Bizzaro Weekend Edition – Foreclosure delays helping the economy

Posted on April 7, 2012 by grim
Posted in Economics, Foreclosures | 31 Comments

From Barrons:

Consumers’ Quiet Helper: The Fruits of Foreclosure

Imagine living at home and paying no mortgage, interest or taxes. That may sound like some late-night TV commercial, but millions of people are doing just that—the silver lining to having their homes in the foreclosure process.

It’s not easy to estimate exactly how much money these folks are not spending on housing, but a good guess is $42 billion a year. Assuming they’re spending it on other things, they’re chipping in about 10% of the nation’s total retail sales. In other words, they’re a surprisingly important force for the economy.

Nearly 1.9 million homes had some form of foreclosure filing upon them at the end of last year, according to RealtyTrac. Because of bottlenecks caused by the Robo-signing mess and legal battles, people in foreclosure have been able to stay put for long stretches. The foreclosure process rose from 281 days in the third quarter of 2010, to 348 days by the end of 2011. In Florida it’s 806 days. In New York, the average stay is a stunning 1,019 days. Until actually foreclosed, people stay in their homes for free.

You get to roughly $42 billion in savings by multiplying the portion of mortgages in foreclosure (4.38% of all homes) by total annual payments of mortgage and taxes (about $970 million).

Yet another housing price index – This one says good times are here again

Posted on April 6, 2012 by grim
Posted in Economics, Housing Recovery, National Real Estate | 79 Comments

From the Economist:

The rebound is now

On fundamentals, America’s housing market looks increasingly healthy. Inventory levels and vacancy rates are way down and rents are up. At the national level, the entirety of the price boom between 2000 and 2006 has been unwound and then some. Mortgage markets are still clogged, but investors are moving properties from owner-occupied to rental status with gusto. And yet, as the quote above indicates, prices are still dropping. What gives?

One major issue is the serious limitations of housing market data. Take the Case-Shiller index. Its monthly figures are a three-month moving average, which means that the January numbers are an average of prices reported in November, December, and January. And Case-Shiller gets its data when closed sales are officially reported, which means that the figures could include sales the contracts for which were signed as far back as September. It’s now closer to September of 2012 than to September of 2011!

There’s a glaring data hole, in other words, and Jed Kolko, chief economist at Trulia, is endeavouring to fix it. Today, he unveiled a new price and rent monitor built on listings at Trulia.com. Mr Kolko writes that final asking prices are a good predictor of sales prices—but are available months before the closing sale price. By taking asking prices and rents and adjusting them for property characteristics, he reckons he can put together a useful indicator of home prices with a much shorter turnaround time. And what does the inaugural monitor say about housing-market conditions?

Nationally, asking prices on for-sale homes were 1.4% higher in March than one quarter ago. Prices increased month over month by 0.9% in March and 0.6% in February. What we found through the Monitor is that asking prices had been declining prior to February and reached a low in January 2012. Throughout 2011, asking prices rose slightly in several months of the year, but never more than 0.2% in a month. Asking prices in March were 0.7% below their level one year earlier.

One thing to keep in mind — because the Trulia Price Monitor is seasonally adjusted, these monthly and quarterly increases are on top of typical springtime price jumps. Without adjusting for seasonality, asking prices rose 2.4% quarter over quarter.

Foreclosure tsunami on the horizon?

Posted on April 5, 2012 by grim
Posted in Economics, Foreclosures, Housing Recovery, National Real Estate | 106 Comments

From Reuters:

Americans brace for next foreclosure wave

Half a decade into the deepest U.S. housing crisis since the 1930s, many Americans are hoping the crisis is finally nearing its end. House sales are picking up across most of the country, the plunge in prices is slowing and attempts by lenders to claim back properties from struggling borrowers dropped by more than a third in 2011, hitting a four-year low.

But a painful part two of the slump looks set to unfold: Many more U.S. homeowners face the prospect of losing their homes this year as banks pick up the pace of foreclosures.
…
Housing experts say localized warning signs of a new wave of foreclosure are likely to be replicated across much of the United States.

Online foreclosure marketplace RealtyTrac estimated that while foreclosures dropped slightly nationwide in February from January and from February 2011, they rose in 21 states and jumped sharply in cities like Tampa (64 percent), Chicago (43 percent) and Miami (53 percent).

