New Jersey Real Estate Report

From the Daily Record:

Chatham homebuilder trims costs to weather chilly sales

As the large, publicly owned homebuilders accumulated increasing market muscle in the 1990s, Brian M. Stolar decided to diversify and ferret out niches they ignored to keep his mid-sized Pinnacle Companies competitive.

While he pushes ahead with new ventures along these lines, and swings away from the long-time mainstay of subdivisions in suburban towns such as Montville, he has had to adjust to the cyclical swings that have governed the housing market for decades.

As sales cooled in the past year, Stolar and top company executives “certainly have trimmed everything we can, cut all the costs that we can. Some of our projects have lead times of several years, but we are only building projects right now where there is significant demand.”

He does not disclose financial results of Pinnacle, the privately owned umbrella for three major subsidiaries that focus mainly on upper-end homes, except to say that annual revenues run above $100 million. But even as the number of unsold homes climbs higher along the New Jersey side of the Hudson River, the site of many of Pinnacle’s current projects, Stolar has continued to poke in new directions.

From the Home News Tribune:

Town-home plan draws jeers

About 50 people spoke out against the proposed construction of 84 multifamily homes in the Princeton Gate subdivision at last night’s Planning Board meeting.

The Planning Board had not yet voted on the proposal by deadline.

The proposal, which has brought strong opposition from neighborhood residents, called for the multifamily homes to be built on 44.54 acres off Gateway Boulevard by K. Hovnanian Central Acquisitions LLC.

Residents argued the multifamily or stacked town homes, which are three-story buildings that can house two families, did not fit with the surrounding area.

“What they are trying to do is build many apartments that look nothing like the rest of our neighborhood,” Stan Kornblum, a Princeton Gate resident, said last night. “All I can do is ask the board to do the right thing, and if it is inevitable that Hovnanian builds something, it be aesthetically pleasing and of a similar price range as the rest of our neighborhood.”
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“We are not opposed to growth,” she said. “We would welcome neighbors with open arms, but this proposal does not blend in with the current neighborhood, not to mention what these multifamily homes would do to traffic and schools.”

Hovnanian contends the homes are a new product focused on young professionals and senior citizens. In each of the three-story homes, the top floor and bottom floor each belong to one family. The middle floor is shared, although it is split into private sections.

Hovnanian representatives told the Planning Board the homes would bring a minimum number of children to the township based on the clientele expected to rent or purchase the units. They also expect a minimal impact on traffic.

The existing homes in the subdivision are all single-family homes built between 10 and 20 years ago. Neighbors said the proposed homes would be an eyesore compared with the rest of the neighborhood. They said they feared the homes would resemble those in high-density areas, such as Jersey City. Others feared the project would open the door to similar multifamily homes in the township.

From PBS:

Newspaper, Bubble Blogs Feed the Real Estate Obsession

Have you ever gone to an open house even though you knew you weren’t interested in buying the property? Have you ever pored over housing price data on Zillow or read through housing ads on Craigslist just for fun? You are not alone. There seems to be a growing obsession with real estate in the U.S., as home prices have soared in the past few years, only to come back to earth a bit in the past year.

But during that boom — and the current correction/bust — blogs of all stripes have sprung up to feed the need for instant real estate information, photos of noteworthy homes for sale, and the off-color stories related to city living. While some newspaper sites have had some recent success with real estate blogs, independent bloggers who have called the boom a speculative bubble — a.k.a. the bubble bloggers — have found a rabid audience for their bearish views.

“Bloggers have moved into bubble coverage because the media hasn’t done a very good job of covering the reality, and reporters are more conventional and look for the story of the hour and what the statistics are,” said Carol Lloyd, who writes the must-read Surreal Estate online column about the San Francisco Bay Area market. “And some of the statistics are produced by the NAR [National Association of Realtors], and they look like they’re just covering the industry for the industry.”

Lloyd wrote a fantastic primer on bubble bloggers, who she says “have become the sages of the day.” Matt Carter, a reporter (and blogger ) for the real estate trade site InmanNews , says the bubble bloggers’ popularity can be traced to a bad case of schadenfreude among some in the public.

