New Jersey Real Estate Report

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.
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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.”
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“We haven’t even hit the worst part of the problem,” said Salowe-Kaye.
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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 Star Ledger:

Rebates won’t rise along with property taxes

Homeowners hit with steep property tax increases last year have a second shock coming in Gov. Jon Corzine’s proposed state budget: New Jersey’s 20 percent property tax rebate will not apply to any increases in property tax bills that kicked in last year.

The Treasury Department said yesterday that basing this year’s rebates on 2006 property tax bills — not the 2007 bills — would save the state $85 million, including $34 million on rebates to senior citizens and $51 million on the checks to others.

As a result, most homeowners will receive the same rebate this year as last year, regardless of any increase in their tax bills.

“I don’t understand why he is doing this,” longtime Perth Amboy resident Alan Silber said of Cor zine. Silber said his property tax bill jumped by $1,255 last year. “There are only 15 municipalities in New Jersey whose taxes went up higher than ours. To base it on 2006 means none of that counts. That’s totally unfair.”
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The budget Corzine presented to lawmakers in March projected a $534 million cut in the property tax rebate program, largely through the elimination of rebates for homeowners earning more than $150,000 and a reduction in rebates for those earning more than $100,000.

The budget proposal also specified that 2006 tax bills would be used to calculate the rebates. That’s a change from the legislation that set up the rebate program last year, which based them on the property tax bills in effect each October.

Treasury Department officials yesterday submitted materials to the Senate Budget Committee spelling out how much the decision to ignore 2007 tax increases would trim the rebates that homeowners would otherwise receive.
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With rebates ranging from 10 percent to 20 percent of a homeowner’s taxes, exempting the $1,255 that Silber’s local tax bill grew by last year means he won’t get the extra $125 to $250 that otherwise would have been added to his rebate check.

From the Record:

How low will homes go?

The number of home sales in North Jersey plummeted some 30 percent in 2007, raising the odds of a significant decline in home values beginning this year.

Prices inched down only slightly in 2007. But the corresponding drop in sales volume suggests this could be the year when sellers holding out for top dollar blink in their ongoing standoff with bargain-hungry buyers.

“The laws of supply and demand have not been repealed,” said Paul Merski, chief economist of the Independent Community Bankers of America. “At some point, things have to come into equilibrium. Either the demand for homes has to increase or the price has to drop to stimulate demand to get things back into balance.”

Predictions about what’s ahead vary, although few experts foresee a quick return to the boom of the first half of this decade.

Donald Moliver, a real estate professor at Monmouth University, predicted that home prices in New Jersey may drop as much as 20 percent over the next several years, although he said that number could be lower if mortgage rates — now around 6 percent — decline.

A double-digit decline in home prices would eclipse the real-estate downtown of the late 1980s and early 1990s, when the state’s home prices declined about 8 percent from the top of the market and did not return to peak levels for a decade.
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Adding to the pressure on prices are tighter mortgage standards, a weak job market and rising foreclosure rates. But homes remain unaffordable for many North Jersey families. Even with the market slowdown, home prices are almost double what they were in 2000, while New Jersey median household incomes rose only about 21 percent from 2000 to 2006, the latest figures available.

In 2007, prices dropped 1 percent to 5 percent across most of the region, with the upper-end neighborhoods hurt slightly more than lower-end areas, according to a study by The Record of about 29,000 home sales.

But the more telling statistic from The Record’s study is a steep decline in the number of sales, which are down about 40 percent from the market peak in 2004.

The drop in sales volume cuts across all segments of the market, with low-end neighborhoods in southern Bergen and Passaic counties hit slightly harder. Sales volume was off about 42 percent in neighborhoods where the typical home sells for up to $350,000, compared with a drop of about 37 percent in areas where homes generally sell for more than $600,000.

In North Arlington, for instance, the overall value of home sales fell 50 percent from a peak of $62.9 million in 2005. But the median price barely declined last year, from $410,000 to $405,000.

