Get with the times NJ

From CNBC:

Backyard bungalows are becoming big business for homeowners and builders

They’re not just she-sheds or he-sheds or granny pods or tiny homes. The latest housing trend in the backyard is now front and center for a new breed of homebuilder and landlord.

Second homes, formally called auxiliary dwelling units (ADUs), are cropping up in back and side yards across America, acting as either rental units or additional space for aging parents and still-nested adult children.

Growth in the sector has been fueled by changes to local and state zoning rules. Some municipalities are struggling with a lack of affordable housing and see these additional units as one remedy.

In 2010 Portland, Oregon, waived impact fees for ADUs, making them significantly less expensive. As a result, the number of ADU permits jumped from 86 in 2010 to 660 in 2018, according to a count by accessorydwellings.org.

In California, when a 2017 state law forced cities to relax ADU regulations, permits jumped even more dramatically.

And that all translates into big growth for ADU builders, like Prefab ADU, based in the California Bay Area. It built and installed about 100 ADUs this year but expects to expand that to at least 1,500 next year.

Posted in Demographics, Economics, National Real Estate, New Development | 87 Comments

The Trump Effect

From CNBC:

Robert Shiller: Recession likely years away due to bullish Trump effect

Nobel-prize winning economist Robert Shiller believes a recession may be years away due to a bullish Trump effect in the market.

According to the Yale University professor, President Donald Trump is creating an environment that’s conducive to strong consumer spending, and it’s a major force that should hold off a recession.

“Consumers are hanging in there. You might wonder why that would be at this time so late into the cycle. This is the longest expansion ever. Now, you can say the expansion was partly [President Barack] Obama,” he told CNBC’s “Trading Nation” on Friday. “But lingering on this long needs an explanation.”

Shiller, a behavioral finance expert who’s out with the new book “Narrative Economics,” believes Americans are still opening their wallets wide based on what President Trump exemplifies: Consumption.

“I think that [strong spending] has to do with the inspiration for many people provided by our motivational speaker president who models luxurious living,” said Shiller.

Despite Shiller’s optimistic stance, he cautions not everything is rosy in the economy. His Shiller PE Ratio, also known as CAPE, tracks the price-to-earnings ratio based on average inflation-adjusted earnings over the last 10 years. He cautions it’s still at a concerning level.

“I’m not saying that I’m so bullish because I have a CAPE ratio that is bearish,” said Shiller, who predicted on “Trading Nation” last March there was a 50% chance the economy would tip into a recession within 18 months.

Yet, he’s sticking with the idea that the economy and markets should have a lot of runway left for gains if President Trump remains in office due to his pro-spending, pro-business narrative.

Shiller contends the next recession may not hit for another three years, and it could be mild.

“Let’s not make the mistake of assuming it’s right around the corner,” Shiller said. “If the economy is strong, which is what he built is case on, ‘make America great again,’ he has a good chance of getting re-elected.”

Posted in Economics, Employment, National Real Estate, Politics | 15 Comments

NJ UE 3.1%

From NJBIZ:

NJ unemployment dips again in September

While job levels remained relatively unchanged, the state’s unemployment rate continued its downward trend for the sixth month in a row.

September’s 3.1 percent rate marked a 0.1 percentage point drop – continuing the trend of once again registering New Jersey’s lowest monthly rate since recording began in 1976. That’s according to data released by the New Jersey Department of Labor and Workforce Development on Thursday, citing estimates from the U.S. Bureau of Labor Statistics.

New Jersey’s unemployment rate also came in under the national rate of 3.5 percent.

Total non-farm wage and salary employment fell by 200 to a seasonally adjusted level of 4,197,200, LWD said. But, year over year, employment was up by 44,600 jobs. Compared with September 2018, 43,400 of gains were in the state’s private sector and 1,200 in the public.

Five out of nine industries in the state’s private sector exhibited gains for September: “other services” were +3,100; leisure and hospitality +2,200; financial activities +1,000; and both construction and manufacturing +500, each.

Professional and business; trade, transportation and utilities; information; and education and health services all recorded losses in September, down by 4,100, 1,100, 800 and 400, respectively.

LWD revised total nonfarm employment estimates for August, lowering the number by 3,000, to show a decrease of 1,900 jobs — whereas preliminary estimates had indicated an increase of 1,100 jobs. However, the August unemployment rate remained unchanged at 3.2 percent.

