Well, when we last left off, I had given up on Sears; and I had decided to go to Home Depot. I went in, guy there pointed to a lawnmower, said it was the best deal in the store in my price range, all assembled, got me a dolly to push it out to the cash register and to load it into my car.
By now it was too late to mow the lawn, so I just took it out of the box, put in the oil, and gassed it up, started it up, mowed one diagonal row and back, shut it off and put it in the garage. (So what do you call the plastic gas can anyway, does anyone know? A gas can?)
Woke up nice and early the next day (well not that early), and mowed the lawn with my new lawn mower. Did a nice job, if I do say so myself, didn’t take that long, and I was able to get right into my day.
I was able to go to my doctor’s appointment. I mentioned in an earlier email that I had met a foot doctor (Podiatrist) at the SIEDC thing at the Hilton, right after I met the person who gave me the free haircut voucher for the Barber College on New Dorp Lane. I still carry my lap top in the Northfield Bank bag.
I have arthritis in my big toes. It’s a family trait. Big Brains, Bald heads, bad skin, bad hearing, and arthritic big toes.
Dr. Rouder told me that he could clean up my arthritic toes and I would then be able to walk and run pain free, so long as I get a physical, blood work, and a chest x-ray, then I can have surgery any Wednesday or Thursday morning.. He wanted to schedule it for the 2nd of July, but we were celebrating 5 years Cancer Free for Angela on the 4th, and I would have to mow the lawn.
A few days later, I had a meeting at the municipal building (City Hall). It was a beautiful day; so I parked at the ferry, “took the ocean voyage”, and walked up (north) to Nassau Street; and after the meeting at DOF, I walked down (south) on Broadway, back to the ferry. I enjoyed seeing all of the local advertisements at the Whitehall Station and on the ferry. Tired and hot, I sat outside and completed my New York Times crossword puzzle thinking not a bad ride if you don’t have to do it every day.
Not a bad walk. When I was a criminal defense attorney with the Legal Aid Society in Manhattan in the 70’s, I did it every day (except in the rain). Some days I even ran it.
But that’s before my arthritis set in, and let me tell you, after walking back and forth that day, any doubts that I had about having the surgery were gone. On this particular day I was lucky. I got off the ferry, caught the shuttle to the parking lot, got into my car, and just as I closed my door, all hell broke loose as it started to rain, torrential downpours (remember June was record rain).
Anyway, so I went and got my chest x-rayed, drew blood to be analyzed, and went to my PCP (primary care physician) who signed a paper that said that I am healthy enough to have my toes cut open.
So now it’s nearing the 4th of July and time for me to “mow the lawn” again. And mow the lawn I did, and I did a great job. I am getting so good at it, arthritic big toes and all.
On the 4th, I set up the place, went out and bought ice cubes, fruity wine, beer, soda, grilled the corn (and I don’t cover the corn in tin foil like we did when I was a kid- rip off the husks and right onto the grill- spray oleo on it), grilled the hot dogs, the hamburgers, sausages, & steak. I am actually a pretty organized cook, getting things done so people are always eating hot food, and bringing it out in stages.
But I didn’t buy enough ice the first time I went, so I went back to Pathmark and bought a couple more bags of ice cubes (they are still in the freezer in the garage refrigerator); and while I was there, I decided that since I was having surgery a few days later, I would buy some of those Pathmark store made square oatmeal raisin cookies.
Everyone commented on how nice the lawn looked, especially after drinking the beer and fruity wine and eating my cooking.
Fast forward to July 8th, Englewood NJ where a Staten Island surgeon performs his surgery- why not on Staten Island? Well that’s another story- a good story for Bob Cutrona to write about in his column in Business Trends perhaps.
Anyway, they knock me out (although not a general anesthesia), and they worked on my toe. Right foot first, because it wasn’t as bad. Cut open my toe, took out their trusty old buzz saw, and went bzzzz along one side of the toe, and then bzzzzz along the other side. Then he changed the blade in the saw, and put in a bigger one, and did it again, so that now there would be space between the two bones. Then he inserted a screw to set the toe back into place. Sewed it up, turned off the sleepy stuff, and I woke up.
I had a bagel and a glass of orange juice and went home spending the next few days with my foot elevated and iced.
That Sunday, we had an open house at our home, so we had to leave the house. I went to work, and sent out emails to y’all from my office computer.
When Angela got home she had a panic attack because the garage door was open, and she thought to herself that someone had stolen the lawn mower. Do you believe this?
