New Jersey Real Estate Report

From the Financial Times:

Manhattan shows first cracks

As the US housing slump deepened over the past three years, Manhattan’s real estate market seemed immune. Instead of crumb­ling with the rest of the nation, prices continued to rocket. Sales surged and new condominiums found multiple bidders. For a long while, Manhattan property was in an orbit all of its own.

But there are growing signs that this last bastion may be giving way. New York City, the seemingly indestructible foundation of the nation’s luxury property market, has this year begun to shown signs of strain. In the second quarter, traditionally the hottest property season, sales slumped 38 per cent to a five-year low, according to the Corcoran Group, the city’s largest residential real estate group.

“Two years ago, you could throw up some brick, put in a kitchen and a bath, put a price on it, and you’d have a bidding war,” says Pamela Liebman, Corcoran’s chief executive. “That’s not the case any more. Buyers now feel that a property they want today could cost less tomorrow.”
…
According to Miller Samuel, a New York residential real estate appraisal company, some 6,869 apartments were for sale in Manhattan in the second quarter. That is 11 per cent more than the first quarter – and a full 31 per cent more than the second quarter of last year.

While some of the rise results from new developments coming on line, much of the latest increase has to do with existing co-operative properties sitting around for months on end. Co-op inventory, which mostly consists of resales, rose at a quicker pace than condo stock did in the second quarter.

In another disturbing sign, homes are staying on the market for longer. Miller Samuel reports that, from April through June, properties were listed for an average of 135 days – nearly three weeks longer than in the same period last year. “We may go through a cycle now where product will sit on the market,” Ms Liebman says. “There’s little room for error in a market like this.”
…
But as yet there is no sign of let-up and the grim mood in Manhattan has spread throughout the region. Consider the softness recently seen in the Hamptons, the Long Island beach retreat whose fate is closely tied to the fortunes of Wall Street. According to data compiled by Suffolk Research Service, the market saw both price declines and slower sales in the second quarter than in the same period last year.

The price drops were even steeper for these beach homes, whose median price fell 11 per cent to $735,000, from $825,000 last year. What is more, volume took a hit for the fourth straight year. Only 576 homes sold in the second quarter, a 29 per cent drop from last year.

From the Central Jersey Register News:

Expert: Housing woes may last through late ‘09

The local housing market has followed its expected downward course this year, and predictions it would begin to recover about this time have proved overly optimistic.

Many in the industry agree that prices are approaching or have already hit rock bottom, but there is some dissent on how much things will worsen before they improve.

Between the second quarter of 2007 and the same period this year, existing single-family home prices dropped just over 3 percent statewide, and sales dropped 18.53 percent, according to the New Jersey Association of Realtors’ Home Sales Report. Figures for the second quarter of 2008 were released this week and are preliminary.

Locally, prices throughout Burlington County dropped just over 4 percent since this time last year, and sales went down 15 percent.
…
“I guess it’s déjà vu from 2007,” said Bill Dressel, executive director of the New Jersey State League of Municipalities. “The housing market and development in general as it relates to the public/private sector partnership has gone south.”
…
“We are fighting our way through a recessionary period as it relates to low housing starts and just a dismal financial picture as it relates to the business community overall,” he said.

Joseph Seneca, professor at Rutgers Edward J. Bloustein School of Planning and Public Policy said there were some encouraging signs in the New Jersey real estate market, including a statewide increase in home sales in recent months, a fairly constant level of unsold inventory, and a slow decrease in prices, which he said probably helps the market.

But he emphasized the starker picture for the national economy, which he said has a large impact on the state. Rises in mortgage prices, credit standards and the large, if fairly stable, inventory of unsold houses are all national issues. So are the financial problems of large institutions, which he said have “no end in sight.”

“There are lots of foreclosures continuing nationally, and that adds more inventory to the market,” Dr. Seneca said. “House prices continue to fall, creating negative conditions for equity for homeowners.

