North Jersey Contracts – May 2013

Here it is! The first look at pending home sales (contracts) for Northern NJ.

(Source GSMLS, except Bergen- NJMLS) – Updated with 2011 Data

May Pending Home Sales (Contracts)

Bergen County
May 2011 – 732
May 2012 – 879
May 2013 – 1087 (Up 23.7% YOY, Up 48.5% Two Year)

Essex County
May 2011 – 352
May 2012 – 392
May 2013 – 569 (Up 45.2% YOY, Up 61.6% Two Year)

Hunterdon County
May 2011 – 109
May 2012 – 119
May 2013 – 172 (Up 44.6% YOY, Up 57.8% Two Year)

Morris County
May 2011 – 441
May 2012 – 460
May 2013 – 679 (Up 47.6% YOY, Up 54.0% Two Year)

Passaic County
May 2011 – 178
May 2012 – 233
May 2013 – 336 (Up 44.2% YOY, Up 88.8% Two Year)

Somerset County
May 2011 – 268
May 2012 – 359
May 2013 – 462 (Up 28.7% YOY, Up 72.1% Two Year)

Sussex County
May 2011 – 100
May 2012 – 157
May 2013 – 183 (Up 15.9% YOY, Up 83.0% Two Year)

Union County
May 2011 – 344
May 2012 – 355
May 2013 – 466 (Up 31.3% YOY, Up 35.5% Two Year)

Warren County
May 2011 – 78
May 2012 – 95
May 2013 – 111 (Up 16.8% YOY, Up 42.3% Two Year)

This entry was posted in Economics, Housing Recovery, North Jersey Real Estate. Bookmark the permalink.

78 Responses to North Jersey Contracts – May 2013

  1. grim says:

    From HousingWire:

    Upbeat buyers push prices higher: Clear Capital

    Spring home buying activity picked up in May with home prices growing 1.3% over the previous quarter and soaring 8.2% annually, Clear Capital said Tuesday.

    The yearly and quarterly gains are the result of market momentum and a low price floor, the data firm added.

    “May home price trends confirm the recovery continues to mature,” said Dr. Alex Villacorta, vice president of research and analytics at Clear Capital.

    He added, “While there’s no questioning the validity of the recovery at this point, performances at the local level remained mixed when considering strength, sustainability and relative positions to 2006 prices.”

    At the metropolitan level, price trends remained mixed, a reminder that the recovery is locally driven.

  2. grim says:

    Repost from scribe yesterday, from the NYT Dealbook blog:

    Behind the Rise in House Prices, Wall Street Buyers

    The last time the housing market was this hot in Phoenix and Las Vegas, the buyers pushing up prices were mostly small time. Nowadays, they are big time — Wall Street big.

    Large investment firms have spent billions of dollars over the last year buying homes in some of the nation’s most depressed markets. The influx has been so great, and the resulting price gains so big, that ordinary buyers are feeling squeezed out. Some are already wondering if prices will slump anew if the big money stops flowing.

    “The growth is being propelled by institutional money,” said Suzanne Mistretta, an analyst at Fitch Ratings. “The question is how much the change in prices really reflects market demand, rather than one-off market shifts that may not be around in a couple years.”

    Wall Street played a central role in the last housing boom by supplying easy — and, in retrospect, risky — mortgage financing. Now, investment companies like the Blackstone Group have swooped in, buying thousands of houses in the same areas where the financial crisis hit hardest.

    In a sign of the potential peril ahead, some of the investment firms have recently taken the first steps to cash out.

    The investment fund financed by Colony Capital filed last week to go public, the second firm to do so in May. Another early player in the business, the Carrington Holding Company, said last week that prices had risen too far, leading the firm to begin selling some of its holdings.

    Fitch Ratings warned last Tuesday that prices for single-family homes in the regions with the biggest housing rebounds had been outpacing the growth rate in the local economies and “could stall or possibly reverse” if big investors start selling.

    “We see economies that continue to struggle — we don’t see them recovering enough to justify this drastic increase in prices,” said Ms. Mistretta at Fitch.

  3. DL says:

    Six words that sum up today’s newly reinvigorated residential real estate market in the eight-county Philadelphia region.

    Sales volume is up, and desirable houses are attracting multiple offers, local brokers and agents report. In many municipalities and certain city neighborhoods, low supply of available homes is driving prices up.

    All of which signals a strength, here and across the country, not seen since the U.S. housing market went bust nearly seven years ago, taking the wider economy down with it.

    Houses are suddenly selling so quickly, there is a shortage, said Kit Anstey, of Prudential Fox & Roach in West Chester. If homes were to stop going on the market, he said, those available now would be sold in three months.

    Over Memorial Day weekend alone, he said, three houses sold for 5 percent to 7 percent over asking price. “I hadn’t seen a multiple offer in six years,” said Anstey, an agent for 31. “I just saw 10 in 10 days.”

    New Hope-based broker Lisa James Otto said her boutique company, which handles many higher-end properties, closed on 28 in May, almost unprecedented activity for a small firm.

    Said Beth English, of Century 21, Hughes-Riggs in Mullica Hill: “As long as it is priced right and in good condition, it is flying off market.”

    At the Jersey Shore, things are heating up as well. Keller Williams agent Ed Kershbaumer presided at a bidding “war” over an Ocean City house that put the property under agreement at 18 percent above appraised value.

    That alone led him to relist a new duplex already on the market at 7 percent more, Kershbaumer said.

    According to Prudential Fox & Roach’s HomExpert Market Report, April sales for the region, based on data from Trend Multiple Listing Service, totaled 4,420 – just 18.7 percent, or 690 properties, higher than April 2012 levels. Median price – half the properties sold for more, half for less – was $205,000 in April, just 2.5 percent more than last year.

