New Jersey Real Estate Report

This is the time and place to post observations about your local areas, comments on news stories or the New Jersey housing market, open house reports, etc. If you have any questions you wanted to ask earlier in the week but never posted them up, let’s have them. Also a good place to post suggestions, requests for information, criticism, and praise.

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Some insanely odd juxtaposition to start off the Weekend (this will be completely meaningless to you if you’ve never seen the movie American Psycho).

Richard Fisher - Head of the Dallas Fed
Miles Fisher - Son of Richard Fisher, Musician/Actor

Richard Fisher

From MarketWatch:

Dallas Fed chief sees ‘deflationary risk’ as pre-eminent

Federal Reserve Bank of Dallas President Richard Fisher said late Thursday that he anticipates businesses will continue to keep a tight rein on spending in the near future, as “markets are still a long way from having normalized.”

In remarks prepared for a speech at the University of California, Santa Barbara, Fisher said that for the immediate future, “the risk to price stability is a deflationary risk, not an inflationary one,” placing himself on the side of those policymakers who are still more worried about growth than the risk the Fed’s ultra-loose money policies will result in heated inflation.

Fisher said that based on a survey of CEOs at key companies, he believes the private sector is currently grappling with excess capacity, and “suffering from shock induced by the trauma of the crisis.” He termed the condition “post-traumatic slack syndrome.”

Miles Fisher

Great cover by Miles, although this might not be safe for work (stop watching by minute 2). Alot of folks recognize the American Psycho scenes, but fewer will recognize the smaller cues taken from the movie Wall Street. The soundtrack, This Must Be The Place (Naive Melody) by Talking Heads, was prominently featured in Wall Street (I don’t think it was in American Psycho at all), and who could forget Michael Douglas talking on the Motorola DynaTac. Floored when I saw this video, not only do I think the cover is great (I’m a fan of covers), but it melds two of my favorite movies and does it very well.

From the Courier Post:

N.J. faces $10B deficit next year, report says

New Jersey faces a projected budget deficit of $8 billion in its next fiscal year, as well as a shortfall of more than $2 billion in its unemployment compensation fund, a report said Tuesday.

The independent Office of Legislative Services estimated the shortfall at the request of Senate Republicans — and GOP office-holders greeted the $10-billion figure with calls for a special legislative session to address state finances.
…
David Rosen, the OLS’ budget and finance officer, in April told lawmakers the state was facing the worst revenue plunge in “modern history.”

Tuesday’s estimate predicted the unemployment compensation fund’s deficit would rise from $2.2 billion to $3.5 billion over the course of fiscal year 2011.

The gloomy projection came just weeks after Corzine signed a $29 billion budget that initially faced a deficit estimated at $6 billion.

When he signed the budget, Corzine noted it was nearly $4 billion smaller than the spending plan enacted for the previous year.

From Bloomberg:

N.J. Faces $8 Billion Budget Deficit, Forecaster Says

New Jersey faces a projected deficit of $8 billion next fiscal year, even after cutting $4 billion of spending and raising taxes this year to close a budget gap, the nonpartisan Office of Legislative Services said.

The state would need $2.5 billion in fiscal 2011 to fully fund pension contributions and will lose $1.6 billion of federal stimulus money, David Rosen, the office’s chief budget analyst, said in a July 20 memo to Senate Minority Leader Tom Kean. It also faces $1.1 billion in expiring tax increases, Rosen said.

Rosen predicted a total of $8.8 billion in spending growth and revenue losses, which would be offset by an $800 million increase in collections from major taxes including those on sales, personal income and corporations. “This figure represents growth below normal growth rates, but would be the first year of growth following two years of decline,” he wrote.

The office’s projection comes about three weeks after Governor Jon Corzine signed a $29 billion budget for fiscal 2010, which began July 1. That plan trimmed spending the most in state history while raising taxes on cigarettes, wine, liquor and the wealthy to close a deficit of $8.8 billion.

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 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.
…
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.”
…
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.
…
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.
…
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.
…
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.
…
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.
…
“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.

(click to enlarge)

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

(click to enlarge)

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

(click to enlarge)

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 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.”
…
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.

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.
…
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.
…
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

22 Midwood Drive, Florham Park NJ
Purchase Price: $800,000
Purchased: 7/21/2006
Current Asking Price: $599,000 (Short Sale - Lis Pendens Filed)
25% under 2006 purchase price

History
MLS# 2339326
Listed: 11/8/2006
Original List Price: $799,500
Reduced: $775,000
Days on Market: 60
Withdrawn

MLS# 2401874
Relisted: 5/1/2007
Original List Price: $850,000
Reduced: $795,000
Days on Market: 92
Expired

MLS# 2484310
Relisted: 2/1/2008
Original List Price: $629,000
Reduced: $599,000
Days on Market: 53
Active