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 the Times of Trenton:

Bankruptcy lawyers’ business booming

With real estate activity in a deep freeze, a deviation of the famous mantra is being whispered in law firms throughout New Jersey: Follow the debt.

McCarter & English, the state’s largest law firm, will announce today it’s ramping up its workout practice by hiring Charles Stanziale, one of the state’s top bankruptcy lawyers, to concentrate on what promises to be a growth industry with the national and state economy in a recession.
…
“In these uncertain financial and economic times, there is an increased demand for lawyers with expertise in restructuring and debt management,” McCarter & English chairman Drew Barry said.

Lawyers, too, go where recessions take them. Personal bankruptcy filings are skyrocketing this year, and corporate filings are trending up, though not as dramatically, being that there is historically a one-year lag between an economic downturn and corporate insolvency.

Many McCarter real estate attorneys, who in recent years were consumed with acquisitions and closings, will now be assigned to help Stanziale liquidate real estate holdings in bankruptcy cases, Barry said.

“The current lack of real estate work will be made up for with restructuring work,” he said.
…
Cole Schotz in recent months has hired eight insolvency lawyers, bringing the number of that team to more than 30 in New Jersey, Wilmington, Baltimore and New York. They are looking to hire more, Sirota said.
…
One trend Sirota sees in the current economic downturn is a bit more humility from banks who are trying to keep their balance sheets in order.

“The (bankruptcy) filings would be even more fast and furious, except for the fact that lenders are now more willing to settle than go through liquidation in the courts,” he said.
…
Scrivo said his firm’s “robust” bankruptcy practice has recently added two attorneys in its Philadelphia office and is “always looking” to add more, particularly in this economic climate. The firm is involved in several commercial foreclosures that are headed to bankruptcy, he said.

“I’m guessing,” he said, “we’re going to see more.”

From Bloomberg:

Fed May Cut Rate to 1%, Signal Steps to Save Economy

The Federal Reserve may lower its benchmark interest rate to 1 percent today and signal further reductions to levels unseen since Dwight Eisenhower was president.

Tumbling commodities prices and weaker consumer spending are slowing inflation, which officials described as a “significant concern” at their last scheduled meeting in September. Tomorrow, the Commerce Department will probably report that the economy shrank at a 0.5 percent annual rate in the third quarter, the most since the 2001 recession, economists predict.

The Fed “will be very aggressive,” said Mark Gertler, a New York University economist and research co-author with Fed Chairman Ben S. Bernanke. “Inflation risks are off the table” and “the issue now is how bad the recession will be.”

He predicted the benchmark rate will be cut by half a point today, matching the median forecast of economists surveyed by Bloomberg News. Bernanke and his team could push borrowing costs to zero by June if the credit crunch intensifies, Gertler said.

The Fed has already cut the benchmark rate from 5.25 percent in the past 13 months and created six lending programs channeling more than $1 trillion into the financial system. Banks are still reluctant to lend to each other and the Standard & Poor’s 500 Index is down almost 36 percent this year, even after yesterday’s surge.

The FOMC is scheduled to announce its decision on rates at about 2:15 p.m. in Washington.

From Bloomberg:

August Home Prices in 20 U.S. Cities Fall 16.6% From Year Ago

House prices in 20 U.S. cities declined in the year ended in August at the fastest pace on record as more properties went into foreclosure before the credit crisis deepened this month.

The S&P/Case-Shiller home-price index dropped 16.6 percent in August from a year earlier, as forecast, after a 16.3 percent decline in July. The gauge has fallen every month since January 2007, and year-over-year records began in 2001.

The decrease in property values, which helped boost sales last month to the highest level of the year, will probably intensify in coming months as the latest tightening of credit markets threatens to dry up mortgage financing. Prolonged price declines may push even more houses into foreclosure, weakening consumer spending and the economy.

