New Jersey Real Estate Report

 From Fox News: 

Housing Vampires Walk Streets After Halloween

The more serious threats to the economy and life as we know it, though, will come from the undead who will still roam the streets well after this year’s Halloween candy has been eaten. They will be those folks who overextended themselves to buy a handsome Gothic mansion in a friendly subdivision. And they will have one thing on their minds – needing more cash to make their monthly mortgage payments, particularly after their adjustable-rate mortgages are re-set. One estimate suggests that 2007 will be the Year of the Vampire, as $1 trillion-worth of ARMs (or 12 percent of all U.S. mortgage debt) will be readjusted upward, increasing monthly payments and adding to homeowners’ burdens. The mortgage companies will want more blood from their mortgagees, yet these homeowners have already been bled white: where will they find the cash to make the payments?

As prices of both new and existing homes fall in many parts of the nation, more ordinary people will become unwilling footsoldiers in the vampire empire, because they won’t be able to refinance their homes. Or, to use the vampire vernacular: They won’t be able to get any more blood from their houses, which will be cold relics of themselves.

Those who own their own homes or who can handle the mortgage or the rent payment may need to start carrying garlic and wearing crosses. Suppose your favorite sister calls to say that she and her husband need some help making ends meet with the mortgage. How will you respond – send the money each month or offer room in your own home? Suppose your friends receive an unwelcome letter coldly stating that their new monthly payment has just increased 50 percent. Will they lose all color from their faces? Will they suddenly feel a strong need for cash – or what Lugosi used to call ‘blahd’ in his thick accent? And — again — where can they find the cash?

From Rismedia:

Home Sale Slowdown Forces Painful Price Reductions

As a real estate broker, Joanne English Rollieson knows how to price houses. But the cooling real estate market forced her to cut $30,000 off the $525,000 asking price for her own home in Teaneck [New Jersey].

“Buyers have a lot to choose from,” explained English Rollieson, president of English Realty in Englewood, who recently sold her four-bedroom colonial. “If sellers are motivated to sell, they need to be more realistic with their prices.”

It’s a lesson home sellers are learning all over North Jersey: After five years of record sales, double-digit price rises and frantic bidding wars, the fizz has gone out of the real estate market, both nationally and in the state.
…
The signs of a slowdown are everywhere. The Realtors association recently reported that the inventory of houses for sale is at the highest point nationwide since April 1993. In New Jersey, house sales dropped 16% from the second quarter of 2005 to the second quarter of 2006, the Realtors reported.

For sellers, it all adds up to one question: How to sell in a buyers’ market?

The first answer is probably the most painful: Price it realistically. Just because your neighbor got $600,000 a year ago doesn’t mean you’re going to get $650,000 – or even $600,000.

And don’t immediately dismiss low-ball offers; in this market, some agents are bringing back the old saying, “Your first offer is your best offer.”
…
The Realtors association’s Lereah predicts that prices will continue to drop until the end of the year, and post only modest gains in 2007. Moody’s Economy.com is less optimistic, predicting that prices will drop in 2007, especially in areas like the Northeast, where prices rose so far so fast.

Economists Richard Shiller and Karl Case, creators of the Standard & Poor’s Case-Shiller Composite Home Price Index, also recently predicted in a Wall Street Journal essay that price moves “might be squarely in negative territory by some time in 2007.”

“There is significant risk of a very bad period, with slow sales, slim commissions, falling prices and rising default and foreclosures,” they wrote.
…
The only people who will suffer are sellers who bought within the past year or two and paid top dollar.

From Baristanet:

Crisco Price Chop!

First, they changed the name. Now they’ve changed the price. The homes at Christopher Court were advertised this week for $1.395 million, down from the original “priced from $1,625,990 to $1,825,990″.

and

New Price For New Urbanism

Crisco’s slashing prices yet again. On October 7th, we told you about a price drop to $1.395 million. Yesterday, in an advertisement in the New York Times’ real estate section, the price was down another $100 grand to $1,295,000. Will prizes be next?