“Foreclosures will continue to rise, and a good amount of the sales we’ve seen, particularly of existing homes, are fire sales of foreclosed homes being conducted by banks. So the housing market remains on a downward trajectory and prices are likely to continue to erode into 2009, nationally and in New Jersey.”
…
Experts generally agreed that the market is attractive for buyers with good credit who did not buy a house recently. “If you have equity in your home and we can price your house to sell, we can sell your home,” said Jeanne Roveda, broker/president of Century 21 B&R Realty in Upper Freehold. “Have prices adjusted? Yes, they obviously have. If you bought your house in 2005, 2006 or 2007, you may not be able to get what you paid for it.”

“We’re actually at a much slower market than 12 months ago,” said Donna Reichert, one of the owners of Coldwell Banker Winzinger Reichert and Associates on Route 130 in Bordentown. She estimated prices had fallen 20 percent in the area.

She added that things have picked up in recent weeks, “but people have to be realistic to expect what to sell their house for.”
…
Dr. Seneca’s forecast was slightly bleaker than those expressed by real estate agents. He said that others’ previous predictions of an economic turnaround in the second half of this year has been “postponed,” possibly to the last six months of 2009.

“And a big reason for that is the housing market hasn’t recovered, and with these negative factors,” he said, “the near-term outlook is for further weakness.

“I think there’s more correction in prices to come because of the very large inventory on the market and the still-increasing number of foreclosures putting more supply on the market, both nationally and in New Jersey,” Dr. Seneca said.

From the AP:

S&P: Home prices drop by record amount in 2Q

A widely watched index released Tuesday showed home prices dropping by the sharpest rate ever in the second quarter, but the data for June suggest the severity of the housing slump may be waning.

The Standard & Poor’s/Case-Shiller U.S. National Home Price Index tumbled a record 15.4 percent during the quarter from the same period a year ago.

The monthly indices also clocked in record declines. The 20-city index fell by 15.9 percent in June compared with a year ago, the largest drop since its inception in 2000. The 10-city index plunged 17 percent, its biggest decline in its 21-year history.

However, the rate of single-family home price declines slowed from May to June, a possible silver lining, the index creators said.

“While there is no national turnaround in residential real estate prices, it is possible that we are seeing some regions struggling to come back, which has resulted in some moderation in price declines at the national level” said David M. Blitzer, chairman of the index committee at S&P.

From the Record:

Housing market finally hitting bottom?

Home prices dropped 7.3 percent in the New York metropolitan area, which includes North Jersey, from June 2007 to June 2008, the Standard & Poor’s/Case-Shiller index reported today.

While that was a significant drop, it was less than half the decline seen nationwide. And some analysts saw signs that the market may be reaching a bottom
…
“Not one market is showing a positive return over the past 12 months,” said David Blitzer, chairman of the index committee at Standard & Poor’s.

But Patrick O’Keefe, former head of the New Jersey Builders Association, said there are signs that the market may be bottoming out in New Jersey and the Northeast as a whole. For one thing, Case-Shiller reported that prices in the New York metropolitan area inched up 0.2 percent from May to June of this year, the first time in almost two years that they haven’t dropped month over month.

“It would be premature to conclude that a rebound is underway,” said O’Keefe, now a director with J.H. Cohn, a Roseland accounting firm. He said housing sales and prices in the region will likely remain flat into 2009.

From Newsday:

U.S. house prices again decline at slower pace

U.S. house prices declined at a slower pace for the fourth straight month in June, signaling that the worst housing slump in more than 25 years may be starting to stabilize.

Home prices in 20 U.S. metropolitan areas fell 0.5 percent from the previous month, with nine areas reporting a gain compared with seven in May, the S&P/Case-Shiller index showed. Prices were down 15.9 percent from the previous month, less than economists had forecast.

The figures add evidence that the drag on the economy from the housing slump is lessening, while officials and analysts predict that a rebound remains at least a year away. A private report yesterday showed that sales of existing homes in the past three months averaged the same rate as the previous period.
…
S&P/Case Shiller also released quarterly figures for nationwide home prices. That measure showed a 2.3 percent drop in the three months through June from the previous three months, compared with a 6.8 percent decline in the first quarter.
…
Unlike half the metro areas in the 20-city index, the New York metro region did not see double-digit declines from a year ago but fell 7.3 percent, data show. Prices did see a 0.2 percent uptick from May to June for the metropolitan area, which also covers Long Island, parts of Connecticut, New Jersey and Pennsylvania, according to the Case-Shiller report.