He repeated this procedure on the big toe on the other foot on July 22nd. After the second surgery I decided to allow myself a final binge before I start my training for the marathon, now that my toes are going to be better. Pathmark Oatmeal Raisin Cookies. I also stopped taking my B5 Pantothenic Acid. After a month of cookies and no B5, I lost my hearing.
And then the grass began to grow.
A few weeks ago I was able to get one of the landscapers who was working a couple of blocks away to mow the lawn.
But the grass has started to grow again…
So the other day I get a text message from Stuart Garber, a lifelong friend, “Alan you should write about Woodstock this weekend.” Previously Stu had asked me to write a story about the fact that his family’s lumber yard is the last family owned lumber yard on Staten Island, after Farrell Lumber closed their doors. Started in the 50’s by Stu’s father and grandfather, on Greenleaf Avenue near the home port, they also now have a second store, Garber’s Do It Best Hardware at 4890 Amboy Road near the Outerbridge.
In August 1969, 40 years ago, (oh man 40 years – some of you weren’t even born yet), I was 18 years old, thin, my hair was getting long, I was about to enter my junior year at St. John’s University, which was still on Schermerhorn Street in downtown Brooklyn, before it moved to Staten Island. I worked full time on the staff of the Howard J Samuels for Governor Campaign. Howard never got the nomination, lost in the primary; the day after he lost, I was with him when Mayor John Lindsay called and asked him to start up Off Track Betting. Howard became Howie the Horse. Couple of years later I became assistant to the President of OTB (eventually I quit to build houses on Staten Island but that’s another story).
So there was a guy who worked in the campaign also named Howard, but this one was Howard Hirsch. He had curly hair and a curly mustache (maybe he had a perm). His claim to fame up until that moment was that he had started something called the Psychedelicatessen (psychedelic delicatessen) an early 60’s hip venue.
Howard Hirsch was asked by the guys running Woodstock to put on an art show to showcase work of some aspiring young hippie artists of the day.
An Aquarian Expedition-
The Woodstock Music and Art Fair.
Howard asked me to bring some friends to Woodstock to help him run the Art Fair.
So I brought my good friend Bobby Garber (that’s why Stuart texted me in the first place), and a few others; and you know, its 40 years later, and I just don’t remember. (I haven’t seen any of these people, except Stuart and Bobby Garber, in years).
We got free tickets, a place to stay, and free meals.
Friday morning I left for Woodstock from Kingston NY, where I had picked up one of our friends. The NY Thruway was still fine, but after we got off of the main highway and started on some of the secondary roads, we began to crawl in the Woodstock traffic.
Eventually, as we approached Bethel, I realized that it made sense to park the car. I pulled into a deli (general store?) and asked the owner if I could leave my car there, which started something, because the owner filled up his lot, side yard, and rear yard, in no time at all after I left. (I can’t remember what kind of a car I drove that day- I remember it was white).
So we started to walk, and caught a ride “on” someone else’s car (people were riding on the trunk and on the roof and on the hood. The communal spirit had begun.
We got to the hotel, which was actually like a 3 or 4 room Inn, and there was a room that was wall to wall mattresses- all next to each other. Not dormitory style, like a room of mattresses. Catch as catch can. No air conditioning.
Then we walked to the fair, to find the Art Show.
The hotel was in “town” (such as it was), and it was a schlep to “Yasgar’s Farm” where the concert (and art show) were being held. Plus there were a lot of people, (hundreds of thousands) so the walk was a journey.
I got to the Art Fair, and this was about the time that they were deciding to make it a free concert. The reason they made it a free concert was that people kept knocking down the fences. During my walk to the art fair I watched (and participated) in fences coming down.
Howard gave me staff passes for everyone (mine is framed on the wall in the kitchen). Remember this was 1969, things were mimeographed. The logo in black print on a green card (construction paper?) that said STAFF, my name, and ART.
It reminds me of the time that JFK came to Staten Island while he was running for President, in 1959. Well he didn’t really come to Staten Island, he took the ferry to Staten Island, where he addressed the crowd at the end of one of the ramps (the old pick up ramp). My father was a big Democrat in those days, but the local Staten Island Democratic Organization was run by the Irish. We went to someone’s office in St George so we could get close to JFK. That person (I can’t remember his name) took a blank card in clear plastic that you pin on your clothes (Hello my name is- w/o the hello my name is), and took out a green magic marker and wrote OFFICIAL on it. He said, we use green because they’re all Irish. It worked. I got right up to JFK on the platform, and did get to shake JFK’s hand. I always remembered while he was shaking 10 hands at a time, I had a whole hand to myself (hey I was 8 or 9 years old).