Posted in Economics, Employment, New Jersey Real Estate | 27 Comments

Housing a bright spot

From Housingwire:

Federal Reserve report cites “rebounded” housing market

The housing market was the bright spot in the Federal Reserve’s monthly economic snapshot released on Tuesday.

While consumer spending “softened,” business equipment spending was “sluggish,” and payroll growth has been “moderate,” the housing market has “rebounded,” the Fed said.

“Housing activity indicators displayed further gradual improvement in August,” the report said. “Single-family housing starts and permits have rebounded over the past three months. New and existing home sales rose in August. A still-strong labor market and low mortgage rates could continue to provide support to housing.”

Under the sub-head “Favorable mortgage rates spur the housing market,” the Fed pointed to August’s 7.1% gain in new-home sales to 713,000 at a seasonally adjusted and annualized pace, which was 18% above the year-earlier month. And, the Fed cited the 1.2% gain in existing home sales in August that put the sales pace 2.9% above a year earlier. 

The report also singled-out homebuilding for mention. Housing starts jumped 12.3% in August, the highest level since June 2007, the Department of Commerce reported last month.

“It appears that single-family starts are finally beginning to respond to the steep decline of mortgage interest rates that has occurred over the past year,” the report said. “Single-family housing starts rose 4.4% in August, the third consecutive monthly increase, and are now up 3.4% on a year-over-year basis.”

The downside for the housing market has been the shortage of homes for sale, the report said.

“Favorable labor market conditions and a substantial decline in mortgage interest rates continue to act as positive forces,” the report said. “Inadequate inventories in affordable price ranges continue to be a drag on sales and to fuel home-price increases.”

Posted in Demographics, Economics, Employment, National Real Estate | 117 Comments

Hey New Jersey – Trump didn’t do anything to your home values

From Patch:

Don’t Blame Trump Tax Cuts For Essex County Home Values: Opinion 

Is President Donald Trump responsible for home values in Essex County? Point the finger somewhere else, some local residents say.

Recently, ProPublica and Fortune released a list of the 30 counties which have seen the largest percentage declines in the values of their homes after the Trump administration enacted its controversial Tax Cuts and Jobs Act of 2017.

Essex County – where homeowners saw an 11.3 percent dip – was right at the top of the list.

The 2017 tax reforms capped federal deductions for state and local real estate and income taxes at $10,000 a year and also eliminated some mortgage interest deductions. However, that’s not the reason property values are stagnating in New Jersey, said Adam Kraemer, a Republican candidate for the Essex County Board of Chosen Freeholders.Subscribe

The study and the reporting of the study, may be accurate on a technical basis. but is misleading in telling what is really occurring because of the omission of certain other parts of the economic situation in the state of New Jersey and omitting other parts of the changes in the tax code from 2018 forward. The capping of the the state and local tax credit at $10,000 against federal income tax in combination of lower federal tax rates for all and larger standard deductions for federal income tax fillers that started in tax year 2018 was a progressive tax change. People, with less income rent more often and if they own homes they tend to be of lesser value and thus subject to less property tax. Those with lower income, also tend to have less state income taxes. Thus lower income tax filers did not benefit from previous federal tax code, with regard to state and local taxes being deductible from federal income taxes. So the negative impact of the federal tax code change was on people in New Jersey and in other places, with high incomes who paid a lot in state income tax, and/or those with high value homes that paid a lot in property taxes. The reduction in corporate tax rate in the nation has resulted in increased wages and increased job growth across the nation as corporations had more cash on hand to invest and grow business. Even in New Jersey, a state know for high business taxes and extensive regulation on business job growth occurred and wages increased. Thus, the tax code has generally, been good for the nation and for New Jersey.

Posted in Demographics, Economics, Employment, Humor, New Jersey Real Estate | 123 Comments

Mortgage company CEO wants tax break so he can write more mortgages

From Marketwatch:

Opinion: This tax break for first-time home buyers could keep the housing market afloat

It’s not easy being a home buyer these days. U.S. home prices are high, housing inventory is low, and consumer sentiment is wobbling. A federal tax break for first-time home buyers will help.

Even with the recent interest rate cuts, there hasn’t been a material increase in the number of homes being purchased: new home sales dropped 12.8% in June, the largest decline since July 2013, and continue to be sluggish. Instead, these cuts have boosted the refinance market. The total volume of mortgage refinancings is on track to swell $678 billion in 2019 from $458 billion in 2018, the Mortgage Bankers Association reports. This refinancing boom should continue at least for the next several months, given that more than 8 million homeowners are eligible to save  $266 per month on average by lowering their monthly payment.

