New Jersey Real Estate Report

This is the time and place to post observations about your local areas, comments on news stories or the New Jersey housing market, 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.

For readers that have never commented, there is a link at the top of each message that is typically labelled “[#] 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 year. The archives can be accessed by using the links found in the menus on the right hand side of the page.

From Wells Fargo:

At Risk Markets Policy, List, and Message Changes

At Risk Markets Policy Changes

The following changes to the At Risk Markets policy will be effective for loans registered on or after Feb. 29, 2008:

• Non-conforming
− Soft markets will now be limited to the lesser of 85% or the product/program limit.
• Conforming
− Investment properties, second homes and cash-out refinance transactions will now be subject to a 5%
reduction from maximum financing in Soft markets in addition to current policy.
− Primary residence purchases will now be subject to a 5% reduction from maximum financing in Soft,
Distressed and Severely Distressed markets
− Use of Enhanced Standards to waive LTV/CLTV reductions in At Risk Markets has been eliminated.

From the Times Trenton:

Revised job figures reveal picture isn’t so pretty in Jersey

New Jersey’s economy isn’t as healthy as state economic officials thought as recently as a few weeks ago.

Last month, 9,500 jobs were lost, and revised figures released yesterday by the state’s labor department reveal New Jersey created a mere 4,700 positions last year — well below the 29,400 new jobs originally estimated. The unemployment rate increased 0.3 percentage points in January, to 4.5 percent, still below the national jobless rate of 4.9 percent.

“The job numbers are just awful, and they reflect New Jersey’s standing in the economic world, which is not very high,” said Philip Kirschner, president of the New Jersey Business & Industry Association, a statewide business advocacy group. “Jobs are not being created here, and I think part of it is the perception that this is a state that has not adopted business-friendly policies, and can’t get its own fiscal house in order.”

(Gov. Jon) Corzine’s budget speech Tuesday, which proposed slashing spending by $500 million and state payrolls by 3,000 people, “is the first step toward bringing fiscal stability to the state,” Kirschner said.

“It was shocking — we slipped from slow growth to no growth over the past year, and the decline in January was far worse than we had anticipated,” said Rutgers economist James Hughes.

From the New Jersey Department of Labor and Workforce Development:

Annual Benchmark Revision of Data Indicates Slower Job Growth in 2007

Revised employment figures for 2007 show that New Jersey’s economy produced jobs at a slower pace than originally estimated. Based on newly benchmarked data, New Jersey employers added 4,700 jobs, over the year, December 2006 to December 2007, a downward revision from the originally estimated gain.

“While the original surveys overestimated the number of jobs created in 2007, today’s report shows that employment trends over the year followed the previously-reported pattern. New Jersey’s economy added 15,300 jobs over the final eight months of 2007, after employment declined by 10,600 jobs in the first four months of the year,” said Labor Commissioner David J. Socolow. “While the overall state economy experienced moderate job growth during the latter part of last year, there were significant job losses in the construction and financial sectors, due to the national downturn in the housing market and the credit crunch stemming from failures in the mortgage industry.”

Previously released nonfarm employment estimates, including those for 2007, have been revised to new employment benchmarks required annually by the United States Bureau of Labor Statistics. The process re-anchors monthly sample-based survey estimates to full-universe counts of employment, primarily derived from records of the unemployment insurance tax system. As a result of the benchmark process, the estimated level of nonfarm payroll employment in New Jersey was revised downward by -0.6 percent. This year’s revision was in line with those made in prior years. Benchmark revisions over the past ten years have averaged plus or minus 0.7 percent. Nationally, nonfarm employment estimates for 2007 were revised downward by -0.2 percent.
…
As a result of the annual adjustment process — conducted each year at this time by every state — the previously announced 29,400 seasonally adjusted job gain over the December 2006 to December 2007 period has been revised downward to 4,700. The revised gain from December 2005 to December 2006 was 29,900.

From the WSJ:

Paulson Dismisses Mortgage Rescue Plans
Bernanke Keeps Door Open to Rate Cuts To Boost Economy
By MICHAEL M. PHILLIPS and GREG IP
February 28, 2008; Page A1

The Bush administration is hardening its opposition to the chorus of Democrats, bankers, economists and consumer advocates calling for a big-money government rescue program for struggling homeowners.

In an interview yesterday, Treasury Secretary Henry Paulson branded many of the aid proposals circulating in Washington as “bailouts” for reckless lenders, investors and speculators, rather than measures that would provide meaningful relief to deserving, but cash-strapped, mortgage borrowers.