“House prices will remain on a downward trend for some time and until they are low enough to stimulate sufficient demand to clear the market,” Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York, said before the report. “Prices will need to fall further.”

Home prices decreased 1 percent in August from the prior month after declining 0.9 percent in July, 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.

From the IHT:

S&P: Home prices post 17 pct annual drop in August

A closely watched index shows home prices tumbled by the sharpest annual rate ever in August.

The Standard & Poor’s/Case-Shiller 20-city housing index released Tuesday dropped a record 16.6 percent in August from the year-ago month, the largest drop since its inception in 2000. The 10-city index plunged 17.7 percent, its biggest decline in its 21-year history.

Both indices have recorded year-over-year declines for 20 consecutive months.

Prices in the 20-city index have plummeted more than 20 percent since peaking in July 2006. The 10-city index has fallen nearly 22 percent since its peak in June 2006.

No city in the Case-Shiller 20-city index saw annual price gains in August — for the fifth straight month.

From CNBC:

US Home Prices Plunge Record 16.6% in August

Prices of U.S. single-family homes plunged a record 16.6 percent in August from a year earlier, according to the Standard & Poor’s/Case-Shiller Home Price Indices.

The composite index of 20 metropolitan areas fell 1.0 percent in August from July, S&P said in a statement on Tuesday.

S&P said its composite index of 10 metropolitan areas declined 1.1 percent in August from July for a 17.7 percent year-over-year drop, also a record.

From MarketWatch:

Home prices off record 16.6% in past year, Case-Shiller says

Home prices in 20 major U.S. cities dropped 1% in August compared with July and had fallen a record 16.6% from the previous year, according to the Case-Shiller home price index published Tuesday by Standard & Poor’s. Prices have fallen in all 20 cities compared with a year ago. Only two of the 20 cities showed price gains in August: Boston and Cleveland. The largest declines in August were found in the San Francisco metro area, where prices fell 3.5%. In the past year, Phoenix and Las Vegas have had the largest declines, down nearly 31% in both cities.

Whatever happened to democracy, freedom, liberty, hard work, opportunity and dedication?

From the Press of Atlantic City:

American Dream is still alive, it’s just getting harder for the middle class to achieve it

The taupe-colored house in Pleasantville stands out for its spiffy newness. The front door is blizzard white and the wooden porch is clutter-free. Jorge and Maria Hernandez zero in on the house’s “for sale” sign.

Could this be home?

They digest the view before a real estate agent ushers them inside. Maria had been unsure from the outside, but now her affection for the house grows when she realizes just how much room there is: A walk-in closet in the master bedroom. A second bathroom for the children. A backyard - spacious enough for a deck.

The initial buyer decided to pull out at the last minute, leaving the seller in a bind, the agent says. The house is priced at $249,000, but the seller will negotiate.
“Maria, this one is right,” Jorge tells his wife. She prays on it.

Three months later, Maria is in her two-bedroom apartment on the Pleasantville-Absecon border, which she shares with her husband, young grandson and goddaughter.

“I want it for my grandson,” she says. “I want my baby to say, ‘This is my house.’”

They are another family trying to pull themselves up the economic rungs of the American middle class. Now, more than ever, it’s a harder climb and a longer haul.

Anecdote for history buffs.

Today marks the 79th anniversary of the official start of the Crash of ‘29. Black Thursday, which took place on October 24th, 1929, was the first phase of the three phases which defined the Great Crash.

Strap in, it is going to be a wild ride. Dow and S&P futures are currently trading “limit down”, the maximum daily amount permitted. The Nikkei fell over 800 points last night (nearly 10 percent), European stocks fell more than 7% and the Russians have halted trading until Tuesday.

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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 Bloomberg:

Mortgage Bankers to Ask U.S. to Lift Home-Loan Limits

The U.S. Mortgage Bankers Association plans to ask the Federal Housing Finance Agency to increase the limit for Fannie Mae and Freddie Mac purchases or guarantees of single-family mortgages to $625,500 to bolster the housing market.