RealtyTrac CEO Brandon Moore said the “numbers point to a gradually rising foreclosure tide as some of the barriers that have been holding back foreclosures are removed.”
…
Zillow expects the resurgence in foreclosures this year, combined with excess inventory of unsold, bank-owned homes will contribute to a 3.7 percent national decline in prices before the market hits bottom in 2013 and stays there until 2016.

“The hangover from this crisis will far outlast the party of the boom years,” said Zillow chief economist Stan Humphries.

Getting through the remaining foreclosures and dealing with the resulting flood of homes on the market in the wake of the bank settlement is a necessary part of the healing process for the U.S. housing market, he added.

According to leading broker dealer Amherst Securities, some 9.5 million homes are still at risk of default and in February it said it expected to see the uptick in foreclosures start to hit in March and April.

Zelman: “The equation of renting versus owning is becoming much more favorable for owning”

Posted on April 4, 2012 by grim
Posted in Economics, Housing Recovery, National Real Estate | 143 Comments

From the WSJ:

As Home Rents Head Higher, Owning Regains Its Appeal

Climbing rents for apartments are combining with a continued decline in home prices to push once-reluctant home buyers into finally taking the plunge, say economists and real-estate agents, helping what appears to be a good start to the housing industry’s all-important spring selling season.

Although increased buying activity from investors and second-home purchasers are also factors behind the recent pickup in home sales, real-estate agents say they are fielding more calls from anxious tenants complaining about rising rents.

“The rental market has been incredibly hot,” said Ronald Peltier, chief executive of HomeServices of America Inc., which owns real-estate brokerages in 21 states. He says rising rents, coupled with slumping home prices and interest rates near record lows, are boosting demand for homes at entry-level prices.

Average apartment rents rose by 2.7% last year while the national vacancy rate dropped below 5% for the first time since 2001, according to a quarterly survey to be released Wednesday by Reis Inc., REIS a real-estate research firm.
…
Such increases are one reason why analysts at Zelman & Associates believe 2012 will be the first year since 2005 when the share of apartment renters that moves out to buy a house increases from the previous year. “The equation of renting versus owning is becoming much more favorable for owning,” said Ivy Zelman, the firm’s chief executive.
…
Nishu Sood, a housing analyst with Deutsche Bank DBK.XE who tracks housing costs, says that, historically, the cost to rent an apartment has been about 10% lower than the after-tax cost of owning a home. That rental discount began to fall in 2010 and disappeared entirely last year. By the end of 2011, Mr. Sood’s research found that the cost to rent an apartment was about 15% higher than the cost to own a home. Conditions are “overwhelming in the favor of buying now. It is unequivocal,” he said.
…
And for some renters, the housing crisis has shaken their desire to become owners. “If I was going to buy, I feel like I would be just in the same problem that other homeowners are having with the market,” said Laurel Slutsky, 24, who just renewed the one-year lease on her Chicago two-bedroom.

“Right now, all my friends and I are hopping around neighborhoods, and I don’t see the benefit in buying and staying in one place.”

First-timers stepping back into the market?

Posted on April 3, 2012 by grim
Posted in Economics, Housing Recovery, NYC | 146 Comments

From Crain’s New York:

Rising rents boosting sales of starter apartments

Studios and one-bedroom apartments in Manhattan made a comeback during the first three months of this year, according to quarterly residential market reports released Tuesday morning as rising rents forced more people to look at buying a place.

These starter- or entry-level apartments represented 56.2% of all sales transactions that closed during the first quarter, according to a report by Prudential Douglas Elliman and Miller Samuel Inc. That was the largest share of the action the segment has accounted for since the fourth quarter of 2009, when the first-time-buyer tax credit touched off a surge in that segment.

In this year’s first quarter, there were a total of 2,311 closings, down 3.5% from the first quarter of 2011. Similarly, in a separate report, the Corcoran Group said studios and one bedrooms accounted for 52.4% of all sales in the first quarter.

“Rents are extremely high and it is driving more first time homebuyers into the sale market,” said Pam Liebman, CEO of the Corcoran Group. Additionally, “we saw a big rush in the studio and one-bedroom market because the mortgage interest rates are low,” added Dottie Herman, CEO of Elliman.
…

“Prices are moving sideways,” said Jonathan Miller, CEO of Miller Samuel, adding that prices have remained stable for more than two and half years now.
…

And it’s not just the high end that is hot. Apartments at all price ranges sold well in the first quarter. Streeteasy.com, which tracks contract signings across Manhattan in its quarterly market report, said 2,621 listings entered into contract during the quarter, up 23.5% from the same period in 2011. All the activity bodes well for the spring results which will track deal closings.

