Christie to propose cap on property-tax hikes

Gov. Christie will propose a constitutional amendment to cap property-tax increases at 2.5 percent per year in his budget speech tomorrow, hoping to hold down the levies that have been a long-standing source of frustration across the state.

He also plans to revive a controversial tax plan to raise money for hospitals; cut aid to towns, schools, and colleges; and reshape the state’s property-tax rebate program as credits on homeowners’ bills - instead of checks in the mail - according to three officials briefed yesterday by the Christie administration. The credits would not be applied until April, May, or June 2011.

That means homeowners would not receive checks in 2010, though they still would get tax relief in the coming fiscal year. The rebates are typically mailed in the summer and fall to help offset the state’s high property taxes, which average $7,300.

Delaying the payments until the fiscal year’s fourth quarter would give Christie time to convert the checks into credits and also buy some time while the state’s financial picture became more clear. Under the governor’s plan, the credits would not be paid until after nearly a full year of tax collections and after he has proposed his next budget.

Those who received rebate checks last year - senior citizens earning less than $150,000 and other homeowners making $75,000 or less - still would be eligible to get a credit at the same level, according to the officials, who spoke on the condition of anonymity because their briefing was meant to be confidential.
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The 2.5 percent property-tax cap would replace the existing 4 percent limit. Christie also will call for eliminating several exceptions that let schools and municipalities often exceed the 4 percent maximum.

According to two sources, Christie has considered imposing a similar 2.5 percent cap on increases in state operations.

The tougher property-tax limit would put more pressure on mayors and school boards to keep local spending in check even as they lost state aid. Christie has argued for weeks that local leaders need to do their part to make the state more affordable, and he has pledged to offer “tools,” such as changes to the rules governing labor negotiations, to give them more power to control costs.

“All levels of government have to impose that discipline. Government cannot continue to be made larger and more expensive,” Christie said at a news conference last week.

N.J. foreclosure rate drops for second month in a row

The number of New Jersey homeowners in various stages of the foreclosure process dropped for the second consecutive month in February, displaying a housing picture that is improving, but still behind the previous year’s estimates.

Lenders sent foreclosure fillings to 3,750 N.J. properties in February, down almost 39 percent from January, according to RealtyTrac, an Irvine, Calif.-based firm that tracks real estate trends. That number, however, is still about 14 percent higher than the number of filings sent in the same period last year.

Nationwide, more than 308,524 properties received notices in February, according to RealtyTrac. That’s about a 2 percent decrease in total properties from the previous month, but a 6 percent rise from the same period a year ago.

N.J. job losses hit 228,300; worst since ’90s

New Jersey’s economy lost 114,100 jobs in 2009 and another 9,100 jobs in January 2010, the state reported Wednesday, offering evidence that the recession has been the most severe since the early 1990s.

It has forced thousands of workers to reinvent themselves, brush up on their skills and prepare for new careers — even as they fall behind on their bills and try to keep their families together.

“Every bill is at least a month late,” Laura Novotny, 45, of Long Branch, said Wednesday after leaving a class at Brookdale Community College in Middletown, where she is studying respiratory therapy. “If somebody stole my identity, they would give it back to me.”

The latest report from the New Jersey Department of Labor and Workforce Development was notable in that it included a full account of the labor market last year.

It found the state lost 228,300 jobs from the time the U.S. recession began in December 2007 through 2009, fast approaching the 258,600 jobs lost during the recession from 1989 to 1992. It also said the state’s unemployment rate in January dipped to 9.9 percent from 10 percent, even though the job losses continued.
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“As bad as (we thought) the recession was, the final numbers indicate that it was worse,” Rutgers University economist Joseph J. Seneca said. “The long road back to recover the lost jobs of the recession is even longer than what we originally thought.”
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The Labor Department’s report showed the private sector lost 121,100 jobs in 2009; the public sector added 7,000 jobs. In the private sector, only the education and health services sector and the leisure and hospitality sector added jobs.

The biggest losses: Trade, transportation and utilities lost 29,000 jobs; professional and business services lost 28,700 jobs; manufacturing lost 28,200 jobs; and construction lost 23,400 jobs.

Unemployed workers have been jobless on average for seven months, the longest stretch since researchers began tracking that figure in 1948. And it has worn them down, said Carl Van Horn, director of the John J. Heldrich Center for Workforce Development at Rutgers University.

N.J. municipalities raise taxes despite state cap

When New Jersey announced that property taxes went up by an average of 3.3. percent last year — the smallest increase in a decade of rapid growth — some hailed it as evidence that a 3-year-old law capping annual increases at 4 percent had finally taken hold.

But a closer look shows the law is hardly a fire wall.