The mortgage bankers’ residential board of governors is scheduled to vote today on the recommendation, which would call for an increase of 50 percent above the current limit of $417,000 in most areas, at the trade group’s annual conference in San Francisco.

“It will be stimulative,” Garry Cipponeri, senior vice president of Chase Home Finance LLC in Iselin, New Jersey, and head of the mortgage bankers’ capital markets committee, said in an interview. “This market needs liquidity.”

A higher limit guaranteed by the government agencies is needed to spur lending in the most expensive housing markets, such as California and New York, Cipponeri said. The availability of mortgages above $417,000, known as non-conforming loans, “has gotten worse” amid a tightening of credit standards, he said.

Congress approved raising the limit temporarily to $729,500. That increase expires at the end of the year and lawmakers would decide whether to raise the limit permanently, with the Federal Housing Finance Agency having oversight of Fannie Mae and Freddie Mac.

From the Record:

House-hunters play waiting game

David DeFabiis of Hackensack has been house-hunting for more than a year.

He’s got a good job, a great credit score, a sizable down payment. He’s been prequalified for a mortgage.

But he’s afraid.

“I’m afraid that a house I buy today will not be worth what I paid down the road,” he said. “I am concerned [about whether] I should play the waiting game some more.”

DeFabiis represents a new breed of house-hunter: the fence-sitter. In a National Association of Realtors survey this spring, 20 percent of Realtors said they have potential buyers waiting it out.

“They’re a very big percentage of home buyers now, people waiting for the market to hit bottom,” said Dianna Ivanov of Terrie O’Connor Realtors in Ramsey. “We have a standard Realtor phrase: ‘You don’t know when the market has hit bottom until prices start rising.’ ”

Denise Cerone of Gentry Realty Associates in Maywood, who has been working with fence-sitter DeFabiis, added, “Everybody’s hoping they get the best buy and don’t overpay. It’s a little hard to tell them differently because prices have come down.”

The fence-sitters are not sitting idly by. They are more like air traffic controllers monitoring the downward progress of a whole slew of properties in which they’re interested, working the Internet and strategizing the most propitious time to make an offer.

Walter M., who asked that his full name not be used, has been house-hunting with his wife for a year. They can spend up to $750,000 (without having to sell their South Bergen condo) and have been searching in Upper Saddle River, Woodcliff Lake, Montvale, Mahwah, Franklin Lakes, Cresskill and Demarest, as well as Wayne and Ringwood.

Walter has a roster of NJMLS listings he tracks regularly. He forwarded a list with his commentary.

Of a $625,000 ranch in Upper Saddle River, he said: “Price just dropped for the third time in one month.”

Of a $799,000 five-bedroom home with a pool in Upper Saddle River, he said: “Listed well over $1 million originally.”

Of a $700,000 three-bedroom ranch in Woodcliff Lake, he said: ‘This would be a good deal at $600,000.”

And a five-bedroom, 3 1/2-bath contemporary colonial listed at $925,000 in Upper Saddle River prompted this comment: “Nice modern house. Originally listed over $1 million. According to the agent, the owners turned down an $850,000 offer not too long ago. By March, they will wish they accepted it.”

Francine O. (who doesn’t want her full name used) is another self-described fence-sitter. She and her husband owned a home in Montvale for 45 years, bought a home in Florida for their retirement, and sold that home in 2005 to move back to Bergen County to be near their family. They have $250,000 in cash from the sale of their Florida home to put into a small single-family home in Bergen County. They don’t want to carry a mortgage. They’ve been looking for a year.

“Prices are down, but they’re not down enough,” Francine said.
…
When these fence-sitters do make a bid, it is often an extreme low-ball. DeFabiis bid on a house in Maywood a little more than a month ago.

