A “challenged housing market that has yet to bottom out”

From the Otteau Group:


The pace of New Jersey home sales sank to a 4 year low in January raising serious questions about what’s ahead for the Spring housing market. Adding to the uncertainty are concerns about rising oil prices, warning signs that a full blown economic recession may be approaching and the sudden reversal of mortgage rate trends which are now rising despite recent rate cuts by the Federal Reserve. According to Freddie Mac’s latest Primary Mortgage Market Survey® (PMMS®), the 30-year fixed-rate mortgage averaged 6.04 percent for the week ending February 21, 2008, up from 5.72 percent one week earlier and from 5.48% on January 24th. These increases make housing more expensive to home buyers and weaken housing affordability leading into the Spring selling season.

Also in January the number of homes for sale increased for the first time since August signaling that Unsold Inventory will likely rise further as Spring approaches. All of this adds up to a challenged housing market that has yet to bottom out and begin a recovery.

This entry was posted in Housing Bubble, New Jersey Real Estate. Bookmark the permalink.

53 Responses to A “challenged housing market that has yet to bottom out”

  1. grim says:

    So much for the Spring market…

    Maybe next year?

  2. crossroads says:

    you use to post the Otteau report. are you still able to do that? I’d like to monitor individual towns

  3. Quandry says:


    Can “attorney review” close if the seller has not fulfilled a contract point? i.e. permits for improvements?

    It’s not a contract unless the WHOLE contract is fulfilled, right?


  4. jam says:

    Quandry, I know your question was for Grim, but could you explain more? I assume by “close” you mean that the two attorneys (and hopefully their respective clients) have come to terms on what the final agreement is.

  5. bruiser says:

    Its all good. Ambac and MBIA are still AAA. Everyone can go back to financing houses that they can’t realyl afford again.

  6. Quandry says:

    that may be the question, language in the contract to purchase the property said that “permits for improvements x, y, z must be presented before the close of review”

    We were told that review closed and then my eagle eyed wife noticed that we don’t have the permits.

    I guess the question is what is attorney review and do we have to abide by this contract, if indeed it is a contract. The deposit date was two weeks from the end of attorney review. Are we obliged to stick to it? Our attorney has been vague on this, (maybe this is his error?) I don’t know.

  7. Clotpoll says:

    grim (1)-


  8. Clotpoll says:

    Quan (6)-

    Oh, that’s an attorney error, all right. Accroding to what you said, attorney review wasn’t to end until those permits were presented.

    Contracts that exit attorney review still have conditions upon them, even though they are binding. So, the permits may be a condition- or could be made a condition- of the binding contract you now hold.

    I am not an attorney and only offer this info to be of quick help. My advice is not to be construed as legal help or an attempt to practice law. Only an attorney can legally represent you, and I suggest that you consult your attorney in this matter.

  9. Quandry says:

    You mean that I cant put Clotpoll on my docs form freelegalforms.com? :)

    Thanks, I appreciate the info.


  10. jam says:

    Clot and Quan:
    First Clot, I like the fact that you acknowledged you aren’t a lawyer but put that disclaimer language at the bottom of your post. Well done.
    In any event, Quan, I am a lawyer and will not give advice out in a blog. I won’t even go as far to say that there was an attorney error because I would need to see the contracts. You have an attorney and you should set up an appointment to meet face to face to express your concerns.

  11. RentininNJ says:


    Can you please see my post #17 on the previous thread and let me know if that is possible?


  12. Quandry says:


    absolutely, the idea of attorney review was nebulous to me. I may need to get secondary attorney to check up on my primary attorney.

    Probably and IU Law grad. :)

  13. House Plans says:

    I find it amazing how much influence the media has on the minds of the public in situations like this. How does that song go?..”What goes up.. must come down”.. This thing will eventually sort its self out and get back to some state of balance. Its just going to take time.

  14. Bystander says:


    Usually your attorney will void the previous contracts during the 3 day review period. My understanding is that attorney review continues until each lawyer agrees (in writing) that it is over. I had a seller try to pull this me. I wanted the appliances and their attorney did not respond for days. I pulled my offer and they threatened to sue claiming that attorney review was over. I laughed at them and never heard back.