“The bubble blogs feed the intense desire many people have — including those who got burned investing in real estate, and first-time home buyers who feel they’ve been priced out of the market — to see housing prices crash,” Carter told me via email. “As was the case during the dot-com bust, people who got left behind want those who were riding high during the boom years to feel their pain.”
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One of the strongest aspects of these blogs is the online community of readers that sprouts up around the subject of real estate. At the Housing Bubble Blog, Jones regularly asks his readers to contribute “Craigslist finds” (listings of interest), and often gets more than 100 comments on each blog post.
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Toscano (pictured here) dings mainstream real estate reporters for relying on expert quotes from analysts who are in bed with the real estate industry — meaning, the quotes are likely to give a positive spin to any negative news. “The other [problem] is that they tend to mirror conventional thought and to shy away from contrarian or non-mainstream analysis, regardless of merit,” he said. “As one example of this phenomenon: Despite the fact that we had been in an obvious speculative bubble for a long time, the media didn’t seriously address the possibility of a bubble until AFTER the housing market had slowed down substantially.”
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“These sites are guilty of the same sin they accuse the real estate industry of: presenting only one side of the story,” Carter said. “They highlight the most dismal news from the most stressed markets — that foreclosures are up, inventories are rising, and prices falling — without providing any context. A lot of these blogs would have you believe that all of the runup in prices was artificial, fueled by speculation and the easy availability of credit. The fact is, housing prices remain stable or continue to appreciate in areas where jobs are plentiful and housing is scarce. There are sound fundamentals in some markets, but you would never know it from reading the bubble blogs.”
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But what will happen if the market does crash and boom again, or whether it’s just a slow poofing souffle? Will people still be enamored with every economic report coming out of Northern Iowa or a suburb of Phoenix? Or does the universality of everyone having a home — whether rental or as an owner or landlord — mean this topic will be fresh for years to come? Perhaps online aggregators that sum up real estate news from all sides, from bear to bull, will be the most valued in the future. Time will tell.

From the U.S. Census Bureau News:

NEW RESIDENTIAL SALES IN OCTOBER 2006

Sales of new one-family houses in October 2006 were at a seasonally adjusted annual rate of 1,004,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 3.2 percent (±11.2%)* below the revised September rate of 1,037,000, and is 25.4 percent (±10.0%) below the October 2005 estimate of 1,346,000.

The median sales price of new houses sold in October 2006 was $248,500; the average sales price was $309,700. The seasonally adjusted estimate of new houses for sale at the end of October was 558,000. This represents a supply of 7.0 months at the current sales rate.

From Bloomberg:

U.S. October New-Home Sales Fall 3.2% to a 1.004 Million Pace

Sales of new homes in the U.S. fell in October, dashing expectations that the worst of the housing slump is over.

Purchases declined 3.2 percent to an annual pace of 1.004 million last month from a 1.037 million rate in September that was lower than previously reported, the Commerce Department said today in Washington. The supply of unsold homes at the current sales pace rose to 7 months’ worth.
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“The housing market is far from the bottom, not with the incredibly high inventory of unsold homes,” Joel Naroff, president of Naroff Economic Advisors in Holland, Pennsylvania, said before the report. “The Fed is worried that a badly faltering housing market could overturn the economic cart, but as of now that has not happened.”

New-home sales had been expected to decline to a 1.049 million rate from September’s originally reported 1.075 million pace, according to the median of 64 forecasts in a Bloomberg News survey of economists. Estimates ranged from 980,000 to 1.09 million.

The median price of a new home rose 1.9 percent to $248,500 in October from $243,900 a year earlier, today’s report showed.

The number of homes for sale fell to a seasonally adjusted 558,000 during the month, the lowest since March, from 562,000 the prior month. The supply of homes at the current sales rate rose from 6.7 months’ worth in September.

From Newsday:

Companies have bleak outlook on N.J. economy

New Jersey’s business leaders are less confident in the state’s economy and business climate than they have been in more than a decade, according to a survey released Tuesday by the New Jersey Business & Industry Association.

“In the midst of an apparent economic slowdown, our members see more of the same ahead: very slow growth,” said association President Philip Kirschner.

The annual survey of the group’s 1,700 members shows that 51 percent of respondents felt the state’s economic conditions would deteriorate in the first half of the year; only 12 percent of respondents expected things to get better in early 2007.

Respondents also gave the state low marks as a place to expand or renovate business facilities; only 17 percent of respondents described the Garden State as a good place for renovation or expansion compared to 28 percent in the association’s previous three surveys.

When it came to the state government’s performance, employers gave New Jersey low marks for its ability to control health insurance costs and government spending and taxes.

From the New Jersey Business & Industry Association:

Business Confidence in NJ Continues to Weaken As Evidence Grows of a Broad-Based Economic Slowdown

Amid evidence of a weakening economy, business confidence in the State economy and the State’s business climate has fallen to the lowest levels since the early 1990s, the New Jersey Business & Industry Association’s 2007 Business Outlook Survey has found.

