New Jersey Real Estate Report

From the NY Times:

Broader Measure of Unemployment Stands at 17.5%

For all the pain caused by the Great Recession, the job market still was not in as bad shape as it had been during the depths of the early 1980s recession — until now.

With the release of the jobs report on Friday, the broadest measure of unemployment and underemployment tracked by the Labor Department has reached its highest level in decades. If statistics went back so far, the measure would almost certainly be at its highest level since the Great Depression.

In all, more than one out of every six workers — 17.5 percent — were unemployed or underemployed in October. The previous recorded high was 17.1percent, in December 1982.

This includes the officially unemployed, who have looked for work in the last four weeks. It also includes discouraged workers, who have looked in the past year, as well as millions of part-time workers who want to be working full time.

The official jobless rate — 10.2 percent in October, up from 9.8 percent in September — remains lower than the early 1980s peak of 10.8 percent.

The rate is highest today, sometimes 20 percent, in states that had big housing bubbles, like California and Arizona, or that have large manufacturing sectors, like Michigan, Ohio, Oregon, Rhode Island and South Carolina.

From the WSJ Developments Blog:

It’s (Almost) Official: Home Buyer Tax Credit Extended, Expanded

Congress voted on Thursday to extend the tax credit and President Obama plans on signing it into law Friday morning. The $8,000 credit will apply to all contracts, for homes up to $800,000, entered into before April 30, 2010, and closed by June 30. It creates a new $6,500 credit for property owners who have lived in their home for at least five consecutive years.

Income limits for eligible home buyers are expanded to $125,000 for single buyers and $225,000 for couples, from $75,000 and $150,000, respectively. To help guard against fraud, buyers are required to attach documentation of purchase to their tax return.

From the NY Times:

A Bad Way to Spend Money

Congress threw good money after bad this week when it voted to extend and expand a wasteful home buyer’s tax credit set to expire at the end of the month.

The new program, which will continue through the spring, is being portrayed as a rescue plan for the ailing housing market. But this costly giveaway to the real estate and mortgage industry will spend far more in taxpayers’ dollars than it can ever deliver in economic benefit. As happened with the cash-for-clunkers program in the automobile industry, the program will make housing look momentarily betterbut is unlikely to contribute to long-term recovery.
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The bill that passed both houses of Congress this week extends the program through April 2010 and grants the full tax credit to couples who earn up to $225,000. The expanded program introduces a $6,500 tax credit for people who already own homes but want to buy new ones.

From the Philly Inquirer:

Bad home-building loans plague banks

As financial regulators shift their sights to the mounting problems with commercial real estate loans, many Philadelphia-area banks remain bogged down in bad loans for residential construction.

Led by construction loans, the overall percentage of problem loans - those seriously behind in payment - at the 15 largest publicly traded banks here soared to nearly 3 percent Sept. 30 from 0.89 percent a year earlier.

That increase added $1.1 billion to the loans banks will have to collect through restructuring, foreclosure, or other measures - unless the improving economy allows the borrowers to recover enough to pay their debts.
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Bankers, meanwhile, even those with the strongest loan portfolios in the region, see continued problems.

“I think every bank is going to be thinking very carefully about bolstering their reserves because you just don’t know what is out there,” said Kent Lufkin, president of TF Financial Corp., of Newtown, the parent of Third Federal Savings Bank, which had the lowest rate of nonperforming assets among the area banks.

Lufkin said Third Federal stayed out of trouble during the real estate boom because it did not change its conservative lending practices. “That’s helped us today to have a lower percentage of nonperforming assets,” he said.

By contrast, Abington Bancorp Inc., of Jenkintown, followed a suburban builder with which it had previous experience into the Philadelphia condo market during the real estate boom. The move came after the company raised $71 million in a 2004 stock offering and contributed to Abington’s possession of the highest rate of nonperforming assets in the region, 5.03 percent, according to data from Bloomberg News.

“It’s our construction-loan portfolio that’s in bad shape,” said Robert White, the lender’s chief executive officer. Indeed, the delinquency rate on its residential construction loans, including loans at least 30 days past due, was 35.2 percent on Sept. 30, according to a report by Stern, Agee & Leach Inc., a research firm in Portland, Maine.
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The average past-due rate on construction loans at 15 Pennsylvania and New Jersey banks Kelley tracks climbed to 15.5 percent in September from 12.1 percent in June. The figure for commercial real estate climbed to 2.9 percent from 2.6 percent.

With loan defaults still rising two years after the subprime-mortgage crisis began, all business loans - not just for commercial real estate - are getting careful attention.