From BusinessWeek:

Home sales, prices mostly fall in Northeast

Homes sales tumbled in most big Northeastern cities last month — with only Passaic, N.J., showing a healthy jump in activity — while sales of distressed properties dragged down median prices in the entire region, according to two reports released Monday.

Sales of existing homes in the Northeast declined nearly 12 percent in July from a year ago, the National Association of Realtors said. The median price in the Northeast was $278,700, down almost 5 percent from July 2007.

That reflected the national trend: sales dropped more than 13 percent year-over-year, while the median price decreased 7.1 percent to $212,000.

But the Associated Press-Re/Max Monthly Housing Report, also released Monday, showed July sales dropped by at least 20 percent in five of the nine Northeast cities tracked. The report analyzed home sales recorded by all real estate agents in those cities, regardless of company affiliation.

In the one bright spot, Passaic, sales jumped 38 percent over July last year. But the rapid sales pace could be stymied by glut of properties coming onto the market. The supply of unsold homes grew 32 percent to 10.6 months, and the median price slid 6 percent to $400,000.

From the Record:

In North Jersey foreclosures are up, home sales down

In a painful sign of the worsening real estate downturn, foreclosure actions in North Jersey nearly tripled in the first five months of 2008 over the same period in 2007, an analysis by The Record has found.

At the same time, the volume of housing sales has plummeted this year. And North Jersey home values, which held steady while many of the nation’s housing markets steeply declined in the last two years, have begun to crack.

Median home prices declined 2.3 percent in Bergen County and 8.2 percent in Passaic County in the first half of this year, compared with the same period in 2007, according to a Record analysis of public property records.

“If you bought your house less than five years ago, you’ve seen a decline in the price,” said Crystal Burns, an agent with Re/Max Advantage Plus in Teaneck.

Still, the region’s housing prices have held up better than the nation’s, where average prices have declined more than 15 percent, according to the Standard & Poor’s Case-Shiller index of 20 metropolitan areas.

But the rising foreclosure numbers are a sign of trouble. About 2,800 North Jersey residential properties — roughly one out of every 135 — were in some stage of the foreclosure process from January to May 2008, compared with about 1,000 — or one in 385 — a year earlier, according to The Record’s analysis of data from RealtyTrac, a California company that follows the market. Those numbers range from initial notices that a homeowner is in default on mortgage payments to a sheriff’s auction of the house to satisfy the debt.

And 335 actually lost their homes to foreclosure in the first five months of this year, a seven-fold jump from the January-May 2007 period. Most of those properties went back to the lenders.
…
Social service agencies are being flooded with calls from homeowners in distress.

“Some people we can help, because there are some lenders that will negotiate,” said Phyllis Salowe-Kaye, head of NJ Citizen Action, which does housing counseling.

“But about half of the people who come in here can’t be helped,” she continued. “They don’t have the money to pay the current loan. They don’t have enough equity to refinance. And they don’t have a lender who’s agreeing to negotiate. Those people are eventually going to get foreclosed on.”
…
“We haven’t even hit the worst part of the problem,” said Salowe-Kaye.
…
Lisa Molnar of Skylands Appraisals in Ringwood said prospective buyers “are just terrified. They think, ‘Why would I buy a house if values are going to decline?”

From the New York Times:

No End in Sight

A year into the financial crisis, the news is grim and there are signs of even worse troubles ahead. The mortgage bust continues and has begun to spread to loans for construction and commercial property, as well as credit cards and auto loans.

There may soon be more bank failures and a spate of corporate bankruptcies. That means that unemployment will almost certainly rise — employers have shed nearly half a million jobs this year — and those who keep their jobs will have to cope with fewer hours, measlier raises and evaporating bonuses.
…
The country cannot afford more delay and more posturing. Before the crisis gets any worse, Congress must take several steps.

