New Jersey Real Estate Report

Mortgage rates tick back up a bit this week. I was expecting a slight drop in rates due to the 10Y yield falling. However, it seems that in the past 2 days the yield did recover, and I’m sure with margins so thin, lenders can’t afford to give back gains.

Mortgage Rates for Single-Family Homes

On the mortgage activity front, applications decline again. However, the decline was largely due to another significant drop in refinancing activity.

U.S. mortgage applications fell for a third straight week, dragged down by a decline in home refinancings to a 16-month low even as interest rates dipped, an industry trade group figures showed on Wednesday.

Mortgage applications decrease: MBA

The group’s seasonally adjusted index of refinancing applications dropped 6.3 percent to 1,484.3 compared with 1,584.1 in the previous week. The index fell for a sixth straight week, and volume was at its lowest level since the week ended June 25, 2004 when the index reached 1,386.9.

The purchase index however, did increase a bit.

The MBA’s seasonally adjusted purchase mortgage index rose 0.8 percent to 476.2 from the previous week’s 472.3. The index is considered a timely gauge on U.S. home sales.

Caveat Emptor,
Grim

I don’t drink coffee I take tea my dear
I like my toast done on one side
And you can hear it in my accent when I talk
I’m an Englishman in New York

Today’s interlude comes to us from a Brit living in NYC. While his commentary on the bubble is UK-centric, I think it would be good for readers to get a bit of exposure to this issue, and not just on a national level, but an international one.

House of Cards

“Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one.” - Charles Mackay, Extraordinary Popular Delusions and the Madness of Crowds

Caveat Emptor!
Grim

Sorry to inform you all, but we are no longer the highest median household income state in the country. According to Census data released yesterday, we’ve lost the top honors to Connecticut.

N.J. loses median income bragging rights to Conn.

Connecticut, with a median household income of $56,409, supplanted New Jersey as the country’s highest wage state in 2003, the most recent year available. New Jersey slid to second, at $56,356, followed by Maryland, Massachusetts and New Hampshire.

The fact that New Jersey had the highest median household income in the country was often used as a rationalization for the bubble prices here. Now, while I may be nit picking over a few dollars, the truth is we can no longer claim that honor when it comes to median income.

Now, granted, those are 2003 dollars and it’s 2005, but I’ll argue wage growth in NJ has largely been unchanged over that period. I asked the question once before, with the median household income in the mid $50,000 range, who exactly can afford to buy a home in New Jersey?

The median family making $56,000 probably doesn’t have $50,000 in savings but let’s say they do. They probably have a bit of credit card debt, say $300 a month and a car payment of $300 a month (hey, I’m being generous here). Figure roughly $700 a year in HOI, and about $6000 in taxes..

Plug that into whatever trusty affordability calculator you use and see what you get. I got somewhere around $150,000 as a top end estimate. So, let me ask you, how are these folks stretching to buy homes? Easy. Use an I/O mortgage, Option-ARM mortgage, or some other Neg-Am mortgage. Maybe they borrowed against their 401K for a downpayment, dipping into their savings every month to make ends meet (and hoping for a huge payout in a year or two). Maybe they bought with a 1.25% teaser IO (like one I heard on the radio yesterday, where the buyer can find themselves owing 125% of the original mortgage amount) not realizing what the heck they were doing. Or maybe they thought they could beat the market, using one of these loans as a high leverage play, hoping to get out before the real payments set in.

Caveat Emptor,
Grim

Welcome to another edition of Lowball!

Lowball! takes a look at home sales over the past week from a very different perspective. For those new to Lowball!, a lowball offer is when a buyer offers a significantly lower bid than asking in hopes that the seller accepts the offer. We take a list of home sales over the past week and pick out the sales that have the highest percentage difference between asking price and selling price.The reason for Lowball! is to show buyers that the market has changed and buyers now have considerably more leverage than sellers. Just a short time ago, lowball offers would have been laughed at and discarded, however, not any more. The fact that so many under-asking offers are being accepted is clear proof that the market is changing.