  15. Quandry says:


    What I think happened is that our attorney just missed point #18. out of 25 and submitted that he agreed. My wife alone caught it days later and we are getting close to forking over cash without resolution because as far as the seller cares, everything was halal.

    We’ll see

  16. jam says:

    Did you get the permits?

  17. Quandry says:


    no permits from the seller, in process getting them from municipality, if they exist.

  18. Ann says:


    Are you sure that getting permits for improvements was a condition to close attorney review, or just a condition that had to be satisfied by closing or whatever date in the contract?

    In my experience, I’ve seen permits only as a condition of closing, not closing attorney review out.

    Your contract could be written that it is a point that has to be taken care of before the close (or most likely you can exit the deal and get all your cash back).

    What improvements were done?

  19. Ann says:

    Looking at the Bergen sales this week (and yes, I know the plural of anecdote isn’t data), the sale prices still look pretty high to me.


  20. kettle1 says:

    i think we are doing it wrong……

    look at the end of the list


  21. mboy says:

    Need some help from you savvy types over here. Renting now and not looking to buy for at least another year.

    Landlord is real scumbag tho.

    Can someone tell me, based on the ordinance of my borough, what my landlord can legally raise my rent to (including additional security deposit they are asking for).

    Been living hee 6 years (2 family) Owner not on premises (they rent out both floors). Rent is 1300- never had increase. Lease over in march and they want to jack it up 200 to $1500 per month and requiring us to give them an additional 300 for security deposit (on top of 1900 we gave them 6 years ago-never sent us a bank statement on that money). They are also adding to the lease that only car can go in garage no storage of anything other then car.

    here is the ordnance:

    I will be calling the town tomorrow, but needless to say, the wife and I are not happy with their treatment of us over past year or so (not fixing things, not returning phone calls etc.

    Just need to stay here 1 more year.


  22. kettle1 says:

    from bloomberg

    Banks Lose to Deadbeat Homeowners as Loans Sold in Bonds Vanish


  23. mikeinwaiting says:

    KET 20 What acct bal does that represent?

  24. kettle1 says:



    from 2006 but will have the data you want

  25. mikeinwaiting says:

    KET thats what I thought,thanks.
    Does anyone remember who wanted a place for horses.Saw a 4br 1800 col. with 9 ac on line today 309.Of course its in my town Vernon but just in case I put it out there.
    Nobody keeps track up here but me as far as I know.BY the way KET that wells reo grim posted awhile back that needed work dropped to 229 from 250 in 6 monthes it will go for 189.I remember you commenting on it.

  26. kettle1 says:

    mike @ 200 or less i might give them call

  27. kettle1 says:


    i took a look at the listing you gave me by the nature reserve. not bad, but i plan on getting a place i can install a fair amount of solar in. that house had to much tree cover, still a very nice location and looked nice from the outside

  28. mikeinwaiting says:

    KET Did you time it from 287?
    The one on 9 ac is in a better place for what you have in mind but on northwest border with Pineisland to far from major roads.Vernon is a big town in land mass,just no people!

  29. mikeinwaiting says:

    KET I’ll let you know if it drops to 200 or below.I do the whole town almost every day
    we must have at least 400 or so here!

  30. mr potter says:

    Some comic relief for my main man from the NAR

    Lawrence Yun, chief economist for the Realtors, said he believed the housing market may be on the verge of bottoming out, with a rebound expected to start toward the end of this year. He said he expected demand to be bolstered in coming months by the housing sections of the $168 billion economic stimulus bill passed earlier this month.

  31. kettle1 says:

    mike, i timed the drive closer to 30 min, but was my first time in the area….

  32. chicagofinance says:


    FDIC Readies for a
    Rise in Bank Failures
    February 26, 2008

    WASHINGTON — The Federal Deposit Insurance Corp. is taking steps to brace for an increase in failed financial institutions as the nation’s housing and credit markets continue to worsen.

