I am very happy to be spending the rent of my life in and out of fencing salles. Fencers tend to have the highest GPAs of all college athletes, so hopefully our children will inherit their parents’ winning traditions.

Under the new legislation (see section 11 on page 14) extending and expanding the home buyers credit, my initial take on it is that we qualify for the $6,500 credit. The reasons are:

• We lived in our old apartment for more than five consecutive years
• We closed in February 2009, within the timeline of the original homebuyers credit
• Our new apartment cost less than $800k
• In 2009 we earned less than $245k as a couple

The LA Times does a good job detailing the changes. All I can say is, hot dog! We could definitely use an extra $6,500.

Also, in case other families want to try to qualify for the credit, the developer of the Hoboken 4BR that I recently helped sell is putting an 1,800 SF 3BR/2BA in the same building on the market. The asking price is $725k ($420 monthly maintenance and about $11k in annual taxes), which works out to $400/PSF. I will post more details when I get them, but I think this is a really good deal compared to similar properties on the market. Shoot me an email if you are interested in seeing the unit.

The upside: you can get them if you are pregnant or asthmatic. PromptMD in Hoboken is charging $24 per shot (walk-in only).

The downside: this batch is for ages 4 & up and they contain a small amount of thimerosal (less mercury than a can of tuna). The CDC only sent 200 thimerosal-free shots to the entire state of NJ, so basically you either take the thimerosal version or you forgo the H1N1 vaccine.

The CDC is currently requiring healthcare workers to initially administer the shot only to:

• Pregnant women
• Caregivers/people in contact w/children under 6 months
• Healthcare & EMS personnel
• Anyone 6 months-24 years
• People aged 24-64 years w/health conditions

The CDC is being really strict about this b/c of the shortage, but PromptMD should be getting more flumist next week.