A tighter mortgage market has shut out many people. Rates are relatively low, but it’s much harder to qualify for loans than it was in 2004 and 2005, when lenders freely offered interest-only and no-down-payment loans.

And many potential buyers are scared of paying too much.

“A lot of them seem to be holding off, with the thought that we may not be at the market bottom yet,” said Sheldon Neal of Re/Max Real Estate in Oradell.

Still, many sellers can’t stomach the idea of lower prices.

“Maybe we’ll say a house should be listed between $500,000 and $520,000. Inevitably, the seller wants to be at $520,000 or $525,000,” Neal said. “We are seeing a little bit of a standoff where sellers are not willing to swallow too much pride and accept that the market has lowered the value of their home out of their control and out of the Realtor’s control.”

Sal Poliandro, an agent with Re/Max Properties in Ridgewood, recalled one seller who cried when he suggested she list her house at $450,000.

“The market value is what the market value is,” Poliandro said. “Nobody cares how much you owe on your mortgage. Nobody cares that you’re getting a divorce and want to start your life over.”

From the Asbury Park Press:

Borrowers used houses to get cash

Proponents had once touted subprime loans as a way for some consumers to afford the American dream of homeownership.

Yet new government data now show a nightmare scenario that economists have suspected: that most of the borrowers with low credit scores turned their homes into a virtual credit card.

Monmouth and Ocean counties led the nation last year in the percentage of borrowers extracting cash from their houses, usually through refinancing or home equity loans.

A staggering seven out of 10 high-risk borrowers in both counties — those with low credit scores — refinanced loans to obtain extra cash, Federal Reserve data for the end of 2007 showed. Those are the highest percentages in the nation among large counties with more than 2,000 subprime loans. New Jersey had five counties in the top 25.

Such mortgage debt will continue to weaken the housing market at the Shore and around New Jersey this year, experts and consumer advocates say.

“It’s no secret that we live in a credit-dependent society,” said Brett Lopes, vice president of Intercounty Mortgage in Hazlet. “In the same way that people don’t handle credit cards correctly, they perceived their house was worth more and more and they used it like a credit card.”
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Forty percent of the 10,800 subprime loans provided to homeowners in Monmouth and Ocean counties were given without full documentation of income, and the average credit score was about 610, far below the top score of 850.

Forty percent of subprime borrowers at the Shore are also behind on their loan payments. Eleven percent are in foreclosure.

The nearly 79,973 subprime borrowers in New Jersey owe an average of $250,614 on their loans, the fifth highest balance in the United States. That’s about $20 billion in subprime loans.
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There were 12,376 foreclosure lawsuits filed in New Jersey Superior Court in the first three months of this year, state officials said Friday. If foreclosures continue at that rate for the year, there would be nearly 50,000, double the number from just two years ago.

Foreclosure lawsuits are usually filed after homeowners have missed several payments.

There were 36,358 foreclosure lawsuits filed in state Superior Court last year, up by 46 percent from 2006, according to state data.

In Monmouth and Ocean counties, 5,102 foreclosure lawsuits were filed last year, up 42 percent from 2006. Local figures for 2008 were not immediately available.

From the Associated Press:

Poll finds New Jerseyans feeling gloomy on economy

Economic woes have New Jerseyans gloomy, a new poll has found.

Forty-nine percent of respondents in the poll issued Monday by Fairleigh Dickinson University’s Silberman College of Business said they’re worse off financially than they were a year ago. That’s up from 41 percent in a January poll.

The new poll also found only 25 percent think they’re better off financially.

“The prospect of a broad economic downturn continues to cause discomfort throughout New Jersey,” said William Moore, FDU’s Silberman College dean. “People are ever-hopeful for their personal prospects, but this economy is fragile and things may get worse before they get any better.”