Lawmakers need to start crafting the next stimulus bill — without repeating the mistakes of the last one.
…
Congress also needs to ensure that a $4 billion grant to states and cities to buy up vacant properties is quickly and efficiently distributed.
…
Congress also cannot wait to see if its anti-foreclosure measures work. It must begin to vet other ideas and be ready to move quickly if the crisis worsens. Most important, lawmakers should be ready to reform the bankruptcy law so that homeowners can have their mortgages modified under court protection.
…
The work doesn’t end there. The Bush administration and federal regulators need to develop a framework for resolving future financial failures before they occur. That is essential for rebuilding confidence in the system.

Millions of Americans are already suffering. And we fear millions more will be hurt before this crisis ends. They cannot wait until after the election for help.

From Barrons:

The Endgame Nears For Fannie and Freddie

IT MAY BE CURTAINS SOON FOR THE MANAGEMENTS and shareholders of beleaguered housing giants Fannie Mae and Freddie Mac . It is growing increasingly likely that the Treasury will recapitalize Fannie and Freddie in the months ahead on the taxpayer’s dime, availing itself of powers granted it under the new housing bill signed into law last month. Such a move almost certainly would wipe out existing holders of the agencies’ common stock, with preferred shareholders and even holders of the two entities’ $19 billion of subordinated debt also suffering losses. Barron’s first raised the possibility of a government takeover of Fannie and Freddie in a March 10 cover story, “Is Fannie Mae Toast?”

Heaven knows, the two government-sponsored enterprises, or GSEs, both need resuscitation. Soaring mortgage delinquencies and foreclosures have led the companies to gush red ink for the past four quarters, and their managements concede the outlook is even grimmer well into next year. Shares of Fannie Mae (ticker: FNM) and Freddie Mac (FRE) have lost around 90% of their value in the past year, with Fannie now trading at $7.91, and Freddie at $5.88.

Similarly, the balance sheets of both companies have been destroyed. On a fair-value basis, in which the value of assets and liabilities is marked to immediate-liquidation value, Freddie would have had a negative net worth of $5.6 billion as of June 30, while Fannie’s equity eroded to $12.5 billion from a fair value of $36 billion at the end of last year. That $12.5 billion isn’t much of a cushion for a $2.8 trillion book of owned or guaranteed mortgage assets.

What’s more, the fair-value figures reported by the companies may overstate the value of their assets significantly. By some calculations each company is around $50 billion in the hole. But more on that later.
…
Note, too, that Fannie and Freddie have nonpareil lobbying operations and formidable political strength, owing to their hefty donations and penchant for hiring former political operatives. Besides, the agencies claim they’ve landed in their current predicament through no fault of their own. As Freddie Mac Chairman and CEO Richard Syron recently put it, the GSEs have been hit by a “100-year storm” in the housing market, accentuated by some higher-risk mortgages that they were forced to buy to meet government affordable-housing targets.

From Bloomberg:

U.S. Foreclosures Increase 55%, Bank Seizures Rise to Record

Bank repossessions almost tripled in July and U.S. foreclosure filings increased 55 percent from a year earlier as falling prices cut homeowner equity, accelerating the housing decline, RealtyTrac Inc. said.

Bank seizures rose 184 percent, the most since reporting began in January 2005, the Irvine, California-based seller of foreclosure data said today in a statement. More than 272,000 properties, or one in 464 U.S. households, got a default notice, was warned of a pending auction or were foreclosed on. Nevada, California and Florida had the highest rates.

“It’s getting worse,” Rick Sharga, RealtyTrac’s executive vice president for marketing, said in an interview. “The number of properties that have been foreclosed on by the banks and still haven’t sold is the highest we’ve ever seen.”

Total filings rose 8 percent from the previous month to 272,171, just shy of the record 273,001 set in May, said RealtyTrac, which has a database of more than 1.5 million properties. Through July, 775,244 properties were owned by banks, compared with about 445,000 for all of 2007 and about 224,000 in 2006, Sharga said.

From the AP:

US foreclosure filings surge 55 percent

The number of homeowners stung by the dramatic decline in the U.S. housing market jumped last month as foreclosure filings grew by more than 50 percent compared with the same month a year ago, according to data released Thursday.