From the Record:

Hard-to-move condos go quickly at auction

In one afternoon, the developer of an East Rutherford condo complex sold 26 units in his 32-unit complex.

Sales of the two-bedroom, two-bath homes in the new Courtland Arms building had suffered in the slumped housing market, so Rolando Cribeiro, president of CP Building Enterprises Corp., agreed to an auction.

On Sunday, suggested starting bids of $150,000 for condos that had originally listed for nearly $500,000 drew a standing-room-only crowd at the Hilton in Hasbrouck Heights.

Manhattan-based auctioneer Sheldon Good & Co. was enlisted to sell off 26 units, eight at the highest price, and the rest sold “on reserve,” where the seller has three days to reject bids not high enough.

But Sunday the homes were selling so well — many fetching prices in the $280,000 range — that CP Building sold them all on the spot.

“The prices were there,” said Cribeiro. “It would have taken 18 months, and to get it accomplished in four hours has been fascinating.”

A first-time home buyer, Ho-Ho-Kus native Stacey Weinberg, 27, drew cheers from the crowd when she finally outbid others for a condo at $284,000 after being forced to pass on previous units that sold above her price range.

“It’s stressful,” said Weinberg, a Manhattan resident who bought one of the luxury units for herself and her husband, Morgan. “It’s to get the best deal, so I guess, what are you going to do?”

From Bloomberg:

New Jersey Won’t Recover Job Losses Until 2019, Rutgers Finds

New Jersey, its jobless rate at a 32-year high, won’t exceed its pre-recession employment for a decade, Rutgers University economists predict.

The state will begin recovering in 2011, yet will require until 2019 to surpass by 118,000 jobs the 2007 employment peak, said Rutgers economist Nancy Mantell, director of the Rutgers Economic Advisory Service, said.

“The country, in contrast, will begin job expansion three years earlier, at the beginning of 2013,” Mantell said in a statement yesterday. “By 2019, it will have 7.7 percent more jobs than at the previous peak.”

New Jersey, the most densely populated U.S. state, entered the recession in January 2008, one month after the nation as a whole, and has lost 161,300 jobs, or 4 percent, of its employment base, Mantell said.

During the first year of the economic crisis, the state shed jobs at a rate comparable to the national figure. In 2009, the pace slowed to 1.8 percent, compared with 2.9 percent nationally.

The New Jersey jobless rate was 9.8 percent in September, up from 4.5 in December 2007, according to state Department of Labor and Workforce Development figures. The national rate is also 9.8 percent. New Jersey currently has 3.9 million non-farm jobs, according to state figures. In December 2007 it had a record-high 4.1 million, the state labor department reported.
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The nonpartisan Office of Legislative Services projects the state will confront a deficit of as much as $8 billion next year as rising unemployment and damped consumer spending depress tax receipts. The revenue gap is more than 25 percent of the $29 billion budget enacted in June by Governor Jon Corzine.

Tax and fee collections for the quarter ended Sept. 30 fell $190 million, or 3.1 percent, below estimates, Treasurer David Rousseau said. Corzine ordered $200 million in cuts and directed his cabinet members to identify another $200 million in reductions.

From the Star Ledger:

Lack of guests leads Borgata to close rooms in Water Club Hotel

The Borgata Hotel Casino & Spa in Atlantic City is taking hundreds of rooms at its Water Club hotel out of service on Tuesdays through Thursdays because of low demand.

The casino also shuttered most of the posh year-old hotel’s 800 rooms on those days last March. They were reopened when bookings picked up over the summer.
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The lower demand comes as Atlantic City’s casinos have struggled with a weak economy and increased gambling competition in Pennsylvania and New York.

From the APP:

Time winding down for home buyers

With its expiration just over a month away, a push is on to extend the first-time home buyers’ tax credit, which boosted the beleaguered housing market in the midst of a recession.
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There are competing ideas out there to extend — and even expand — the tax credit, which gives up to $8,000 to first-time buyers who close on a home by Nov. 30.

In a press conference on Monday at the New Jersey Association of Realtors in Edison, U.S. Rep. Leonard Lance, R-N.J., said his bill would open the tax credit to all people buying a primary residence, regardless of past home ownership or income. He would increase the credit to $15,000 and extend the program through Dec. 1, 2010.

“We do not want the American dream to expire,” Lance said. “We want to make sure as many Americans as possible have home ownership.”

Lawmakers are under pressure from real estate agents and others in the housing industry to extend the credit.

The timing is critical, Lance said.
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In the Senate, Senate leaders are negotiating to extend the credit and gradually reduce it through 2010, Democratic Sen. Bill Nelson of Florida said Monday.