The poll found 40 percent think they’ll be better off financially a year from now, compared to 35 percent who think they’ll be worse off.
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However, respondents younger than 30 are more upbeat about their position and prospects. Half of them say they’re better off now than a year ago, and more than half say they’ll be better off a year from now.

Those 45 and older, though, say they’re worse off.
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The poll found 79 percent don’t plan on taking on more debt, with 31 percent saying they have either a “somewhat” or “very difficult” time making debt payments.

From the Record:

More deals falling through

Deal — or no deal?

Does a signed contract mean the property will actually sell? In a volatile housing market, the answer these days is “not necessarily.”

“You start earning your commission the day you get the contract,” said Kate Conover of Re/Max Properties in Franklin Lakes. “Getting a contract isn’t as hard as keeping it together.”

Home builders are especially plagued by canceled deals. Large builders say their cancellation rates have soared in the past year or two — to 35 percent or higher — often because their would-be buyers can’t unload their own homes. In an effort to head off cancellations, Hovnanian Enterprises of Red Bank, New Jersey’s largest homebuilder, now offers free home inspections, staging advice and other services to help its buyers sell their homes.

Cancellations are not as big a problem with existing home sales, according to North Jersey real estate agents. But they say keeping deals on track — from the offer through the contract to the closing — has become much more complicated.

Sometimes buyers have second thoughts; sometimes lenders balk at the size of the mortgage or the credit record of the buyer. Sometimes the home inspection turns up trouble.

“A lot of buyers are getting cold feet and backing out in attorney review,” said Ann Murad of Re/Max Real Estate Associates in Woodcliff Lake. “It’s usually three days of attorney review. Sometimes they’re dragging it out a week, and then they’re backing out.”

Often, deals go on the rocks because lenders have gotten tightfisted — after several years of being free (in some cases, reckless) with mortgage money. And at banks’ request, appraisers are being more conservative when valuing properties.
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When real estate prices were rising, deals that fell apart were no big deal, McGuirl said. “You’d sell for as much or more, and it was never a matter of litigation,” he said. But now a seller could face real losses, he said.
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“In this business,” he said, “a deal is not done till it’s done.”

Preliminary March sales and inventory data for Northern New Jersey is in. Please note that this data is subject to revision.

The first graph plots the unadjusted sales data (closed sales) for the counties listed. Please note the lower bound of the graph, it is set to 500, not to zero. I do this to emphasize the seasonal nature of the Northern NJ market.

(click to enlarge)

The second graph is another view at the sales data for the full year. Please note that this graph does cross at zero.

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The third graph displays only March sales, 2000 to 2008 YOY.

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The fourth graph displays an overlay of Sales and Inventory from 2003 to 2007.

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The fifth graph displays the year over year change in inventory on a month by month basis.

(click to enlarge)

The sixth graph displays the year over year change in sales on a month by month basis.

(click to enlarge)

The last graph displays the absorption rate (not seasonally adjusted), in months:

(click to enlarge)

Additional tables/graphs:

NJAR Q4 Statistics - New Jersey Pricing by Bedroom

NJAR Q4 Statistics - New Jersey Pricing by Region

OFHEO, S&P Case Shiller, and NAR pricing graph, courtesy of Pretorius:

(click to enlarge)

From the Star Ledger:

Poll: Business owners painting bleak picture

Home prices will keep falling, money is tight, and the $160 billion federal economic stimulus package won’t do much good.

New Jersey’s small and mid- sized business owners shared that bleak forecast with the PNC Economic Outlook survey, during a twice-yearly poll published today.

The results add up to a decided tilt toward pessimism.

“The survey supports our view that the U.S. economy has slipped into a fairly mild recession,” Stuart Hoffman, chief economist for PNC Financial Services Group, said yesterday. His forecast shows a return to growth in the second half of the year, “as the stimulus plan kicks in and the housing market approaches a bottom in terms of prices and sales.”