Nationwide, more than 272,000 homes received at least one foreclosure-related notice in July, up 55 percent from about 175,000 in the same month last year and up 8 percent from June, RealtyTrac Inc. said. That means one in every 464 U.S. households received a foreclosure filing last month.

From Reuters:

Home foreclosure filings up 55 pct in July

U.S. foreclosure activity in July rose 55 percent from a year earlier as a slump in once-sizzling housing markets forced yet more borrowers to default on their mortgages, according to a monthly report.
…
That means one in every 464 U.S. households received a foreclosure filing in July, the firm said. Bank repossessions (REOs) rose 184 percent year-over-year. Default notices were up 53 percent, and auction notices rose 11 percent.

“The sharp rise in REOs, combined with slow sales, has resulted in a bloated inventory of bank-owned properties for sale,” James Saccacio, chief executive of Irvine, California-based RealtyTrac, said in a statement.

RealtyTrac now has more than 750,000 properties in its active REO database, or about 17 percent of the inventory of existing homes for sale reported in June by the National Association of Realtors, RealtyTrac said.

From the Financial Times:

Tighter rules dash hopes of end to squeeze

Banks expect to tighten lending standards for US households and businesses through to the end of the year and into 2009, damping any hopes of a quick end to the credit squeeze, according to a report by the ­Federal Reserve.

The Fed survey of senior loan officers is conducted every three months. Monday’s report was based on responses from 52 US banks and 21 US branches of internationally based banks in mid-July.

It highlighted that domestic banks had tightened standards in “all major loan categories” since the last survey in April, with consumer loans in particular becoming tougher to secure.

“Coming at a time when the cash flow from the rebates has dried up and the growth in labour income is slowing to a crawl, the restriction in lending to households underscores the challenges facing the consumer in the second half of the year,” said Michael Feroli, a US economist at JPMorgan.

The survey also pointed to a bleak outlook, with “large net fractions” of foreign and US banks expecting lending standards to tighten further in the remaining part of this year and “smaller, though substantial, net fractions” expected the stricter terms to continue next year.

“These days, you practically need the Jaws of Life [a hydraulic rescue tool] to pry open a banker’s wallet,” said Mike Larson, an interest rate and property analyst at Weiss Research.

“Overall, the longer the crunch ­lingers, the longer the economic slump could drag on.”

From Reuters:

Fed says banks broadly tighten U.S. loan standards

Banks in the United States further tightened lending standards in all major categories, especially for consumer loans, in the past three months amid a weakening economic outlook, according to a Federal Reserve survey released on Monday.
…
The survey added to evidence that a year-long credit crunch sparked initially by subprime mortgage defaults is far from easing as banks hoard capital and make it harder to borrow.

The tightness in credit is now being driven by broader weakness in the U.S. economy and is defying efforts by the Fed to boost liquidity in the banking system and keep interest rates low.

“It clearly is going to be difficult to get a loan. The Fed cutting rates doesn’t help a lot when you can’t get a lender to make a loan,” said Gary Thayer, senior economist at Wachovia Securities in St. Louis.

He said the tighter lending standards was typical in a weakening economy, and creates headwinds that will help delay recovery, along with a worsening housing slump and still-high fuel prices.

The tightening of credit was particularly pronounced in the consumer sector, where banks increased minimum credit scores required on credit cards and reduced card balance limits.
…
he housing sector got no relief in the past three months, as lenders further tightened standards all mortgage categories. The Fed said about 75 percent of U.S. banks tightened lending standards on prime mortgages — those given to customers with better credit histories — versus about 60 percent who said they tightened in the April.
…
However, 50 percent of the respondents said there was a lack of demand for such loans and 40 percent said there was a limited number of mortgage applicants at their bank who meet the Fannie Mae and Freddie Mac underwriting criteria for conforming jumbo loans, which require better credit scores and higher down payments.