    The FDIC is looking to bring back 25 retirees from its division of resolutions and receiverships. Many of these agency veterans likely worked for the FDIC during the late 1980s and early 1990s, when more than 1,000 financial institutions failed amid the savings-and-loan crisis.

    FDIC spokesman Andrew Gray said the agency was looking to bulk up “for preparedness purposes.” The division now has 223 employees, mostly based in Dallas.

    The agency, which insures accounts at more than 8,000 financial institutions, is also seeking to hire an outside firm that would help manage mortgages and other assets at insolvent banks, according to a newspaper advertisement.

    In public, policy makers are debating what role the government should play in trying to stabilize the housing market and minimize foreclosures. Meanwhile, regulators have worked discreetly behind the scenes to closely monitor the growing number of troubled banks and thrifts considered at risk.

    “Regulators are bracing for well over 100 bank failures in the next 12 to 24 months, with concentrations in Rust Belt states like Michigan and Ohio, and the states that are suffering severe housing-market problems like California, Florida, and Georgia,” said Jaret Seiberg, Washington policy analyst for financial-services firm Stanford Group.


  33. Quandry says:


    permits were specifically due at end of “attorney review.” Multiple additions of various ages including a bathroom. I don’t know whose fault it is, but attorney review “ended” two weeks ago and I see no permits. My bet is that the permits don’t exist. House was bought in 2004 during the frenzy, which may have cause irrational exuberance during the previous purchase and clouded sound judgment.

  34. chicagofinance says:

    btw – goofy useless anecdote….was downtown today……………QUIET…you could hear a pin drop….no lunch rush either…

  35. kettle1 says:


    for anyone who has been paying any attention to the economic issues, this is expected. i linked to an article earlier that shows GS holding 1.1 times its net worth in leveraged loans at risk of write down. MBIA and friends have been downgraded. US banks have a negative real reserve rate for the first time since the data has been recorded (1950’s)etc. it would be a surprise if the banks werent lined up for failure. but dont worry, since the average US citizen has 0 savings then there is little chance of an old fashioned bank run :) !

  36. kettle1 says:

    hmm maybe i should pop in Its a Wonderful Life just for kicks


  37. t c m says:

    re: permits

    i’m not understanding the permits thing.

    are you saying that as a buyer, you need to make sure all the permits are on file for all the work that was done?

    how far back should you go?

    what if they don’t have the permits? does that mean you shouldn’t buy the house – or that you will have a hard time selling because you can’t furnish permits?

  38. chicagofinance says:

    Citi’s Hits: 15 Times $100 Million
    Adviser Wolfensohn Faults All Street;
    An Analyst: ‘Ouch!’
    February 26, 2008

    Talk about a bad day — or 15.

    Citigroup Inc. disclosed that traders in its investment bank piled up daily losses of more than $100 million on 15 separate occasions last year.

    Those 15 financially disastrous days, which Citigroup disclosed in its annual report filed late Friday but declined yesterday to describe in detail, added to worries the New York bank’s problems are deeper than those that led to about $20 billion in mortgage-related write-downs last year, the ouster of its chief executive and a sinking stock price.

    “Ouch!” said David Hendler, an analyst at CreditSights Inc., about the trading losses.

    Citigroup shares fell 38 cents, or 1.5%, to $24.74 a share in 4 p.m. New York Stock Exchange composite trading yesterday as investors digested the annual report, more than 200 pages long, not counting attachments. Besides the trading flubs, investors were worried by gloomy Citigroup rhetoric about its 2008 outlook and vulnerability to losses on mortgage investments, leveraged loans and commercial real estate.

    “There are just so many things that they’re struggling with,” Mr. Hendler said. “Everybody wants more disclosure, but when they get it, they get more depressed.”

    Banks and investment houses typically release data showing the size and frequency of daily trading losses in an attempt to give investors a way to gauge risks being taken in this unpredictable part of their business. The losses partly reflect the highly volatile market conditions that have been whipsawing nearly every financial firm for months.