Mr. Paulson’s comments came amid signs that the nation’s housing market is getting worse, not better. Indeed, at a House hearing yesterday, Federal Reserve Chairman Ben Bernanke kept the door open to further interest-rate cuts to boost the economy, even as he warned that inflation pressures have intensified in recent weeks.

President Bush and other administration officials have voiced skepticism before about a major government effort to ease the burden of the nation’s housing slump. But Mr. Paulson’s comments are the most explicit to date in laying out the administration’s opposition to the recent spate of rescue plans.

Mr. Paulson, citing estimates that as many as two million Americans could lose their homes to foreclosure this year, predicted that the administration’s market-based approach will be enough to keep the situation under control. Its centerpiece is a plan that encourages the mortgage industry to voluntarily ease up on certain borrowers.

“I don’t think I’ve seen any scenario where the American taxpayer needs to be stepping in with more taxpayer dollars,” Mr. Paulson told The Wall Street Journal.

From the Wall Street Journal:

Decline in Home Prices Accelerates

The decline in U.S. home prices accelerated in the fourth quarter, according to two leading barometers, compounding two of the biggest threats facing the nation’s economy: faltering consumer spending and tight credit markets.

The S&P/Case-Shiller national home-price index for the fourth quarter fell 8.9% from a year earlier, the largest drop in its 20 years of data. And the Office of Federal Housing Enterprise Oversight’s index — which tracks only homes purchased with mortgages guaranteed by home-loan giants Fannie Mae or Freddie Mac — was down 0.3%, the first year-to-year decline in the measure’s 16 years.
…
Lower home prices threaten the economy’s growth by making consumers feel less wealthy and thus less willing to spend. They also curtail homeowners’ ability to borrow against the value of their homes to finance other purchases. In addition, lower housing prices erode the value of banks’ collateral, prompting them to tighten their lending standards, which further damps economic growth.

A top Federal Reserve official indicated the housing slump and its broadening impact on the economy probably would keep the central bank biased in favor of more interest-rate cuts. “It appears that the correction in the housing market has further to go,” Fed Vice Chairman Donald Kohn said yesterday in a speech in North Carolina. Mr. Kohn said that the downturn, after being “contained” for nearly two years, “appears to have spread to other sectors of the economy.” He added that if the housing market deteriorates more than expected, “lenders might further reduce credit availability.”

The Fed’s efforts so far to soften the blow of the housing slump with lower interest rates appear to be having a muted effect. Since September, the Fed has reduced its target for short-term interest rates by 2.25 percentage points to 3%. But some mortgage rates are actually rising, and those that are falling haven’t fallen that much.

From the Associated Press:

Reports Reflect Bleak Housing Picture

House prices may still have a long way to fall.

Across much of the nation, home values are dropping — even those backed by solid mortgages — and banks are repossessing more every day. Most experts say the dive won’t hit bottom for another year and only after excess inventory is sharply reduced and credit markets improve.

More government intervention may be needed, too, if the free market system doesn’t work quick enough.

“The housing value crisis is spreading and deepening,” said David Abromowitz, a senior fellow at the Center for American Progress. “It has gone way beyond subprime borrowers stretched too far with bad loans and now has clearly extended into the housing markets more broadly.”

U.S. home prices dropped 8.9 percent in the final quarter of 2007 compared with a year ago, according to the Standard & Poor’s/Case-Shiller home price index released Tuesday. That marked the steepest decline in the index’s 20-year history.

Meanwhile, the narrower Office of Federal Housing Enterprise Oversight said Tuesday that nationwide prices dipped 0.3 percent in the fourth quarter, the first annual decline in 16 years. Eleven states posted declines in values for the year, while prices in nine states appreciated more than 5 percent.

The OFHEO index is calculated using mortgages of $417,000 or less that are bought or backed by government-sponsored mortgage companies Fannie Mae or Freddie Mac. That excludes properties bought with some of the riskier types of home loans or homes in more expensive markets like California and the Northeast.

“We reached a somber year-end for the housing market in 2007,” said Robert Shiller, one of the architects of the S&P/Case-Shiller index. “Home prices across the nation and in most metro areas are significantly lower than where they were a year ago. Wherever you look, things look bleak.”