From the Delaware County Times:

Housing market declines
By SOLOMON D. LEACH

Delaware County’s home sales dropped 10 percent in the third quarter, but showed a smaller drop-off than neighboring counties as the housing market continued to slow down, according to a recent report. A total of 2,241 homes in the county were sold during the third quarter, compared to 2,492 in the third quarter of 2005, according to the HomExpert Market Report from Prudential Fox & Roach Realtors, which records all public transactions.

The 10 percent decline in Delaware County was modest compared to a 25.3-percent decrease in Bucks County and a 25.1-percent slide in Burlington County, N.J.

The report also indicates that homes remained on the market longer, with the average home in Delaware County staying on the market for 45 days during the third quarter, up from 34 days a year ago, another indication of the market’s slowing pace.

Meanwhile, the median or mid-range sale price in the county increased 1.7 percent to $213,500 from $210,000 during the same period last year.
…
Reiburn said the slowdown from 2004 and 2005 has created a more balanced market, which favors buyers. At the same time, he insisted that sellers are still making a decent profit. “It’s still a good real estate market, but the market could not sustain that type of (sales) increase year over year. We just couldn’t continue to do that,” he said.

Contrary to what many have said, Reiburn believes the housing bubble has not burst, but rather returned to a more traditional performance, which he expects to continue at least for the next quarter.

From the Record:

Oakland studies a new look for downtown
By MATTHEW VAN DUSEN

Mayor John Szabo hopes the journey to a better downtown, where people leave their condos to stroll into boutiques and sip coffee at outdoor cafes, officially starts today.

That’s when the Planning Board will vote on adding the Central Business District Study and Plan to the borough’s Master Plan.

The downtown plan proposes turning 50 acres around Ramapo Valley Road between Oak Street to Franklin Avenue into a pedestrian-friendly shopping area, with consistent architecture and 154 condominiums that would satisfy affordable housing requirements and thus save rural or sensitive areas from development.

The plan also calls for buildings with shops at street level and condos above, decorative streetlights and a road extension that redirects traffic on Oakland Avenue through Terhune Street to Ramapo Valley Road.

“People are looking for that hometown feel,” said Szabo, the planning director for the township of Wayne. “They want to shop close to home. They don’t want to go to Macy’s or Wal-Mart.”

From RealtyTrac:

National Foreclosures Increase 17 Percent in Third Quarter According to RealtyTrac(TM) U.S. Foreclosure Market Report

RealtyTrac, the nation’s leading online marketplace for foreclosure properties, today released its Q3 2006 U.S. Foreclosure Market Report showing that 318,355 properties entered some stage of foreclosure nationwide during the third quarter of 2006, a 17 percent increase from the previous quarter and a 43 percent yearly increase from the third quarter of 2005. The nation had a foreclosure rate of one foreclosure filing for every 363 households during the quarter, slightly higher than last quarter’s rate
of one foreclosure filing for every 425 households, but lower than the first-quarter rate of one foreclosure filing for every 358 households.
…
“Higher interest rates and a general softening of the real estate market are the two key factors contributing to the 43 percent increase in foreclosure filings from the third quarter of 2005,” said James J. Saccacio, chief executive officer of RealtyTrac. “What our third quarter research appears to be showing is that the first wave of adjustable rate
mortgages is having a negative impact on the number of homes going into foreclosure. With the volume of these loans — more than $1 trillion of them due to adjust over the next 15 months — this is a trend that definitely bears watching.”
…
“While the overall number of foreclosures represents a return to more or less normal levels, there are pockets of the country that are being hit more severely,” Saccacio noted. “States with underlying economic issues, such as high unemployment or depreciating home prices will continue to outpace the rest of the country in the total number and rate of
foreclosures.”