While employers as a group have voiced growing concern about the near-term economic outlook at all levels—from the US economy to their own companies—their bleakest assessment is reserved for the New Jersey economy.
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Kirschner noted that this year’s decline in confidence follows a sharp loss of confidence found in last year’s 2006 Business Outlook survey. That survey uncovered one of the most dramatic shifts from optimism to pessimism for the state and national economies in 22 years of survey data.

“In hindsight, it is apparent that our members sensed the onset of the economic slowdown that now confronts us,” Kirschner said.

From the New Jersey Herald:

Fredon lifts veil from revised plan

Revisions to the proposed master plan, many based on a subcommittee’s work this fall, will be discussed by the town’s Planning Board when it meets tonight, the discussion will not have a public input segment.

“This will not be an open public (comment) session,” explained Planning Board Chairman George Green. “I realize this is a very emotionally-charged issue in this town. The public will have a chance to talk (about) the plan at a later date.”

In late summer, town residents filled a Planning Board meeting to complain about facets of the proposed master plan which included a provision for a 16-acre minimum lot size. At the time, Green publicly agreed the plan had flaws and set up a subcommittee to meet with the board and present concerns from the public.

“We met with the (Planning) Board three times,” said Peter Southway, a dairy farmer. “But I don’t know what the report will say. I haven’t been told anything.”
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Many landowners were upset about various aspects of the plan, including a proposed 16-acre lot size which, they said, takes away from the value of their land. Currently, much of that same land is zoned for six-acre lots.

The master plan does permit smaller lot sizes, but only if the remaining property is left undeveloped. Southway said one of the subcommittee recommendations was a sliding scale approach which would allow a developer to cluster houses, townhouses or condos into a higher density provided there is enough open space.

“Let’s face it. The 16-acre requirement is creating economic segregation,” he said. “We’re saying, ‘If you can afford to build a house on 16 acres, you’re OK to move in. Nobody is going to put up a ’starter’ on 16 acres.”

From Prudent Bear, by Ron Peebles:

How I would have blown a housing bubble - if I had done it
Or: Confessions of a former Fed Chairman

People are always asking me about bubbles. Like do I believe in bubbles? And how do you blow them?

Well, I’m not sure I have all the answers on bubbles. I’m just a former central banker who spending his twilight years playing bridge and looking at the correlation coefficients of economic variables. Typical retirement stuff. So when it comes to bubbles, I don’t know. A few years ago Beannie Babies got a little out of hand, but you know, the market is the market and who’s to say what’s a fair price?

Back in the day, some people thought I had the power to make things happen, you know, like I was Bono or something. If you want to know the truth, I spent a lot of time sitting around a big table shuffling boring academic papers and wondering why the hell we couldn’t get some decent coffee.

But if I were to think about it, I guess I could come up with some ideas about how to make a bubble. Just off the top of my head, for example, I would lower short term interest rates, you know so people would buy more stuff. That might get things to perk up a bit.
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That might get things cooking, but maybe not so bubbly. So next I’d lower interest rates some more. And I’d keep lowering them until people decided that apartment living was for suckers and that they should run out and buy a house ASAP. And, people already in a house would think that they deserved a bigger house, figuring that if their brother-in-law can buy a three-thousand square foot Colonial with a pool, why can’t they? And what better time to buy than when rates are low?

So then you have people already in houses wanting houses, and you have apartment people wanting houses, and a lot of those houses are new houses, that gets the homebuilders building because suddenly there aren’t enough new houses to go around.
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And once homeowners discovered that just by sitting in their living rooms watching “Lost” they were creating wealth, pretty soon they’d figure out that they could borrow against that new wealth. They would build new kitchens, and add bathrooms, and maybe even add on a room to the garage to store that table saw they just bought on credit.
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Pretty soon, some speculators are making so much money that get become cover stories on personal finance magazines, and thus, role models to millions. Eventually, people get so used to housing prices going up so fast that they begin to think that’s what housing prices are supposed to do, and if they hadn’t been so busy working they would have become housing speculators years ago. But better late than never.

And at this point, I’d say you’ve got a pretty good bubble going. I mean, if I were to guess.

Anyway, I sure wouldn’t want to be around when it was over.

From Marketwatch:

Existing-home sales rise first time since Feb.

Sales of existing U.S. homes rose 0.5% to a seasonally adjusted annual rate of 6.24 million in October, the first increase since February, the National Association of Realtors reported Tuesday. Economists were expecting sales to fall to 6.15 million annualized. September’s sales were revised higher to 6.21 million from 6.18 million initially reported. Sales are down 11.5% in the past year. Median sales prices fell a record 3.5% year-over-year, the third decline in a row. Inventories of unsold homes increased 1.9% to 3.854 million, representing a 7.4-month supply at the October sales rate. It’s the largest months’ supply since April 1993.

