Bergen, Passaic home prices continue to slide

North Jersey home values dropped 3 percent in the first half of this year, bringing Bergen County’s median single-family home price below $400,000 for the first time since the housing meltdown began five years ago, an analysis by The Record has found.

The analysis also found that prices did not move in lock step across Bergen and Passaic counties; values fell furthest in lower-priced communities hard-hit by rising foreclosures and the troubled economy. More affluent housing markets held their value better. Some even rose.

Rick Del Guercio, a Glen Rock appraiser, said his experience bears out The Record’s findings.
Hard hit at the bottom

Prices generally dropped most at the low end of the North Jersey housing market, but held their own at the high end.

The analysis for this article and accompanying graphics used tra­ditional “arms-length” sales that reflect market values as well as sales of properties at various stages of a foreclosure or estate liq­uidation process. Sales of distressed properties were included be­cause they represent a significant part of the housing market and reflect the true value of homes in many communities, according to real estate experts.

“You see a greater drop in some of these lower-end towns than in some of the higher-end towns,” he said. “The lower end is being flooded by foreclosures, which is obviously dropping the price for everyone.”

“Locations where the distressed property percentage is high are having huge problems, while other areas are stabilizing,” said Barbara Weismann, a real estate agent with Weichert Realtors in Tenafly.

The Record’s analysis also found that the number of home sales in the two counties plummeted 25 percent from the first half of 2010 to the first half of 2011, though that probably reflected the fact that sales were artificially inflated in early 2010 by the $8,000 federal tax credit for buyers.

The number of homes sold decreased from about 3,600 to 2,800 in Bergen and from 1,450 to 1,000 in Passaic. The latest numbers are down by about two-thirds from the highest levels seen during the housing boom.
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As painful as it is to see housing wealth disappear, “most sellers at this point have adjusted to the new pricing realities,” said Beth Freed of Prominent Properties Sotheby’s International Realty in Ridgewood.

But rather than accept lower prices for their homes, many are simply delaying plans to sell, if they can.

“I think most of the people who are selling right now are doing so because they have to, either because of job loss or divorce,” said Jaime Bolnick, a Re/Max agent in Franklin Lakes.
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“Buyers are seeing incredible savings in comparison to just a couple of years ago,” said John Reilly of Century 21 Van Der Wende Associates in Little Falls, who says prices have returned to 2003 levels in many towns.
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“A lot of buyers are hesitant to commit even if it’s priced fair or below market,” said David Hsu, an agent with Abbott and Caserta Realtors in Ho-Ho-Kus.

That smaller pool of buyers translates into lower demand, which in turn, means lower prices.

Carmelo “Mel” Oliveri of Property Hub Realtors in Paramus predicts that prices will continue to drop because of the large number of foreclosures and short sales expected to come on the market over the next couple of years.

Sheldon Neal, a Re/Max agent in Oradell, agreed.

“The ones who benefit will be first-time buyers,” Neal said.

But, Hsu warned, they should resist the temptation to treat a home as “an investment vehicle.”

“Those days are over for a while,” he said.

Home Prices Down 3.9 Percent Year-Over-Year

Home prices in the U.S. decreased 1.3 percent on a month-over-month basis, the third consecutive monthly decline. According to the CoreLogic HPI, national home prices, including distressed sales, also declined by 3.9 percent on a year-over-year basis in October 2011 compared to October 2010. This follows a decline of 3.8 percent* in September 2011 compared to September 2010. Excluding distressed sales, year-over-year prices declined by 0.5 percent in October 2011 compared to October 2010 and by 2.1* percent in September 2011 compared to September 2010. Distressed sales include short sales and real estate owned (REO) transactions.

Highlights as of October 2011

* Including distressed sales, the five states with the highest appreciation were: West Virginia (+4.8 percent), South Dakota (+3.1 percent), New York (+3.0 percent), District of Columbia (+2.4 percent) and Alaska (+2.1 percent).
* Including distressed sales, the five states with the greatest depreciation were: Nevada (-12.1 percent), Illinois (-9.4 percent), Arizona (-8.1 percent), Minnesota (-7.9 percent) and Georgia (- 7.3 percent).
* Excluding distressed sales, the five states with the highest appreciation were: South Carolina (+4.6 percent), Maine (+3.1 percent), New York (+3.1 percent), Alaska (+2.9 percent) and Kansas (+2.8 percent).
* Excluding distressed sales, the five states with the greatest depreciation were: Nevada (-8.8 percent), Arizona (-7.0 percent), Minnesota (-5.7 percent), Delaware (-3.9 percent) and Georgia (- 3.6 percent).
* Including distressed transactions, the peak-to-current change in the national HPI (from April 2006 to October 2011) was -32.0 percent. Excluding distressed transactions, the peak-to-current change in the HPI for the same period was -22.4 percent.
…
October 2011 12-Month HPI

MSA/% Change/% Change Excluding Distressed
Chicago-Joliet-Naperville IL -9.9% -1.3%
Atlanta-Sandy Springs-Marietta, GA -7.9% -3.9%
Phoenix-Mesa-Glendale, AZ -6.7% -6.3%
Los Angeles-Long Beach-Glendale, CA -5.8% 0.8%
Riverside-San Bernardino-Ontario, CA -5.7% -3.5%
Houston-Sugar Land-Baytown, TX -4.0% 0.4%
Dallas-Plano-Irving, TX -0.2% 3.4%
Philadelphia PA 0.7% 1.6%
Washington-Arlington-Alexandria, DC-VA-MD-WV 1.3% 2.9%
New York-White Plains-Wayne, NY-NJ 2.6% 3.6%

Storms may push homeowners’ insurance rates higher

Homeowners’ insurance rates may go up as insurers seek to offset losses expected from the unusual pre-Halloween snowstorm that socked the region on Saturday, and from Hurricane Irene and other severe weather, according to industry observers.