So back to the Art Show, we are putting up “fences” to hang the art on. As soon as we put up a fence, someone comes and knocks it down, and says- hey it’s a free concert. So up with the fences, down with the fences. Even with art work on them, the hippies insisted upon knocking them down.
There was a van or something parked not far from the art show, and they had an 8 track player in the van, but they only had one tape: Sly and the Family Stone. Sly and Family Stone would start and I thought- great the concert is starting. This happened several times over the next day or so until the concert actually did start.
Then it started to rain.
So much for the art show, we had to protect the art from the rain, so we put it away.
Since it was raining, the smart move was to go back to the hotel and get some sleep. It was hot and muggy in there, but I slept. I can sleep standing up, sleep is never a problem for me. But I remember a couple of my friends couldn’t sleep and wound up outside the hotel all night.
Saturday was the muddy day. It stopped raining. It got nice out.
I walked to the fair, and there was a truck (like a U-Haul) with cases and cases of #10 cans of juices (like the big spaghetti sauce cans), that they were selling for $1 a can. I bought a can.
10 feet away was a hippie, telling people to leave their unfinished cans with him so he could give them to others to take a sip. “Don’t buy from the capitalist pigs, drink for free, or buy and share.” I left the rest of the can with him.
Woodstock Nation.
So it is pretty calm- muddy, but calm.
I walked to the art fair, nothing happening there. Hung around with Howard and others. The van played Sly and the Family Stone, and every time it did, I thought the concert had starting.
I walked around. Saw the information booth. The medical tent. The freak outs. Saw the hog farm. They had this really neat vehicle. Like a little jeep, but small, like a four seater, jet ski size. Really neat.
Bobby Garber (unbeknownst to me) took his staff pass and went back stage. He and a couple of our other friends watched much of the concert from the stage.
All this past weekend on the History Channel they ran a Woodstock show, interviewing some of the people from then, now. I read it on my closed captioned TV.
They said that at the beginning of Woodstock, the press was reporting false information about Woodstock. They were reporting that there were fights, and illness, and chaos.
They also showed the pay phones at Woodstock. They said that so many people called home and told their parents how wonderful it was, who then called their local TV stations, that is how the real story got out that it was a love festival and not chaos.
Being a good son, I called my mother. I didn’t call my father. I didn't not call my father. Wow- what a revelation!!! sorry Zack and Jake.
On the TV, they also showed Woodstock memorabilia, but no staff passes. Wonder what mine is worth? Anyone interested? I’m taking offers. Not!
Back to the concert. All of a sudden I heard Richie Havens. And it wasn’t on the 8 track. The concert had started.
Freedom. Freedom. Freedom. Freedom.
But I wasn’t dug in for music. I listened to Richie Havens set (6 songs), and started to walk around some more. Couldn’t find my friends. (There were hundreds of thousands of people there). (They were on the stage). Didn’t run into anyone else that I knew there either.
I listened to Santana do Soul Sacrifice, although I had never heard of Santana before, but thought that they were great.
There were a lot of announcements about don’t take this acid or that acid. I didn’t take any drugs at Woodstock.
Sometime later Saturday I met a girl who was with a bunch of people whose car was parked somewhat near the art show. And she had a bottle of Chianti. I can’t remember her name, or where she was from, and I never saw her again. I also didn’t really listen to any more of the concert, and really don’t remember anything else about the fair until it was time to leave.
So we all sort of ran into each other back at the hotel, and leaving Woodstock, we caught a ride on the back of someone’s car, to my car, and came home “the conquering heroes”.
Woodstock’s anniversary is now over, my hearing has returned, the ringing has stopped. (Was it stress? Was it lack of vitamins? Was it too much sugar? Who knows.
I have now decided that I am going to start to get into the best shape of my life. No more oatmeal raisin cookies from Pathmark.
But before I run the marathon, I first have to be able to get my sneakers on my feet. However, as soon as I do, the first thing on my agenda, before Labor Day weekend, is that I am going to mow the lawn.
Sunday, August 23, 2009
Saturday, August 8, 2009
The long road to the bottom of the market.
Are we there yet? Are we there yet? Are we there yet?
Those of you that receive my emails of foreclosures have been seeing notes on some of the properties saying things like “This price must be the bottom of the market,” or “this house is another sign of the bottom of the market.” (Those of you who don’t receive these emails, and would like to, please tell me. Those of you who would like to receive the cheapo cheapo listings, that I no longer send out, email me to be put on the cheapo cheapo list).