From the AP:

Existing Home Sales Decline

Sales of existing homes fell for the sixth straight month in January, dropping to the slowest sales pace on record. Median home prices were also down and many analysts predicted further price declines in the months ahead given high levels of unsold homes.

The National Association of Realtors said Monday that sales of single-family homes and condominiums dropped by 0.4 percent last month to a seasonally adjusted annual rate of 4.89 million units. That was the slowest sales pace, going back to 1999, and was seen as evidence that the steepest slump in housing in a quarter-century has yet to hit bottom.

The median price of a home sold in January slid to $201,100, a drop of 4.6 percent from a year ago. Particularly alarming, analysts said, was the fact that the inventory of unsold homes jumped to a 10.3 months’ supply, meaning it would take that long to sell the 4.19 million homes on the market at the January sales pace.

That was up from 9.7 months in December and just below a two-decade high of 10.5 months hit in October. During the peak of the housing boom in 2005, the supply of homes relative to sales stood at 4.5 months.

“With sales weak and inventories at extraordinarily high levels, prices are likely to fall a lot more,” said Joel Naroff, chief economist at Naroff Economic Advisors. “Eventually, sellers will end their denial and realize that if they want to unload their homes, they will have to cut prices even more.”

Analysts said one of the problems was a rising tide of mortgage foreclosures, which is pushing even more unsold homes back on the already glutted market.
…
Sales of existing homes fell by 12.7 percent in 2007, the biggest decline in 25 years, and are down 20 percent from their all-time high set in 2005, the final year of a five-year housing boom that saw sales and prices soar to record levels. Over the past two years, housing has been in a steep downturn made worse by a severe credit crunch as financial institutions tightened their lending standards in reaction to their multibillion-dollar losses on mortgages that have gone into default.

“With prices expected to continue dropping and banks leery to make loans, few prospective homeowners feel now is the time to buy,” said Michael Gregory, an economist at BMO Capital Markets.
…
“Expect sales and prices to keep falling,” said Ian Shepherdson, chief U.S. economist for High Frequency Economics. “There is no end in sight for the housing disaster.”

From the Otteau Group:

HOME SALES POST WEAK JANUARY

The pace of New Jersey home sales sank to a 4 year low in January raising serious questions about what’s ahead for the Spring housing market. Adding to the uncertainty are concerns about rising oil prices, warning signs that a full blown economic recession may be approaching and the sudden reversal of mortgage rate trends which are now rising despite recent rate cuts by the Federal Reserve. According to Freddie Mac’s latest Primary Mortgage Market Survey® (PMMS®), the 30-year fixed-rate mortgage averaged 6.04 percent for the week ending February 21, 2008, up from 5.72 percent one week earlier and from 5.48% on January 24th. These increases make housing more expensive to home buyers and weaken housing affordability leading into the Spring selling season.

Also in January the number of homes for sale increased for the first time since August signaling that Unsold Inventory will likely rise further as Spring approaches. All of this adds up to a challenged housing market that has yet to bottom out and begin a recovery.

From Bloomberg:

Recession in U.S. More Likely in 2008, Economists’ Survey Finds

The proportion of economists who forecast a U.S. recession this year more than doubled in three months, to 45 percent, according to a survey by the National Association for Business Economics.

Of those, a majority expect the downturn to be “relatively muted,” according to the poll of 49 professional forecasters taken Jan. 25 to Feb. 13. Less than 20 percent predicted a downturn in the previous poll completed Nov. 6.

The spillover from the biggest housing slump in a quarter century, turmoil in financial markets and higher energy prices will cause growth to slow to an annual pace of 0.4 percent this quarter and 1 percent in the second quarter, the survey found.

“U.S. economic growth is expected to slow to a crawl in the first half,” Ellen Hughes-Cromwick, the group’s president and chief economist at Ford Motor Co., said in a statement.

The economy will expand 1.8 percent in the year ending in 2008’s fourth quarter, according to the survey. That compares with predictions of 2.6 percent in November.

The survey’s median forecast for fourth-quarter growth compares with 2008 forecasts of 1.7 percent in a Bloomberg News survey taken this month.
…
The housing slump and credit availability were cited by forecasters as hurting growth this year. More than 60 percent of the economists said the housing recession will have a major negative effect on consumer spending.

From Bloomberg:

Homebuyer Patience Triumphs in a Waiting Game: John F. Wasik

With no bottom in sight for the U.S. housing market, buyers are in game-show mode.