New Jersey
July 2006 - 2,725
August 2006 - 2,992
September 2006 - 3,221
Q3 2006 Total - 8,938
Change from Q2 - 32.51%
Change from Q3 2005 - 49.19%

From the Asbury Park Press:

Kara gets OK to sell nine homes, but financing falls through
BY DAVID P. WILLIS AND MICHAEL L. DIAMOND

A bankruptcy court judge today gave permission to Kara Homes to move forward with the sale and closing of nine homes.

Kara had hoped to get permission to restart construction of up to 300 homes, but a lawyer for the troubled home builder said the short-term financing to get the company started again had fallen through.

East Brunswick-based Kara, one of the largest home builders in central New Jersey, filed for protection from creditors under Chapter 11 of the bankruptcy law Oct. 5. It owes creditors — including banks, suppliers and employees — hundreds of millions of dollars. Customers who have contracts for uncompleted homes are also listed as creditors.

In an earlier court filing, Kara said it had lined up $5 million in financing to start
rebuilding and to start meeting its payroll for about 70 employees still working for the company. Kara said it also wanted to reimburse customers who had canceled their new home contracts before the builder filed for Chapter 11.

At a bankruptcy hearing today, Kara’s lawyer, David L. Bruck, said negotiations with Medical Capital Group, the entity that was to supply the financing, had fallen through on Friday.
…
U.S. Bankruptcy Court Judge Michael B. Kaplan gave Kara permission to move forward with the sale and closing of nine homes that are completed.

“I am concerned with nine families looking to close and who have probably sold homes and are on the hook,” Kaplan said.

From the New York Times:

Bursting Bubble Blues
By PAUL KRUGMAN

Here are the five stages of housing grief:

1. Housing bubble? What housing bubble? “A national severe price distortion [in housing] seems most unlikely in the United States.” (Alan Greenspan, October 2004)

2. “There’s a little froth in this market,” but “we don’t perceive that there is a national bubble.” (Alan Greenspan, May 2005)

3. Housing is slumping, but “despite what you hear from some of the Eeyores in the analytical community, a recession is not visible on the horizon.” (Richard Fisher, president of the Federal Reserve Bank of Dallas, August 2006)

4. Well, that was a lousy quarter, but “I feel good about the U.S. economy, I really do.” (Henry Paulson, the Treasury secretary, last Friday)

5. Insert expletive here.

We’ve now reached stage 4. Will we move on to stage 5?

Over the last few years, most good U.S. economic news has been the result of soaring home prices. Spending on new houses created jobs and poured cash into the economy. Consumers borrowed against the rising values of existing homes and went on a buying spree, spending more than they earned for the first time since the great depression.

But the housing boom became a bubble, fueled by a surge of irresponsible bank lending, which continues even now. (Yesterday’s Denver Post tells of a runaway prisoner who managed to borrow enough to buy three expensive houses while on the lam, then bought two more while in prison.) The question now is how much pain the bursting bubble will inflict.

Last week’s report on G.D.P. showed the first signs of serious economic damage. According to the “advance” estimates (which are often subject to major revisions), growth in the third quarter of 2006 slowed to its worst level since early 2003. A plunge in spending on residential construction, which fell at an annual rate of 17 percent, was the main culprit. But was that just a temporary setback, or the beginning of something much worse?

Some say the worst is already over. Mr. Greenspan, who’s been an optimist all the way, now argues that the latest data on new-home sales and mortgage applications suggest that housing has already bottomed out. Business investment is still growing briskly, and so far consumers haven’t cut their spending. So maybe this is as bad as it gets.

But I think the pessimists have a stronger case. There’s a lot of evidence that home prices, although they’ve started to decline, are still way out of line. Spending on home construction remains abnormally high as a percentage of G.D.P., because banks are still lending freely in spite of rapidly rising foreclosure rates.