From the APP:

Tax boards face flood of appeals by homeowners

Homeowners battered by the economy are seeking help in unprecedented numbers from property tax review boards. Nearly 6,000 tax assessment appeals were filed in Monmouth and Ocean counties this year, pushing hearing dates months beyond the normal calendar.
…
James Stuart, president of Stuart Appraisal Co. in Freehold, said homeowners “are looking at appeals more closely than at any time I’ve seen in over 20 years in the appraisal busi-ness. People see it as perhaps their one shot at having a say about their tax bill.”

Most appeals are unsuccessful. Tax officials said traditionally about a third of the appeals receive reductions. L. Ozzie Vituscka, the Ocean County tax administrator, said the success rate of appeals can top 40 percent “when the housing market is difficult or when a large number of revaluations are updated. The percentage of reductions is different each year.”

Still, a substantial number of area homeowners are willing to plunk down anywhere from $5 to $150 in appeal filing fees. The fees are based on the property valuation amount.

“People are really hurting in this economy, and when they get a tax bill for $9,000, they want to take a shot at knocking it down some,” said Wayne C. Pomanowski, a Monmouth County Tax Board commissioner.
…
Officials said they forecast a larger number of appeals next year if the slumping housing market doesn’t improve.

The Ocean County board is handling 4,100 appeals this year, more than twice the average appeals heard in previous years since 2000, according to Waxman, who said the number next year could be in the 7,500 to 10,000 range. Waxman said the projection is based on the poor housing market and because revaluations are scheduled to be completed for 2009 in several of the county’s large municipalities.

Clark said Monmouth County also could see an increase in appeals next year. The Monmouth board received 1,800 appeals this year, he said. The number is close to twice the average of previous years since 2000.

The record number of appeals for the two counties — 10,175 in Ocean in 1994 and 7,009 in Monmouth in 1993 — came during that decade’s housing slump.

From USA Today:

Jack Jentzen never saw it coming. Four years ago, as a real estate agent in Elgin, Ill., he was enjoying the rewards of the most frenzied U.S. housing market in decades, and money poured in.
Now he’s fighting to keep his home.

The real estate slump that hit in 2006 eventually stifled home sales, shrank prices and unleashed a wave of foreclosures. And as it did, the hardest-hit victims included a group of people, such as Jentzen, who never imagined they had anything to fear: real estate agents themselves.

Tens of thousands of Realtors have been forced to quit the industry in the past couple of years. Some are enduring their own agonizing foreclosures. Agents who had staked their fortunes on galloping home sales now struggle to afford health care, utilities and other basics.

Some, like Jentzen, are trying to build new careers. Others are pursuing drastic and aggressive tactics to tough out the housing slump, from embracing new marketing plans to spending thousands to earn advanced designations they hope will help them stand out from the competition. Some say the housing collapse is undermining their professional self-esteem.

“I’m looking at jobs that are way lower than what I was once making,” says Jentzen, 43.
…
“The realty industry is quickly becoming a shadow of what it was,” says Mark Zandi, chief economist of Moody’s Economy.com. “For those who remain employed, their compensation has plunged. Realtors were also among the most aggressive housing investors. Many made the error of working and investing with leverage in the same industry, something financial planners counsel strongly against.”
…
“Some members are saying there are too many Realtors out there who are bringing additional competition, and a shake-up is expected,” says Lawrence Yun, the NAR’s chief economist. “We do anticipate lower membership going forward since housing recovery is taking longer.”
…
Robert Millosh, a Realtor for Re/Max in Middlesex County, N.J., says he’ll need to find some other job to stay in the area. He used to earn at least $30,000 annually as a Realtor. Right now, he says, home sales are so dismal that he’s looking at a job change or a move to Florida or Pennsylvania.

“I am almost broke and struggling to get by from day to day,” says Millosh, who is 45 and single. “I’m having an estate sale for most of the furniture I have that I don’t need. My life has been ripped apart.”

Milltown, N.J., is a quaint small town, the kind of place families want to move to. They have an all-American Fourth of July celebration, with a parade, fishing, rodeo, a band in the park and fireworks at night. Millosh says it would be a hard place to abandon, but he might not have a choice.

From the NY Times:

Economists Plumb the Depths of the Downturn

Even if the economy continues to deteriorate, economists generally agree that the United States is not heading for another Great Depression.

