April 2006
Monthly Archive
Sun 30 Apr 2006
Observations about your local areas, comments on news stories or the New Jersey housing bubble, Open House reports, etc. If you have any questions you wanted to ask earlier in the week but never posted them up, let’s have them.
For readers that have never commented, there is a small link on the bottom of each new message that reads “# Comments”. Go ahead and give that a click, you might be missing out on a world of information you didn’t know about. While you are there, introduce yourselves to everyone.
For new readers that have only read the messages displayed on the main page, take a look through the archives, a substantial amount of information has been put online in the past 6 months. The archives can be found at the bottom of the right hand menu and are categorized by month.
As always, anything goes!
Sun 30 Apr 2006
From the Daily Record:
Poll: Homeowners can’t afford new home in own town
Donna Mackey bought her four-bedroom house in Butler 20 years ago for about $120,000. She estimates it’s worth about $325,000 now, but that sum couldn’t get her the home she would want if she were looking to buy in Morris County today.
“I could find maybe a two-bedroom (home) with absolutely no yard and tiny rooms,” said Mackey, 47. “I don’t even think I could stay in the same town. I could never get four bedrooms. I don’t really think I could be in Morris County anymore.”
Mackey’s predicament is not unusual in the Morris area or the state, according to a recent Monmouth University/Gannett New Jersey newspapers poll, which found that 78 percent of New Jersey homeowners would not be able to buy a house in their own town if they were first-time homebuyers.
…
Maria Creutz, 24, of Jackson, said she and her husband cannot afford to purchase a home in New Jersey and she holds out little hope of a political solution.
“Lawmakers do not consider affordable housing a priority,”she said. “They have roofs over their heads, so they don’t think about the rest of us.”
Sat 29 Apr 2006
Welcome to another edition of Price Reduced!
For all the newcomers to this blog, Price Reduced! takes a 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.
I’m going to break this down into three lists this week:
$1M+
MLS# 2256708 - Branchburg, NJ
Previous Price $1,400,000
List Price $1,079,000 (Price Reduced 22.9%)
MLS# 2257218 - Orange, NJ
Previous Price $1,990,000
List Price $1,649,000 (Price Reduced 17.1%)
MLS# 2256689 - Franklin Lakes, NJ
Previous Price $2,900,000
List Price $2,499,000 (Price Reduced 13.8%)
MLS# 2257604 - Wayne, NJ
Previous Price $1,499,000
List Price $1,299,900 (Price Reduced 13.3%)
MLS# 2237189 - Bernardsville, NJ
Previous Price $3,950,000
List Price $3,495,000 (Price Reduced 11.5%)
MLS# 2209416 - Upper Saddle River, NJ
Previous Price $1,299,000
List Price $1,149,000 (Price Reduced 11.5%)
$500K - 1M
MLS# 2261831 - Scotch Plains, NJ
Previous Price $1,100,000
List Price $849,900 (Price Reduced 22.7%)
MLS# 2262422 - Westfield, NJ
Previous Price $1,199,000
List Price $999,000 (Price Reduced 16.7%)
MLS# 2241465 - Mountain Lakes, NJ
Previous Price $1,195,000
List Price $995,000 (Price Reduced 16.7%)
MLS# 2259301 - Verona, NJ
Original List Price $1,295,000
Previous Price $1,195,000
List Price $999,000 (Price Reduced 16.4%, 22.9% off OLP)
MLS# 2252471 - Midland Park, NJ
Original List Price $750,000
Previous Price $734,700
List Price $649,000 (Price Reduced 11.7%, 13.5% off OLP)
MLS# 2247088 - Wyckoff, NJ
Previous Price $789,000
List Price $699,000 (Price Reduced 11.4)
Sub 500k
MLS# 2268518 - Livingston, NJ
Previous Price $599,000
List Price $479,000 (Price Reduced 20%)
MLS# 2264899 - Newton, NJ
Previous Price $299,000
List Price $250,000 (Price Reduced 16.6%)
MLS# 2249970 - Lebanon, NJ
Previous Price $449,900
List Price $379,000 (Price Reduced 15.8%)
MLS# 2268096 - Maplewood, NJ
Previous Price $379,000
List Price $320,000 (Price Reduced 15.6%)
MLS# 2231166 - Clifton, NJ
Original List Price $479,000
Previous Price $439,900
List Price $380,000 (Price Reduced 13.6%, 20.7% off OLP)
MLS# 2251894 - Chatham, NJ
Original List Price $599,900
Previous Price $479,900
List Price $425,000 (Price Reduced 11.4%, 29.2% off OLP)
Fri 28 Apr 2006
Something a bit on the positive side to start the weekend. From the NY Times:
Is It a Miracle, or Just Reality?