This means that home sales probably still have a long way to fall. And you don’t want to make too much of the fact that some housing indicators have turned up; those indicators tend to bounce around a lot from month to month.

Moreover, much of the good news in the latest economic report is unsustainable at best, suspect at worst. Almost half of last quarter’s estimated growth was the result of a reported surge in automobile output, which some observers think was a statistical illusion, not something that really happened.

So this is probably just the beginning. How bad can it get? Well, you don’t have to go far to find grim forecasts: Merrill Lynch predicts that the unemployment rate will rise from 4.6 percent now to 5.8 percent by the end of next year.

In case you’re wondering, I don’t blame the Bush administration for the latest bad economic numbers. If anyone is to blame for the current situation, it’s Mr. Greenspan, who pooh-poohed warnings about an emerging bubble and did nothing to crack down on irresponsible lending.

Still, the bad news will have political consequences. The Bush administration has been trying to shift attention away from the disaster in Iraq to an allegedly booming economy. That strategy wasn’t working too well even when the headline numbers were good, because it never felt like a boom to most Americans. But now even the headline numbers have turned lousy.

And if that hurts the G.O.P. in next week’s election, well, there’s a certain poetic justice involved. The administration tried to claim undeserved credit for the positive effects of the housing boom, so why shouldn’t it receive some blame for the negative effects of the housing bust?

From RealtyTimes:

Congressional Committee Proposes Crackdown on Homeowner Tax Writeoffs
by Kenneth R. Harney

Have you been writing off your mortgage interest and real estate taxes correctly on your federal income tax filings? Or maybe not?

Whatever your answer, an influential Capitol Hill committee believes tens of thousands of homeowners have been deducting a lot more than they should — to the tune of hundreds of millions of dollars a year.

Now the nonpartisan congressional Joint Committee on Taxation has proposed to the Senate and the House that they consider plugging two revenue-losing loopholes in the system, and crack down on homeowners who are deducting too much.

In a new report released last week, the staff of the committee recommends requiring local governments or mortgage lenders to annually report to the IRS the itemized details of the property tax payments claimed by millions of homeowners. Property tax deductions now cost the federal government $20 billion a year, according to committee estimates. A 1993 federal study found that approximately $400 million of that year’s property tax writeoffs were improperly claimed — a figure that could easily be double that today.
…
The committee also believes that homeowners who do cash-out refinancings may be writing off mortgage interest improperly — claiming deductions on more than the $100,000 in home equity debt the tax code permits.

To close both loopholes, the committee proposes requiring all mortgage lenders and servicers to report whether new loans are refinancings, and whether the refi resulted in a new loan more than $100,000 larger than the mortgage it replaced.

The committee staff’s recommendations are often highly influential and find their way into law. So don’t be surprised if the new real estate proposals surface early in the new Congress next year for inclusion in a major tax bill.

From the Allentown Morning Call:

Builders give buyers a break
By Beth W. Orenstein

To move cars at the end of the 2005 model year, Ford, General Motors and Chrysler offered some buyers the same discounts they offer their employees. One area homebuilder, Heritage Homes Group of Jamison, recently started a similar incentive program to spur sales of its homes.

Since mid-September, Heritage has offered ”employee pricing plus,” which entitles homebuyers to the same discounts its employees would get if they were to buy a home in one of its developments: $25,000 worth of options for free if they buy a single family home and $10,000 in options if they buy a town house. The program applies to all its developments, including The Manors and Carriage Court at Highgate, a mix of single family and town houses, in Upper Macungie Township.

The builder incentive program is a sign of the times.

When the new home market was at a fever pitch — as it had been for at least three years — builders needed to do little to attract buyers. They could build home after home and offer them at take-it-or-leave-it prices, and they would sell. However, when the new-home market slows, as it has since the middle of last year, that is no longer a case.

”The day of people running at you and saying, ‘Please take my check,’ is over,” says Sharon Sheldon, the real estate agent for the Elliott Group’s CloverView Estates in Lower Saucon Township, a development of 14 luxury homes on 2 to 5 acre sites that sell for more than $800,000.