“I anticipate a robust housing market in the spring,” said Mr. Miller.

Hammers start to swing again

Posted on April 2, 2012 by grim
Posted in Economics, Housing Recovery, New Development, New Jersey Real Estate | 107 Comments

From the Record:

Home construction shows signs of life after long downturn

From new luxury homes in Saddle River to town houses in Garfield to rentals in Fort Lee, Elmwood Park, Hackensack and Wood-Ridge, North Jersey is seeing small signs of life in the deeply troubled housing construction industry.

After bumping along at near 40-year lows for several years, homebuilding is nowhere near a real recovery yet. But builders are feeling, if not exactly optimistic, a little less pessimistic. While national housing indicators — housing starts, new home sales and builders’ outlook — remain below the levels seen in a healthy market, they’ve risen from their recent lows. And the Standard & Poor’s home builders stock index is up about 70 percent from last fall.

“It’s the first time in four or five years that we’re generating job growth, which is always a driver of housing,” said Carl Goldberg of Roseland Property in Short Hills, which is building the Estuary, a 583-unit luxury rental building in Weehawken, among other projects.
…
“New Jersey’s homebuilders are off to their best start since 2008,” said Patrick O’Keefe, an economist with J. H. Cohn in Roseland. Building permits rose almost 24 percent in January and February compared with the same period last year. If that pace continues, builders will construct more than 16,000 housing units in New Jersey this year, O’Keefe estimated. Though still only about half of the long-term averages, that’s an increase from recent levels in the 13,000 range, which were the lowest levels since World War II.

Multifamily units are expected to make up a record 55 percent of the state’s new construction this year, according to O’Keefe. And rentals are especially popular. With mortgages hard to come by, and people feeling skittish about home values and the employment market, fewer builders are constructing homes for sale.

“We stopped doing for-sale housing about three years ago,” said Andrew Abramson, chief executive of the Value Companies of Clifton, a 60-year-old builder and apartment owner. “We honestly got tired of beating our heads against the wall.”
…
“The homeownership rate continues to drop,” said Ron Ladell of AvalonBay, a Northern Virginia-based company that has new apartment complexes recently finished or under construction in North Bergen, Wood-Ridge and Hackensack, and plans to start more projects in New Jersey later this year and next year. “Rentals are the place to be, let me tell you.”
…
And BNE Real Estate Group of Livingston, which once planned to build condos on a Fort Lee site, is instead constructing a 12-story, 194-unit apartment building because of the strong market for rentals.

“The demand for rental housing has been growing at a quicker pace than the underlying economy,” Goldberg said. “The level of demand and kind of production you’re seeing on the rental side is not yet matched in the for-sale market. … There continues to be a real demand for high-quality housing adjacent to mass transit in our urban core.”
…
Other builders are also betting on for-sale properties, especially in niche markets.

“It’s got to be the right product at the right price at the right site,” said Paul Schneier, Northeast division president for the Pulte Group, which is building 184 town houses in Garfield and 750 age-restricted condos at Wanaque Reserve in Wanaque.

“It’s a very unforgiving market,” Schneier said. “There’s no margin for error. You can’t just push prices higher to make up for your mistakes.”
…
Toll Brothers, for example, said sales have been picking up at its high-end Hoboken developments, which include Maxwell Place, at the old Maxwell House coffee site on the Hudson River and the Hudson Tea redevelopment. nearby.

“Our buyers have kept their jobs. They still have cash. They’re looking around and realizing they can get mortgage loans for around 4 percent,” said John McCullough, assistant vice president at Toll Brothers City Living. “A lot of them have been sitting on the sidelines for a few years and have come to the feeling that this is the time to get on with their lives.”

Hovnanian Enterprises of Red Bank has seen sales pick up significantly at its 420-unit 77 Hudson high-rise in Jersey City, according to Randy Brosseau, metro area president. And sales are also improving at its 55-and-up communities in Woodland Park and Montvale, he said.
…
Whatever the timetable for a housing recovery, builders and analysts say the nation is unlikely to see the kind of construction experienced in the mid-2000s boom, when new-home sales topped a million a year for several years.

