New Jersey Real Estate Report

From Bloomberg:

Economy in U.S. Probably Expanded at Slowest Pace in Five Years

The U.S. economy probably grew in the first quarter at the slowest pace in five years as consumer and business spending faltered and the housing slump deepened, economists said before a government report today.

A 0.5 percent annual pace of growth from January through March, the smallest gain since the last three months of 2002, is the median estimate of 80 economists surveyed by Bloomberg News.

“I’d probably call it a recession,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York. “It’s a pretty bad environment that is unlikely to get better any time soon. The consumer is on very shaky footing.”

Spending by households, the biggest part of the economy, probably grew last quarter at the slowest pace in 13 years as job losses mounted, food and fuel prices surged and property values tumbled. Federal Reserve policy makers are forecast to cut the benchmark interest rate today to limit the downturn.

The Commerce Department’s report on gross domestic product, the volume of all goods and services produced, is due at 8:30 a.m. in Washington. The economy grew at a 0.6 percent pace in the last three months of 2007.

From the AP:

Fed expected to cut key interest rates one more time

The Federal Reserve, which began the year aggressively fighting a severe credit crunch and economic weakness, may push the pause button after delivering perhaps one more quarter-point cut in interest rates.

Fed Chairman Ben Bernanke and his colleagues were to wrap up a two-day meeting Wednesday and financial markets widely expected that the discussions will end with an announcement that the Fed will cut a key interest rate by a quarter-point.

That would be the seventh reduction in the federal funds rate since the central bank began battling against the credit squeeze and the growing possibility of a recession last September.

The Fed delivered two three-quarter-point moves and one half-point cut over an eight-week period from mid-January to mid-March that represented the central bank’s most aggressive rate cuts in a quarter-century.

However, the central bank is expected to respond with a less aggressive quarter-point move at this meeting, in part because the financial turmoil seems to have eased and because there are growing concerns about inflation.

While there is some thought that the Fed might decide to forgo a rate cut, most analysts believe that the greater likelihood is a quarter-point move.

From the Allentown Morning Call:

Five good reasons to be a renter

No risk. Owning a home can be a risky business, and there are no guarantees that it will be a good investment. Lots of people who got in over their heads with subprime loans (high-cost loans made to people with spotty credit histories) are learning the hard way that homeownership at any cost can be a losing proposition. When you rent, someone else accepts the financial risks, while you get to enjoy the peace of mind.

Cheaper. When you consider the cost of being a homeowner — mortgage payments, association dues, property insurance, property taxes, repairs, maintenance and upgrades to protect your home’s value — most of the time, renting will be cheaper.

Flexibility. A big home mortgage can keep you stuck in a job (or two) that you hate. When you are not tied to that kind of debt, you have the freedom to quit your job and move to another area. Or keep your job and move to another place. Or quit your job and start your own business. See? You’ve got flexibility.

Landlord. Owning a home is not all joy and sunshine when the roof starts to crumble, the furnace goes out or the plumbing springs a leak. When stuff happens (and it will, trust me), a renter calls the landlord. When you’re not worrying about fixing toilets, you have the time and freedom to do what you want.

Get out of debt. Homeowners who are up to their eyeballs in the costs of owning a home often struggle with paying down credit card debt because they’re so strapped for cash. And the temptation to keep adding to that debt because of all the costs to own a home can be great. Renters, on the other hand, have the opportunity to get really serious about getting out of debt because of all the reasons I just mentioned.

If you are a renter, sit back and count your blessings. Be grateful that you are among roughly 30 percent of American households for whom renting a home for now makes a lot of sense. And during these months and years that you are living more cheaply than you would be if you had a big mortgage, get into the savings habit. Save all you can so that when the time is right for you to buy, you’ll have a nice, fat down payment. That way, chances are great that you’ll take on a mortgage payment that is on a par with the rent you’ve been paying.

Now that’s an American dream!