From the National Association of Realtors:

Existing-Home Sales and Prices Overview

Breakouts of Single-family, Condo and Co-op

Single-Family Existing-Home Sales and Prices

Condo and Co-op Sales and Prices

The New Jersey Association of Realtors (NJAR) 2006 Q3 Statistics are available:

New Jersey Home Sales Report (PDF)

Highlights:

From the WSJ Real Estate Journal:

What to Do in a Market That Is Headed for a Falloff

After hurtling along for years, the nationwide real-estate boom has come to a screeching halt. In 2005, home prices in the U.S. rose more than 12%; this year, the National Association of Realtors expects appreciation to reach just 1.9% — the lowest gain since 1992.

Rising mortgage rates and selloffs by skittish real-estate investors have helped depress housing prices in many metropolitan areas. But there’s another factor that many observers miss: the relationship between home prices and incomes.

When the cost of housing in a given area grows far faster than local wages and salaries, the pool of potential buyers shrinks, and prices are much more likely to sink.
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According to Mr. Winzer, any market that’s more than 30% overvalued is due for a correction. In the fall of 2003, only eight markets on the list of 152 fit that description; on this year’s list, 37 did. Sure enough, price decreases are beginning to pop up in many of the markets that have shown up year after year as the most overvalued — especially in Florida and California.

What to do if you’re in a falling market? Obviously, that’s a promising climate for a bargain-hunting buyer. A savvy real-estate agent can help you craft a bid that’s low enough to save you money, but realistic enough to be accepted. When one of Frank Borges LLosa’s clients finds an appealing home, the Northern Virginia broker searches the history of the selling agent — data not available to consumers — on the local multiple listing service. If the agent frequently sells below the asking price, Mr. LLosa knows he can be aggressive.
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In an ideal world, you wouldn’t sell a house at all while prices were falling. But if you must, experts agree that it’s best to act quickly, before prices slide further.

Often, that means gritting your teeth and offering the best price to get potential buyers in the door. Here again, getting your agent to tap pending-sales data can pay off. Pay attention to the pricing per square foot for homes similar to yours, and set your asking price at the bottom of, or even below, that range.

South Florida broker Mike Morgan recommends that his clients take 1% to 3% off the price every week until they get an offer.

From the Originator Times:

News Stories Not the Driving Force Behind Home Buying

The nation’s prospective home buyers may derive some of their information on the housing market from the news media, but at the end of the day the things that matter far more when they are deciding whether to make a purchase include the price of the new home, mortgage interest rates and their housing needs, according to a new nationwide survey commissioned by NAHB.
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When asked to rate the importance of several factors that might affect their decision to buy or not to buy a home, survey respondents put the home’s price at the top of the list, with 80% citing its significance.

That was followed by: the potential for the new home to appreciate in value, 71%; the prospect of selling their current home at a fair price, 70%; the level of mortgage interest rates, 69%; and personal life changes, such as a new job or an addition to the family, 60%. On a list of eight items, news stories on real estate market conditions ranked second from the bottom, with 28% saying that it was an important factor behind their decision to buy.

When further asked about the influence of the news media on their decisions of when to buy a home, only 19% of the respondents said it played an important role; 23% indicated that it had some importance on their decision; and 7% said it played a minor role. A full 48% said it had no influence whatsoever.

Sixty-one percent of the survey participants said that the media is “sometimes trustworthy” as a source of information on the housing market and 5% said that it is “always trustworthy.” Twenty percent and 8%, respectively, said it is “seldom trustworthy” and “never trustworthy.”

From the Courier Post Online:

State workers decry planned cuts at rally

With lawmakers mulling pension and health-care cuts for public workers, including a plan that would roll back retirement benefits, labor unions rallied at the State House Monday, insisting that any changes come through negotiations with the Corzine administration, not a vote by the Legislature.

The rally drew labor leaders and rank-and-file union members, including firefighters wearing helmets and turnout jackets who crammed into a State House meeting room minutes before a legislative panel approved a report that recommends slashing retirement benefits for future public workers and cutting health coverage for nearly all government employees.

In the name of trimming government expenses and reducing property taxes, the report includes calls for raising the retirement age and cutting pensions for newly hired state workers, and requiring all public employees to pay a share of their health-care premiums. Lawmakers are also considering reducing the number of state workers’ paid holidays.

