New Jersey Real Estate Report

Ridgewood Ave, Glen Ridge, New Jersey
Upscale - Check
Desirable - Check
Great Schools - Check (Some would say best-in-state)
Train Town - Check (Jitney at your door!)
Best Street in Town - Check
Mega Comp Killer - Damn Right

This beauty was purchased in June of 2006 by a Lehman Brothers Senior VP. Built in 2002, this baby has got it all, new world materials and old world craftsmanship. 6 Bedrooms, 9 Baths, and 10 other rooms that comprise an 8,900 square foot monument to excess. Taxes? 80 grand.

Purchase price? $3,700,000.00 (Yep, three point seven million)

Fast forward to September 17th, 2008, two days after the Lehman bankruptcy was announced, coincidentally.

Back on the market, this time at a price of $3,900,000.00. Factoring in the 5% commission, the seller would be walking away with roughly $3.7 million at this asking price, two years later and you break even, not too shabby. What real estate crash?

Come October, still not sold. I don’t get it, upscale train town with a great school system? This place should have been snapped up in a.. snap? Guess not, price reduced to $3,675,000.

Another month goes by, now we’re well into November. Still no sale. Price reduced again, $3,350,000. Now we’re firmly into loss territory. Factoring in commission, we’re at roughly a half a million dollar loss here. Surely no problem for a baller of this caliber.

December? Snooze.

January? Snip, price cut to $2,999,000.

Now we’re talking about serious cash. $701,000 under what they paid for it. Factor in that pesky 5% commission and now we’re at a loss of $851,000 in a little over two years.

Comes out to roughly a 10% per year loss, 20% off peak. Not so bad I guess, outperformed the stock market. Oh, wait, one catch… It still hasn’t sold.

Note: Like Lehman, I too forgot to take LEVERAGE into account as a factor of risk. In this case, if the owner made a 20% down payment on the property, the loss would have been roughly 100%.

History
MLS# 2468806
Listed: 12/20/2007
Original List Price: $749,900
Days on Market: 98
Active

History
MLS# 2270030
Listed: 4/24/2006
Original List Price: $935,000
Reduced: $885,000
Days on Market: 338
Withdrawn

MLS# 2390640
Listed: 3/27/2007
Original List Price: $885,000
Days on Market: 279
Expired

MLS# 2486815
Listed: 2/7/2008
Original List Price: $729,900
Reduced: $698,800
Days on Market: 49
Active

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

2 Green Hill Road, Chester NJ
Purchase Price: $1,129,000
Purchased: 5/11/2006
Current Asking Price: $950,000 (Short Sale)
16% under 2006 purchase price

History
MLS# 2447201
Listed: 9/4/2007
Original List Price: $1,199,000
Reduced: $950,000
Days on Market: 182
Active

Purchase Price: $590,000
Purchased: 5/16/2005
Current Asking Price: $499,000 (Short Sale)
15% under 2005 purchase price

History
MLS# 2255782
Listed: 3/8/2006
Original List Price: $689,900
Reduced to: $634,899
Days on Market: 156
Withdrawn

MLS#: 2309154
Relisted: 8/11/2006
Original List Price: $634,899
Reduced to: $599,000
Days on Market: 155
Withdrawn

MLS#: 2385919
Relisted: 3/14/2007
Original List Price: $599,000
Reduced to: $583,333
Days on Market: 162
Withdrawn

MLS#: 2437705
Relisted: 8/23/2007
Original List Price: $583,333
Reduced to: $553,333
Days on Market: 144
Expired

MLS#: 2476370
Relisted: 1/14/2008
Original List Price: $536,000
Reduced to: $499,000
Days on Market: 66
Active

From CNN/Money:

Subprime loans defaulting even before resets

For months, we’ve fretted about the Armageddon that will hit when subprime adjustable rate mortgages start resetting to much higher interest rates.

What’s happening is even worse: Many of these loans are defaulting well before their rates increase.

Defaults for subprime loans issued in 2007 - none of which have reset yet - hit 11.2 percent in November. That represents perhaps 300,000 households, and is twice the default rate that 2006 loans had 10 months after being issued, according to Friedman, Billings Ramsey analyst Michael Youngblood.

Defaults are spiking well before resets come into play thanks to the lax lending environment of the past few years. Many borrowers were approved for mortgages that they had little chance of affording, even at the low-interest teaser rates .

“I was rather shocked by the characteristics of the 2007 loans,” said Youngblood.
…
Originally, concerns about these loans focused on the fact that that most homeowners wouldn’t survive such pricey resets. In late 2006, the Center for Responsible Lending (CRL), predicted that 2.2 million subprime ARM borrowers would lose their homes in the following two years due to reset shock.
…
For instance, in both 2006 and 2007, well over 40 percent of subprime borrowers were awarded mortgages with either little or no documentation of their ability to pay. With these so-called “liar loans,” borrowers did not have to show proof of either earnings or assets.

And even when borrowers did go on the record about their earning power, it didn’t bode well. Both 2006 and 2007 ushered in a large proportion of loans with high debt-to-income ratios (DTI), which indicates the percentage of gross income required to pay debt. In 2007 subprime originations, the DTI hit 42.1 percent, up from 41.1 percent in 2006. Borrowers were simply taking on more debt that they could afford.