The list does not contain all sales, I hand-pick the most interesting sales from the list. These listings might be the highest dollar drops, biggest percentage reductions, or sales in towns that are thought to still be ‘hot’. Please note, even with double digit percentage reductions, these homes are still incredibly overpriced. This week I tried to grab listings that were more affordable than many I’ve posted in the past.

On to the list!

MLS# 2096239 - West Milford
Asking Price $189,000 (Originally Asking $219,000
Selling Price $150,000 (20.6% Lowball, 31.5% off OLP)

MLS# 2110494 - Mountainside
Asking Price $499,000
Selling Price $425,000 (15% Lowball)

MLS# 2100710 - Bayonne
Asking Price $395,000 (Originally Asking $425,000)
Selling Price $340,000 (14.1% Lowball, 20% off OLP)

MLS# 2108573 - Oakland
Asking Price $429,000
Selling Price $375,000 (12.8% Lowball)

MLS# 2087115 - Madison
Asking Price $1,250,000
Selling Price $1,100,000 (12% Lowball)

MLS# 2095044 - Plainfield
Asking Price $269,900
Selling Price $240,000 (11.1% Lowball)

MLS# 2106708 - Raritan
Asking Price $289,900
Selling Price $260,800 (10% Lowball)

MLS# 2093756 - Clifton
Asking Price $399,900
Selling Price $360,000 (10% Lowball)

MLS# 2084434 - Vernon
Asking Price $310,000 (Originally $324,000)
Selling Price $280,000 (9.7% Lowball, 13.6% off OLP)

MLS# 2082433 - New Providence
Asking Price $439,000
Selling Price $399,000 (9.1% Lowball)

MLS# 2069885 - Wayne
Asking Price $1,155,000 (Originally $1,225,800)
Selling Price $1,060,000 (8.2% Lowball, 13.5% off OLP)

And for the reader that requested Morristown. For the other readers that requested, I didn’t forget you.

MLS# 2108112 - Morristown
Asking Price $219,900
Selling Price$210,000 (4.5% Lowball)

Caveat Emptor!
Grim

In the spirit of the holiday season I thought I’d post up the lyrics to a Shania Twain song that I think fits the season well..

Ka-Ching
By Shania Twain

We live in a greedy little world–
that teaches every little boy and girl
To earn as much as they can possibly–
then turn around and
Spend it foolishly

We’ve created us a credit card mess
We spend the money that we don’t possess
Our religion is to go and blow it all
So it’s shoppin’ every Sunday at the mall

All we ever want is more
A lot more than we had before
So take me to the nearest store

Can you hear it ring
It makes you wanna sing
It’s such a beautiful thing–Ka-ching!
Lots of diamond rings
The happiness it brings
You’ll live like a king
With lots of money and things

When you’re broke go and get a loan
Take out another mortgage on your home
Consolidate so you can afford
To go and spend some more when
you get bored

All we ever want is more
A lot more than we had before
So take me to the nearest store

[Repeat Chorus]

Let’s swing
Dig deeper in your pocket
Oh, yeah, ha
Come on I know you’ve got it
Dig deeper in your wallet
Oh

All we ever want is more
A lot more than we had before
So take me to the nearest store

[Repeat Chorus]

Can you hear it ring
It makes you wanna sing
You’ll live like a king
With lots of money and things
Ka-ching!

Caveat Emptor!
Grim

P.S. Please don’t hold the fact that I listen to country music against me..

New Home Sales Hit Record Level in Oct.

Sales of new homes soared at a record pace in October in what could be a last hurrah for the booming housing market.

The Commerce Department said that sales of new single-family homes shot up by 13 percent last month, the biggest one-month gain in more than 12 years. The increase pushed sales to an all-time high seasonally adjusted annual rate of 1.42 million units.

The increase confounded analysts who had been predicting that new home sales would decline by 1.8 percent, reflecting continued increases in mortgage rates. It was possible that the unexpected surge reflected a final rush by buyers to get into the market before mortgage rates climb higher.