Not only are the conditions far less dire, eight economists said in interviews, but the government is playing a heightened role in trying to cushion the impact of the housing downturn, losses at financial institutions and rising unemployment.

“The government is larger now and it acts as an anchor,” said Richard Parker, senior fellow at the Shorenstein Center at Harvard. “During the Great Depression, the government had neither the means nor the capability to serve as a backstop.”

But the economists — who range from academics to policy researchers, liberals to conservatives — disagreed about just how bad this economic slowdown, led by the worst housing slump since the Depression, could be.

“I think we’ll see a miserable job market and, consequently, an eroded standard of living for the vast majority of Americans for several years,” said Lawrence Mishel, president of the Economic Policy Institute, a liberal research organization in Washington.

“This is indistinguishable from a recession for a working family,” Mr. Mishel said. “They’re losing jobs, and they’re getting a double bite as wage growth slows down and inflation kicks up. People are losing out on both ends.”
…
“You read the headlines and you look around and you think the world is coming to an end,” said Charles W. Calomiris, a visiting scholar at the American Enterprise Institute, a conservative research group in Washington. “But I don’t think so. If you’re going to tell a worst-case scenario story at this point, it’s only going to be because the Fed loses control.”
…
“The Fed isn’t the whole story, but it’s a big part of it,” said Gerald P. O’Driscoll Jr., who was vice president of the Federal Reserve Bank of Dallas from 1982 to 1994 and is now a senior fellow at the Cato Institute, a libertarian research organization in Washington. “It allowed these absolutely insane bubbles to happen. The lesson is, you can’t let these bubbles continue unabated with no policy making.”

But the economists said others were to blame, too: investors, banks and rating agencies, as well as the current chairman of the Federal Reserve, Ben S. Bernanke, and the Clinton and Bush administrations.

“They thought it was just a great thing that the stock market kept going higher and higher,” said Dean Baker, co-director at the Center for Economic and Policy Research, a liberal research group in Washington. “Then, of course, Wall Street just ran wild. It was some mix of irresponsibility and downright greed. They’re all sort of on the hook, but Greenspan sits front and center.”
…
“People are way too willing to extrapolate from history,” said Jan Hatzius, chief domestic economist at Goldman Sachs. “If it’s 2005, you can’t look at a 40-year run of data and say, ‘It must be a law of nature that housing prices never fall.’ ”

Don’t forget to buy your tickets for the I.O.U.S.A. Screening GTG
Thursday, August 21st at 8:00pm

AMC Clifton Commons 16
405 Route 3 East
Clifton, NJ 07014

Tickets can be purchased online, click here.

—————————-
From CNBC:

Housing Prices Could Skid Another 33%, Analyst Says

Housing prices will fall more than 30 percent before the market recovers and banks will continue their reluctance to lend until the credit crisis clears up, Oppenheimer analyst Meredith Whitney said on CNBC.

In a wide-ranging interview, Whitney said the housing deterioration will be worse than even the doom-and-gloom predictions that already have circulated regarding the market.

“There’s one obvious area where the bad news isn’t all out yet, and that’s with home prices … Home prices are going to fall much more than people expect,” she said.

“I think it’s going to be well worse than 33 percent, and here’s why: If you look at the futures market, it’s indicating a range right around between 2002-2003 levels, when home ownership rates were actually higher, but fewer people can qualify for a mortgage because you’ve got to put 20 percent down, and that’s a lot of money for people,” she continued. “Furthermore, then you’ve got to find a bank to lend to you, because, Countrywide’s not lending to you.”
…
“If you don’t need capital you can get capital. If you need capital, you’re not going to get capital,” she said.

The banking and housing industries will only recover, Whitney said, when banks start feeling comfortable enough to lend again.

From the Star Ledger:

INSTEAD OF FORECLOSED: SOLD!

A dozen chatty women and children stepped off a yellow school bus Saturday morning and into a vacant condo on 5th Street in Elizabeth. Armed with notepads, digital cameras and binders, they sounded optimistic about finding their dream home in the Union County city.