Only 5 percent of New Jersey business owners are optimistic about the state’s economy, with 52 percent taking a dim view of New Jersey’s economic prospects — compared with 29 percent who were pessimistic last fall. About two-thirds, or 66 percent, of New Jersey business owners have a negative view of the national economic outlook, a deterioration in senti ment from six months ago.

“These entrepreneurs are normally a fairly optimistic group, and they are in a more cautious and somber mood than we’ve seen them in the five years we’ve been doing this survey,” Hoffman said.

More than a quarter — 26 percent — of the New Jersey business owners think their own profits will decline in the next six months; 65 percent are planning to invest in their own business, down from 75 percent to 80 percent six months ago; and 62 percent expect to be paying higher prices to their suppliers in the months ahead.

The prospect of a recession is their biggest worry, followed by higher energy prices, the survey said.

The housing prices slump is very much on the New Jersey business radar screen, with 54 percent saying they expect house prices in their area to decrease in the next six to 12 months. Among those forecasting a price decrease, 21 percent say falling home prices will have a negative effect on sales.

Hoffman said he was surprised that these business owners don’t expect the fiscal stimulus package to help them: 64 percent said the program will have no or very little impact on their business.

From the APP:

Corzine wants $260M to replenish jobless trust fund

Gov. Corzine said Tuesday he wants to move $260 million from the current state budget to shore up the unemployment trust fund and avoid a trigger that would mean higher payroll taxes for employers.

The decision came after state projections showed the fund that pays unemployment benefits might not have enough money to meet its obligations.

“This really was brewing,” said David J. Socolow, commissioner of the state Department of Labor and Workforce Development. “We’ve been right on the bubble of this happening for years.”

Unemployment benefits are given to workers who lose their jobs through no fault of their own, and they are funded by taxes both on employers and workers. The state is required by law to maintain a balance that ensures the program will be adequately financed.

But lawmakers diverted $4.7 billion from the fund for other projects for 14 years until Corzine took office and ended the practice. The program is under more strain, given the shaky economy; the state’s jobless rate rose to 4.8 percent in February from 4.5 percent in January.

The result: The unemployment fund on March 31 was projected to have $999 million for the next fiscal year, less than the $1.04 billion it needed to be considered financially healthy. That would automatically trigger a hike on employers’ payroll taxes that would generate another $350 million, Corzine officials said.

Employers’ tax rates for the unemployment program depend on how often their workers use it; an employer with heavy turnover pays more than an employer with a relatively stable work force. If the trigger were to go into effect, an employer paying a 1.7 percent tax rate, for example, would see it rise to 2.1 percent. Workers’ taxes would remain the same.

The governor “will not burden employers with taking care of an obligation that is not their fault,” Corzine spokesman Jim Gardner said.

Corzine’s solution is to change the date on which the fund balance is calculated from March 31 to June 30 for this year, and to transfer $260 million from the state’s current budget surplus to the unemployment plan. The plan first needs the Legislature’s approval.

From the Trenton Times:

Singing the mortgage blues

Otis Boone describes his housing problem as “a funny situation,” but stories like his have become common in Mercer County and around the country.

In August 2005 he and his wife moved out of Trenton and got a zero-down loan on a newly built home on Saratoga Avenue in Ewing Township. Boone, who worked in the shipping department at a train manufacturer, hurt his back the following year, went on disability and saw his income cut in half.

He couldn’t keep up with the mortgage payments of $1,900 per month, plus taxes and other expenses, as well as the prospect of even higher payments when his adjustable rate mortgage resets, he said.

Putting the place up for sale brought no offers, so last August the couple moved out of their home, which remains unoccupied, and moved into an apartment in Hamilton.

“At the time when I wasn’t making the payments, something like this never happened to me before,” said Boone, 59. “I wanted to get an apartment before my credit really got bad. I don’t know where I can get the money unless I get a miracle.”