“Everything in moderation,” said Witmondt of Woodmont Properties. “In the go-go days of the mid-2000s, the exuberance was too great, and everyone got ahead of themselves. Hopefully, we’ve all learned a lesson. When things get good, don’t floor the accelerator. Go nice and slow and steady.”

Too early for so much hope and optimism?

Posted on April 1, 2012 by grim
Posted in Economics, Housing Recovery, New Jersey Real Estate | 37 Comments

From the Star Ledger:

Warm weather, improved economy bringing out homebuyers and sellers this spring

In the real estate business, there is a budding sense of optimism these days.

A warmer winter, a stronger sense of job security and a general feeling that home prices have stopped dropping are fueling a new outlook.

“This is extraordinary,” said Jeffrey Otteau, president of the Otteau Valuation Group in East Brunswick. The market is “exploding off the charts, and I’m convinced this is just the early stages of what is yet to come.

“And, I’m not an optimistic person by nature,’’ he added. “I’ve seen so many negatives.”

Springtime is traditionally a busy buying and selling season for homeowners: the weather is nice, and buying now gives new homeowners time to settle in before school starts in the fall. But this year, activity started earlier and there are already stories of double-digit visits at open houses, bidding wars and homes sold within days.

The reasons are numerous, according to real estate agents. Potential buyers are tired of waiting on the sidelines, worrying that prices could drop further. Interest rates are still at historic lows, but are starting to creep upward, which in turn gives buyers a sense of urgency to make a move. And sellers, long reluctant to accept the reality that their homes’ values have declined, are increasingly willing to list them at realistic prices.

“We’re seeing the kinds of activities that lead us to believe we’re going to have some improvements in the market over what we’ve seen in previous springs, (and) over the last several years,” said Charlie Young, CEO of Parsippany-based ERA Real Estate. “What it tells us is people are feeling like it might be time to stick their head out from the rabbit hole and look around.”
…
In mid-March, Jodi Luminiello, with Coldwell Banker, handled a bidding war on a three-bedroom split-style house in Cranford. She had listed it and hosted an open house on Sunday, and by Monday multiple prospective buyers had sent in their offers. It was priced correctly, she said.

“We’re getting double-digits when running open houses, so I think it’s overall very active out there,” Luminiello said. “Sellers are finally coming to terms with the true value and being realistic about their prices, so that’s helping everything get active again.”

Activity in New Jersey is slightly above what is happening nationwide, said Young, of ERA. And from what his agents tell him, the momentum is happening throughout the state, not just in select towns that were somewhat immune to the recession because of their location or housing stock.

That’s what Gary Large, president of the New Jersey Association of Realtors, is seeing too.

“In most cases, we’re starting to see a stabilization of prices,” said Large, who is branch manager of Prudential New Jersey Properties in Morristown. “We’re getting very close to the point we’ll be able to say prices have stabilized and the correction is over.”

Where do we go from here?

Posted on March 31, 2012 by grim
Posted in Economics, Housing Recovery, National Real Estate | 43 Comments

From CNBC:

Real Estate Recovery a Tale of Good, Bad and Ugly

In Miami, condominiums are hot again.

In Phoenix, builders are opening new communities.

In New Jersey, buyers are finding it takes about three years to foreclose on a property

In Atlanta, home prices are down 14 percent annually, thanks to a new wave of foreclosures.

In California, more than half of all home sales in February involved distressed properties, but sales were up 5 percent month-to-month.

In Northern Virginia, a half million dollar home just sold in less than a week.

The housing recovery is under way in fits and starts, but it is volatile, and it is local.
…
Home prices nationally are down around 4 percent from a year ago, according to the latest report from S&P/Case-Shiller. While price declines are decelerating, that’s a new low for the index, which is now down 34.4 percent from its peak in 2006.

“Our view is that foreclosures, excess supply, and weak demand will drive home prices as measured by the Case-Shiller indices down at least another 5 percent,” says Patrick Newport of IHS Global Insight.

Newport points to the following negatives: 12 percent of homeowners with mortgages (i.e., more than 6 million homeowners) were either delinquent on their payments or in foreclosure at the end of the fourth quarter, according to the Mortgage Bankers Association; 22 percent of residential properties with mortgages are currently underwater, according to CoreLogic.
…
While the employment picture is improving, unemployment and underemployment are still running high, and mortgage rates, which hit historical lows just a few months ago, are on the rise again.