THE Turner family, who left town on a much-needed vacation a week ago, is about to get a look at its new three-story elevator-equipped and wheelchair-accessible home.
The television cameras for the ABC reality show “Extreme Makeover: Home Edition” will be rolling Sunday morning for the full ritual hoopla, moving aside an enormous trailer parked in front of the house for “the reveal,” the moment when 54-year-old Beverly Turner and her nine adopted special-needs children get to see a place scrupulously planned to be perfect for them in every detail.
The Turners’ old house, at 79 Harrison Place, a boarded-up two-story wood-frame structure that caught fire last fall, was still standing when they left, on the very same 50-by-124-foot lot where the new house, with its stone foundation, expansive bay windows and custom features was built — in four days.
…
Then, the “Extreme” people told the builders they had something “extra-special” in mind, Mr. Morris recounted. “They said they wanted us to do the biggest and highest house ever built for the show, and they wanted an elevator so the children can go all over the house,” he said.
…
A special two-hour episode of “Extreme Makeover” featuring the Irvington project is tentatively scheduled to appear on Sunday, May 21, at 8 p.m., as the season finale.
Fri 28 Apr 2006
I just want to thank Record/Herald journalist Prashant Gopal for being one of the few North Jersey journalists to cover the real estate market in a fair and balanced manner. Hats off to Mr. Gopal for his effort.
From the Record/Herald News:
Housing expert says party’s over
The once-sizzling New Jersey real estate market is showing signs of going flat, according to an expert who presented his findings Thursday at the Atlantic Builders Convention.
It appears to be shifting from a buyers’ market to a sellers’ market, with home listings outnumbering home sales by 2-to-1 in the first quarter of this year, said Jeffrey Otteau, who owns the Otteau Appraisal Group in East Brunswick.
The clear message to sellers is that the party is over,” Otteau said after the talk to a standing-room only crowd of builders. “The days of increasing asking and selling prices have passed.”
In Bergen County, there was a five-month inventory of homes in the first quarter, meaning it would take that long to sell all the homes on the market at the current pace, Otteau’s report said. By comparison, there was a three-month inventory in the first quarter of 2005, he said.
But Otteau said a housing crash is highly unlikely in New Jersey because of constraints on new construction, increasing numbers of aging baby boomers looking for second homes and the state’s relatively strong economy.
“We aren’t looking at a market that is going to crash,” he told the builders. “We are absolutely looking at a market that is going to adjust.”
…
The average number of Bergen County home sales dropped by 11 percent compared with the first quarter of last year, and the average number of listings increased 84 percent, according to Otteau’s report. In Passaic County, where there was a six-month supply on the market in the first quarter, the number of sales dropped 15 percent, and listings were up 65 percent.
Statewide, the average number of sales dropped by 12 percent and the average number of listings jumped by 65 percent in the first quarter, compared with the same period last year, he told the crowd.
…
Appearing on the panel with Otteau was Joseph J. Seneca, a Rutgers economics professor and head of the state Council of Economic Advisers, who said the New Jersey job market is not growing at a robust pace, which could hurt the housing market. (emphasis added)
Caveat Emptor!
Grim
Fri 28 Apr 2006
From the Record/Herald, by Prashant Gopal:
Build with caution
It’s a time of transition for New Jersey home builders.
The real estate market appears to be cooling from the peak levels of 2004 and 2005, as cautious buyers are less willing to bid up prices. Vacant land is disappearing. And New Jersey’s environmental regulations make it difficult to build on what land is available.
Builders are responding by finding ways to boost both new home supplies and demand. Some developers are focusing on housing for senior citizens, many of whom might otherwise retire outside the state. And builders are redeveloping former industrial zones in urban areas.
Still, developers should prepare for the possibility of a market pullback, said Patrick O’Keefe, CEO for the New Jersey Builders Association
“Builders are advised … to manage their levels of activity with an eye toward the future, rather than assume the trends of the past,” O’Keefe said.