As years of unrealistic subprime loans collide with job losses, personal misfortune and the slumping housing market, hundreds of Mercer County residents face similar crises. The number of county properties entering foreclosure hit a recent peak in January, and mortgage counselors who try to help people keep their homes say they see no end in sight.

The county had 180 foreclosure filings in January, according to records kept by County Clerk Paula Sollami-Covello. The number fell slightly to 167 in February and remained relatively high in March, with 145 filings received through Tuesday.

In March 2007 the county had a similarly high 176 filings, while the figures were lower through much of last year. Banks and mortgage companies file foreclosures when homeowners fall behind in their mortgage payments, but most do not result in people losing their homes.

Tracking the number of foreclosed homes is difficult because some of the filings include more than one property. But records maintained by private real estate companies, and the experience of counselors, confirm that owners keep falling behind on their payments at high rates.

“The numbers for us continue to rise,” said Phyllis Salowe-Kaye, executive director of New Jersey Citizen Action, whose Trenton office has been overwhelmed with homeowners seeking help. “We’re at overcapacity and we see nothing letting up.”
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RealtyTrac, a California company that has its own system for tracking foreclosures, reported a recent high of 452 filings in September in Mercer County and 349 in October. Last month the company reported 216 foreclosures.

New Jersey as a whole had 5,598 foreclosures in February, the highest figure in at least a year, according to RealtyTrac.

From the Daily Record:

Morris hasn’t escaped crunch of foreclosures

The Morris County Sheriff’s Office reports that the number of houses put up for auction within the first two months of this year was 40 percent higher over the same period last year. And houses placed on the sheriff’s list are much more likely to be sold at auction this year than they were last year at the same time, with fewer homeowners able to get their homes off that list.

And while Morris County foreclosure filings increased at a slower rate than the state average, according to state court statistics, they have been going up dramatically within the past two years after remaining stable for a decade:

• There were 1,146 foreclosure filings in Morris last year, up 36 percent from the previous year, 69 percent from 2005, and 89 percent from 1997.

• Within the first two months of this year, 74 homes were scheduled to be auctioned at a Morris County sheriff’s sale compared with 53 homes within the first two months of 2007. Last year, 21 homes were sold over that time and 31 homes came off the list. This year, 39 homes were sold and 16 came off the list.

Housing counselors here, as elsewhere, report that they began getting calls from homeowners having trouble keeping up with their mortgages last summer, and that the volume became larger in December. They report hearing many of the same stories — buyers receiving mortgages too large for their incomes, often with no money down and with adjustable rates that kept going up and left them unable to make payments.

Maria Jacome, director of ACORN Housing in Newark, which counsels low- to moderate-income homebuyers across the state, said most of her clients with mortgage problems are from Essex and Hudson counties. But 10 percent of her clients come from affluent Morris County. Some housing experts say middle- and upper-income families sometimes are more likely to get bad deals on mortgages because low-income families often participate in workshops sponsored by affordable-housing groups.
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The National Association of Realtors reports that the median sales price of Morris homes for the fourth quarter of 2007 was $470,300. That’s an 8.7 percent decrease from the $515,300 median at the end of the previous year. Hudson was the only county reporting a steeper decline when comparing those periods.

From the Star Ledger:

Bid for reality

Lenny Klein thinks home sellers could learn a thing or two from eBay.

Nothing draws bidders quicker to an auction than a low opening bid, the real estate agent said. Setting a list price slightly below market value builds excitement and is more likely to create a bidding frenzy — which can ultimately drive up the final price in the end.

“If you look at ebay, sellers start with the lowest price,” said Klein, a sales agent with Schweppe Burgdorff ERA in Upper Montclair. “They say 99 cents and no matter what the product is, it’s going to find its value in the market place.”

It’s a lesson homeowners across the state are learning well, these days.

Certainly, Realtors have a vested interest in pricing homes so they move quickly since their compensation is tied to sales — and a slumping real estate market has put a major dent in their commissions.