None of this points to a speedy recovery.
…
With more regulation ahead for the mortgage market, an uncertain future for Fannie Mae and Freddie Mac, and 11 million Americans owing more on their mortgages than their homes are worth, housing will not spring back to life, no matter what the season.

Instead, it will likely sputter for a while, surge, retreat and repeat the cycle, until most of the distressed inventory is sold and home prices finally find a bottom.

Poor not welcome in Short Hills

Posted on March 30, 2012 by grim
Posted in New Jersey Real Estate, Unrest | 139 Comments

Came across this opinion/letter to the editor piece this morning in the Daily Record. Not sure whether to cheer or be appalled, but I’m leaning towards the latter, mostly due to the fact that the writer lives in Short Hills, and based on a few google searches, looks to be pretty well off. So I’m going to call this out as some pretty outrageous crap.

What’s the real issue here Mr. and Mrs. Eisner? Is it wealth redistribution to urban areas like you mention below? I think not, since that runs completely contrary to your real thesis which is … that you don’t want minorities to soil your beautiful neighborhood. Or worse, god forbid, you should be forced to live next to someone that is “poor”?

Do you really believe that property values would decline further? Remember, it’s the forclosure that caused the initial declines in value, not the fact that a low-income resident had moved in. Oh.. Oh.. I see now. You *do* think it’s a fact that if the low income resident moves in, it will cause further declines in price.

Why raise the alarm around protecting property rights? The need for protection was long gone when the borrower defaulted and breached the terms of his or her note. Clearly, it is the right of the lender to take back the property to make good on the note. I’m not quite sure how anyone’s property rights are at risk when it is the government who is choosing to buy these homes. They would clearly be the owners, and who better to look after the interests of the government but the government itself? Where is the risk of eminent domain? S1566/A2168 mentions nothing about the seizure of property. Again, why the alarmist attitudes?

Mr and Mrs. Eisner, if you don’t want minorities or the poor to invade Short Hills, the solution is simple, just buy up all the foreclosed homes yourselves.

From the Daily Record:

Foreclosure ‘transformations’ threaten suburbia

We are very concerned about a bill that is passing through both the Senate and Assembly in New Jersey named the NJ Residential Foreclosure Transformation Act(S1566/A2168). If this bill passes and is signed by the governor it will allow the state to buy houses in any town, convert them into low-income housing and it is deed-restricted for 30 years.

We feel the legislation is social engineering at its worst. It will severely impact the property values, will continue the unacceptable practice of re-distribution of wealth to urban areas at the expense of the taxpayers and it has potential for eminent domain abuse. There has been virtually no citizen input and worst of all, the plan does not in any way guarantee the citizens’ property rights and personal rights are not specifically protected.

The public needs to be informed about this bill as it will affect every citizen and property owner of New Jersey in a negative way.

Judith and William Eisner

Jamie says all clear on the housing front

Posted on March 29, 2012 by grim
Posted in Economics, Housing Recovery, Humor | 115 Comments

From CNBC:

Improving Housing Market Driving Economy: Jamie Dimon

The U.S. housing market is very close to a bottom and there are already signs its improvement is giving a boost to the overall economy, JPMorgan Chase CEO Jamie Dimon told CNBC Wednesday.

“I believe we’re very close to the inflection point. People look at prices that are still coming down but all the other signs are flashing green,” Dimon said during a job fair in New York for hiring veterans.

Housing is more affordable and “the shadow inventory everyone talks about is lower today than it was 12 months ago. It will be a lot lower 12 months from now,” he said.

Distressed inventory “is actually coming down, not going up. Homes for sale are about half what they were four years ago. You could come up with a pretty bullish case. If the economy grows, housing gets better, quicker.”

He said the U.S. economy is “getting stronger all the time. It’s broad-based, companies are in great shape…Consumers are in great shape.”
…
Dimon believes the threat of a double-dip recession is behind us.

Turning the corner or hanging off the edge?

Posted on March 28, 2012 by grim
Posted in Economics, Housing Recovery, National Real Estate | 161 Comments

From the Record:

Area’s home prices drop 2.9% in January

Despite signs of an economic recovery, home prices nationally and in the New York metropolitan area, including North Jersey, continued to slide in January, the Standard & Poor’s Case-Shiller index reported Tuesday.

Home values in the region dropped 2.9 percent from January 2011 to January 2012. Nationally, home prices dropped 3.8 percent.