“It was an estate sale, and the ad said, ‘Bring all offers,’ ” said DeFabiis. “It needed a new kitchen, a new bath. It was certainly not a turnkey house. They were looking for $379,000 and I offered $305,000. They never responded to the offer, and I finally withdrew it.”
…
A year ago, said Walter M., if you indicated you were going to make a low-ball bid, the agent would tell you to go to a more affordable town.

Now, he said, “If you’re going to make an offer that’s $150,000 off price, the agent will say, ‘Put it on paper.’ ”
…
Real estate analyst Jeff Otteau of the Otteau Valuation Group in East Brunswick said prices in North Jersey have dropped 19 percent since the high of 2005 and will likely continue to drop for the next six months or so, by 5 percent to 10 percent more.

While this has nothing to do with the economy or real estate, I had to share. Introducing my newest foster, Spooky (yes, named for Halloween)! Spooky is a pure bred boxer that has a broken leg, severe tendon damage, and a rather nasty soft tissue infection. The vets were worried that he might actually lose his rear leg. Owner wanted to put him to sleep, can you imagine! Spooky is pictured here analyzing the credit quality of a RMBS tranche.

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 Federal Reserve:

Beige Book - Second District–New York (Includes NJ)

Construction and Real Estate

Housing markets in the District have generally weakened since the last report. Virtually all contacts emphasize that there has been little activity in recent weeks and that it is too early to gauge the impact of the recent financial crisis on the market; there were frequent mentions of both buyers and sellers being in a “wait and see” mode. A contact monitoring New Jersey’s residential construction sector reports that both new home sales and new construction activity were exceptionally weak in August and that prices have continued to decline, with builders increasingly offering steep discounts.The inventory of homes on the market remains fairly high, though two contacts note that many sellers are discretionary and would take their homes off the market before reducing the asking price substantially. A number of contacts in northern New Jersey estimate that single-family home prices are down 20 to 25 percent from their peak levels; one contact notes somewhat steeper declines in prices for townhouses and condos. Housing markets on New Jersey’s Gold Coast (near Manhattan), where both multi-family development and apartment sales and prices had been showing some resilience, are reported to have weakened recently.

New York City’s co-op and condo market also showed signs of softening in the third quarter: prices were still reported to be up slightly from a year earlier, but lower than in the second quarter. Moreover, sales activity weakened noticeably, and the inventory of unsold units, though still fairly low by historical standards, was up an estimated 35 percent from a year ago. Manhattan’s rental market was steady to somewhat softer in September: on average, rents were running 4 to 5 percent lower in September than a year earlier, while the inventories of available rental units and the vacancy rate have been relatively stable.

From the Press of Atlantic City:

More people find refuge with FHA mortgages

The U.S. housing agency created in the depths of the Great Depression is once again doing a brisk business helping stabilize the mortgage finance market.

Demand for loans insured by the Federal Housing Administration is soaring, after years of being overshadowed by subprime, interest-only, no-doc and other inventive mortgage types.

Through July, the number of FHA loans in New Jersey already is 80 percent higher than in all of 2006, according to the Philadelphia office of the FHA.

Drew Fishman, president of the New Jersey Association of Realtors and a broker with Re/Max Atlantic in Northfield, said Monday that FHA-insured loans years ago covered a big portion of home sales, but their popularity fell off as rising property prices exceeded the FHA loan limits.

Then in the spring of this year, the FHA increased its loan limits to provide relief to struggling homeowners and the tight housing credit markets.

“It was very good to have the increases in loan limits,” Fishman said. “It allows more people to get into the market, and more refinancing to reduce rates.”

He said that in southern New Jersey, the FHA loan limit is about $450,000, while upstate, where prices are higher, the limit is above $750,000.

Most of the new interest is coming from distressed homeowners seeking to refinance their existing, mainly non-FHA loans - especially adjustable loans resetting at higher rates.

Of 22,666 FHA loans in New Jersey through July, 13,597 were for refinancings by existing homeowners.