Thu 27 Apr 2006
From Inman:
Cendant may consider other options if spin-off plans fizzle
Company expects real estate business to be flat in ‘06
If Cendant Corp. plans for spinning off its massive real estate franchise and company-owned brokerage business as a separate publicly traded company fall flat, the company might consider other options, CEO and chairman Henry Silverman said today during a discussion of the company’s first-quarter earnings.
He did not rule out the potential for a private sale of the company’s real estate segment, which re-branded this year as Realogy, or other business segments that the company plans to spin-off as separate companies. Silverman, who will serve as chairman and CEO for the first 18 months of the spin-off real estate company, prefaced the comment with a statement that there is no plan at this time to sell off the real estate business.
…
He also said that Cendant’s real estate business should be roughly flat this year, with some improvement expected in the second half of the year.
…
In its first-quarter earnings announcement, Cendant announced that transaction volume dropped 10 percent for its franchise business and 6 percent for company-owned business compared to first-quarter 2005, and total revenue for franchise and company-owned business dropped slightly while earnings before interest, income taxes, depreciation and amortization, or EBITDA, fell 25 percent compared to first-quarter 2005. The first quarter is typically slow for the real estate industry, with most profits coming during the second and third quarters of the year, Silverman said.
…
While the National Association of Realtors released existing-home sales data this week that showed an improving market from February to March, Silverman said he is unconvinced that the market is getting better at this time. “I’m not sure the (association) data is terribly relevant. They typically sample only 20 percent of MLSs and then they adjust those numbers with a number of variables. I think that with 30 percent of the market — as we believe we have at least on price and size in terms of dollar volume — statistically you could argue we are the market.”
He added, “So our results are more likely to be accurate as to the market than whatever (the association) is projecting or … has reported.”
——————
For those who don’t know who Cendant is, I’ll give you a hint… They own Century 21, Coldwell Banker, ERA Real Estate, and Sotheby’s International Realty.
It’s rather suprising that the CEO of Cendant doesn’t put much weight on the National Association of Realtors numbers.. They only 20% of the market and adjusting “those numbers with a number of variables”? I can see why he wouldnt. I wonder just who gets to pick which markets are sampled?
Caveat Emptor!
Grim
Thu 27 Apr 2006
From the AP:
Jobless claims rise by most in 6 weeks
The number of Americans filing new claims for unemployment benefits rose to the highest level since early March, the government reported Thursday.
The Labor Department said that 315,000 newly laid off workers applied for jobless benefits last week, an increase of 11,000 from the previous week. The claims total was the highest since 319,000 laid off workers applied for benefits the week ending March 11.
Private economists had been forecasting a much smaller rise of around 2,000 applications last week. Even with the bigger increase, claims remained at a level indicating a relatively strong labor market.
The four-week moving average of claims, which smooths out weekly volatility, edged up slightly to 308,500 last week, compared to 305,750 the previous week. It was the highest level in three weeks.
…
There were two states reporting an increase in layoffs of more than 1,000 for the week of April 15.
Georgia said that layoffs increased by 2,024, a rise that was blamed on higher unemployment in the textile industry. New Jersey officials reported an increase in layoffs of 1,625 with the rise blamed on increasing numbers of pink slips in transportation, warehousing and service industries.
——-
The Initial Claims Report can be found here:
UNEMPLOYMENT INSURANCE WEEKLY CLAIMS REPORT
While the weekly increase in New Jersey layoffs is interesting. I wouldn’t read too far into the number. For some insight into these numbers, take a look at the New Jersey WARN Notices for this year. Those can be found here:
NJ WARN Notices
Caveat Emptor!
Grim
Thu 27 Apr 2006
From the Wall Street Journal (courtesy of the Post Gazette):
Housing strength shifts to new markets
A look at inventories of unsold homes, prices and employment trends points to generally positive signs in Houston, Dallas and Atlanta — cities that have seen only modest home-price gains in recent years.
Metropolitan areas whose housing markets look less healthy, at least in the short term, include Boston, Los Angeles, Miami, Minneapolis, New York, Philadelphia and San Francisco. All of them have growing inventories of homes and relatively weak job growth. As a result, houses that a year or two ago might have sold in hours now are languishing on the market for months, and some sellers are cutting prices.