“Prices collapsed between 2007 and 2009, have been mostly inching down ever since, and signs of a turnaround are nowhere in sight,” said Patrick Newport, an economist with IHS Global Insight. “Our view is that foreclosures, excess supply, and weak demand will drive home prices down at least another 5 percent.”

Home prices in the region have dropped 25 percent since the market peak in mid-2006, and are now at the levels of late 2003. Nationally, home prices have declined an average 34 percent and have returned to early 2003 levels. In four metropolitan areas — Atlanta, Cleveland, Detroit and Las Vegas — home values are now below their levels in 2000.

The report came a day after East Brunswick appraiser Jeffrey Otteau said that the New Jersey spring home-buying market will be the busiest in four years — though he also predicted that home prices will remain flat this year.
…
In Passaic County, the median price was $243,619, down 11 percent from a year earlier, while the number of sales rose 33 percent.

From Bloomberg:

Home Prices in U.S. Cities Fell at Slower Pace in January

Home prices in 20 U.S. cities dropped at a slower pace in January, pointing to stabilization in the real estate market.

The S&P/Case-Shiller index (SPX) of property values in 20 cities fell 3.8 percent from a year earlier, matching the median forecast of 32 economists surveyed by Bloomberg News, after decreasing 4.1 percent in December, a report from the group showed today in New York. Prices were little changed in January from the prior month, the best performance since July.

Property values are steadying as a strengthening labor market underpins housing demand, which may allow the industry that precipitated the recession to contribute to growth this year. Nonetheless, the recovery in sales may be restrained by foreclosures that are putting more properties onto the market.

“We are starting to see a slightly less-negative picture,” said Sean Incremona, a senior economist at 4Cast Inc. in New York, who correctly projected the decline. “We have seen some slight progress from very depressed levels, but there’s still a long, long way to go.”

From the WSJ:

S&P Case/Shiller: Home Prices Back to 2003 Levels.

Home prices continue to tumble, according to S&P’s Case-Shiller home-price indexes.

U.S. home prices dropped in January from a month earlier, with the average home price dropping back to levels last seen in 2003.

The S&P Case-Shiller index dropped 0.8% from a month earlier. Year-over-year prices fell 3.9% in the index’s 10 major markets, while the 20-city index dropped 3.8%.
…
Here are a smattering of reactions from economists and market observers:

Peter Boockvar of Miller Tabak: Bottom line, the housing numbers seen over the past week have been mostly below expectations pointing to a still tough industry but one that isn’t getting much worse with signs of stabilization in some markets. Prices will likely still fall and purchase deals will still be held up by tight lending standards and strict appraisals but generally speaking most of the damage has already been done.

Dan Greenhaus of BTIG: We have been arguing that housing as a whole bottomed in late 2010/early 2011 and, more importantly, this summer would mark the six year anniversary of the peak in home prices. Historically, housing bubbles tend to see home prices on average bottom out six years after peaking. As such, if the United States were to suffer a decidedly average housing crash, this summer would mark the point at which prices should begin turning upwards on a sustained basis.

Joshua Shapiro of MFR: The enormous supply overhang of existing homes (factoring in all those in foreclosure or soon to be) promises to keep pressure on prices for some time. From a longer-term perspective, it is important to keep in mind that in the seven years leading up to the peak in July 2006, the non-seasonally adjusted national 20 city home price index jumped by 155% (126 index points) to a high of 206.52 (January 2000=100). So far, this index has dropped by 34% (71 index points) since its peak. We look for further declines to be registered in the quarters ahead, although in all likelihood the rate of deterioration will be nowhere near as steep as that recorded earlier in the cycle.

TD Securities: On the whole, the dramatic moderation in the pace of home price depreciation in January is very encouraging, especially as it may be an indication that home prices may finally be stabilizing. And with home sales beginning to show signs of improvement and labor market activity also providing a favorable backdrop for the housing sector, we may now be witnessing the bottom in home prices.

Otteau: “We are at a turning point in the housing market and the economy”

Posted on March 26, 2012 by grim
Posted in Economics, Foreclosures, Housing Recovery, New Jersey Real Estate | 139 Comments

From the Record:

N.J. housing market recovering, appraiser says

New Jersey’s housing market is recovering, and this spring’s home-selling season will be the liveliest in four years, appraiser Jeffrey Otteau said Monday.