    By those standards, Citigroup’s losing string is far from the most embarrassing. In August, when the mortgage mess first rocked financial markets, Morgan Stanley lost $390 million in one day’s trading. The loss stemmed from a quantitative strategies group, which lost $480 million during that quarter. In its fiscal third quarter, Morgan had four days when it lost more than $125 million-and eight days where it made more than $125 million, according to the firm.

    In a statement last night, a Citigroup spokeswoman said the trading disclosure “highlights the volatility that existed in the markets in 2007. There were many days when we saw significant gains, including more than 55 where revenue gains exceeded $100 million.”

    Either way, recent write-downs and other losses already had made the company a poster child for slapdash risk management. In November, Citigroup replaced its longtime chief risk officer, Dave Bushnell, with another Citigroup veteran risk manager, Jorge A. Bermudez.

    “I think that the managements of many of the financial institutions simply didn’t have a clue of what was going on,” James D. Wolfensohn, a former World Bank president who now holds the title of “senior adviser” at Citigroup, said Sunday evening at a public event in Manhattan.

    Mr. Wolfensohn said in an interview yesterday he was referring generally to Wall Street firms, not to Citigroup in particular.

    Citigroup’s latest disclosures come as analysts and investors are clamoring for Vikram Pandit, Citigroup’s new chief executive, to unveil his widely anticipated turnaround plan. Mr. Pandit has been mum, but tonight he is hosting 15 to 20 Wall Street analysts in a private “meet and greet” cocktail hour at Citigroup headquarters. The gathering has irked some investors, who weren’t invited and who note that Citigroup hasn’t yet scheduled a public investor day since Mr. Pandit took over.

    After sifting through the annual report, Oppenheimer analyst Meredith Whitney slashed her 2008 earnings estimate on Citigroup by more than 70% to 75 cents a share, cautioning that even the lowered projection “could still prove optimistic.” She said the bank’s suffering share price could fall below $16 — or to about 70% of its book value. That level was last seen “during the last credit cycle of 1990-1991,” she added.

    At the end of the fourth quarter, Citigroup’s book value was $22.74 a share. Ms. Whitney projected Citigroup will report a net loss in the first quarter.

    In its report, Citigroup gave significantly more detail about its exposure to and involvement with off-balance-sheet vehicles. The figures suggested investors still need to worry about what they can’t quite see on the bank’s books.

    Citigroup said off-balance-sheet entities connected to it had total assets of $356 billion, compared to $388 billion at the end of 2006. The 2007 figure, however, didn’t include $58 billion in structured investment vehicle, or SIV, assets Citigroup now carries on its own books, which were included in the prior year’s tally.

    Of those assets, Citigroup has a maximum possible exposure to loss of about $152 billion, compared to $148 billion the previous year. About $14 billion of this potential loss comes from the bank’s continuing exposure to collateralized-debt obligations, or CDOs, which analysts fear could be in for further downgrades.

    At the end of last year, Citigroup consolidated more than $20 billion in such CDO assets, which were previously kept off its books. In extreme circumstances, Citigroup potentially could be required to bring an additional $38 billion in CDO assets onto its books at a time when it is trying to slim down its balance sheet.

    Citigroup’s expansion of the information it provided about off-balance-sheet entities followed a December request from the Securities and Exchange Commission that firms with big exposures to these entities give investors more information in their annual reports. Citigroup also disclosed that it is in discussions with the SEC’s division of corporate finance regarding these off-balance-sheet vehicles, as well as “hedging activities.”

    Adding to investors’ jitters, Citigroup disclosed in the annual report for the first time that its investment bank is holding about $20 billion of hard-to-value trading positions “that are directly or indirectly tied to the global commercial real estate market.” The filing didn’t elaborate on the types of investments the bank is holding. With concerns mounting that commercial real-estate is likely to lose value in the coming year, Citigroup warned that its trading portfolio may suffer.

  39. Quandry says:

    t c m:

    I don’t like surprises. No permits, no sale. Its in the contract that they are to be provided by the end of attorney review. One addition was already found to be improperly insulated and moisture barriered(?)