They peppered tour guides with questions about taxes, schools, unfinished basements and the number of bedrooms in each of the dozen properties the group would see. But this wasn’t an ordinary real estate tour.

It was a foreclosure bus tour hosted by the city — the first in the state to offer such tours as a public service, according to the New Jersey League of Municipalities.

In Florida, California and Michigan, where the housing foreclosure crisis has hit residents especially hard, these tours are becoming the rage among real estate agents. In New Jersey, which according to RealtyTrac, a firm that monitors foreclosures, saw a 140 percent jump in foreclosure filings over the last three months, real estate agents are catching on.

Tours are being organized in Sussex, Morris, Union and Warren counties and along the Shore. But this one was different: It was designed not only to help first-time buyers get an affordable home, but to keep troubled homeowners above water.

“Maybe it’s better to call it a ‘pre-foreclosure tour,’” said the city’s housing program director, Susan Ucci. “We want to prevent people from going into foreclosure.”
…
Only one of the homes on the tour had been repossessed by the lender; the rest were nearing foreclosure. Tour guides — carrying binders of information to match prospective buyers with sellers — were members of the city’s Home Improvement Program and the nonprofit housing group Brand New Day. The nine prospective buyers on the tour, all women, were pre-qualified for mortgages by Brand New Day, and all took and passed classes for first-time home-buyers.

Elizabeth’s program stands out, Ucci said, with benefits for all involved. Homeowners don’t go through the painful and credit-ruining foreclosure process. First-time buyers get a bargain on a home and “we get an occupied house instead of a foreclosed house in the neighborhood.”

Bill Dressel, executive director of the New Jersey League of Municipalities, said this is the first he’s heard of a city working with a nonprofit group to show off nearly foreclosed homes.

“I think it’s absolutely brilliant,” Dressel said, adding he wants to promote the program across the state. “It cuts through a lot of bureaucracy, and it literally matches people in homes where they want to be.”
…
Sandra Johnson, from Edison, said she was hesitant to look at homes that are near foreclosure but came on the tour because she was curious about what the market has to offer. “The tour is beautiful,” she said. “Everybody’s reminding you about what you can afford. A Realtor’s not reminding you.”

Organizers are planning another tour in September. And cities across the state may soon follow suit. Jacques Howard, economic director of Plainfield, said the tours “make perfect sense.” He plans on rolling out a comprehensive package of programs to battle foreclosure in his Union County city. He hopes to include home foreclosure tours.

When homes are vacant, “the city’s losing, the bank’s losing, everyone’s losing,” Howard said.

From Bloomberg:

Hamptons Home Prices Fall on Wall Street Jobs, Economic Outlook

Home prices in the Hamptons, the summer haven of New York financiers and socialites, fell almost 12 percent in the second quarter from a year earlier as Wall Street firms cut jobs and the economy teetered near a recession.

Sales dropped 26 percent and the median price slid to $970,000 in the resort towns on the East End of Long Island, New York-based broker Prudential Douglas Elliman Real Estate and appraiser Miller Samuel Inc. said in a report today.

“We used to think of the Hamptons as insulated and that’s not the case,” said real estate developer Arthur Rauscher, who is trying to sell his four-bedroom custom-built East Hampton house for the second time in three years. He’s asking $1.3 million and hasn’t received any offers. “It’s not what it used to be.”

The housing slump is hitting the Hamptons as financial firms have announced more than 76,000 U.S. job cuts sparked by mortgage- related losses and writedowns. The nation’s economic expansion may slow to the weakest pace in six years in the fourth quarter, according to a Bloomberg News survey, and New York Governor David Paterson has said a 20 percent drop in securities industry bonuses this year will cut state revenue by $700 million.

Homes in the Hamptons — where billionaire Ronald Perelman, director Steven Spielberg and “Sex and the City” star Sarah Jessica Parker own — took an average of 143 days to sell in the quarter, up 18 percent from a year earlier, said closely held Miller Samuel. The company appraised more than $5 billion in property in the past year. Sellers in towns including Southampton, Quogue and Amagansett got an average of 9 percent less than their final asking price.