According to S&P Case Shiller, NY Metro Area home prices are down 6.6% in the past year, and down 8.05% from the peak set in June of 2006:

(click to enlarge)

From Standard and Poor’s:

Steep Declines in Home Prices Continued in February 2008 According to the S&P/Case-Shiller® Home Price Indices (PDF)

“There is no sign of a bottom in the numbers,” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “Prices of single family homes continue to drop across the nation. All 20 metro areas were in the red for the February-over-January reading. In addition, 19 of the 20 MSAs are still reporting negative annual returns. The monthly data show that every one of the MSAs has now declined every month since September 2007, marking six consecutive months. On top of that, remained steep the declines have with eight of the 20 MSAs and both composites reporting their single largest monthly decline in February.”

From MarketWatch:

Home prices fall record 12.7% in past year, Case-Shiller say

The decline in U.S. home prices quickened in February, with prices down a record 12.7% in the past year for 20 key cities, according to the Case-Shiller home price index released Tuesday by Standard & Poor’s. “There is no sign of a bottom in the numbers,” said David M. Blitzer, chairman of the index committee at Standard & Poor’s. Prices in 19 of the 20 cities have fallen over the past year, with prices in all 20 cities falling month-to-month for six straight months. The biggest declines were in Las Vegas and Miami, with declines of more than 20% in the past year. Prices in Charlotte, N.C., are up 1.5%.

From Bloomberg:

S&P/Case-Shiller U.S. Home-Price Index Fell 12.7%

Home prices in 20 U.S. metropolitan areas fell in February by the most on record, pointing to an imbalance between supply and demand that shows no sign of ending.

The S&P/Case-Shiller home-price index dropped 12.7 percent from a year earlier, more than forecast and the most since the figures were first published in 2001. The gauge has fallen every month since January 2007.

Prices will probably keep sliding as foreclosures push even more properties onto the market just as stricter lending rules limit the number of qualified buyers. Shrinking home values have contributed to a slowdown in consumer spending that may already have tipped the economy into a recession.

“We’re going to continue in this abyss for a while,” said Ellen Zentner, an economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “Inventories are getting worked off but it’s a slow process. Sales and prices will go down.”

Prices dropped 2.6 percent in February from a month earlier, after a 2.4 percent decline in January, the report showed. The figures aren’t adjusted for seasonal effects, so economists prefer to focus on year-over-year changes instead of month-to-month.

The index was forecast to drop 12 percent following a 10.7 percent drop in January, according to the median estimate of 14 economists surveyed by Bloomberg News. Estimates ranged from declines of 12.6 percent to 11 percent.

The group’s 10-city composite index, with a history back to 1987, fell 13.6 percent in the 12 months ended in February, also the most ever.

From Reuters via CNBC:

Home Prices Tumble Again; ‘No Sign of a Bottom’

Prices of existing US single-family homes extended their slump in February, with 17 of the 20 measured regions posting record annual declines, according to the Standard & Poor’s/Case Shiller home price index Tuesday.

The composite month-over-month index of 20 metropolitan areas fell 2.6 percent to 175.94 in February from January, for an annual drop of 12.7 percent.

S&P said its composite month-over-month index of 10 metro areas slid 2.8 percent in February to 190.58, for an record annual decline of 13.6 percent.

Eight of the top 20 metro areas, as well as both composite measures had their biggest monthly declines in February, S&P said in the release.

From Bloomberg:

U.S. Foreclosure Filings Double in First Quarter

U.S. foreclosure filings more than doubled in the first quarter as payments rose for subprime adjustable mortgages and falling home prices left property owners unable to sell or refinance without losing money.