Nearly a third of the state’s 566 municipalities raised property taxes above the cap with the state’s permission last year, many because they were able to show they were facing virtual civic dysfunction, a Star-Ledger review shows. Through hundreds of pages of applications asking to exceed the cap, school and town officials spared no adjectives when describing what would happen without relief: The police force would be cut. Special education aides would be fired. Fire hydrants would not be installed.

“Impossible” one town said of the budget it would produce under the cap. “Catastrophic” disruptions to basic services, warns another.

Still others envisioned Armageddon scenarios:

Carlstadt, where property taxes rose 10 percent, claimed it would “have no alternative but to shut down all operations in the borough.” Lake Como, where taxes jumped nearly 9 percent, said denying a waiver to spend more “would jeopardize the public health and safety.”

Of 76 towns that asked to exceed the cap last year, 62 were approved, according to state records. Of 33 school districts, 25 were approved — though many at a far smaller dollar amount than they asked for. The state granted $12.3 million of the requested $35.4 million in waivers for schools — down from $33.2 million of a requested $58.6 million in 2008. Towns that were approved asked for more than $47 million in exceptions.

Other local governments did not need state permission because the costs driving their tax hikes — such as health care or rising school enrollments were not subject to the cap.

Bill would create N.J. homebuyer tax credit

In an effort to boost the state’s housing market, New Jersey legislators have introduced a bill that would give home buyers an income tax credit of up to $15,000, spread over three years.

“The housing industry is at an all-time low,” said Sen. Paul Sarlo, a Wood-Ridge Democrat and a co-sponsor of the bill. “The economic output that will be generated from these homes being built will be quite significant and will really help to stimulate the economy.”

The home-building industry has been slammed by the housing downturn. In New Jersey, fewer than 12,000 new housing units were built in 2009 — the lowest number since World War II. As a result, unemployment has soared among construction workers.

The bill would target new construction, with 75 percent of the tax credits going to buyers of newly built homes and 25 percent going to buyers of existing homes. Existing home sales make up the large majority of home sales.

If passed, the tax credit would cost the state Treasury $100 million over three years, at a time when New Jersey is in dire financial straits. But Sarlo said the economic stimulus would more than make up for those lost revenues.
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Because the tax credit’s cost is capped at $100 million, a total of 6,667 buyers would be able to claim the credit — 5,000 of them new-home buyers. The credits would be available on a first come, first served basis.

N.J. legislation could create home buyer tax credit

A state association of real estate agents is backing legislation that would create a New Jersey tax credit for home buyers, according to a release.

The bill, which has yet to make it out of committee, would establish a tax credit much like the federal incentive that is set to expire after the first half of this year, the New Jersey Association of Realtors said.

Real estate brokers, home builders and appraisers have been touting the national first-time home buyer’s tax credit as an integral part to the recent stabilization in home prices.

Some comments on the credit: (Courtesy of Calculated Risk):

The Very Expensive Home Buyer Tax Credit

It’s terrible policy,” says Mark Calabria of the libertarian Cato Institute.

“It’s awful policy,” says Andrew Jakabovics, associate director for housing and economics at the liberal Center for American Progress. “It’s incredibly expensive. It’s not well targeted.”
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“We paid $8,000 to at least 1.5 million people to do something they were going to do anyway,” Jakabovics says.
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“A heck of a lot of people would have bought the house anyway,” says Ted Gayer, an economist at the Brookings Institution.
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The tax break, due to expire at the end of November, is on track to cost $15 billion, twice what Congress had planned. In other words, it will cost $43,000 for every new homebuyer who would not have bought a house without the tax break.

The Beige Book - Second District — New York

The Second District’s economy has shown some further signs of strengthening since the last report, despite some apparent slowing in the housing market; input price increases have become more widespread. In general, business contacts report ongoing improvement in overall conditions and some pickup in hiring activity.
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Commercial real estate markets have been steady to softer since the last report, while the sales/investment market remains exceptionally weak. Residential real estate markets were mixed to weaker in early 2010. Finally, bankers report weakening in loan demand in all categories, rising delinquency rates–mainly in the household sector–but some leveling off in credit standards on consumer loans and residential mortgages.
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Housing markets appear to have softened in early 2010, after hints of a pickup in late 2009. New York City’s sales and rental markets both showed signs of slackening since the last report. Rental activity, which had stabilized in December, has reportedly weakened more recently, while asking rents were relatively stable but lower than a year earlier. Co-op and condo transactions, which had picked up in the latter part of 2009, are said to have slipped across the board thus far in 2010, while prices have reportedly continued to drift down. Similarly, northern New Jersey’s single-family housing market has reportedly lost momentum in early 2010–particularly for new homes–after showing scattered signs of a pickup in late 2009. However, this may partly reflect unusually harsh winter weather this year in much of the state. Construction of both single- and multi-family homes is moribund, as developers are reportedly holding off on any new development. Still, a real estate agent in a relatively upscale area notes that short sales are not all that common and that most transactions are still above the remaining mortgage balance; however, she notes that prices continue to drift down–especially at the high end, where affordability remains a major factor. The homebuyer tax credit is not much of a factor because it represents a small portion of the typical house price. Buffalo-area Realtors indicate that sales were sluggish in both late 2009 and early 2010, though here, the recent extension of the homebuyer tax credit is expected to spur increased activity in the months ahead.