In preparation of writing this article, I gazed at my crystal ball, read tea leaves, threw tarot cards, and counted the bumps on my head, to find the answers. What did I find? I found Questions, like:
Which market are we looking at for the bottom? We have the stock market, we have the bond market, we have the gold market, we have the Real Estate market, and lots of other markets.
The Stock Market
The stock market reacts to all of the markets. Wall Street says that this recession and fall of the stock market is in response to the crash of the subprime mortgage market. My friends in the market tell me that the market still hasn’t dealt with the inflation, and unemployment, so the stock market has not hit bottom, and could even have another serious down spin, or crash. Of course that’s easy to say.
The Unemployment Factor
Many say that we haven’t peaked in unemployment as yet. That as unemployment grows, more people will lose their houses to foreclosures, and there will be more REO property on the market, less buyers due to unemployment, and on and on.
345,000 US jobs were lost in May 2009, and the unemployment rate jumped to 9.4%, its highest point in 25 years (1984- just before the wild 80’s took off?). Economists said that job losses are likely to continue to pile up through the rest of the year.
Yet the stock market took this as a good sign, because the pace of losses was lower than they anticipated, and that is was showing sustained signs of stabilizing (does stabilizing mean hitting bottom?).
But does the stock market really ever make sense?
There are lots of people selling books and emails, and courses that offer advice on how to buy and sell stocks, and play the market, based upon their formulas which always worked, always did better than the stock market. I just Googled “bottom of the market” and came across one of these guys, who shows how to tell the signs of the bottom of the market. This particular genius stated that after a crash; check the BKX index for a 10% rise…that will be the bottom. He also said when the economy reaches the front page of the NY Times, and every other major newspaper, that is when the market has hit mega bottom, and it is time to buy. He was wrong, the market continued to tank.
I never trusted the stock market. I never trusted the prices of stocks, IPO’s, stock tips, etc. If I got a stock tip, I know how far down the food chain I am, it can’t possibly be any good at that point. It was probably time to sell, by the time I got the tip. Especially after watching the films Wall Street and Pretty Woman. And what about Ivan Boesky, Michael Milken and Nicholas Leeson,… companies manipulate stock prices for their own accounts, and to big Wall Street players. We all know that.
Over the past several years, prior to the crash of the sub-prime mortgage crisis, I sat on the side lines, and watched as the prices of real estate climbed, and the stock market went up, despite our financial losses and costs in running the war in Iraq. (Which at this point seems small). I never could understand why the prices of stocks kept going up, and why the prices of real estate kept going up. Made no sense then.
So why should the stock market make sense now? Has anything changed? Aren’t the big players, just buying up the bargains while they can? They have the money; they borrowed billions from the fed. They had to have done something with the money; they bought stock that they can manipulate later. And didn’t they clean house? Got rid of the older high paid employees? Trimmed the fat, as it were? But mark my words, when the time is right, when the money is flowing again, when their customers are in the mode called buy and spend, they will re-sell these companies and stocks at huge profits. Next time the stock market is on the rise.
Housing Market
Now the housing market is different than the stock market. The major difference is that housing is a necessity shelter. People have to have a place where they can go with a roof over their heads to protect them from the elements. I don’t have to explain the use and necessity of housing.
But in the housing market there are certain constants, and there are always new people entering the housing market, and people ready to make a move to their next house:
People graduate; get married; have babies; get new jobs; get promotions; hit the lottery and/or have other windfalls and inheritances; children grow, and leave the house (empty nesters- I wish).
So there is a constant flow of new people entering the housing market, but what happens during the bad market times (or whatever you want to call whatever it is), these people don’t enter the market.
Why aren’t they entering the market now?
People aren’t entering the market for the obvious reasons, like they are afraid, they want to wait until the bottom is hit, they are waiting for the buy of their life to come knocking on their door. No one wants to buy on the way down, when it could still go down further. When things start to go up however, “when the train is starting to leave the station” according to my friend Jon Salmon, that’s when everyone wants to buy!
While there are good reasons to buy now, and good reasons not to buy now, the result of these people not buying is being felt in the market. Today, there is a growing amount of pent up demand for housing. At some point, we will understand that we have passed the bottom, and that it is “okay” to buy real estate now. At that time, there will be a rush, which will bring the prices up, because of this pent up demand. (Look what happened with the stimulus package to buy a new car and trade in your clunker- all of the pent up demand hit the market and the program was overwhelmed- The amount provided to last for 3 months, was used up in 3 days).