To produce a snapshot of residential real-estate prospects for 18 major metro areas, The Wall Street Journal examined inventories of homes for sale at the end of the first quarter from a variety of local sources; pricing trends based on surveys of real-estate agents by Daniel Oppenheim, an analyst at Banc of America Securities in New York; and projections of job creation by Moody’s Economy.com, a research firm in West Chester, Pa. Inventory data provide a broad picture of the overall supply of housing, while job trends are the biggest driver of demand. The pricing data show how markets are adjusting to recent shifts in supply and demand.
…
In New Jersey, a market highly dependent on people who commute to other states, prices are likely to be flat to slightly higher this year, down from the double-digit pace of recent years, says Jeffrey G. Otteau, president of Otteau Appraisal Group in East Brunswick, N.J. Next year, he thinks prices could fall 5 percent or so in the state.
“We think that we’re going to be in a flat holding pattern for the next several years,” Mr. Otteau says, though at the top end of the market, there is “an extreme oversupply” of houses. In Spring Lake, N.J., known for expensive homes, there is a three-year supply of homes at the current rate of sales, and Upper Saddle River has a 21-month supply, Mr. Otteau estimates. He blames the state’s loss of high-paying jobs in such industries as telecommunications and pharmaceuticals.
Wed 26 Apr 2006
From the AP & Bankrate:
Weekly Home Mortgage Rates
Average mortgage rates for single-family homes in the 10 largest metropolitan areas as of Apr. 26 as compiled by bankrate.com. The rates are for 30-year, fixed-rate mortgages for 80 percent of the value of the house. A point is a one-time fee equaling one percent of mortgage.
Apr. 26 Prev. Wk
percent+points
Boston 6.61 + 0.28 6.59 + 0.21
Chicago 6.80 + 0.08 6.71 + 0.09
Dallas 6.66 + 0.48 6.56 + 0.53
Detroit 6.72 + 0.03 6.65 + 0.03
Houston 6.61 + 0.56 6.53 + 0.61
Los Angeles 6.69 + 0.53 6.63 + 0.53
New York 6.62 + 0.19 6.52 + 0.23
Philadelphia 6.50 + 0.65 6.44 + 0.64
San Francisco 6.72 + 0.28 6.63 + 0.33
DC Metro 6.51 + 0.72 6.44 + 0.91
National Avg 6.64 + 0.38 6.57 + 0.41
bankrate.com’s national average for a 5-year adjustable mortgage, based on a 30-year loan for 80 percent of the value of a single-family house.
Apr. 26 Prev. Wk
percent+points
Average 6.31 +0.38 6.19 +0.39
We sure seem to be pushing through the sixes in rapid fashion. A few months back I thought there was a possibility of hitting 7% on a 30Y fixed come Winter. Now I’m thinking we might just hit 7% by Summer..
Caveat Emptor!
Grim
Wed 26 Apr 2006
GSMLS
Single Family Homes, Condo, Coop
(Bergen, Essex, Hudson, Morris, Passaic, Somerset, Sussex, Union, Warren Counties)
4/19 - 15,126
4/26 - 15,648 (3.5% Weekly Increase)
NJMLS
Single Family Homes, Condo, Coop
(Bergen, Essex, Hudson, Passaic Counties)
4/19 - 7,429
4/26 - 7,622 (2.6% Weekly Increase)
MLSGuide
Single Family Homes, Condo, Coop
(Hudson County)
4/19 - 2,263
4/26 - 2,259 (0.2% Weekly Decrease)
Wed 26 Apr 2006
From CNN Money:
New home sales soar
With rising mortgage rates driving up the cost of financing home purchases, most economists have been looking for the real estate market to cool off in 2006 after several years of record sales.
But economist Bob Brusca said last month’s drop in new home prices is a sign that the market for new homes isn’t nearly as strong as the jump in sales would suggest.
He noted that the report showed an unusual drop in prices from both February and a year earlier, which could be a sign that home builders are cutting prices to move a large supply of new homes now on the market.
“New homes sales sprang back top life like a zombie in a cheap horror flick,” Brusca said. “And like that zombie, housing really is dead. Don’t let all that twitching fool you.”
He said that many of the new homes sold in March were probably built in a stronger real estate market.
And unlike existing homes, where sellers can live until they get an acceptable price, “builders can’t live in these houses unless they have a lot of family,” he said. “By and large they must finance them at rising interest costs.”
…
Meanwhile, average prices fell 7.1 percent from February to $279,100, after topping $300,000 for the first time in the February revised figures. The median price, which reflects the point at which half the homes sell for more and half sell for less, also fell 6.5 percent to $224,200.