As the purchase market remains soft, I’m concerned that this deceleration will continue, especially as the broader U.S. economy weakens. Having managed a large mortgage company during and after the financial crisis of 2008, I know that it’s vital for the U.S. housing market to remain robust and resilient. 

That’s why a tax break for first-time owners is necessary so that they can more easily afford to purchase a home. Most of these first-time buyers are millennials. This generation of young Americans make up the largest group of home buyers, at 37% of the overall market.

It’s time to re-adopt the tax break for first-time home buyers at the federal level. A similar measure was introduced in 2008 and provided a credit up to $7,500 for first-time home buyers. This initiative could be structured as a zero-interest loan that is paid back over several years or as a full credit. This eligibility for this credit could be targeted exclusively to first-time buyers over the next two years, which could be enough time for many young Americans to take advantage of this opportunity. 

While many states have their own versions of first-time home buyer programs, it’s important to have a nationwide initiative so that home buyers are treated equally and fairly across the country. Pairing such a narrow-in-scope credit with the mortgage interest-rate tax deduction should serve as tailwinds for home buyers who are currently unable to purchase a home, even though they have the capability and intention to repay a loan. Such a tax break is indeed a counter-cyclical policy that should help to sure up confidence in the housing market before it deteriorates more fully.

Posted in Economics, Housing Bubble, Housing Recovery, Mortgages, National Real Estate | 101 Comments

Poverty falls in NJ

From NJ Spotlight:

Poverty in New Jersey in 2018 by County

The percentage of New Jerseyans living in poverty last year dropped below 10% for the first time this decade, although the proportion of the state’s residents who are considered poor remained higher than before the Great Recession, according to the most recent survey by the U.S. Census Bureau.

Given the 2018 American Community Survey also found the median household income to be stagnant when inflation was figured in, this means the typical family found itself in no better shape last year than in 2017.

Taken together, the two sets of data paint a positive, though not necessarily rosy, picture of New Jersey households’ financial health.

“New Jersey’s economy continues to improve, but not all residents are benefitting from this progress,” said Brandon McKoy, president of New Jersey Policy Perspective (NJPP), a left-leaning think tank. “Poverty rates remain higher than pre-Recession levels. Far too many New Jersey families still struggle to pay for basic expenses like food and childcare.”

New Jersey’s median household income last year was $81,740. That was slightly higher than in 2017, though adjusted for inflation, it was actually $23 lower — but when accounting for the margin of error that difference is not considered significant. Last year’s median income was about 3% higher than the 2016 inflation-adjusted income and 7% more than in 2014; both of those changes are considered statistically significant.

The drop in the statewide poverty rate to 9.5% of all New Jerseyans, down a statistically significant 0.5% from 2017, was welcomed by advocates for those who are of low income. It was the lowest rate since 2009. Still, advocates noted that the rate remains higher than at the beginning of the 2007-2009 Great Recession, when less than 9% of New Jersey residents were considered poor by federal standards.

“Any drop in the poverty rate is a welcome development, but it cannot and should not obscure the fact that poverty in our state last year remained significantly higher than at the beginning of the recession 1l years ago,” said Melville D. Miller Jr., president of Legal Services of New Jersey. “That’s deeply disturbing and shameful.”

Posted in Demographics, Economics, Employment, New Jersey Real Estate | 82 Comments

Hey New Jersey – Here’s what Trump did to your home values

From ProPublica:

Trump’s Trillion-Dollar Hit to Homeowners

Posted in Economics, National Real Estate, New Jersey Real Estate, Politics, Property Taxes | 45 Comments

Will rent control work in Cali?

From HousingWire:

California enacts statewide rent control

During a ceremony Tuesday at a senior citizen center in Oakland, California, Gov. Gavin Newsom signed a statewide law that controls how much landlords can charge for rent. Starting in 2020, the law caps annual rent increases to 5% plus inflation.

The governor called Assembly Bill 1482 the “nation’s strongest statewide renter protections.”

With Newsom’s signature, California became the second state in the nation to pass a rent cap. Oregon passed a similar law in March.

In addition to controlling rent increases, the California law requires landlords to have “just cause,” such as failure to pay rent, before terminating a lease. That will prevent property owners from evicting tenants to rehab units and boost rents.

The California Rental Housing Association, representing more than 22,000 rental property owners, issued a statement in opposition to the rent-cap law.