Almost 650,000 properties were in some stage of foreclosure during the quarter, or 1 in every 194 U.S. households, Irvine, California-based RealtyTrac Inc., a seller of foreclosure data, said today in a statement. The number was 112 percent above a year ago. Nevada, California and Arizona had the highest rates.
…
“This country needs a cleansing,” billionaire real estate investor Sam Zell, chairman of Equity Group Investments LLC, said yesterday at the Milken Institute Global Conference in Los Angeles. “We need to clean out all those people who never should have bought in the first place, and not give them sympathy.”
…
Government attempts to slow the flood of defaults “could be simply deferring another flood of foreclosures,” Saccacio said in the statement. “That could extend the length of time it takes the market to recover from this downward cycle.”
…
“That whole process has to be liquidated,” Zell said.
…
California had the most filings at 169,831, and the second- highest rate at one for every 78 households. Arizona had the third-highest rate, one in every 95 households. Florida was fourth at one in 97.

The foreclosure rate was one in 110 in Colorado, one in 166 in Massachusetts, one in 202 in Maryland, one in 265 in New Jersey, and one in 550 in New York, according to the report.

From the AP:

Homes facing foreclosure more than doubled in 1Q from 2007

The number of U.S. homes heading toward foreclosure more than doubled in the first quarter from a year earlier, as weakening property values and tighter lending left many homeowners powerless to prevent homes from being auctioned to the highest bidder, a research firm said Monday.

Among the hardest hit states were Nevada, Florida and, in particular, California, where Stockton led the nation with a foreclosure rate that was 6.6 times the national average, Irvine, Calif.-based RealtyTrac Inc. said.

Nationwide, 649,917 homes received at least one foreclosure-related filing in the first three months of the year, up 112 percent from 306,722 during the same period last year, RealtyTrac said.

The latest tally also represents an increase of 23 percent from the fourth quarter of last year.

From the Bridgeton News:

Mortgage payments in trouble

Housing foreclosure rates are rising quickly throughout Cumberland County, with rates in Bridgeton, Millville and Vineland already surpassing the national average, according to representatives at the Tri-County Community Action Agency and Affordable Homes of Millville Ecumenical (AHOME).

The two groups, centered in Bridgeton and Millville, respectively, have joined together with 10 other housing counseling agencies across the state to help residents avoid foreclosure.

AHOME Executive Director Donna Turner said her office has received an “incredible” increase in the number of new clients over the past month.

“We averaged one client every two weeks or so, but now we’re getting new people coming to us by twos and threes every week,” said Turner. “They’re mostly 60 days or more behind in their payments and in default.

“It’s just incredible, this increase. We’re going to need to hire staff.”

According to Turner, more than 168 Millville homes are currently in pre-foreclosure — in which the residents have missed at least one payment. Sixty-six have already been taken by banks and 14 have gone up for auction.

In Bridgeton, 114 homes are in pre-foreclosure, with 71 taken by banks and 10 sold in auctions.

And more than 230 homes in Vineland are in pre-foreclosure, with already 84 picked up by banks and 20 sold in auctions.

“We expect these numbers to only increase,” added Turner.

RealtyTrac, one of the largest online providers of foreclosure listings in the country, places the foreclosure rate in Bridgeton at more than one in every 1,200 homes, using United States Census numbers. The national average is about one in every 5,000 homes.

In Millville, between one in 300 to one in 600 homes have fallen to foreclosure. It is the same story in many parts of Vineland, especially center city, its most affected area. East Vineland does slightly better than the rest of the city, roughly mimicking Bridgeton’s numbers.

From the Courier Post:

Expert: Housing downturn has another year

An economist and a consultant painted a less than rosy picture of the fiscal health of New Jersey and the people who call it home during an annual look at the recent economic outlook at the Atlantic Builders Convention.

The genesis of the crisis followed the 2001 recession and the aftershock of 9/11, when the federal interest rate reached 1 percent, the lowest ever, spurring a boom in the housing market.

“That fueled a boom with its irresponsible lending and borrowing on a national scale. The market promised to keep going and going and going like the battery bunny,” said Joseph Seneca of the E.J. Bloustein School of Public Policy at Rutgers University.