Link to the Census Bureau Report:
October New Residential Sales

I’ll let you folks draw your own conclusions. I expected a much more significant decline, both in sales numbers and median price.

Caveat Emptor,
Grim

National Foreclosures Increase Almost 19% in October

RealtyTrac, the leading online marketplace for foreclosure properties, today released its October 2005 Monthly U.S. Foreclosure MarketReport, which showed 81,382 properties nationwide entered some stage of foreclosure in October, an 18.6 percent increase from the previous month. The report shows an October national foreclosure rate of one foreclosure for every 1,422 U.S. households.
…
New Jersey foreclosure rates were the highest in the country, with one foreclosure for every 422 households, and New Mexico foreclosures ranked third highest, with one property in every 601 in foreclosure.

Caveat Emptor,
Grim

Hot off the wire..

Existing Home Sales Decline in October.

Home Sales in the Northeast Decline 7.4% compared to last month (seasonally adjusted). The unadjusted fall in the Northeast was 10.6% vs last month, and 1.1% versus last year.

Existing Home Sales were expected to come in anywhere from 7.20M to 7.30M, but instead dropped significantly to 7.09M.

Nationally, the months supply increased from 4.6 in September to 4.9 in October, a whopping 14.0% percent from last year.

Existing Home Sales

More to Follow.

Caveat Emptor,
Grim

Big pharma has always been a big breadwinner for the state, but Whitehouse Station based Merck is cutting in a big way. Today, Merck announced cuts of 11% of it’s workforce, about 7000 jobs, in addition to closing down 5 plants (I’m still trying to find out more information on locations). This, just on the heels of an 825 person cut announced last month.

Merck to Cut 7,000 Jobs, Close 5 Plants in Restructuring Plan

You can’t deny at least some impact to the NJ economy based on cuts of these proportions, and even more disconcerting is the fact that CEO Richard Clark called these actions only the first steps in restructuring.

Caveat Emptor,
Grim

It’s time for yet another episode of Price Reduced! For all the newcomers to this blog, Price Reduced! takes a good look at a handful of significant price reductions across Northern NJ. The purpose of this exercise is to serve as proof that the Northern New Jersey real estate market has long since been overvalued and has started the long hard decline back to the mean. These listings are in no way an endorsement by myself, nor do I believe they are a bargain or a value. Even reduced, I still believe these homes are still grossly overpriced. With that, the listings please!

MLS# 2218495 - Belleville, NJ
Original Price $210,000
Reduced Price $155,000 (26.2% Reduction)

MLS# 2060526 - Hardyston, NJ
Original Price $1,199,900
Reduced Price $989,900 (17.5% Reduction)

MLS# 2093259 - Clifton, NJ
Original Price $300,000 (Reduced from $329,900)
Reduced Price $249,999 (16.7% Reduction)

MLS# 2200794 - Millburn, NJ
Original Price $1,550,000
Reduced Price $1,300,000 (16.1% Reduction)

MLS# 2210412 - Parsippany, NJ
Original Price $389,900
Reduced Price $329,900 (15.4% Reduction)

MLS# 2101635 - Newark, NJ
Original Price $699,900
Reduced Price $599,999 (14.3% Reduction)

MLS# 2203333 - Bloomfield, NJ
Original Price $725,000
Reduced Price $625,000 (13.8% Reduction)

MLS# 2200880 - Madison, NJ
Original Price $1,495,000
Reduced Price $1,295,000 (13.3% Reduction)

MLS# 2108706 - Mendham, NJ
Original Price $1,425,000
Reduced Price $1,250,000 (12.3% Reduction

MLS# 2211051 - Roxbury, NJ
Original Price $439,900
Reduced Price $390,000 (11.3% Reduction)

MLS# 2095841 - Blairstown, NJ
Original Price $640,000
Reduced Price $570,000 (11% Reduction)

MLS# 2212566 - Wayne, NJ
Original Price $999,999
Reduced Price $899,999 (10% Reduction)

And now, for some jaw dropping statistics (GSMLS Only)..

