From the WSJ:
Even before Sandy ripped through the Northeast coast last month, the region’s housing market had been among the weakest in the nation.
Now, damage from the storm is raising new concerns in coastal communities about falling home prices and more foreclosures as weary homeowners—some upside down on their mortgages or still reeling from last year’s Tropical Storm Irene—decide whether to stay or go.
The problems are especially evident in New Jersey, which has been largely left out of the housing recovery that has taken hold in much of the rest of the nation.
New Jersey home values declined 1.8% in September from a year earlier, according to real-estate data firm CoreLogic Inc. CLGX +0.47% Only Rhode Island and Illinois posted bigger declines. Nationally, prices were up by 5%, with 43 states seeing year-over-year gains.
Meanwhile, nearly one in six New Jersey homeowners with a mortgage is upside down, or owes more than their properties are worth. And the state has the second-highest foreclosure rate in the country—after Florida—with some 12.7% of loans that were three months past due or in foreclosure as of September, up from 11.9% one year ago, according to the Mortgage Bankers Association. Nationally, the share of seriously delinquent loans fell to 7%, from 7.9% one year earlier.
The fallout from Sandy could make a bad situation even worse. “Anybody who was about to buy a house and needed to get a mortgage, that is stopped in its tracks,” said Dana Miller, a real-estate agent with Weichert Realtors in Rumson, N.J.
Economists say that over the past decade, hurricanes have generally prompted a surge in mortgage delinquencies but not necessarily foreclosures because lenders tend to give borrowers time to catch up on payments after natural disasters.
Still, Sandy is one of the first major storms to hit a region with so many borrowers who already owe more than their homes are worth. “The foreclosure piece injects a lot of uncertainty into a market that was already dealing with a lot of problems,” says Lawrence Friscia, an attorney in Newark, N.J., who represents homeowners facing foreclosure.
“Let’s put it this way: a lot of these folks may make the calculus that they don’t want to throw good money after bad,” he says. If that happens, “the effect on these submarkets can be profound.”
Lawrence Yun, chief economist of the National Association of Realtors, says he expects that cancellations in home sales in New Jersey, New York and Connecticut during November will lead to a small decline in the national home-sales figure that will be reported next month.
Even in shore communities that didn’t sustain much damage, real-estate agents say higher flood-insurance costs could tamp down demand.
Tom Marino is going ahead with a $352,500 purchase of a three-bedroom split-level home in Brigantine, N.J., on the shore, even though the home was flooded. He was initially set to close on the vacation-home purchase three weeks ago, but had to wait until repairs to the home’s walls, heating systems and flooring have been made.
The sellers, who have flood insurance, finished those repairs and the home will be reappraised Friday. Mr. Marino, a 60-year-old professor of anatomy, hopes to close next week. He brushes aside concerns about declining property values. “Brigantine is a gem,” he says, “and it’s just going to be even better when it’s rebuilt.”