“Rates usually don’t go up because of one storm,” said Loretta Worters, vice president of the Insurance Information Institute. “If there’s been a lot of disasters in certain areas over a period of years, there could be higher premiums where they see there is a lot of loss in a particular area.”

Some homeowners’ rates have already gone up this year, said Jennifer Manthey, a customer service representative at insurance brokerage Insurance Center of North Jersey in Hackensack, which received about 10 homeowners’ claims Monday morning.

“It’s unfortunate when people have been paying premiums for 20 years and they put in a small claim and their rates go through the roof,” Manthey said.

The average cost of a homeowners policy in New Jersey in 2008 was relatively modest at $691, ranking 25th among the states, according to the latest statistics available from the National Association of Insurance Commissioners. That was below the national average of $791. The highest-priced state was Texas with an average annual premium of $1,460.

Last year a number of insurers received permission to raise homeowners’ rates. The state’s top homeowner policy underwriter, State Farm Fire and Casualty, was granted permission for a 4.6 percent increase.

Most of the claims for this weekend’s storm will be from fallen trees and limbs damaging automobiles and roofs, Worters said. Tree removal is covered only if the tree hits a house under most policies.

J. Robert Hunter, an insurance expert from the Consumer Federation of America, said that even with high losses this year from storms and tornadoes, the property and casualty industry is flush with capital, and most insurers shouldn’t need to raise rates. Snowstorms such as the one that hit the region this weekend should already be figured into pricing models, he said.

“Theoretically, there shouldn’t be a major impact,” Hunter said. “Sometimes insurance companies use the opportunity of events like these to try to raise rates they wanted to raise anyway.”

MarketNEWS – November 2010

The New Jersey housing market continued to experience weak purchase demand in October due to the lingering effects of the economic recession. In October, home purchase contracts in New Jersey for both existing and new homes fell by 30% from one year ago, marking the 6th consecutive month of declining sales. To put some perspective on present pace of sales, the chart below shows that October’s performance essentially matched that from 2 years ago in the midst of the worldwide economic collapse following Lehman Brothers bankruptcy in September 2008.

Beige Book – Second District–New York

Construction and Real Estate

Housing markets have been mixed but generally stable since the last report. Real estate contacts in both northern New Jersey and western New York State report that sales activity has remained exceptionally weak as the usual seasonal pickup in September has not occurred. The ongoing weakness was partly attributed to the expiration of the home-buyers tax credit, which is believed to have pulled sales forward from the second half of 2010. Prices are characterized as relatively stable in upstate New York and drifting down in northern New Jersey, where one industry contact notes a sizable inventory of distressed properties on the market. Manhattan’s co-op and condo market was stable in the third quarter: sales activity was steady, after accounting for a normal seasonal dip, and prices were steady to down slightly overall. Manhattan’s apartment rental market improved modestly: effective rents are estimated to be rising moderately, as landlords pull back on concessions. New leasing activity picked up noticeably in the quarter–largely attributed to renters moving in response to the end of concessions on lease renewals.

Office markets across the District softened modestly since the last report. Asking rents continued to drift down in Manhattan and northern New Jersey but were mostly steady in other parts of the region. In Manhattan, office vacancy rates retreated in August and September, after rising in July. In most of the District, though, vacancy rates have edged up since the last report.

N.J. real estate prices headed up

New Jersey home prices have bottomed out and will rise about 2 percent this year, real estate appraiser Jeffrey Otteau predicted Monday.

“While things will get better from here, they’re going to get better at a slow, steady and sustained pace,” Otteau said. Otteau is based in East Brunswick, but he analyzes real estate markets around the state.
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He predicted that prices, which he says have fallen about 18 percent since the peak of the market in 2006, will rise only about 3 percent a year for the next five years. As a result, home values won’t return to their 2005 levels until 2016.

Otteau’s prediction is in line with other forecasts that home values will be either rise slightly or be flat this year. No one is predicting a jump in values, and some analysts expect further declines.

Otteau said the housing recovery will be slow as foreclosures continue “flooding into the system” and high unemployment keeps potential buyers out of the market.

He said home sellers have to price their properties competitively, because buyers will not be willing or able to overpay. Aside from buyers’ stagnating incomes, lenders are no longer giving mortgages to unqualified buyers.
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But sellers trying to unload million-dollar-plus homes are in trouble, he said.

“The luxury end of the market will probably never recover,” he said. He said that as baby boomers downsize from big homes, there will be fewer younger buyers who can afford to buy those properties.

There’s an even bigger oversupply of 55-and-up housing units, which were overbuilt during the housing boom, Otteau said. He estimates there is a 16-year supply of those units available.

For readers that have never commented, there is a link at the top of each message that is typically labelled “[#] Comments“. Go ahead and give that a click, you might be missing out on a world of information you didn’t know about. While you are there, introduce yourselves to everyone.

For new readers that have only read the messages displayed on the main page, take a look through the archives, a substantial amount of information has been put online in the past year. The archives can be accessed by using the links found in the menus on the right hand side of the page.

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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.

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.
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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.

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?”

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.”

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.

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.

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.”

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)

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.