“It is unfortunate that political expediency won over a comprehensive housing solution that will actually move the state closer to the Governor’s goal of creating 3.5 million new housing units,” the statement said.

The new law was also opposed by the National Multifamily Housing CouncilNational Apartment AssociationMortgage Bankers AssociationCalifornia Mortgage Bankers Association, and other housing and mortgage industry groups.

When the new law goes into effect in January it will roll back any rent increases that occurred after March that are above the allowed caps. But no-fault evictions that happen in that time cannot be rolled back, which prompted some landlords to evict low-paying tenants so they could raise rents on their units, according to the Los Angeles Times.

Posted in Economics, National Real Estate, New Development | 85 Comments

Housing optimism dips, but still very high

From Yahoo Finance:

US housing market optimism slides

Optimism about the U.S. housing market may have peaked after hitting its all-time high in August, according to a measure of consumer sentiment.

The Fannie Mae Home Purchase Sentiment Index slid 2.3 points in September to 91.5, down from 93.8, its peak a month earlier. It was the greatest percentage point loss since December 2018. This follows a steep increase in sentiment in the first eight months of 2019. The waning optimism may reflect anxiety about the national economy after the yield curve inverted, signaling a looming recession, and amid weak manufacturing and services data and the September jobs report, which showed hiring slowed.

“Consumer sentiment remains relatively strong overall, though uncertainty about the economy and individual financial circumstances appear to be weighing on housing market attitudes a bit more than a month ago,” said Doug Duncan, senior vice president and chief economist of Fannie Mae, in a statement.

The latest Fannie Mae National Housing Survey found that just over half of Americans said the economy is on the right track, but a strong 40% said it is on the wrong track. The study showed that more Americans think the time is right to buy or to sell, though respondents favored selling over buying 44% to 28% respectively.

As the preference to sell rose, fewer Americans believe home prices would rise in the next 12 months. Only 29% of respondents thought home prices would continue to rise in the next 12 months, a 7 percentage point drop from last month, continuing a three-month decline. Home price growth was unchanged in July, after a 15-month slowdown, according to the latest S&P CoreLogic Case-Shiller national home price index.

Posted in Demographics, Economics, Employment, Housing Recovery, National Real Estate | 84 Comments

Not time to drop?

From HousingWire:

CoreLogic says U.S. home-price gains will accelerate through 2020

CoreLogic Chief Economist Frank Nothaft said the pace of home-price gains will quicken over the next 12 months as low mortgage rates give buyers the ability to pay more for properties.

Home prices probably will increase 5.8% in the 12 months through August 2020, Nothaft said in an exclusive interview with HousingWire. That’s a faster pace than the 3.6% growth seen in August 2019 from a year earlier. 

Rates for fixed mortgages will probably stay below 4% through the end of 2020, Nothaft said. Cheap financing allows homebuyers to qualify for a bigger loan because the amount they can borrow is based on their monthly payment, which drops as financing costs fall.

“We’re in a very special environment for housing demand – for the first time since at least World War II we have mortgage rates below 4% while at the same time the unemployment rate is below 4%,” Nothaft said. “That’s a golden period that will stimulate activity, and we expect sub-4 mortgage rates and sub-4 unemployment rate through at least the end of 2020.”

Posted in Economics, Employment, Housing Bubble, National Real Estate | 81 Comments

Not so good in NYC

From the very rarely cited Fox News:

NYC housing prices in near ‘free fall,’ conditions mirror recession era following tax hikes

The Manhattan real estate market stumbled in the third quarter of 2019, new reports show, as prices plunged and fewer buyers were willing to purchase higher-priced properties in the wake of two recent tax increases.

The median sales price for properties fell 17 percent from the same quarter last year, to $999,950, according to new data from CORE. The average sales price dropped 12 percent, to $1.64 million. 

Condo sales fell 8 percent, logging 946 transactions. Co-op sales, on the other hand, were up a modest 2 percent year over year.

“The third quarter of 2019 was undoubtedly the most challenging quarter in recent memory, especially for condo sales,” Garrett Derderian, managing director of market analysis at CORE, said in a statement. “Market prices have gone from what was once described as the kindest, gentlest correction to a near free fall. The last time conditions were described in such a way was in the height of the recession.”

Posted in Economics, Housing Bubble, NYC | 167 Comments

Retire in Bayonne … or Clifton

What the f*ck?