But new data from a New Jersey consulting firm suggests over-priced homes not only take longer to sell, they consistently sell for thousands of dollars less than similar homes that were priced lower in the first place.

The study by Otteau Valuation Group measured and analyzed more than 15,000 transactions annually over a period of several years. The same pattern emerged in every price range, regardless of whether the properties in question were entry-level or luxury million-dollar homes: Sellers who priced their home below the market from the beginning, often received a higher price and a faster sale.

“We haven’t hit bottom yet,” said Jeffrey Otteau, a long-time consultant and appraiser. “For every buyer that comes to the market there are two, or three or more sellers who put their home on the market.”
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During 2005, when home prices were doing like Marie Osmond and dancing with the stars, there were about 30,000 homes for sale in New Jersey, he said. Right now, that number has more than doubled, to 62,000 homes for sale.
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At the peak of the housing boom, there were 105 buyers for every 100 sellers in New Jersey, he said. Today, there are typically just 10 or 20 or less.

In Bloomfield, for example, there are roughly 18 buyers for every 100 sellers, he said. In Mendham and Scotch Plains, eight. Even Montville, which ranked 13th in Money magazine’s best 100 places to live in the United States in 2007, can only conjure up four buyers for every 100 sellers.

Otteau estimated home prices in New Jersey will not recover to 2005 peak levels until the spring of 2015, at the earliest.

All of this, has Realtors and homesellers scrambling to figure out the best listing price. It’s an inexact science at best.
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The traditional thinking in pricing a home was to aim high so there’s wiggle room for negotiations. But in a market with a glut of properties for sale, a price that undercuts the competition is a surefire way to make your home stand out and attract more prospective buyers.

And Sobeck said when buyers smell a good deal, it creates a sense of urgency and pits them against one another.

Source: A Realtor (R) Association Newsletter

Need I say more?

From the Associated Press:

NJ lawmakers call for cities, towns to impose their own taxes

Assembly lawmakers on Tuesday said the state should weigh allowing cities and towns to impose their own taxes as more woes were predicted for New Jersey’s troubled state finances.

The Legislature’s budget official predicted the state will collect $289 million less in taxes next fiscal year than Gov. Jon S. Corzine has estimated as economic activity slows in the coming months.

“It should be clear that most of the risk in this forecast is on the downside, and it is easy to imagine plausible economic scenarios in which the outcome is considerably more dire,” David Rosen, the legislative budget and finance officer, told Assembly lawmakers.

Corzine’s $33 billion budget already calls for cutting spending by $2.7 billion to try to right finances plagued by high debt and taxes.

A $289 million shortfall would require either additional cuts or increased taxes, but Corzine has said he currently doesn’t support tax increases. He has also said he wouldn’t be surprised if less revenue came in than was estimated.
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But Greenwald said lawmakers should look at how other states let municipalities charge their own taxes.

New Jersey local governments raise nearly all their revenue from property taxes, which average $6,800 per property owner in New Jersey, twice the national average.

But New York, for instance, allows local governments to add their own sales taxes. Many states and cities allow local income taxes. Some have a personal property tax on cars, trucks, motorcycles and other vehicles.

“We ought to look at that, too,” said Assemblywoman Joan Quigley, D-Hudson.
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Corzine said letting municipalities impose their own taxes “makes sense and could potentially go a long way to relieving some of the pressure that exists with property taxes,” but was uncertain amid economic worries.

“I’m not particularly inclined to think that having new taxes at a time of economic recession is a good idea, so I’d be a little hesitant about the immediate imposition,” Corzine said.

14 Fernwood Road, Livingston NJ
Purchase Price: $995,000
Purchased: 1/22/2007
Current Asking Price: $799,000 (Short Sale)
20% under 2007 purchase price

History
MLS# 2430585
Listed: 7/30/2007
Original List Price: $995,000
Reduced: $799,000
Days on Market: 240
Active