“We are at a turning point in the housing market and the economy,” said Otteau, who tracks the statewide market from his office in East Brunswick and whose forecasts are widely followed. “The bounce in home sales [in January and February] is nothing short of astounding.” He said sales are up about 30 percent in the first two months of the year, compared with last year.

But that doesn’t mean sellers can hike their asking prices, Otteau said. With incomes flat and banks cautious about lending, buyers will be unwilling or unable to pay inflated prices, he said.

“Homes that are overpriced will not sell,” he said.

Otteau predicts that home prices will be flat this year, after falling almost 5 percent statewide last year, and will not return to their 2006 peaks until 2020.
…
Otteau said that Garden State home buying will be fueled this year by an energized job market, as well as more affordable home prices and mortgage rates below 4 percent. Average New Jersey home prices have fallen 26 percent from the market peak in 2006, and are back to 2003 levels, he said.

There’s pent-up demand among potential buyers, who have waited four or five years because they were insecure about their jobs or worried that home prices would fall further, Otteau said. And rising rents mean that many households will soon decide it’s better to buy than rent.

But he warned: “This improvement is not a return to the market frenzy we saw back in 2005.”

And more than 16 percent of New Jersey homeowners are either in foreclosure or late on their mortgage payments, according to the Mortgage Bankers Association. That represents “a deep, dark hole” for the housing market, especially in rural and inner-city areas, Otteau said.
…
Foreclosures tend to sell at a steep discount – 20 percent to 30 percent less than similar properties, according to research. That tends to pull down values of neighboring properties.

“Areas with large concentrations of foreclosures will see prices decline,” Otteau warned.

Appeal 2012!

Posted on March 26, 2012 by grim
Posted in Economics, New Jersey Real Estate, Politics, Property Taxes | 81 Comments

From the Record:

North Jersey homeowners seek lower tax assessments (Hat tip Gary)

Watching their property taxes rise as the value of their 82-year-old house dropped, Nora and Pat Sfarra of Teaneck decided to appeal their tax assessment last year. With the help of a tax-appeal company, they were able to get their home’s assessed value reduced from $351,000, to $310,000, knocking about $1,000 off an $8,000-plus annual tax bill.

“I’m satisfied that I got something off,” said Nora Sfarra.

The Sfarras are among the thousands of North Jersey homeowners who have challenged their tax assessments as home values eroded over the past several years. And with the April 2 deadline for filing this year’s tax appeals approaching fast, many homeowners are rushing to get their paperwork in.

The wave of appeals is having an impact on town budgets.

“It’s creating a major problem for communities up and down the state,” said William Dressel, executive director of the state League of Municipalities, which represents towns. “It’s reducing the amount of property taxes going into municipal coffers, which has a direct impact on the towns’ ability to be able to provide adequate services.” The result could be either service cuts or a higher tax rate, he said.

A number of towns have responded to the rise in appeals by conducting town-wide reassessments or revaluations, with the aim of getting valuations in line with actual market values, which makes it harder for homeowners to question their assessments.

And the first thing homeowners need to know is that you can’t appeal your tax bill, just your property’s assessment.

“A lot of people think if they pay too much in taxes, they have an appeal,” said Hackensack lawyer Martin Sharit, who has filed many tax appeals. “But we all pay too much in taxes.”
…
Teaneck, for example, has a tax ratio of 104 percent — meaning that the town already knows that the properties’ assessments are greater than their actual value. By that formula, a property assessed at $350,000 may really be valued by the town at only about $336,500.

The New (Jersey) Suburbia?

Posted on March 24, 2012 by grim
Posted in Economics, New Development, New Jersey Real Estate | 36 Comments

From the NY Times:

High Marks for Transit Hubs

WANT to know which New Jersey train stations have the most plentiful supply of parking spaces relative to town population? There’s a list for that. Or what about stations in the areas with the greatest number of jobs? There’s a list for that. Or transportation hubs with the densest populations? There’s a list for that as well.
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The timing of the study — which maps income, car ownership, employment, housing, commuter activity, downtown amenities and more — is propitious, given the many indicators that the population will continue to consolidate in urban and commuter town centers.

“It’s funny; the timing is working out so well,” said B. Timothy Evans, the research director at NJ Future, a nonprofit research organization that focuses on smart growth. After three years spent “putting this thing together,” he added, it is a stroke of luck that “the interest is exactly in this sector.”