Reduced Listings This Week: 554
Average Price Reduction: 4.12%
Total Dollar Reduction: $12,015,099

I tried to grab a set of towns I haven’t grabbed before. If someone asked for a particular town and I didn’t include it, just please reply to this post and I’ll drop one or two in for you.

Now, to all the buyers and readers of this blog, I am not posting this information for you to drool over thinking these are great deals. These are not great deals. These are the first price reductions along a very long road downward. If I threw a knife up into the air, would you try to catch it on the way down? No, you’d wait until it hit the ground and then pick it up. The same rule applies here. Alot of people lost alot of money buying on the downside of the stock market after the Nasdaq crash in hopes of a fast recovery. There will be no fast recovery here. Sit tight, grab some popcorn and enjoy the ride.

Caveat Emptor!
Grim

We’ve got a rather full economic calendar next week.

Monday 11/28
New Home Starts

Tuesday 11/29
Durable Orders
Consumer Confidence
New Home Sales

Wednesday 11/30
Preliminary Q3 GDP & Chain Deflator
Chicago PMI
Fed Beige Book

Thursday 12/1
Auto and Truck Sales
Initial Claims
Income, Spending, and Savings Rates (I’m especially keeping an eye on this one)
Construction Spending
ISM Index

Friday 12/2
Nonfarm Payrolls
Unemployment Rate
Hourly Earnings

-grim

It’s Wednesday and time again for the weekly inventory update. It’s a historic event actually, the first time we’ve seen a real decline in the GSMLS Active Listings in quite some time. When I noticed this today, I decided to do a bit digging into the underlying activity behind the change this week, what I found was rather interesting, but first the numbers:

GSMLS
11/16 - 12833
11/23 - 12693

NJMLS
11/16 - 5801
11/23 - 5811

Hudson MLS
11/16 - 1764
11/23 - 1784

Now let’s explore what I found happened to the GSMLS numbers this week. At first glance someone might see the decline and proclaim “They are buying again!” Sorry, but that doesn’t seem to be the case, the active listings did decline, but it wasn’t because of sales.

Here is a breakdown of the weekly activity on GSMLS for Northern NJ (Ber, Ess, Hud, Mor, Pas, Som, Sus, Uni, War):

New Listings: 831
Back on Market: 130
Total Listings Added To Active: 960

Total Listings Sold: 670

At this point you are probably saying, “Grim, but you said we saw a decline, how can it be?” I asked myself the same question, and dug deeper yet.

Expired Listings: 194
Withdrawn Listings: 191
Temporarily Withdrawn: 92

Total Withdrawn or Expired: 477

Ah hah! Now it makes sense! We had a net loss of 186 listings, but it wasn’t due to sales picking up. Comparing a real demand (Sales) of 670 with a supply of 961 still shows us that inventory is being added at a rate faster than consumers are purchasing. So what about the withdrawn or expired listings? Well who knows really, but I have a feeling we’ll be seeing them back in the spring.

Caveat Emptor!
Grim

Mortgage activity dropped last month, according to the MBA, declining 3.4% (seasonally adjusted).

U.S. mortgage applications fall last week - MBA

U.S. mortgage applications fell last week, dragged down by a slump in home refinancings which hit a 16-month low as interest rates remained close to their highest levels this year, industry trade group figures showed on Wednesday.
…
The MBA’s seasonally adjusted purchase mortgage index fell 1.2 percent to 472.3.The index is considered a timely gauge on U.S. home sales.
…
The group’s seasonally adjusted index of refinancing applications dropped 6.9 percent to 1,584.1. The refinancing index is down 17.4 percent compared with four weeks ago, and volume was at its lowest level since the week ended June 25, 2004 when the index reached 1,386.9, the MBA said.

Rates did moderate a bit this week, the 10Y bond yields dropped a bit, allowing the mortgage lenders a little more leeway.

Caveat Emptor!
Grim

On behalf of the holiday, I’m posting up this HowTo earlier than I was intending to. Since one of our readers (Richie) let the cat out of the bag on this question, it makes no sense to hold back.