There are plenty of deals out there, yet you have to make some decisions if you are buying a new home. Choices flash in front of you as if a host is badgering you to decide your next move. Do you wait for prices to fall further? Or do you buy now and take the builder’s incentives or their financing?

Whatever strategy you adopt, you will need to ignore some of the bells and whistles being offered and focus on price. You don’t want to be caught buying a home today that may be marked down $50,000 next month.

With more than 4 million unsold homes on the market, the buyer with good credit and cash for a down payment can do well.

Builders are doing whatever they can to move properties. In February, almost half surveyed said they cut prices, according to the National Association of Homebuilders, a Washington-based trade group. More than half “reported offering optional items at no charge and 44 percent said they paid all or some of the closing costs.”

Itching to buy? Let’s say you are considering a second or vacation home. You are confident that the market has bottomed and you don’t want to miss out on the best prices.
…
Playing the waiting game? If you delay your purchase, you may be rewarded. Home prices are forecast to fall 12 percent this year, according to Richard Syron, chief executive officer of Freddie Mac, the second-largest provider of money for U.S. home loans. Housing starts may plunge 22 percent in 2008 and remain at their lowest level in 16 years, he said in a speech to the homebuilders association on Feb. 13.
…
Prices are going to fall a lot more than Freddie Mac’s forecast 12 percent in the most overpriced areas, which may experience 50 percent declines or more.

Patience is a virtue in this market. It will also net you a better deal if you can turn off your game-show impulses.

From BusinessWeek:

The Post-Bubble Curriculum

Educators call them “teachable moments,” and whether the students are in third grade or grad school the idea is the same—to draw lessons from real-world events. The subprime mortgage meltdown and the ongoing shocks to the global economy have created a multibillion-dollar teachable moment in business schools, where students dissect exactly what happened and the lessons that can be drawn to prevent similar economic earthquakes.

Indeed, the problems that began with the implosion of the subprime market were being flagged by some business school researchers several years before financial institutions started reporting extensive writeoffs of subprime mortgages in 2007. But as the effects of the crisis continue to spread, terms such as CDOs and SIVs have become part of the lexicon in many mainstream business school courses covering such areas as real estate finance, ethics, and fixed-income securities.

For instance, at Washington University in St. Louis, a graduate-level real estate finance course used a case study on how sophisticated debt instruments magnified the effects of the subprime crisis. Meanwhile, MBA students at Miami University’s Farmer School of Business examined Countrywide Financial’s (CFC) fire sale merger with Bank of America (BAC) as part of their enterprise risk management studies.

For the short term, at least, the subprime meltdown and debt crisis are going to be one of the hot topics for discussion in MBA and undergrad business courses, according to business school deans and other academics. But it will take the full unwinding and some historical perspective to see whether the crisis will permanently change the business school curriculum.

“I’m not sure whether or not new courses will be created,” says Paul Portney, dean of the Eller Graduate School of Management at the University of Arizona. “But in the credit risk modeling class there’s no question that the examples would be drawn exactly from what we’ve seen the past couple of years. There won’t be a top-notch business school that won’t find a way to work this in.”

Now Open, Part II!

Prior weekend thread closed due to comment overflow.

From CNBC:

Re-listing: I Think It’s Cheating–What Do You Think?

There’s been a lot of talk in the blogosphere lately about the phenomenon of “re-listing”, and so it behooves me to weigh in. “Re-listing” is when an agent takes a property that’s been sitting on the market a bit longer than one might like and removes it from the market, only to “re-list” it days or even minutes later as a “fresh” listing.

As homes sit on the market longer and longer these days, it’s a tactic that many real estate agents say is legal, helpful, and really a no-brainer.

The problem is that despite all the news of the housing downturn, for some reason buyers still like to see “days on market” under 30 before they’re willing to step in. Anything above that is a turn-off. There are ways to find out, if you know where to dig, what the total days on-market has been, but the average real e-surfer probably doesn’t know how.
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I beg to differ. Here’s my opinion (which I’m allowed to give here on the blog because it’s a blog, not my other job as a business journalist on CNBC): That’s rot. It is cheating. It’s one thing to change the perception of a home by staging it, dressing it up a bit, but fudging the numbers of “days on market” is just as bad as leaving out the fact that the basement floods periodically. There’s a reason that number is there, so people can gauge interest and understand if that home is correctly priced compared to its neighborhood comps.

This is the time and place to post observations about your local areas, comments on news stories or the New Jersey housing market, 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.