It didn’t.

The increase in income came nowhere close to the increase in home sales, putting things out of joint, Seneca said. “In the long run, they need to be equal.”

At the same time, employment growth in New Jersey was tepid, gaining an average of 23,300 new private sector jobs between 2004 and 2007, a third of the annual gains between 1992 and 2000.

By the end of 2005, first-time buyers stopped buying. “The market came to a screeching halt,” said Jeffrey G. Otteau, of the Otteau Valuation Group Inc.

If newcomers don’t buy a starter home, the seller has no money to buy a larger home and up the food chain it goes, Otteau said. Inventory rose, prices fell.

“What began as a housing slowdown in 2006 turned into crisis by the end of 2007,” Seneca said.

The result was a rise in foreclosures and mortgage payment deficiencies, as well as credit paralysis, where worthy borrowers cannot obtain credit even with falling home prices. Camden had the highest rate of foreclosure in the state between 2005 and 2007.

The last time the housing industry fell this much — in 1988 — it took 10 years to recover. The housing market is not close to the bottom of the cycle, Otteau said.

“The pace of home sales in 2008 is the weakest in the last four years. And a correction still has a year to run at least,” he said.

In New Jersey, there are 70,000 houses for sale now. Four years ago at the same point, it was 30,000. Otteau shattered the myth that the upper end of the market is immune. “The deepest decline in pace and sales strength were the brightest parts a year ago,” he said.

From the Otteau Group:

ECONOMY & CREDIT CRISIS SPOILING SPRING HOUSING MARKET

New Jersey home sales in March ran well below last year’s pace despite an increase above the February level. In March, contract-sales activity ran 27% below one year ago despite a 9% increase from February. The clear signal is that the housing market has further to fall.

While housing affordability in New Jersey has improved over the last year, home sales remain weak due to a variety of factors including tighter lending standards and low confidence in home prices. Adding to these housing troubles is growing concern about job security as the economy shows increasing signs of weakness. Particularly worrisome for the northern New Jersey submarket is a new Department of Labor estimate which projects as many as 36,000 job cuts on Wall Street, nearly double the previous estimates. Should this play out, housing demand in Manhattan and its surrounding suburbs will be further reduced.

As a result, expect the Spring selling season to be ‘late & brief’ with only a modest increase in sales activity. Given that contract-sales activity this year is the weakest in recent history (see chart at right), the 2nd half of the year will pose significant challenges for home sellers as prices continue to drift downward.

The one positive note for the housing market is that the growth in Unsold Inventory has slowed significantly and is actually declining in some markets. As a result, the New Jersey housing market has 10.5 months of for-sale inventory, down from 11 months in February. Expect a slower pace of home price declines in 2008 as the market gets closer to reaching a bottom point.

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 the WSJ:

The Brighter Side of Housing
Amid Downturn, ‘Unaffordable’ Is Within Reach
By JAMES R. HAGERTY
April 24, 2008; Page D1

And now for the heartwarming side of the housing bust: It’s helping some people buy homes that they couldn’t afford a couple of years ago.

Michelle Dudley for years commuted 50 miles each way to her job as a civil servant in Anaheim, Calif., because she and her husband, Don, didn’t feel they could afford a home near her office. This week, though, the Dudleys moved into a three-bedroom house in Anaheim that they recently bought for $390,000, down from the original listing price of $445,000 in November. Similar homes in the area were selling for as much as about $600,000 two years ago, says Erin Eckert, an agent for Redfin, an online real-estate brokerage that represented the Dudleys.

Still, many potential buyers are holding out for better deals. The Wall Street Journal’s quarterly survey of housing-market conditions in 28 major metro areas points to continued downward pressure on prices in much of the country.
…
Kevin McCleary, a computer-security consultant, remained a renter through the housing boom even though he could afford to buy, because he believed prices were reaching unsustainable levels. In October, though, he and his fiancée finally decided to buy a foreclosed home in Herndon, Va., and negotiated a price of about $443,000. The same home sold in 2005 for $645,000. “I don’t believe we hit it at the perfect time,” Mr. McCleary says. On the other hand, he says, “we were just tired of putting our lives on hold.”