And while month-to-month declines in home prices are not unusual, more significantly, prices also fell from a year earlier: a 2.2 percent decline in median prices and a 3.6 percent fall in average prices over that time. (emphasis added -grim)
Wed 26 Apr 2006
Census released the New Residential Sales data for March 2006. The report can be found here:
NEW RESIDENTIAL SALES IN MARCH 2006
Sales of new one-family houses in March 2006 were at a seasonally adjusted annual rate of 1,213,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 13.8 percent (±14.9%)* above the revised February rate of 1,066,000, but is 7.2 percent (±12.8%)* below the March 2005 estimate of 1,307,000.
The median sales price of new houses sold in March 2006 was $224,200; the average sales price was $279,100. The seasonally adjusted estimate of new houses for sale at the end of March was 555,000. This represents a supply of 5.5 months at the current sales rate.
New Home Sales were down 7.2% Nationwide with the Northeast leading the decline at -15.2%.
Median sales price was down 6.5% in March versus February. The March median sales price ($224,200) is down 8.1% from the peak of $243,900 set in October. Median prices are down 2.2% on a year over year basis. Inventory was up 2.7% in March.
Caveat Emptor!
Grim
Wed 26 Apr 2006
From Reuters:
U.S. mortgage applications decrease last week-MBA
U.S. mortgage applications fell for a third consecutive week, with demand for home purchase loans falling to its lowest since November 2003 despite a drop in interest rates, an industry trade group said on Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity for the week ended April 21 fell 3.7 percent to 548.6, its lowest level this year. It was 569.6 in the previous week.
The MBA’s seasonally adjusted purchase mortgage index fell 4.4 percent to 389.4 from the previous week’s 407.4, its lowest level since the week ended Nov. 7, 2003 when it touched 375.4.
The group’s seasonally adjusted index of refinancing applications decreased 2.4 percent to 1,489.4 compared with 1,526.1 the previous week.
Tue 25 Apr 2006
From RealtyTimes:
Foreclosure Numbers at New Highs: Are Toxic Loans To Blame?
You have to wonder: Are we seeing more foreclosures than last year as toxic mortgages mature? These are “nontraditional loans,” a sterile description for mortgages with ridiculously low monthly costs at first (but higher costs later) as well as mortgages that feature limited documentation and overly-large initial loan balances.
…
We asked Rick Sharga, Realty Trac’s vice president of marketing, about the impact of toxic loans on the rising number of foreclosures and here’s what he had to say:
Question: Are toxic loans linked to the rise of foreclosures?
Answer: While we haven’t seen any report that definitively links the two, it’s logical to surmise that higher risk loans will default at a higher rate than more traditional loans. And the fact that a larger percentage of home loans fall into the high risk category than at any time in recent memory makes the possibility of a spike in foreclosures more likely.
Question: Have toxic loans begun to impact the marketplace?
Answer: It’s hard to assign the increase in the number of properties in default and foreclosure specifically to high risk loans, but they’re almost certainly a contributing factor. As large numbers of ARMs reset this year and next — we’ve seen numbers as high as $300 million in loans this year and $1 billion in 2007 resetting — we’ll be better able to gauge the impact on national foreclosure rates.
Question: Will we see a further increase in foreclosure levels?
Answer: We anticipate that foreclosures will increase throughout 2006 for several reasons.
First, the number of properties in foreclosure has been below historic averages for several years, and the market appears to be moving back toward more “normal” levels.
Second, increasing interest rates are driving up monthly payments for homeowners with ARMs, and will significantly increase monthly payments for people with 3/1 or 5/1 ARMs due to reset.
Third, house values appear to be cooling off, which gives homeowners less equity to leverage in the event that they find themselves in a financial bind — and limits the opportunity to sell a property at a profit for homeowners in default.
…
Question: Any general industry comments?
Answer: One of the trends we’re following is the number of properties that actually end up becoming REOs (bank repossessions). Over the past year, even as the general numbers of properties entering foreclosures has increased, the number of homes that actually end up as REOs has consistently stayed below 20 percent of the inventory. That relatively low number suggests that the market has been strong enough to allow owners to either re-finance, work out new terms with lenders, or sell the properties before they’re foreclosed on. It’s a statistic we’ll be watching closely, as we believe that a spike in the percentage would be a red flag.
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