Senate Majority Leader Harry Reid of Nevada and Senate Finance Committee Chairman Max Baucus of Montana, both Democrats, may seek to add the home buyers’ extension to legislation extending unemployment benefits that may be debated as early as this week, according to Regan Lachapelle, an aide to Reid.

Another proposal by Sen. Christopher Dodd, D-Conn., Senate banking committee chairman, and Georgia Republican Sen. Johnny Isakson would extend the credit through next June and expand it to couples earning $300,000 or less, up from the current program’s $150,000 maximum income eligibility for married couples.

The current program comes with costs. Congress allocated $13.6 billion for the home buyers’ credit. As of July 17, 2009, more than 1.1 million tax returns claiming more than $8 billion in credits have been processed.

From Minyanville:

Where the Housing Market Goes From Here

Subsidizing renters with gobs of greenbacks if they buy a house turns out to be a pretty popular program.

Thanks to the tax credit for first-time home buyers, as well as cheaper home prices and lower mortgage rates, existing home sales increased by 9.4% to a 5.57 million annual rate in September, the National Association of Realtors said Friday.

Sales had been forecast to rise to an annual rate of 5.35 million, according to economists surveyed by Thomson Reuters.

First-time home buyers, many of whom certainly owe you and every other taxpayer a thank-you card, rushed in to take advantage of the program.

The question, though, is what happens after the program expires in November?

Patrick Newport, US economist at IHS Global Insight, notes that the government’s home-buyer tax credit, like Cash for Clunkers, simply shifts sales from one period to another, but it doesn’t do much to heal the housing market.

“The report might, on the surface, look to be really good,” Newport tells us. “But, if you think about it more carefully, it’s really not great news. We are just trading off good news now for bad news in 2010.”

From the NY Times:

Puzzling Over Home Prices

THE housing market in New Jersey has been on a little roll toward recovery — the number of sales has risen and the number of houses on the market has fallen for four straight months — even though activity cooled slightly in August for the country at large.

But what does that mean for home prices? A halt in the decline? Even, possibly, a start in the other direction?

“In some neighborhoods, I have to say yes, prices are starting to go up,” said Karen Eastman Bigos, a partner in the Towne Realty Group, based in Short Hills, one of the highest-priced markets in northern New Jersey.

On the other hand, she and others say, brokers continue to encounter sellers who are “stuck in 2006.” Some people hear news reports about the improvement in conditions nationally, and insist on pricing their homes at precrash levels, Ms. Bigos said.
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Most recently, Jeffrey Otteau, the group’s president, announced his view that it will take until 2016 for prices to recover to their high point in 2006.

Over all, he added, it is “very difficult — and possibly too soon” to say whether prices have even stopped their decline.

For one thing, data on final sales prices are not available until sales close — usually two to six months after a contract is signed — so there is a lag time before conclusions can be drawn. For another, there is no tried-and-true analytical method for determining the direction prices are headed at a time of flux like this.

When pressed to consider what could be discerned from information now at hand, Mr. Otteau came up with this: The seasonal shift downward in prices that occurred from summer to fall was not as sharp as last year’s. This year, the downward shift from the second to third quarters was 7.4 percent; last year, it was 10.4 percent.
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Mr. Otteau said his data suggested that “a ground is beginning to form in terms of prices,” and noted that the trend had occurred as government stimulus programs that were intended to stabilize the residential real estate market were taking effect.

No matter how good the numbers are in a particular community, however, realistic pricing is critical.

From the Federal Reserve:

Beige Book - October 2009

Second District–New York

The Second District’s economy has shown scattered signs of a pickup since the last report. The labor market has given mixed signals, with some signs of strengthening in manufacturing, but ongoing weakness in hiring in other sectors. Manufacturing sector contacts report increased activity and remain optimistic about the near-term outlook.
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Consumer confidence, though still low, has moved up moderately since the last report.
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Commercial real estate markets–in both the office and industrial categories–have been steady to moderately weaker since the last report. Residential real estate markets have been mixed since the last report, but generally weaker, especially at the high end of the market. Home sales activity reportedly rebounded a bit from depressed second quarter levels, but prices, as well as rents, have continued to decline. Finally, bankers report rising delinquency rates–particularly on consumer and commercial mortgage loans–along with ongoing tightening in credit standards; loan demand continued to decline, except for residential mortgages, where bankers report some pickup in demand.
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Housing markets remain sluggish across the District, though sales activity has picked up in certain areas. A New Jersey contact indicates that resale activity is inching upward, though prices continue to be depressed due to a substantial volume of foreclosures and short sales. New home sales remain flat in northern New Jersey, though the inventory is gradually diminishing, due to a lack of new development. In western New York State, home sales activity reportedly slowed in August and remained relatively sluggish in September, while prices generally remained steady; contacts express concern that the upcoming expiration of the $8,000 tax credit for first-time homebuyers will adversely affect sales and prices. Manhattan’s apartment sales market remained weak in the third quarter. Sales activity rebounded moderately from the prior quarter but remained lower than a year earlier; prices continued to decline and were estimated to be down 18 percent from a year earlier on a per-square-foot basis. The inventory of listings declined modestly, but the average number of days on the market continued to climb. Manhattan’s rental market slackened further in September, with average asking rents continuing to run about 10 percent below a year earlier; in addition, landlords are reported to be offering increasingly generous concessions–waiving fees and offering one or more months of free rent. Vacancy rates are reported to have edged down seasonally, but this is expected to reverse in the upcoming (typically slower) winter season.
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For all loan categories, respondents indicated a tightening of credit standards, ranging from 24 percent in the residential mortgage category to 30 percent for commercial mortgages; virtually no banker reports easing in credit standards. Respondents report widespread decreases in average deposit rates. Finally, bankers note increased delinquency rates for all loan categories, most notably in the consumer loan category.

Sure hope we’ve got enough of them, there are currently 332 homes for sale over $2m in Essex, Hunterdon, Morris, Somerset, Sussex and Union (GSMLS). That number goes up to 600 homes when you add in Passaic, Hudson, and Bergen (NJMLS).

From the NY Times:

Pitching to Professional Athletes

STEVE NEEDLE, a developer, thought a year ago that he had sold a $3 million castle-style mansion in Westfield even before his firm had finished construction.

But the buyer, employed as a Wall Street stock trader at the time, lost his financial footing in the crash last year.

“He could not complete,” Mr. Needle said, referring to the buyer and the sale, but sounding rather as though he was talking about a quarterback aiming for the end zone.

As things are turning out, his metaphor may be quite apt. With the Wall Street bonus-earning, mansion-buying client base sharply reduced at this point, Mr. Needle and other developers say they are trying to pivot, and make direct pitches to another elite group less affected by recessionary times: professional athletes.

“This area always depended so much on Wall Street, hedge fund money and to an extent ‘big pharma’ execs,” said Mr. Needle, whose Westfield-based company is called Needle Point Homes. “But the market has changed so much in the last year, and the buyer stream is sort of down to a trickle.”

His broker, Arlene Gonnella, a top-performing agent at Weichert Realtors for the last six years, said she recently “refocused” her marketing of the most lavish homes in the Short Hills area, where she is based, on sports agents and recruiters who might refer players looking to relocate.
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“There are actually a lot of pro athletes out there looking for homes right now,” said Ms. Gonnella, who noted that she had shown the Jets linebacker Bart Scott and his wife, Darnesha, several houses in Short Hills last summer, after Mr. Scott was wooed to the Jets by Rex Ryan, the coach, who lives in Summit.

From the Record:

State’s jobless rate climbs to 32-year high of 9.8 percent in September

New Jersey’s unemployment rate rose to 9.8 percent in September, the highest since 1977, state labor officials said today. The rate matched the national rate.

The number of jobs in the Garden State fell by 12,700, with 12,000 of the losses in the private sector.

“The latest national and state employment estimates show that New Jersey was not immune from the national trend,” said New Jersey Labor Commissioner David J. Socolow.

From the Star Ledger:

N.J. unemployment rate inches up to 9.8 percent

The New Jersey unemployment rate inched up from 9.7 percent to 9.8 percent in September, exactly tracking the national rate, the state labor department said today.

The state’s private sector lost 12,000 jobs from August to September, as well as 700 public sector jobs, according to an employment survey. Total nonfarm employment slipped to 3,917,700, down from 4,046,600 a year ago.

The private sector slip is a particular disappointment, because over the summer the private sector looked as if it were making small but steady gains since a May low of 3,279,800 jobs.

From the Philly Inquirer:

N.J. jobs drop, unemployment rises.

New Jersey’s unemployment rate continued to rise in September, hitting 9.8 percent of the workforce, the highest in 32 years.

At the same time, the number of state residents with jobs fell after two months of gains, the state Department of Labor and Workforce Development reported today.

The jobless rate was up from 9.6 percent in August and matched the national rate for September, the report showed. The state’s unemployment rate was last at 9.8 percent in April 1977.
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In September, seven of New Jersey’s 10 industry sectors posted job losses - with the largest decline coming in construction (4,000 jobs), the department said. Even the health services/education sector, which typically increases employment month-to-month, lost 1,000 jobs in September.