One of the most common questions I get is, “How do I find an address if I am looking at a listing online?” It’s a valid question. Many times a buyer might want to do a drive by without having to get involved with an agent. Maybe your agent only services a small area and you are interested in another area as well (but don’t want to hurt his/her feelings).

However, in the past, the answer was usually, “ask your real estate agent.”

Sure, and that’s probably the best way to find the information. Not all agents are terrible people looking to push you into this.

Here is a handful of ways to find the address you are looking for:

The Straightforward Approach
Ask your personal real estate agent for the information, they’ll give it to you. I am not anti-agent. In fact, (and this may come as a shock), I do have a real estate agent. She has been in the business for many years and I trust her opinion. She knows my position in the market and understands it. She also understands the current market. Are all agents good? No, in fact I think the majority of them aren’t qualified to wash your laundry.

Social Engineering
Call the listing agent and tell them you don’t have an agent in the area, but are interested, they will not give you the address, so don’t ask. However, tell them you are familiar with the area and would like to know what street the home is on, or what neighborhood. If you get the street, just use the taxrecords database to pinpoint the property by using the assessed value. Or, if the assessed value is common (returns many listings), just use MapQuest to help you narrow down the search. Matching land/improvements assessed values will help you pinpoint.

Open House Listings
Use the weichert.com or other realtor website to search the upcoming open houses. This isn’t a very accurate method, but sometimes you hit one.

New Listings Services
Sign up for one of the many “Just listed” services over the internet. I know some people that use justlisted.com. However, keep in mind, these services will send your search information to a real estate agent. That agent will then send you listings on a regular basis. If you don’t want to be associated with an agent, do not use these services. You can always sign up for a gmail account and make up some information.

Assessed Values Search
This is the goldmine. This is also the one method that *no one* will share with you, well, that is except certain readers here and myself. The other methods do not require any walkthru for you to do, this one is a bit more complicated, so I’ll follow the same format I used in the previous HowTo. Make sure you know how to use the tax databases before you attempt to walk through this process.

1) First you need to find the land and improvements assessments for the property you are interested. Open a browser to:

www.gsmls.com

2) Click “Search for Properties”, this will bring up a map of NJ. Click Morris County. This will bring up a map of Morris. In the drop down under “Cities/Towns” on the left, select “Chatham Bor.” Scroll down and click the “Continue” button.

3) Select a List price from “500,000″ to “550,000″ and click the “Search Now” button. Follow this path, I’m pushing you to a listing I’ve preselected to use in the walk-thru, and I’ll explain why later on.

4) Look for MLS# 2214727. The current asking is $549,000. Under the picture of the home, there is a text link that says “More details”, click it.

5) This is the typical detailed MLS info screen, it gives you quite a bit of information, but no address. However, look for the values for “Building Assessment, Land Assessment, Total Assessment”. That is the data we are interested in. For reference, we’ll grab the total assessment value of $493,400.

6) Bring up the Monmouth tax website. Select Morris, Chatham Bor., and do an Advanced Search.

7) Scroll down the page until you see the fields labelled “Net:”. In the “From” column only, enter in the total assessed value of 493400 (no special characters). Leave to “To” column blank. Click the “Submit Search” button.

8) If you did everything correctly, you’ll be rewarded with the information you are seeking.

Here are the issues when doing total assessment searches:

1) You don’t find anything. If this happens, try searching by just the land or improvement data separately. Or, search with a range to try to narrow down.

2) You find too many. Use the individual assessment values to pinpoint the record in question.

3) You still don’t find anything. Sorry, you are out of luck, use another method.

Sorry if this one seems rushed!

Caveat Emptor!
Grim

Here is the first part in our HowTo series:

HowTo: Searching Tax Records

The purpose of the HowTo series is to educate home buyers. While I’d love to hang around the blog helping everyone hunt down information, I realize that I can probably help everyone much more by showing you HowTo find the info you need.