During the boom, home prices rose far faster than incomes. Home prices as measured by the S&P/Case-Shiller national index shot up 74% in the six years through 2006, while median household income rose 15%. (Neither figure is adjusted for inflation.) Now prices in many areas are adjusting back toward more affordable levels, a process that could take several years.
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Economists at Goldman Sachs say home prices are likely to level off by late 2009. They also point to improving affordability. Goldman’s chief U.S. economist, Jan Hatzius, says the share of a typical family’s income needed to pay mortgage payments on a median-priced home averaged about 17.5% from 1993 to 2003, before jumping to 26% in 2006. The figure now has fallen to 20% and is likely to keep declining as home prices fall.

Mr. Hatzius estimates that average U.S. home prices have fallen 15% since the second quarter of 2006 and projects they will fall an additional 10% before stabilizing late next year. But he also sees a risk that home prices will fall further, particularly if the foreclosure problem proves worse than already expected.

Goldman estimates that foreclosures will add 1 million to 1.5 million homes to the for-sale market this year, compared with less than half a million a year before 2007.

From First American CoreLogic:

First American CoreLogic Releases Febuary 2008 LoanPerformance House Price Index

(click to enlarge)

Philadelphia, PA CBSA
3-Month -1.47%
12-Month -1.14%

Edison, NJ CBSA
3-Month -1.36%
12-Month -4.67%

New York-White Plains-Wayne, NY-NJ CBSA
3-Month -0.80%
12-Month -3.34%

“Thirty-three states now show year-over-year real estate declines according to this latest LoanPerformance HPI release,” said Mark Fleming, chief economist for First American CoreLogic. “However, on a quarter-over-quarter basis, there are now thirty-eight states with decreasing property values,” added Fleming.

Three years ago, during the peak of the housing bubble, I went out on a limb and offered up my forecast on where New Jersey home prices would go. That number was down 30%, and it caused quite a stir. The analysis was simple one, based on historical home prices, incomes, and rents. Home prices had risen dramatically when compared to household income. This left us with three possible outcomes, incomes would rise to bring the ratio back near historic levels, home prices would fall to restore those levels, or we had undergone a paradigm shift and the old ratio was no longer valid. When I looked at historic price to rent ratios, the pattern was the same, homes were commanding prices far and beyond what their rent rolls would infer. The same three outcomes existed here as well, rents would increase to make up the gap, home prices could fall, or else “it really was different this time.”

There was no magic, no crystal ball, no black box, and no esoteric finance. The concept was simple, how could home prices rise faster than the incomes needed to support those prices? Surely we’d hit a point where no one would afford to buy a home. The same applies to rental prices, at what point would it no longer make financial sense to hold on to an investment property? Or the opposite, rents so low that no one would consider investing in real estate. Landlords were subsidizing renters and were not being compensated for their risk.

I digress, neither the forecast nor the analysis was the point of this, it was the reaction. Hell hath no fury like a homeowner scorned. I was called crazy for even suggesting the possibility that home prices might fall 30%, it simply wasn’t possible, it couldn’t be possible. I was a bitter renter, or worse, a housing terrorist for suggesting such things. What did I know? I was just some idiot bubble blogger trying to crash the market.

My my, how times have changed.

From the WSJ:

Yale’s Shiller: U.S. Housing Slump May Exceed Great Depression

Yale University economist Robert Shiller, pioneer of Standard & Poor’s/Case-Shiller home-price index, said there’s a good chance housing prices will fall further than the 30% drop in the historic depression of the 1930s. Home prices nationwide already have dropped 15% since their peak in 2006, he said.