Commercial real estate markets across most of the District softened since the last report. Vacancy rates in Manhattan continued to climb, while asking rents continued to fall and were down more than 20 percent from a year ago. Vacancy rates also rose noticeably in Westchester and Fairfield counties, while asking rents were down by 6 percent. In most other areas around the District, however, vacancies and rents were relatively stable. Commercial real estate sales remained exceptionally weak across the board.
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Bankers report decreased demand for all types of loans, particularly in the residential mortgage category, where more than half of those surveyed report weakening demand, compared with just 11 percent reporting a pickup. Bankers also reported decreased demand for refinancing. Respondents indicate further tightening in credit standards in the commercial mortgage and commercial and industrial loan categories but some leveling off in standards on consumer loans and residential mortgages. Still, no banker reported an easing of credit standards in any of the categories.
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Finally, respondents report continuing increases in delinquency rates for all categories except the commercial and industrial loan category, where rates are reported to have leveled off.

(Emphasis Added)

Experts: N.J. less hard-hit by recession, but projected for slower growth

The Garden State has withstood the economic downturn better than other parts of the country, with less dramatic increases in unemployment and availability rates in commercial real estate space, according to two local experts. But New Jersey’s relative stability has more to do with the state’s lack of growth than having a more robust economy than other states, they said.

In New Jersey, “we lost employment faster than in the prior two recessions,” said Rae Rosen, senior economist and assistant vice president of the Federal Reserve Bank of New York, speaking at the Newark Regional Business Partnership’s annual Real Estate Market Forecast in the Brick City Tuesday morning. The job loss isn’t as severe as it was in the 1989 downturn, which had close to an 8 percent decline, compared a current decline of about 6 percent.

But “the unemployment rate rose dramatically,” to 10.1 percent statewide in December 2009; the rate was even higher in the Ocean City and Atlantic City-Hammonton metropolitan areas and Hudson County, she said. “These aren’t typical of these areas.”

Private-sector job growth in the state declined 2.7 percent year-over-year in December, compared to 3.5 percent nationally, Rosen said. But breaking down job growth by sector, she noted that the state lost a large portion of its manufacturing jobs in the last two decades, so “the rate of loss wasn’t as bad.”
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Overall in New Jersey, “the rate of loss wasn’t as bad as the nation, but going forward, it may not get a rapid pickup, either,” Rosen said.
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While the United States and New York saw a big dip in office availability during the boom years between 2005 and 2007, the Garden State’s availability rate had “a slow but steady increase” during that time, and “a lot of that is because of the lack of private-sector job growth in the state.”

New Home Sales Plunge to ‘63 Levels

Sales of new single-family homes plunged last month, underscoring the fragility in the housing market.

Sales dropped 11.2% in January from a month earlier to a seasonally adjusted annual rate of 309,000, the Commerce Department said Wednesday. The decline brought sales to their lowest level since the government began tracking the numbers in 1963. Sales were 6.1% lower than in January 2009.

This gauge of new-home sales is particularly volatile because it is based on a very small sample size and carries a wide margin of error. Still, the sharp decline is an indication that the housing market remains feeble, despite improvements in the past year fueled by low mortgage rates, reduced home prices and a government tax credit for home buyers.

The tax credit, which was expanded and extended, is set to expire April 30. It could lead to an upturn in sales in the next couple of months as buyers rush to take advantage of it, analysts say.
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The drop in sales in January triggered an increase in the backlog of unsold new homes on the market, pushing it up to the equivalent of what would normally be sold in 9.1 months versus eight months in December. And the abundance of homes on the market continued to bring prices down. The median sales price for new homes fell 2.4% to $203,500 in January, compared with a year ago.

Faltering demand in the housing market also led to a drop in mortgage applications for both new and existing homes. The Mortgage Bankers Association’s seasonally adjusted purchase index fell 7.3% for the week ended Feb. 19 from the prior week, the advocacy group that represents the real-estate finance industry said Wednesday. It is the index’s lowest level since 1997.