    My main question was the definition of attorney review. I was not sure when attorney review ended. I am reasonably sure now that review ended with out two contract clauses fulfilled by the seller.

    If my attorney closed review with two contract clauses still open, then I have to… Well I don’t know what to do.

    At least I have a paper trail.

    Unlike just recently, plenty of houses out there now.

  40. gefilte says:

    Is it unethical for a buyer to have a friend in a low ball offer ahead of his, to get the seller to lower their expectations?

    After all the seller sets an unrealistic selling price to inflate the perception for buyers, despite the fact that they have no thought of ever achiveing that price, (not to mention the relisting game Grim pointed to)? Is there this a fair tactic in the buyer-seller game perception/deception game?

  41. RayC says:

    39 gefilte

    Unethical? Absolutely. But until re-listing loses the NAR stamp of approval, what the hey.

  42. Bubble Disciple says:

    mboy (21):

    My landlord gets 1.5 months rent as security.
    I think this is the largest allowed (probably under state law).
    It sounds like your landlord is using the same formula; raise rent $D, get additional $1.5*D in security.

    As for getting repairs or upgrades done, unless it is a health/housing violation, the landlord will stall hoping you’ll give up.

    I know from experience, since I’ve had my shares of success/failure over the years.

    The best leverage you have is convincing the landlord that you won’t renew the lease until the repairs are done.

    The landlord might agree, if worried about finding another credit-worthy tenant.

  43. Punch My Ticket says:

    -> 39

    Why would it be unethical?

  44. Bubble Disciple says:

    Also, I am fairly sure that the landlord is legally required to tell you what bank is holding the security deposit, and I think you are supposed to get some interest at the end of each calendar year; in my case it is a laughable 1%.

    My landlord also does not allow storage in the garages, because they want tenants to rent space in the community storage room. But everyone ignores this. The guy in the garage stall next to me uses it like an auto repair shop – what a mess!

  45. mboy says:

    The question is, can they raise my rent over 15% based on the ordinance (link) I posted?

  46. Clotpoll says:

    mboy (21)-

    But I thought there was no downside to renting????

  47. Clotpoll says:

    ChiFi (32)-

    There’s pretty clear indication of what lies ahead.

    Perhaps someone should forward this article to Lawrence Yun…

  48. Clotpoll says:

    Quan (33)-

    You can always go to the township code enforcement office, and check the permit file for your purchase’s address. Just give them the lot/block identifier. Either the permits are there, or they aren’t.

    If the seller side gets pushy with you, just tell code enforcement you’re about to buy a house with improvements that haven’t been permitted/final inspected. Then, sit back with a fruity drink, and watch the show.

  49. Clotpoll says:

    When code enforcement officers in most towns discover non-permitted work, there can be fines, back taxes assessed, closings disallowed and retroactive permit filings demanded (complete with opening up walls for the final inspection).

  50. Clotpoll says:

    gefilte (39)-

    There’s no code of ethics for buyers acting on their own.

    That being said, using 3rd party/straw man offers to soften up a seller is kinda sleazy, IMO. Sleazy may not equal illegal, though.

  51. mboy says:

    Clot- this is about the only 1.

    Scumbag landlords.

  52. PGC says:

    #50 Clot

    “That being said, using 3rd party/straw man offers to soften up a seller is kinda sleazy, IMO. Sleazy may not equal illegal, though.”

    They are just relisting the lowball .. :*) A lowball looks better if it is less than 30days from the last one.

  53. Bubble Disciple says:

    mboy (21),

    I read the ordinance and you may have a point about the rent increase. Assuming that no improvements have been made in the past 12 months, this increase (15%) probably far exceeds the increase in CPI.

    My guess is that the landlord is trying to catch up for several years without increases. But I don’t think the ordinance allows that. You should check if the landlord got approved by the municipality for a hardship increase.

    Even if he was approved, there is nothing to stop you from negotiating it lower. A friend of mine did that once several years ago – basically got landlord to renew the lease without an increase.

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