“I think there is a scenario that they could be down substantially more,” Mr. Shiller said during a speech at the New Haven Lawn Club.

Mr. Shiller, who admitted he has a reputation for being bearish, said real estate cycles typically take years to correct. Home prices rose about 85% from 1997 to 2006 adjusted for inflation, the biggest national housing boom in U.S. history, Mr. Shiller said. “Basically we’re in uncharted territory,” he said. “It seems we have developed a speculative culture about housing that never existed on a national basis before.” Many people became convinced that housing prices would increase 10% annually, a notion Mr. Shiller called crazy.

From Bloomberg:

U.S. Existing Home Sales Fell in March; Prices Lower

Sales of previously owned homes in the U.S. fell in March as loan restrictions and the prospect of further price declines kept buyers away.

Purchases dropped 2 percent, less than forecast, to an annual rate of 4.93 million, from 5.03 million in February, the National Association of Realtors said today in Washington. The median sales price fell 7.7 percent from a year earlier.

Defaults on subprime mortgage loans have led banks to tighten borrowing rules, while home values are decreasing as foreclosures add to the glut of unsold properties. The housing slump, now in its third year, is one reason some Federal Reserve policy makers are concerned the U.S. is heading into a recession.

“The declines will persist through 2008,” Avery Shenfeld, senior economist at CIBC World Markets Inc. in Toronto, said before the report. “To see a consistent upturn in sales and prices, we’re going to need to work through the slump in housing and the crisis in the credit market. That will take time.”

Resales were forecast to fall 2.3 percent to a 4.92 million annual rate, according to the median projection of 72 economists in a Bloomberg News survey. Estimates ranged from 4.8 million to 5.08 million.

Sales fell 19.3 percent in March compared with a year earlier. Resales averaged 5.67 million in 2007.
…
The number of homes for sale at the end of March increased by 40,000 to 4.06 million. At the current sales pace, that represented 9.9 months’ worth, up from 9.6 months’ worth at the end of the prior month.

The median price of an existing home dropped to $200,700 from $217,400 a year earlier.

From the Asbury Park Press:

N.J. job growth low, report says

New Jersey’s private-sector job growth ranked 41st nationwide each of the past two years in a sign that its high costs drove employers away, Rutgers University economists said in a report released Monday.

And the state faces bleak prospects: New Jersey has a high concentration of jobs in the financial services sector, which is getting hit hard in the economic downturn, they said.

“I’ve seen a lot of cyclical times with real estate, but I’ve never seen it this bad,” said Arnie Lubliner, general manager of Winstar Mortgage Co. in Manasquan, where business in 2007 was off 63 percent from the previous year.

The report by Rutgers economists James W. Hughes and Joseph J. Seneca comes as bad news to business owners and workers, who had hoped the worst of the economic downturn was behind them.

It argues New Jersey’s economy has several obstacles. The state’s job growth is slower even than its high-cost neighbors, and it sits at the epicenter of the financial services industry.

“This is a very significant economic storm that we have entered into,” Hughes said.

The report found New Jersey’s private sector grew by 0.8 percent in 2006 and 0.1 percent in 2007. By comparison, New York’s private sector grew by 1.5 percent in 2006 and 1.2 percent in 2007, and Pennsylvania’s private sector grew by 1.2 percent in 2006 and 0.6 percent in 2007.

That puts New Jersey in the company of states that have been considered economic trouble spots: California, Nevada, Florida and Arizona have also felt the most pain from the housing bubble’s collapse.
…
“New Jersey has become a place where it is very, very expensive to operate — even within the region,” said Philip Kirschner, president of the New Jersey Business and Industry Association, the state’s biggest business lobby. A quick recovery isn’t likely, the economists said. New Jersey and the rest of the nation are caught in a downturn stemming from a slow housing market. That has forced lenders to tighten their credit standards.

New Jersey is likely to suffer more than others. Financial activities — banking, brokerages, real estate and finance — account for 6.9 percent of the state’s employment, compared with 6.1 percent of U.S. employment, Hughes said.