For readers that have never commented, there is a link at the top of each message that is typically labelled “[#] 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 year. The archives can be accessed by using the links found in the menus on the right hand side of the page.

The morning after: I find myself in a familiar position. My inbox is filled with a mix of hate mail from Realtors and love(?) mail from consumers. Realtors all seem to think this practice is perfectly acceptable, some go so far as to say it is their responsibility. Consumers are angry as hell, and rightfully so.

Note to other Realtors: If you want to be treated with respect and trusted, act in a way that begets those traits. Attempting to salvage trust and respect with half-ass justifications for unethical behavior? Is it any wonder why real estate agents are lumped into the same category as used-car salesmen and ambulance chasers?

Note to New Jersey Realtors: Stopping this practice is now my personal mission. I will go to no end to have this practiced stopped. From the local boards, to the NJAR, the legislators, the real estate commission, the DOBI, etc. Hell hath no fury…

From ABC News/Nightline:

Buyer Beware: Unsold Homes Are Often ‘Re-listed’
By VICKI MABREY and MELIA PATRIA
Feb. 20, 2008

If you’re looking to sell your home fast, Minnesota realtor Joe Niece believes he’s your guy.

“I’m probably the most aggressive person in the entire state,” he said. “Maybe even the United States.”

Niece says he will sell your home 30 percent faster than average market time.

“I do probably ten times more than a good many of my competitors when it comes to marketing,” he said.

Niece sold one home in Eden Prairie, Minnesota, after just 27 days on the market, and another house after only 15 days. “I can tell every single seller that I have, that I did everything to sell their house that I would have done for my mom’s house or my house,” Niece said.

How does he do it? The problem is, the figures he cites are not technically accurate. The first house in Eden Prairie actually lingered on the slumping market for 99 days. And the one that sold in 15 days actually sat for 126 days.

It’s a tactic called “re-listing,” which is legal and more common than you think.
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Here’s how it works: Niece cancels house listings when they reach 70 days on the market, and then re-lists them as new, with 0 days on the market.

“So, when the buyer says, ‘Well, how long’s this one been on the market?’ And he looks at a report that normally an agent or a buyer would have when they’re showing houses, it only shows the current time on the market,” Niece said. “So a buyer’s going to be way more positive as they look through a home that says 25 days versus 125 days.”

Niece believes that re-listing is an important marketing tool in tough periods like this, because first impressions are crucial.
…
But real estate blogger James Bednar says re-listing is simply unethical. “As a buyer, it does make me angry,” he said. “I need to know how long a home’s been on the market or what the original price is.”

“Hiding that market information from consumers is wrong, and it’s got to stop,” he added.

Bednar started blogging in 2005 after growing aggravated with realtors during his own house-hunting search.

“The issue here is that when a re-listed home is sold, it skews the market transaction data,” he said. “When an agent typically says they can sell a home in 30 or 60 days, is that really true? If they’ve re-listed a home, that might not necessarily be true.” In an effort to gain access to market data, he actually got a real estate license and a membership with his local listing service. With a few key strokes he can find the true history of any listing in his northern New Jersey neighborhood.

“The most common outcome is probably that a buyer overpays for a home,” he said. “I think it’s only a matter of time before a buyer who buys a home under these false pretenses realizes it and perhaps sues the real estate agent for misrepresenting a house.”
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Niece said most buyers don’t understand that more than 100 days on the market is actually average market time. “They perceive that 20 days is an average market time because for the last seven years that’s what they’ve heard,” he said. “It would only be cooking the numbers if buyers’ agents couldn’t easily get the numbers.”
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Across the country in Sacramento, California, the problem got so bad that Michael Lyon, CEO of Lyon Real Estate, blew the whistle after he noticed that one third of all “new” listings were re-listings.

“This is just silliness,” he said. “I’m sorry, but you can’t pull the wool over the buyer’s eyes.”

Lyon forced his regional listing service to set a new standard. “We let people see all the previous listings, period, there are no secrets,” he said. “We want the buyer to know everything about all the times it was listed, so we can allow them to truly investigate the home.”
…
The National Association of Realtors says it hasn’t seen a need for regulation on re-listing because it is not aware of a problem. Lyon says buyers should ask their agents to get the entire listing history.

“You want to know all the times the house has been listed in the last two years,” he said, adding that days on the market are “very important” to buyers.

“It allows them to ask other questions,” he said. “If it has been on a long time, why? Why is this happening? And those answers will allow them to make a fair offer. ”