What’s more, many borrowers started out with low- or no-down payment loans, which left them with almost no equity in their home.

During the boom, rapid price appreciation meant borrowers built up home equity quickly. That minimized defaults, since owners could draw from that equity to pay their bills - including their mortgages - through home equity loans, lines of credit or cash-out refinancings.

But prices fell starting in 2006,leaving borrowers with less home equity to draw upon when they run into financial problems.
…
Owners with mortgages worth more than their homes simply began walking away from their homes when costs become unmanageable.
…
“Lenders felt they had to take the loans to preserve their access [to the rest of the loan pool],” he said. They were willing to accept some risky subprime loans so that the mortgage brokers would also send them safer prime and Alt-A loans.

Of course that’s a bet that went bad. And it’s likely to get worse as resets for ARMs issued in 2006 and 2007 kick in this year.

I’m not sure what I’m more amazed by, the fact that this property has been reduced by almost half, or the fact that the original asking price was a pipe dream. Another great example of trying to chase the market down. This property has been on the market for more than two years, and has seen price reductions totalling more than $850,000, a whopping 46% off of the original list price.

History:
Address: Tiger Lilly Lane, Harding NJ
Original List Price: $1,850,000
Current List Price: $999,995 (Price reduced 46%)
Time on Market: 2 years, 1 month

MLS# 2105400
Listed: 09/03/05
Original List Price: $1,850,000
Reduced to: $1,750,000
Days on Market: 192
Withdrawn

Relisted as MLS# 2256702
Listed: 03/13/06
Original List Price: $1,750,000
Reduced to: $1,649,500
Days on Market: 173
Expired

Relisted as MLS# 2315799
Listed: 09/03/06
Original List Price: $1,575,000
Days on Market: 119
Expired

Relisted as MLS# 2370403
Listed: 02/01/07
Original List Price: $1,575,000
Reduced to: $999,995
Days on Market: 246
Active

Welcome to another edition of Price Reduced!

For all the newcomers to the site, Price Reduced! takes a look at a handful of significant price reductions across Northern NJ. The purpose of this exercise is to serve as evidence that the Northern New Jersey real estate market has long since been overvalued and has started the long hard decline back to the mean. These listings are in no way an endorsement, nor do I believe they are a bargain or a value. It is very possible that even with reductions, many of these homes may still be overvalued.

These listings are from GSMLS and consist of Single Family Homes, Condos, and Coops. We’re going to change to format a bit this week, yet again. Below you’ll find two tables, the first displays price reductions of greater than $200,000 and the second displays price reductions greater than 20%. All other price changes can be found in the Excel file below. With that, the listings please!

This data is also available in XLS format here: PriceChange-Nov06a.xls

Welcome to another edition of Price Reduced!

For all the newcomers to the site, Price Reduced! takes a look at a handful of significant price reductions across Northern NJ. The purpose of this exercise is to serve as evidence that the Northern New Jersey real estate market has long since been overvalued and has started the long hard decline back to the mean. These listings are in no way an endorsement, nor do I believe they are a bargain or a value. It is very possible that even with reductions, many of these homes may still be overvalued.

These listings are from GSMLS and consist of Single Family Homes, Condos, and Coops. We’re going to change to format a bit this week. Price reductions of greater than $150,000 are displayed here, all other price changes can be found in the Excel file below. With that, the listings please!

The Excel (XLS) data file can be found here: PriceChange-Oct06b.xls

From the Asbury Park Press:

Assembly chief: Halving property taxes unlikely
BY JONATHAN TAMARI

Assembly Speaker Joseph J. Roberts Jr., D-Camden, said Tuesday that talk of cutting property taxes in half is “unrealistic.”

Roberts said he supports some of the ideas proposed by Assemblyman John Burzichelli, D-Gloucester, and floated in media reports, but said the state could not afford the 20 percent to 50 percent cuts Burzichelli pondered.

Roberts said lawmakers are considering ways to provide more direct relief to property taxpayers — likely through government credits that would replace the existing property tax rebates — and through caps on property taxes.

Those caps, referred to as “circuit breakers,” could kick in when property taxes reach a certain level or consume a set percentage of a family’s income. Those credits could be linked to the same criteria, but lawmakers are still ironing out the details of how they would work, Roberts said.

One option said to be gaining steam would be selling or leasing a major state asset, such as the New Jersey Turnpike, to get a cash infusion large enough to provide relief.

Roberts said he would favor such a move, under the right circumstances.

“If the private sector can do something better, then the state should permit them to do it,” Roberts said. “If the state can gain some value by repositioning or reselling assets, we should very much consider doing it.”
…
“The session has become alarmingly stagnant and there is little hope that it will produce the bold action needed to alleviate New Jersey’s oppressive property taxes,” Sen. William Gormley, R-Atlantic, and Assemblyman Kevin O’Toole, R-Essex, wrote in a letter to Gov. Corzine. “The committees’ calendar of activities so far has been a blueprint for failure.”