Looking to retire in New Jersey? This Hudson County city is the place to go, rankings say

Bayonne is the “it” place in New Jersey — for seniors.

The Peninsula City has been ranked the No. 1 city in the state to retire, according to rankings by Chamberofcommerce.org.

Bayonne Mayor Jimmy Davis, not surprisingly, was not surprised. The lifelong city resident pointed out “services provided by our Office On Aging, the Bayonne Economic Opportunity Foundation (BEOF), senior centers, senior apartment buildings … and non-profit organizations.”

“Bayonne is a walkable community that also offers bus service and light rail. In the very near future, we will also be able to offer ferry service to Manhattan. All of these factors make Bayonne an attractive, convenient place for active seniors.”

Bayonne, sandwiched between the Hudson River and Newark Bay, was ranked the 31st-best city in the entire country to retire, behind the likes of Yonkers, New York (13th), Waukesha, Wisconsin (26th) and Boca Raton, Florida (28th). Two Massachusetts cities, New Bedford and Quincy, are Nos. 1 and 2, respectively. New York City is No. 4.

Sorry Jersey City, but Clifton, in Passaic County, was the only other New Jersey City to make the list, at No. 99.

The website examined all cities with more than 10,000 people and ranked them in eight different categories, such as percentage retirees in the 65-and-older city population, overall poverty rate, percentage of the college-educated residents, median monthly housing costs and violent crime per 100,000 population.

Some residents ridiculed the results, while other pointed out items they say are drawbacks to living in Bayonne.

“Is this a joke,” Joy Ciarla said on a Facebook post that asked for Bayonne residents’ reaction to the rankings.

Posted in Demographics, Economics, Humor, New Jersey Real Estate | 51 Comments

Turns out millennials are not all that different

From the WSJ:

Millennials Continue to Leave Big Cities

Large U.S. cities lost tens of thousands of millennial and younger Gen X residents last year, according to Census figures released Thursday that offer fresh signs of cooling urban growth.

Cities with more than a half million people collectively lost almost 27,000 residents age 25 to 39 in 2018, according to a Wall Street Journal analysis of the figures. It was the fourth consecutive year that big cities saw this population of young adults shrink. New York, Chicago, Houston, San Francisco, Las Vegas, Washington and Portland, Ore., were among those that lost large numbers of residents in this age group.

The drop in young urban residents last year was smaller than in 2017, when big cities lost nearly 54,000 residents in this age group. But the sustained declines signal a sharp reversal from the beginning of the decade, when young adults flooded into cities and helped lead an urban revival.

Separate Census figures show the majority of people in these age groups who leave cities move to nearby suburbs or the suburbs of other metro areas.

City officials say that high housing costs and poor schools are main reasons that people are leaving. Although millennials—the cohort born between 1981 and 1996—are marrying and having children at lower rates than previous generations, those who do are following in their footsteps and often settling down in suburbs.

Posted in Demographics, Economics, National Real Estate | 104 Comments

Murphy blows it

From the Star Ledger:

N.J. public worker pension investments fall short 

New Jersey’s government-worker pension fund investments fell short in the fiscal year that ended in June.

The pension fund returned 6.27 percent, trailing the 7.5 percent the pension system assumes it will earn on investments over the long term.

The public pension fund is among the worst-funded in the U.S. but has been improving as the state increases how much money it contributes each year. Investment earnings play a big role in the health of the fund, as well.

Investment-grade credit and real estate were “bright spots” in the performance of the pension fund’s portfolio last year, Division of Investment Director Corey Amon told the State Investment Council Wednesday. Investment-grade credit returned more than 10 percent and real estate was up 8.7 percent, according to Division of Investment reports.

Private equity, part of the state’s alternative investment program, returned 10 percent. It has in recent years been the fund’s best-performing asset class.

U.S. equities were up 7.85 percent but suffered somewhat because the pension fund’s U.S. equities portfolio focused on small cap stocks, which underperformed, and value stocks while holding fewer growth stocks that actually did better than expected, Amon said.

Shortly before leaving office, Gov. Chris Christie lowered the assumed rate of return from 7.65 percent to 7 percent. Gov. Phil Murphy reversed course, citing the hardship that placed on the state and local governments, which would have had to come up with another $700 million in pension contributions.

Murphy set the assumed rate of return at 7.5 percent, putting in place a plan to gradually reduce it to 7.0 percent in 2023.

Posted in Economics, New Jersey Real Estate, Politics | 20 Comments