The interest he cited is being evinced first and foremost by home shoppers. Real estate sales are consistently strongest in towns along New Jersey’s main commuter corridors; the economic downturn has not altered that. The latest survey on home prices conducted by the Otteau Valuation Group found that towns along the rail lines with New York City commutes of less than 50 minutes saw real estate values increase by 3.6 percent from 2010 to 2011, as compared with rural New Jersey, the weakest sector, which saw an 8.7 percent drop in home values.

The future, too, looks bright for the commuter corridor, according to another Otteau survey, which found that building permits in rail towns reached 49 percent of the total permits issued from 2009 to 2010, having grown from 24 percent in the 1990s.

Developers seeking to capitalize on this interest in transit hubs have for the last several years seen their enthusiasm and ambitious plans well rewarded by the state. Public financing for transit-oriented developments, once largely directed at municipalities, is today going directly to developers, in the form of tax credits.

New Jersey’s Transit Hub Tax Credit Program has provided nearly $1 billion in tax credits over the last three years to developers and business owners who have initiated sizable projects in nine cities deemed “distressed” and in need of investment.

Bestowed by the state’s Economic Development Authority, the tax credits are available to companies investing more than $50 million in projects within half a mile of one of the designated cities’ transit stations, and generating more than 250 full-time jobs. Commercial enterprises can receive up to 100 percent tax credit on their capital investment, paid out over 10 years, while residential projects can receive up to 35 percent tax credit on the investment, up from the former cap of 20 percent.

Good start for employment in 2012, but quite a distance to go

Posted on March 23, 2012 by grim
Posted in Economics, Employment, Housing Recovery, New Jersey Real Estate | 107 Comments

From the Star Ledger:

New Jersey job figures show slow but steady growth, economists say

During the first two months of 2012 alone, New Jersey created more than half the number of jobs it did during all of last year, according to new data released yesterday from the state Department of Labor and Workforce Development.

In January and February, employers in the state added a net total of 17,500 non-farm jobs. Last year’s tally came to 33,400 new jobs in the private sector.

The two-month total accounts for the state revising down January’s reported jobs gains to 8,800, as preliminary estimates of 13,300 proved too high. Preliminary estimates peg February’s net job growth at 8,700, all due to private sector gains. That marks the sixth straight month of job growth, to a seasonally adjusted amount of just over 3.89 million jobs, the department said.

“New Jersey employment is now moving up at a well-sustained rate. With over 74,000 new private sector jobs added since 2010…the number of private sector jobs in the state has reached a three-year high,” Charles Steindel, chief economist for the state’s Department of Treasury, said in a statement.

Economists who study the Garden State said the gains are a positive sign that New Jersey, along with the rest of the country, will keep up a steady crawl out of the great recessession.

“The state economy will continue this tortoise-like improvement,” said Joel Naroff of Naroff Economic Advisors, giving his outlook for 2012.

But despite the last month’s boost in payrolls, New Jersey’s jobless rate remained unchanged at 9 percent. That eclipses the national rate for February of 8.3 percent.

While layoffs in the pharmaceuticals sector and casino and gaming industry have added to New Jersey’s joblessness rate, a number of other factors also will keep the unemployment rate higher than the national average. For one, cutbacks in the public sector continue to partially offset employment gains in the private workforce, Naroff said. For example, government payrolls last month dropped by 1,000 while private sector employers added 9,700 workers, the Labor Department reported yesterday.

Secondly, the unemployment rate reflects New Jersey residents’ ability to find jobs not just in state, but also elsewhere such as neighboring Pennsylvania and New York.

Thirdly, the unemployment rate is a reflection of the number of people actively looking for work, economists note. Paradoxically, the rate can go down if large numbers of people simply give up on finding a job.

Chances are, the rate will continue to lag behind the national average this year. Naroff said a very good outcome would be if New Jersey’s unemployment rate sank to 8.5 percent by year-end.

In terms of numbers of private sector jobs the state may add this year, gains could exceed 50,000, said James Hughes, dean of Edward J. Bloustein School of Planning and Public Policy at Rutgers University.

“However, the other big picture we still have is a deep employment-deficit hole to climb out of,” he said. Between December 2007, when the recession officially began, and February 2010, when New Jersey and the U.S. hit the bottom in terms of job losses, the state lost 248,200 private sector jobs. Since then, it has added back 74,500.

“We still have to add 173,700 private-sector jobs to get back to where we were before the recession started,” Hughes said.