The first part in the series is HowTo track down public tax information. The public tax databases contain a wealth of important information that will help you become educated homebuyers. Until recently, searching the tax records involved a trip down to the county records office, and probably the better part of an afternoon. Not anymore, with just a few clicks I’m going to turn you into Sherlock Homes (what a terrible pun).

First, here are the links I use:

Morris County Tax Board

Monmouth County Tax Board

www.taxrecords.com

Bergen County Tax Board (taxrecords.com database)

Why so many links? Open them up, take a look, not every site has the most up-to-date database, and some sites (like Monmouth) allow you to search more than one county.

So lets begin:

1) First we need to find the address of a home we are interested in. For this we’ll go over to ForSaleByOwner.com, you can use the link over to the right of the page if you would like to support the site (I’m still waiting to make my first penny off those by the way).

2) At the top of the page there is a section called “Buying a home”, lets type in Madison for the city, and use NJ for the state, click go.

3) Choose listing #20527608 ($599,000). Not every home has past sales records, if the home was owned for a very long period of time, it’s possible that you will not find past sales records. Also, if the home is new, you may not find sales records. I picked Madison at random and chose this listing at random (but verified that it indeed had sales data).

4) Grab the address, the address is important, it’s the key we’ll be using to search the databases (for those that would rather not go to forsalebyowner.com, the address is “36 Albright”.

5) Click the link for the Monmouth Tax Board, you’ll see a page with a somewhat complicated form, don’t be scared, it’s easy.

6) Select “Morris - 2005″ as your County, Select “Madison Borough” as your District, and Select “Advanced Search” as your Search Format.

7) Scroll down the page until you see the field marked “Street Addr”, type in “36 Albright”, the street suffix is not necessary (and I find it throws off the search on some tools, so don’t bother). Scroll down to the bottom of the page and click the “Search” button.

8) You should be rewarded with a single entry returned. Click the “More Information” button on the left side of the record.

9) This is it, you’ve done it. We see the owners, we can verify what they paid for the home and when they purchased it, the assessed value and what the taxes are.

10) Click your back button twice to return back to the search screen. This time, we’ll only use “Albright” as the Street Address. Why? Because we’d like to see the other properties in the neighborhood.

11) Now we’ll go through the Morris County Tax Board site. Why? You might like it better, it might be updated more recently, the Monmouth Site might be down, It doesn’t matter, just go.

12) At the top of the page you should see “SR1A’s”, hover your mouse over the button and you’ll see “Search SR1A’s” pop up, click it.

13) Click “Search SR1A’s By Property Location” under “Select Search Critera”. A box should pop up with a handful of fields.

14) Under District select “Madison”, enter “36″ for House Number and “Albright” for Street Address. You can leave SR1A Year blank. Click “Search”.

15) Bingo, you’ll see a similar record as we did in the first search. You may need to scroll the browser window to the right to reveal the “Detail” button. Click it when you find it. You’ll see much of the same info as you did before. You can go back and click the “Tax” button if you’d like some more information on the property or tax.

16) I’ll let you go through the Bergen and taxrecords.com sites on your own. Most of these follow the same pattern, so once you’ve mastered the search, you’ll be comfortable on most any tax search database.

You’ve now become tax record experts, and are probably wondering why I wanted you all to become tax record experts. It’s simple really, because we need to know what the current owner purchased the home for, and when they purchased it. Home values typically appreciate at about the rate of inflation. So we can use the inflation numbers to calculate the inflation adjusted price of the home in today’s dollars. This will give you a good starting point for which to base your offer. “But wait,” you ask, “what about the asking price?” Asking price? We here at NNJBubble believe no such thing, you can ask what you’d like, it doesn’t mean we’re going to pay it. We only pay what we believe the asset to be worth, no more. We don’t care what the neighbor got for his place, we don’t care how well the market did in the past year, we simply don’t care.

Refuse to buy into the mania and refuse to pay the asking price. If the seller rejects your offer, walk away, do not buy, do not bend, and do not let this process become emotional.

Caveat Emptor,
Grim