History has this strange habit of repeating itself.
In the late 70’s and again in the early 80’s, our economy was in really bad shape. We had left Vietnam, in disgrace, and the Shah of Iran was overthrown and our embassy was held hostage for 444 days. Our cities were falling apart; New York was on the verge of bankruptcy. Money for mortgages disappeared. Interest rates were up to 16% for a home mortgage, if you could get one.
And the real estate industry, including new home construction, grinded to a halt.
So some of the builders and some of the bankers came up with an idea, where they could lower the interest on the mortgage for a short period (3 years or so), and make them affordable.
Woodbrook Condominiums had just opened its first phase, and they offered a deal where you could get a mortgage at Citibank where the interest rate for the first three years was 10.5%. The builder paid the bank three years interest on the difference in rates, and sales were phenomenal. (they were called negative amortization mortgages).Other builders got the idea, and the market began again, slowly. And then we ran out of inventory, the builders that had the jobs ready to go, became the biggest builders. (Does Mirador ring a bell?).
Perhaps what really kick started the real estate market was the influx of foreign money, in the mid 80’s, as the United States had become such a terrific bargain. Large buyers from Japan, Germany and other European countries went on a buying spree, stimulating the market, as these dollars trickled down. Of course they not only spent money on real estate, they also spent money buying companies, and stocks. Next came the wild days of the 80’s where people made so much money that opulence was the way of the day.
The buzz around was he who has the most toys at the end- wins. Michael Douglas’ movie Wall Street had a scene where he was preaching GREED to his shareholders.
The builders on Staten Island decided that the best way to go was to utilize existing zoning laws and build as many townhouses on a piece of land as was possible. Houses went from 20 feet wide to 12 feet wide. Townhouses’ were built attached on all sides including the rear so the only property would be the 8’ front yard. And the price of houses went through the roof. I remember wondering how a person making $40,000 is going to be able to buy a house that cost $180,000. The price of homes went up faster than the salaries.
But then in the late 80’s government got into the act and all of a sudden the market crashed, and all of the banks built on their houses of cards fell with them.
In New York City, government (city council) decided to change the zoning laws and created something called contextual zoning. This only affected houses in Staten Island and Queens. It meant that from then on, garages counted in the computations of FAR (Floor Area Ratio’s), and other changes that made absolutely no sense to us on Staten Island were enacted. The net effect was that houses would either be 1/3rd smaller, buyers would get less room (no more garages, lofts, splays, etc.) and builders would get less units or yield from their land.
At the same time, President Reagan changed the tax code and eliminated capital gains treatment in real estate. That meant that profit from real estate was taxed as ordinary income, instead of as capital gains, which is taxed at a lower rate.
Bye Bye foreign money, hello recession.
Bye Bye banks, hello RTC (Resolution Trust Corporation.)
And then there were lean years and slow markets, etc., but then a funny thing happened.
Instead of building townhouses, some builders started to build detached one and two family homes, and the people who were ready to move out of their “starter home” into their next home, started buying these homes. The new entry level buyers, with all of that pent up demand, started buying the resale’s from those I just mentioned, and again we ran out of inventory, and prices started to climb again.
Only this time, they were fueled by real easy credit, and the subprime mortgage business, which enabled anyone who could breath and had a driver’s license (or was it a library card) could get a mortgage and buy a house.
So what will happen this time?
Smart money is already buying up the bargains. How much longer do you really believe that you will be able to buy a two family house for under $200,000? C’mon. Maybe we haven’t hit bottom, but some of the merchandise has.
Is now the time to invest in Real Estate?
Yes
Here are some of the reasons why:
First: $8,000 Tax Incentive available at closing- does not get paid back. (Unless you don’t live in the house as your primary residence or violate the other terms). Expires November 30, 2009. (First time homebuyers- haven't owned a home in 3 years)
Second: 96.5% Financing FHA & SONYMA
Third: Lowest Rates in History, and below market programs available.
Fourth: Lowest prices in 20 years
Fifth: This is a buyer’s market- Huge Inventories. Sellers are nervous and are negotiable.
Sixth: High amount of foreclosures and short sales available. There are bargains galore in every area of town, even Million dollar short sales.
Seventh: Prices in the neighborhood that you are interested in are relatively stable- either they are holding their own, increasing, or the pace of decline is slowing.