Financial services gained 1,200 jobs last month, and leisure/hospitality was up 1,000, the state said. One sector, natural resources/mining, was unchanged.

The state’s total number of jobless people rose by 8,000 in September to 444,900.

Employment fell by 12,700 to 3,917,700.

If critics think the credit is so supportive, what are the chances that the credit becomes not only permanant, but as untouchable as the mortgage interest deduction?

From CNN/Money:

Push on to expand $8,000 tax credit

Congress is considering proposals to greatly expand a soon-to-expire $8,000 tax credit for first-time homebuyers — potentially applying it to all but the wealthiest homebuyers.

Supporters say doing so would further boost home sales, stabilize housing prices and generate jobs. Opponents say extending and expanding the credit would be a waste of money and only temporarily stave off further price declines.

The credit now can be claimed by anyone buying a home who has not owned one for three years and who closes the deal by Nov. 30.

Beyond extending that deadline, some lawmakers want to make the credit available to all homebuyers who meet income eligibility requirements. And some want to increase the amount of the credit from $8,000 to $15,000.
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Opponents of extending and expanding the credit worry that such moves offer poor bang for the buck and won’t stem housing declines.

“Everything spent on this program will ultimately have to be paid for later through higher, economically harmful taxes,” Ted Gayer, co-director of economic studies at the Brookings Institution, wrote in a Brookings blog.

Assuming there are 5.5 million home sales in 2010, Gayer said, expanding the credit to all homeowners “is poorly targeted because it would give a credit to 5.5 million homebuyers who would have bought a home anyway.”

The current credit was estimated to cost federal coffers $6.64 billion over 10 years. But Gayer notes that the cost is likely to be much higher since more people than expected took advantage of it but only about 15% of people wouldn’t have bought a house otherwise.

From the NY Times:

Overall, International Interest in U.S. Real Estate Has Waned

Despite plummeting prices, international interest in United States property cooled in the last year, according to an annual survey by the National Association of Realtors, a U.S. organization of property agents.

From May 2008 to May 2009 foreign nationals purchased an estimated 154,000 homes in the United States, down from 170,000 in the previous 12 months, the survey found. Twenty-three percent of the agents questioned reported at least one contact with an international client, down from 26 percent in 2008 and 32 percent in 2007.
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And agents in the top four states for international sales — Florida, California, Texas and Arizona — reported their international business actually increased 35 to 45 percent in the period.
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In May 2009, with currency exchange ranges fluctuating, the average U.S. home price was $218,300, compared with $278,100 in Canada and $237,900 in Britain, according to the association’s data.
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International buyers paid a median price of $247,100 for existing homes, compared with a median sales price of $198,100 in 2008, the new study found. Buyers from India paid the highest median price, $322,200.

Most international buyers came from Canada, Britain, Mexico, India and China, in that order, the survey showed. And while the numbers from Canada, Britain and China declined, those from Mexico and India increased.

From HousingWire:

Bill Raises Required Down Payment to 5% for FHA Loans

A bill introduced in Congress Monday would increase the minimum down payment for Federal Housing Administration (FHA)-insured mortgages from 3.5% to 5%.

The FHA Taxpayer Protection Act of 2009 — HR 3706 — would also prohibit financing initial service charges, appraisals, inspections, or other fees or closing costs with any part of an FHA mortgage.

The bill’s author, Rep. Scott Garrett (R-NJ), said the current policy of allowing closing costs to be rolled into the mortgage effectively reduces FHA down payments to as low as 2.5% because borrowers don’t have to have as much cash on hand at closing.

“[T]he benefits of promoting homeownership using government subsidies must be balanced against the potential risk of insuring less creditworthy borrowers and exposing the American taxpayer to that risk,” Garrett said in a statement on his Web site. “As we have learned repeatedly throughout the mortgage crisis, the amount of equity a homeowner has in their home directly correlates to the credit risk associated to their mortgage.”
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The bill also calls for the Government Accountability Office (GAO) to conduct a review of the FHA’s fiscal stability and the state of the Mutual Mortgage Insurance Fund, including the appropriate capital ratio of the fund, and how that ratio affects broader housing market. The bill also calls for an examination of the housing market’s dependence on the fund since the mortgage crisis began.
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The market share of FHA mortgages has increased from 3% in 2006 to more than 20% in 2009, and the rate of delinquency for FHA loans is also on the rise, currently more than 14%, according to testimony Department of Housing and Urban Development (HUD) inspector general Kenneth Donohue gave to Congress in April.