From CNN/Money:

The trillion-dollar mortgage time bomb

Among the nightmares lurking around the corner for the already battered housing and credit markets would be a meltdown at mortgage financing giants Fannie Mae and Freddie Mac.

Although few are predicting an imminent need for a bailout just yet, credit rating agency Standard & Poor’s recently placed an estimated price tag on this worst case scenario — $420 billion to $1.1 trillion of taxpayer’s money.

This dwarfs how much it cost to help banks during the savings and loan crisis of the late 1980’s and early 1990’s. That cost taxpayers about $250 billion in today’s dollars.

S&P added that saving Fannie and Freddie might cost so much that the federal government’s AAA credit rating, the top possible rating, might even be at risk. If that was lost, then all federal government borrowing would become more expensive.
…
Wagner pointed out that at the end of January, 82% of all mortgages in the U.S. were backed by one of the firms, up from only 46% in the second quarter of 2007.
…
And Fannie and Freddie’s role in the mortgage and real estate markets is likely to grow, as Congress recently allowed them to back larger mortgages, up to $729,750, up from the previous limit of $417,000.
…
“I don’t think the message is a bailout is necessary or imminent,” Wagner said. “But they’re facing this increased role at a time that their own credit performance is suffering from the rifts in the housing and mortgage markets. They’re both projecting much higher losses than we’ve seen in some time.”
…
“The real fundamental problem is real estate prices have been falling and they might fall substantially more,” said Robert Shiller, a Yale University economist who argued for years that a bubble was forming in real estate prices. “OFHEO and Fannie and Freddie never considered the possibility of a massive real estate correction.”
…
“I would say there’s at least a 50-50 chance of some sort of bailout. I’m not saying it will necessarily cost $1 trillion, but they’ll need some kind of help, and it very well could happen this year,” said Dean Baker, co-director of the Center for Economic and Policy Research.

From the AP:

Property tax rebates — touted as not being “an election year gimmick” — now ready to be cut

They’ve talked of keeping parks and the state agriculture department open and maybe boosting aid for towns and cities, but legislators have devoted scant debate this year to sustaining property tax rebates they so highly touted just a year ago.

Democrats who expanded the rebates last year and promised they weren’t an election-year gimmick seem ready to accept Democratic Gov. Jon S. Corzine’s proposal to eliminate rebates for households earning more than $150,000 and scale them back for others.

That has Republicans saying, “We told you so.” They spent last year deeming the expanded rebates a ploy to ensure Democrats — as they ultimately did — kept their legislative majorities in November’s elections.

“Why should the public believe anything we say here based on that experience?” asked Assemblyman Declan O’Scanlon, R-Monmouth.

But Democratic leaders said they couldn’t have foreseen the national economic woes that helped threaten state tax revenues and prompt Corzine to propose a $33 billion budget with $2.7 billion in spending cuts.

“No one could have foreseen the national recession to this degree when we passed that rebate program a year ago,” said Assembly Budget Chairman Lou Greenwald, D-Camden.

He noted the massive financial troubles that hit several leading Wall Street firms that employ many New Jersey residents, thus threatening state income tax collections.

“You just don’t see some of these things,” Greenwald said.
…
The proposed rebate cuts would save the state $519 million.

Households earning up to $100,000 would still get rebates averaging $1,115 under Corzine’s $33 billion budget plan, and senior citizens would still get about $1,270.

But households earning between $100,000 and $150,000 would get $665, or about $300 less than last year.

Households earning between $150,000 and $250,000 would get nothing after getting $745 last year.

Renters would see rebates cut to $80 from as much as $350 last year.

Some fear further declines in tax revenue could lead to sharper rebate cuts, but Assembly Speaker Joseph Roberts Jr. _ who has proposed converting the rebate checks to state income tax credits said the rebates have been cut enough.