Eighth: You plan on staying in this home for more than 5 years. That way regardless of the market at this point, it will have stabilized and you will ride out any downturn, and come out ahead in price.
Ninth: Your rent equals a mortgage payment.
Tenth: You can use the tax deduction against your income.
Eleventh: You’ve found the right house in the right area for you. The schools are great. You know that if the market were better, this house would have been sold already, or there would be more competition for it.
Twelfth: You’ve got equity in your house, and want to move to a smaller house (empty nester). Although you will not be getting as much for your sale, you will more than make up for it in your purchase.
Thirteenth: If you don't buy now, you will kick yourself for the rest of your life.
Fourteenth: There probably will never be another market like this one in our lifetimes.
There is a lot of competition for the bargains
While there are lots of good deals out there these days, there are also a lot of savvy real estate professionals in the marketplace that are buying up the good deals wherever they can. Here on Staten Island, because of the large numbers of foreclosures on the market, there are a whole new group of OFF Island Realtors® who have joined SIBOR, because they receive foreclosures (REO) from the banks. These off island realtors also have “off island customers” who have discovered Staten Island as a fantastic bargain basement -the best bang for the buck- (compared to the prices of real estate in Brooklyn and Queens, and are grabbing huge amounts of these great deals as they occur.)
So how will we know that we’ve hit the Bottom of the Market?
We will know for sure that we've hit the bottom of the market, well after we are on the way up. We will read about it in Newsweek and Time Magazine, we will see TV shows about it. More and more of the articles and stories we hear and read about will be talking about the bottom, and then they will be talking about the bottom as having passed the bottom. In other words, we won't know for sure officially that we are at the bottom, until we are well passed it.
So are we there yet?
Yes and No.
The June numbers are in, and new construction sales are up for the 4th month in a row, although still below last year's numbers.
New Building Permits are up for the 4th month in a row, which means that the Building Industry is confident that the worst is over.
I am getting more calls than ever before, and more inquiries and requests to be added to the email list to receive free foreclosure listings.
Some aspects have hit bottom, others haven’t. Some things will get worse, some things are getting better.
Some house prices have hit the bottom, others have a ways to go.
So what is the answer?
…………………to be continued
Those of you that receive my emails of foreclosures have been seeing notes on some of the properties saying things like “This price must be the bottom of the market,” or “this house is another sign of the bottom of the market.” (Those of you who don’t receive these emails, and would like to, please tell me. Those of you who would like to receive the cheapo cheapo listings, that I no longer send out, email me to be put on the cheapo cheapo list).
In preparation of writing this article, I gazed at my crystal ball, read tea leaves, threw tarot cards, and counted the bumps on my head, to find the answers. What did I find? I found Questions, like:
Which market are we looking at for the bottom? We have the stock market, we have the bond market, we have the gold market, we have the Real Estate market, and lots of other markets.
The Stock Market
The stock market reacts to all of the markets. Wall Street says that this recession and fall of the stock market is in response to the crash of the subprime mortgage market. My friends in the market tell me that the market still hasn’t dealt with the inflation, and unemployment, so the stock market has not hit bottom, and could even have another serious down spin, or crash. Of course that’s easy to say.
The Unemployment Factor
Many say that we haven’t peaked in unemployment as yet. That as unemployment grows, more people will lose their houses to foreclosures, and there will be more REO property on the market, less buyers due to unemployment, and on and on.
345,000 US jobs were lost in May 2009, and the unemployment rate jumped to 9.4%, its highest point in 25 years (1984- just before the wild 80’s took off?). Economists said that job losses are likely to continue to pile up through the rest of the year.
Yet the stock market took this as a good sign, because the pace of losses was lower than they anticipated, and that is was showing sustained signs of stabilizing (does stabilizing mean hitting bottom?).
But does the stock market really ever make sense?
There are lots of people selling books and emails, and courses that offer advice on how to buy and sell stocks, and play the market, based upon their formulas which always worked, always did better than the stock market. I just Googled “bottom of the market” and came across one of these guys, who shows how to tell the signs of the bottom of the market. This particular genius stated that after a crash; check the BKX index for a 10% rise…that will be the bottom. He also said when the economy reaches the front page of the NY Times, and every other major newspaper, that is when the market has hit mega bottom, and it is time to buy. He was wrong, the market continued to tank.
I never trusted the stock market. I never trusted the prices of stocks, IPO’s, stock tips, etc. If I got a stock tip, I know how far down the food chain I am, it can’t possibly be any good at that point. It was probably time to sell, by the time I got the tip. Especially after watching the films Wall Street and Pretty Woman. And what about Ivan Boesky, Michael Milken and Nicholas Leeson,… companies manipulate stock prices for their own accounts, and to big Wall Street players. We all know that.
