I normally do not write these types of macro economic articles but the housing market is so hyped up (like it was back in 2008), I wanted to memorialize it so that I can look back in 10 years to see what happened.
Although a lot of economists and talking pundits say that 2021-2022 housing growth is not the same as 2008, I can’t help but noticed the similarities:
- 2008 – fueled by relatively “low interest rate” in the 6% range with VERY loose (“liar loan”) mortgage standards
- 2022 – fueled by super low interest rate in the 3-4% range (although it climbed to 5% range in May coupled with free government money and COVID benefits (i.e. no eviction meant renters could stay for free while saving money to buy a house, etc.)
I have been looking to buy a small condo in the low $200 range for my aging mother in a 55+ community since early 2021.
But after being outbid on multiple properties (most successful buyers were bidding $30k to $50k above asking price), I have pretty much given up in hopes of buying one after the bubble pops in the near future
There are three primary (in terms of size) 55+ communities in Monroe Township (Middlesex County), NJ:
Rossmore is the oldest development and based on my tour of the properties and neighborhoods, it is at the lowest end, although due to high housing prices, flippers are starting to remodel these units and selling them at sky-high prices.
Clearbrook is at the middle tier where it is actually divided into 16 subsections where each of these subsections have their own rules and regulations. Thus, some neighborhoods are very nice (i.e. clean landscapes, etc) whereas others are not so nice (i.e. plastic lawn chairs strewn about the property, etc.).
I consider Concordia to be the nicest when compared to Clearbrook and Rossmoor units.
I wanted to give you an example of how crazy emotional people can get when FOMO (fear of missing out) is in full action.
I just got an update email from Redfin about this property:
By any definition, this is a beautiful unit. The original asking price was $309k but Redfin said it was sold for $320k.
Now, $11k above asking price isn’t too bad, except look at this previous sold price from njparcels.net
That’s right, someone bought this property back on August 2020 for $225k and re-sold it for $320k ($95k profit before fees which is roughly a 42% return!)
But there is more. If you click on the map using Redfin website, you will see this:
Yes, that’s right, the property is on a property that has a flood risk of 5/10 which according to FEMA, it “designates Zone X as a low-to-moderate flood area. In this zone, the risk of flooding is reduced, but not completely removed.“
But what most people may not know is that Rossmoor suffered a devastating flood back in 2021 from Tropical Storm Henri where units that normally do not get flooded out were impacted. Some news articles stated that more than 50% of the Rossmoor community were impacted, many without flood insurance because they did not need it.
Google searching “rossmoor monroe nj flood” reveals some devastating pictures:
- Rossmoor community residents in Monroe Township deal with flood-damaged homes after Tropical Storm Henri (NJ.com)
- Middlesex County, Central NJ hit with flooding in wake of Tropical Storm Henri (MyCentralNJ.com)
- See photos of flooding, aftermath from Henri dumping 9 inches of rain on parts of N.J.
I love nature and I am NOT some crazy climatologist either but from what I have seen, the weather pattern seems to be getting more erratic so the last thing I would want is to purchase a property that has a decent chance of flooding risk.
I have no idea who the sellers and buyers are for this particular property but I used it to share my non-professional opinion that housing market is due for a severe correction (because it always corrects itself at the end).
But having owned a primary home that was flooded, I sincerely hope that the new buyers were aware of the flood risk.
In addition, we can now see that the millennial’s fad of wanting to rent vs own is not without risk. Owning your home can provide you with a piece of mind that you cannot get from renting.
Lastly, for God’s sake, your primary residence should be looked as a place to live. It should NOT be looked as an investment or an ATM.
Thanks for reading my ramblings and as always, caveat emptor!