That’s why more and more, builders are offering incentives such as low-rate financing, free upgrades and special promotions. Some are even cutting asking prices.

From the AP via Yahoo Business:

Survey: Rising Rates Worry Homeowners
By Eileen Alt Powell

Homeowners with adjustable-rate mortgages worry about rising interest rates, but many believe they will be able to refinance their loans if necessary, according to a study released Monday.

An survey of homeowners conducted for Wells Fargo & Co., the San Francisco-based bank, found that about one in seven respondents had an adjustable-rate mortgage, or ARM.

With an ARM, the interest rate rises or falls, often in lockstep with an underlying security such as a Treasury bond.

The study found that nearly 80 percent of homeowners with ARMs said they were “somewhat” concerned, “very” concerned or “extremely” concerned about rate increases.

But more than half said they believed they could refinance their loans. And about 20 percent said they were prepared for rate adjustments and didn’t plan any changes.
…
Woo Ho said that one surprising finding was that younger homeowners — especially those born since 1964 — view their homes as a good investment as well as a place to live.

Overall, 72 percent of those surveyed said that the equity in their home was their most important investment, she said.

“That’s a shift,” Woo Ho said. “A home is now considered a major part of homeowners’ financial portfolios.”

From the Delaware State News:

Area housing market slows
By Jenny Maher

If you look in the real estate section these days, you’ll probably notice two words rarely seen in the past few years - “price reduced.”

It’s something homebuyers have been longing to see - a sign that the pendulum has swung in their direction.
…
With so much demand, area homeowners had little difficulty selling their property quickly, and for lofty asking prices.

But experts knew it was only a matter of time before the real estate bubble would burst.

“It was an anomaly and it couldn’t be sustained,” Ms. Briggs-King said. “It would’ve priced too many people out of the market.”

As expected, the housing market cooled this year.
…
And with the housing market slumping in other areas, Mr. Martin said there aren’t as many out-of-state buyers coming to Delaware, because they are having a hard time selling their homes.

“The New Jersey and Pennsylvania markets are not as healthy, and they do have an impact on our market,” he said.

From the New Brunswick Home News Tribune:

Amboy bank to cover loan losses
By JASON METHOD

This is the time and place to post 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. Also a good place to post suggestions, requests for information, criticism, and praise.

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From the Record:

Seller beware: It’s a buyer’s market
By KATHLEEN LYNN

As a real estate broker, Joanne English Rollieson knows how to price houses. But a rapidly cooling real estate market recently forced her to cut $30,000 off the $525,000 asking price for her own home in Teaneck.

“Buyers have a lot to choose from,” explained English Rollieson, president of English Realty in Englewood, who was successful in selling her four-bedroom Colonial. “If sellers are motivated to sell, they need to be more realistic with their prices.”

It’s a lesson home sellers are learning all over North Jersey. After five years of record sales, double-digit price rises and frantic bidding wars, the fizz has gone out of the real estate market, both nationally and in North Jersey.

The signs of a slowdown are everywhere. The National Association of Realtors recently reported that its index of pending home sales — that is, where the contract has been signed but the deal has not closed — is down 16 percent from July 2005. And the U.S. Commerce Department recently reported that the inventory of unsold homes was at a record high.

“Sales are slowing, homes are plentiful and sellers are negotiating,” said David Lereah, chief economist of the Realtors association.

For sellers, all this data adds up to one question: How to sell in a buyers’ market?

The first answer is probably the most painful: Price it realistically. Just because your neighbor got $600,000 a year ago doesn’t mean you’re going to get $650,000 — or even $600,000.

“A lot of sellers haven’t accepted reality,” said Nick Tselepis of the Nicholas Real Estate Agency in Clifton. “Anything eventually will sell — it depends on the price.”