Over the past several years, prior to the crash of the sub-prime mortgage crisis, I sat on the side lines, and watched as the prices of real estate climbed, and the stock market went up, despite our financial losses and costs in running the war in Iraq. (Which at this point seems small). I never could understand why the prices of stocks kept going up, and why the prices of real estate kept going up. Made no sense then.
So why should the stock market make sense now? Has anything changed? Aren’t the big players, just buying up the bargains while they can? They have the money; they borrowed billions from the fed. They had to have done something with the money; they bought stock that they can manipulate later. And didn’t they clean house? Got rid of the older high paid employees? Trimmed the fat, as it were? But mark my words, when the time is right, when the money is flowing again, when their customers are in the mode called buy and spend, they will re-sell these companies and stocks at huge profits. Next time the stock market is on the rise.
Housing Market
Now the housing market is different than the stock market. The major difference is that housing is a necessity shelter. People have to have a place where they can go with a roof over their heads to protect them from the elements. I don’t have to explain the use and necessity of housing.
But in the housing market there are certain constants, and there are always new people entering the housing market, and people ready to make a move to their next house:
People graduate; get married; have babies; get new jobs; get promotions; hit the lottery and/or have other windfalls and inheritances; children grow, and leave the house (empty nesters- I wish).
So there is a constant flow of new people entering the housing market, but what happens during the bad market times (or whatever you want to call whatever it is), these people don’t enter the market.
Why aren’t they entering the market now?
People aren’t entering the market for the obvious reasons, like they are afraid, they want to wait until the bottom is hit, they are waiting for the buy of their life to come knocking on their door. No one wants to buy on the way down, when it could still go down further. When things start to go up however, “when the train is starting to leave the station” according to my friend Jon Salmon, that’s when everyone wants to buy!
While there are good reasons to buy now, and good reasons not to buy now, the result of these people not buying is being felt in the market. Today, there is a growing amount of pent up demand for housing. At some point, we will understand that we have passed the bottom, and that it is “okay” to buy real estate now. At that time, there will be a rush, which will bring the prices up, because of this pent up demand. (Look what happened with the stimulus package to buy a new car and trade in your clunker- all of the pent up demand hit the market and the program was overwhelmed- The amount provided to last for 3 months, was used up in 3 days).
History has this strange habit of repeating itself.
In the late 70’s and again in the early 80’s, our economy was in really bad shape. We had left Vietnam, in disgrace, and the Shah of Iran was overthrown and our embassy was held hostage for 444 days. Our cities were falling apart; New York was on the verge of bankruptcy. Money for mortgages disappeared. Interest rates were up to 16% for a home mortgage, if you could get one.
And the real estate industry, including new home construction, grinded to a halt.
So some of the builders and some of the bankers came up with an idea, where they could lower the interest on the mortgage for a short period (3 years or so), and make them affordable.
Woodbrook Condominiums had just opened its first phase, and they offered a deal where you could get a mortgage at Citibank where the interest rate for the first three years was 10.5%. The builder paid the bank three years interest on the difference in rates, and sales were phenomenal. (they were called negative amortization mortgages).Other builders got the idea, and the market began again, slowly. And then we ran out of inventory, the builders that had the jobs ready to go, became the biggest builders. (Does Mirador ring a bell?).
Perhaps what really kick started the real estate market was the influx of foreign money, in the mid 80’s, as the United States had become such a terrific bargain. Large buyers from Japan, Germany and other European countries went on a buying spree, stimulating the market, as these dollars trickled down. Of course they not only spent money on real estate, they also spent money buying companies, and stocks. Next came the wild days of the 80’s where people made so much money that opulence was the way of the day.
The buzz around was he who has the most toys at the end- wins. Michael Douglas’ movie Wall Street had a scene where he was preaching GREED to his shareholders.
The builders on Staten Island decided that the best way to go was to utilize existing zoning laws and build as many townhouses on a piece of land as was possible. Houses went from 20 feet wide to 12 feet wide. Townhouses’ were built attached on all sides including the rear so the only property would be the 8’ front yard. And the price of houses went through the roof. I remember wondering how a person making $40,000 is going to be able to buy a house that cost $180,000. The price of homes went up faster than the salaries.
But then in the late 80’s government got into the act and all of a sudden the market crashed, and all of the banks built on their houses of cards fell with them.