Many of the reforms dealing with retirement benefits could be approved through votes by the Legislature, but the labor unions insisted that benefit changes should be hammered out at the bargaining table.

From the Cherry Hill Courier Post:

SMALL-BUSINESS ADVICE: N.J. gets low marks for policy climate

New Jersey ranked second-worst in the nation for its “public policy climate for small business and entrepreneurship, according to a study by the Small Business & Entrepreneurship Council.

According to SBE Council chief economist Raymond J. Keating, author of the study, “In politics, talk is cheap, and everybody talks about how much they love small business. The “Small Business Survival Index 2006″ moves past the rhetoric to actually rank the states according to the policies implemented in terms of taxes, regulation, spending and other governmental costs affecting the entrepreneurial sector of our economy.”

The index analyzes 29 major government-imposed or government-related costs affecting small businesses and entrepreneurs. These measures are added together to compute an overall rating.

The study can be found here:

SMALL BUSINESS SURVIVAL INDEX 2006

In terms of their policy environments, the most entrepreneur-friendly states under the Small Business Survival Index 2006 are: 1) South Dakota, 2) Nevada, 3) Wyoming, 4) Alabama, 5) Washington, 6) Florida, 7) Mississippi, 8) Colorado, 9) Texas, 10) Michigan, 11) South Carolina, 12) Indiana, 13) Tennessee, 14) Virginia, and 15) Arizona. In contrast, the most anti-entrepreneur policy environments are offered by the following: 37) West Virginia, 38) Ohio, 39) Oregon, 40) North Carolina, 41) Iowa, 42) Vermont, 43) Massachusetts, 44) Hawaii, 45) New York, 46) Minnesota,
47) Maine, 48) Rhode Island, 49) California, 50) New Jersey and 51) District of Columbia. (Please note that the District of Columbia was not included in the study ranking the states according to their liability systems, so D.C.’s last place score actually is worse.)

From the Home News Tribune:

Lawmakers tout bills to cut state work force, tighten ethics

Three Shore-area Republican state legislators are hopeful that bills they’ve proposed to reduce the size of the state work force and tighten ethics rules will be given a hearing by their colleagues.

But state Sen. Leonard T. Connors Jr., R-Ocean, says he’s realistic about the chances of such measures being championed by a member of the majority Democratic Party, which is what’s needed for the bills to see the light of day.

“I believe it would take some intestinal fortitude on the part of someone to move such a bill,” he said of his proposal to cut the number of state workers by 14,000 over four years.

Connors isn’t the only one who wants the bill heard. Shore residents such as Walter E. McInerney, 66, of Wall say they want it considered, too.

But, McInerney said, the bill doesn’t go far enough, fast enough.

“If he thinks that 14,000 could be eliminated, why doesn’t he take a look at at least 10,000 of those that will be eliminated in the next several years and start eliminating them now,” McInerney said of Connors. “Step it up.”
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The reduction would be achieved through attrition, Sen. Connors said. He said state Office of Legislative Services’ figures show about 5,000 state workers leave government service each year. His proposal, he said, would call for not filling 3,500 of those jobs each year.

The bills were immediately shipped to the chambers’ respective state government committees, where they still sit.

Sen. Connors predicted that the several unions which represent state workers would take issue with the reduction act.

“They don’t understand the bill,” he said. “Nobody loses their job, that’s number one.”

From the New York Post:

New York’s Housing Scene Is Humming Again

The fourth quarter is invariably the slowest and weakest period of the year for the city’s housing market. Because of the holiday season, New Yorkers are more interested in shopping for gifts and taking the kids to see Santa than shopping for a new residence.

Not so this year, according to four real estate pros, all of whom tell me the New York housing scene is humming again, contrary to all the gloom and doom talk you hear and read about. They all say sales in the Big Apple are beginning to display considerably more zip despite the usual fourth quarter weakness.
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Jonathan Miller, one of the city’s leading real estate appraisers, also confirms the housing pickup. “We’re seeing a decided increase in the number of transactions ” he says. It suggests to the president of Miller Samuel that next year’s first quarter could be a good one, especially when compared to the traditionally weak current quarter.

Mr. Miller, who conducts well-publicized quarterly surveys on the state of the city’s real estate business, also points to the upper end as one of the best performing sectors of the market, notably apartments at $3 million and up.

What about overall inventories? Including new construction, they’ve leveled off, he says, holding at about 7,600 units the last couple of months. Overall, though, that’s still higher than the average 4,000 to 5,000 units that have been on the market over the last five years.

Given his assessment, indications are prices could firm or head up a bit from the third quarter’s average prices.