From Bloomberg:

World May Be Lucky to Get Worst Recession Since 1983

The world may be heading for its worst recession in a quarter of a century — if it’s lucky.

A steep slump looks likely as the credit squeeze crunches economies from the U.S. to Singapore and panic engulfs global financial markets.

“It’s certainly going to be the worst since the 1980s,” says Bradford DeLong, an economics professor at the University of California at Berkeley who worked at the U.S. Treasury Department from 1993 to 1995. “The hope is that it won’t become the worst unemployment business cycle since the Great Depression.”

Of special concern: The two big bulwarks of the global economy in recent years — U.S. consumer spending and the rapid growth of emerging markets — may be finally giving way in the face of the 14-month-old financial turmoil.

That raises the odds that the coming economic decline will be long and deep, despite U.S. Treasury Secretary Henry Paulson’s $700 billion financial rescue plan, similar efforts by European leaders and the coordinated interest-rate cuts engineered by Federal Reserve Chairman Ben S. Bernanke and other central bankers last week.

“This is the worst crisis I’ve seen in my 50-year career,” William Rhodes, senior vice chairman of Citigroup Inc. in New York, told fellow bankers in Washington yesterday. “We still have to deal with the effects on the real economy here and elsewhere.”
…
Household finances are also being pinched. The steep decline in U.S. stock prices last week alone wiped some $2.16 trillion from investors’ wealth. And banks are getting stingier with credit: Borrowing by U.S. consumers fell in August by the most on record as lenders shut access to loans, according to data from the Fed.

The consumer pullback is already sending ripples throughout the economy. Vacancies at U.S. neighborhood and community shopping centers rose to a 14-year-high in the third quarter, New York-based real-estate research firm Reis says.

A sharp reduction in household spending could turn what is shaping up to be the biggest recession since the early 1980s into something worse, Bruce Kasman, chief economist at JPMorgan Chase & Co. told a meeting of the Institute for International Finance in Washington yesterday.

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 CNN/Money:

For states, it’s ‘worst-case scenario’

States and municipalities are facing their worst budget crunches in decades - and it’s only going to get worse.

As the weakening economy undermines consumers and businesses alike, governments are facing a rare confluence of declines in personal and corporate income taxes, property taxes and sales taxes. This is forcing officials to raise taxes and fees, lay off workers and slash spending - cutting aid to hospitals, schools, Medicaid and more.

At the same time, as unemployment and inflation rise, demand for public services and the cost of delivering them is on the increase.

On top of all that, the credit crunch has made it virtually impossible for some governments to borrow to cover short-term financing needs, forcing states such as California to appeal to Washington for help.

Worst of all, most experts are predicting the fiscal squeeze will only deepen.

“It’s all just starting,” said Chris Hoene, director of the Center for Policy and Research at the National League of Cities. “It’s going to be at least three years of pretty tough sweating.”
…
Other states, however, have no choice. Michigan and Maryland enacted tax increases, while New Hampshire and New York are increasing cigarette taxes, according to the Center on Budget and Policy Priorities. New Jersey, meanwhile, is eliminating property tax rebates for households with incomes of more than $150,000 and is reducing property tax rebates for some other residents. A public utilities tax that was scheduled to end in 2010 will continue to 2013.

“We’re preparing for the worst-case scenario,” said Tom Vincz, spokesman for the New Jersey Office of the State Treasurer.

From Bloomberg:

Fed, ECB, Central Banks Lower Rates in Coordinated Reduction

The Federal Reserve, European Central Bank and four other central banks lowered interest rates in an unprecedented, emergency coordinated bid to ease the economic effects of the financial crisis.

The Fed cut its benchmark rate by a half point to 1.5 percent, the central bank in a statement. The ECB and central banks of the U.K., Canada, Sweden and Switzerland are also reducing rates, the Fed said in a statement.

“The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability,” according to a joint statement by the central banks. “Some easing of global monetary conditions is therefore warranted.”