In New York City, government (city council) decided to change the zoning laws and created something called contextual zoning. This only affected houses in Staten Island and Queens. It meant that from then on, garages counted in the computations of FAR (Floor Area Ratio’s), and other changes that made absolutely no sense to us on Staten Island were enacted. The net effect was that houses would either be 1/3rd smaller, buyers would get less room (no more garages, lofts, splays, etc.) and builders would get less units or yield from their land.
At the same time, President Reagan changed the tax code and eliminated capital gains treatment in real estate. That meant that profit from real estate was taxed as ordinary income, instead of as capital gains, which is taxed at a lower rate.
Bye Bye foreign money, hello recession.
Bye Bye banks, hello RTC (Resolution Trust Corporation.)
And then there were lean years and slow markets, etc., but then a funny thing happened.
Instead of building townhouses, some builders started to build detached one and two family homes, and the people who were ready to move out of their “starter home” into their next home, started buying these homes. The new entry level buyers, with all of that pent up demand, started buying the resale’s from those I just mentioned, and again we ran out of inventory, and prices started to climb again.
Only this time, they were fueled by real easy credit, and the subprime mortgage business, which enabled anyone who could breath and had a driver’s license (or was it a library card) could get a mortgage and buy a house.
So what will happen this time?
Smart money is already buying up the bargains. How much longer do you really believe that you will be able to buy a two family house for under $200,000? C’mon. Maybe we haven’t hit bottom, but some of the merchandise has.
Is now the time to invest in Real Estate?
Yes
Here are some of the reasons why:
First: $8,000 Tax Incentive available at closing- does not get paid back. (Unless you don’t live in the house as your primary residence or violate the other terms). Expires November 30, 2009. (First time homebuyers- haven't owned a home in 3 years)
Second: 96.5% Financing FHA & SONYMA
Third: Lowest Rates in History, and below market programs available.
Fourth: Lowest prices in 20 years
Fifth: This is a buyer’s market- Huge Inventories. Sellers are nervous and are negotiable.
Sixth: High amount of foreclosures and short sales available. There are bargains galore in every area of town, even Million dollar short sales.
Seventh: Prices in the neighborhood that you are interested in are relatively stable- either they are holding their own, increasing, or the pace of decline is slowing.
Eighth: You plan on staying in this home for more than 5 years. That way regardless of the market at this point, it will have stabilized and you will ride out any downturn, and come out ahead in price.
Ninth: Your rent equals a mortgage payment.
Tenth: You can use the tax deduction against your income.
Eleventh: You’ve found the right house in the right area for you. The schools are great. You know that if the market were better, this house would have been sold already, or there would be more competition for it.
Twelfth: You’ve got equity in your house, and want to move to a smaller house (empty nester). Although you will not be getting as much for your sale, you will more than make up for it in your purchase.
Thirteenth: If you don't buy now, you will kick yourself for the rest of your life.
Fourteenth: There probably will never be another market like this one in our lifetimes.
There is a lot of competition for the bargains
While there are lots of good deals out there these days, there are also a lot of savvy real estate professionals in the marketplace that are buying up the good deals wherever they can. Here on Staten Island, because of the large numbers of foreclosures on the market, there are a whole new group of OFF Island Realtors® who have joined SIBOR, because they receive foreclosures (REO) from the banks. These off island realtors also have “off island customers” who have discovered Staten Island as a fantastic bargain basement -the best bang for the buck- (compared to the prices of real estate in Brooklyn and Queens, and are grabbing huge amounts of these great deals as they occur.)
So how will we know that we’ve hit the Bottom of the Market?
We will know for sure that we've hit the bottom of the market, well after we are on the way up. We will read about it in Newsweek and Time Magazine, we will see TV shows about it. More and more of the articles and stories we hear and read about will be talking about the bottom, and then they will be talking about the bottom as having passed the bottom. In other words, we won't know for sure officially that we are at the bottom, until we are well passed it.
So are we there yet?
Yes and No.
The June numbers are in, and new construction sales are up for the 4th month in a row, although still below last year's numbers.
New Building Permits are up for the 4th month in a row, which means that the Building Industry is confident that the worst is over.
I am getting more calls than ever before, and more inquiries and requests to be added to the email list to receive free foreclosure listings.
Some aspects have hit bottom, others haven’t. Some things will get worse, some things are getting better.
Some house prices have hit the bottom, others have a ways to go.
So what is the answer?
…………………to be continued
Subscribe to:
Posts (Atom)