  4. Pack in the latecomers, then bar the exits shut.

    Great good fun.

  5. grim says:

    Boy, how quickly perception can shift, clearly Apple has gone from “can do no wrong” to “doing everything wrong.”

    Apple faces backlash over popular S.F. fountain

    And in the Bay Area no less? Talk about pissing on their pop culture core constituency. Tax dodgers, e-book price fixers, wearable laggards…

  6. DL says:

    So what are the US equivalent phrases?

    The translations come courtesy of, an online estate agent.

    Russell Quirk, the website’s founder, said it was time for agents “to be straight with British home owners”.

    Here are some of the fibs told by estate agents, and their translations:

    Estate agent speak
    “The property has excellent transport links”
    “There’s a motorway and or busy railway line right next to it”

    Estate agent speak
    “In need of modernisation”
    “This property hasn’t been updated since the 1970s and needs a complete refit”

    Estate agent speak
    “An ideal purchase as your first three-bedroom home”
    “You can barely fit a bed into the third bedroom”

    Estate agent speak
    “Set within a purpose-built residential development”
    “This property is in the middle of a large housing estate”

    Estate agent speak
    “A cosy property in a rural location”
    “This property is small and the nearest shop is 20 minutes’ drive away”

    Estate agent speak
    “Easy-to-maintain living space”
    “It’s really incredibly small”

    Estate agent speak
    “Conveniently located”
    “Next door to a busy main road and above a take away”

    Estate agent speak
    “Unexpectedly re-available”
    “The previous buyer pulled out at the last minute due to major problems or the surveyor revealed that the property was vastly overpriced”

    Estate agent speak

    Estate agent speak
    “Within easy reach of local schools”
    “Kids will congregate outside your house at lunchtime and drop litter all over your driveway.”

    Estate agent speak
    “Ideal for the first-time buyer or as a buy-to-let investment”
    “The property’s small and in a terrible area ”

    Estate agent speak
    “Tremendous scope for improvement. A real blank canvas”

    Estate agent speak
    “In need of some updating and offered with no onward chain”
    “An old lady has recently died in the house and it hasn’t been decorated since she originally moved in 50 years ago”

    Estate agent speak
    “A garden flat”
    “A dark and most probably damp basement flat”

    Estate agent speak
    “Bordering the sought-after area of North Clapham”
    “The property is actually in Stockwell”

    Estate agent speak
    “The property has many character features”
    “The ceilings are extremely low”

    Estate agent speak
    “Low maintenance rear garden”
    “The garden is concrete”

    Estate agent speak
    “Situated in a stamp duty exempt area”
    “Situated in a deprived part of town”

    Estate agent speak
    “New price!”
    “This property was massively overpriced in the first place”

    Estate agent speak
    “ Character….”

  7. grim says:

    From MarketWatch:

    Banks loosen standards on down payments

    Aside from rising home prices and reports of bidding wars, here’s one sure sign the housing market is improving: banks seem to be loosening standards for down payments.

    The average down payment in purchases with a 30-year fixed rate mortgage dropped to 16.1% nationwide in May from 17.6% two years ago, according to a report released Monday by LendingTree, an online mortgage marketplace. In some states, like Mississippi and West Virginia, the average down payments are as low as 12%, the survey found.

    After sustaining huge losses during the financial crisis when borrowers — many of whom put no money down — foreclosed, lenders raised credit standards, with many requiring 20% down payments. But now that the broader economic picture has improved, some banks are willing to approve mortgages with much smaller down payments. “Lenders have increasing confidence that the loans they’re originating today are less likely to default,” says Doug Lebda, founder and chief executive of LendingTree.

  8. anon (the good one) says:

    @WSJ: War, natural disaster – in minutes, your hard-won equity gains could vanish. Cushion your portfolio with real estate.

  9. anon (the good one) says:

    good opportunity to buy in

    grim says:
    June 4, 2013 at 7:24 am
    Boy, how quickly perception can shift, clearly Apple has gone from “can do no wrong” to “doing everything wrong.”

  10. joyce says:


    Re: loosening down payment requirements = housing market improving

    Don’t you just love how completely twisted and bass ackwards the media gets almost everything?

    If by improving they mean prices going up, no argument there. If by improvement, they mean sustainable, healthy, non-bubbly … yeah right.

  11. Brian says:

    5 – Apple was Steve Jobs

  12. (7)-

    Same old shit, different day. Seen this movie before; it ends in tears.

    “Aside from rising home prices and reports of bidding wars, here’s one sure sign the housing market is improving: banks seem to be loosening standards for down payments.”

  13. God, am I glad I’m out of RE.

  14. Anon E. Moose says:

    Anon [9];


    Here’s the deal — leftist fascism turns on idol worship: Obama, Jobs, Che, etc. That’s why the “occupiers” stopped their protest against “the 1%” to hold a vigil for the CEO of a $500 B concern. Cognitive dissonance is not among their problems.

    Now that their idol is gone, AAPL is just another Eeeee-vil corporation, and will get treated accordingly (think baby/diaper). AAPL management will have to adjust to Jobs’ loss in more ways than one. Its not just whatever he contributed to the organization that is gone – he had social capital to do things others could not.

  15. chicagofinance says:

    It really feels that way doesn’t it……..I just also would add that there is a guy with gasoline standing by the door ready to burn the place to the ground AND then collect the insurance money…….

    Scrapple n’Ricin says:
    June 4, 2013 at 7:15 am
    Pack in the latecomers, then bar the exits shut.
    Great good fun.

  16. chicagofinance says:

    …….since he paid off the cops, he walks away a free man…..

  17. Brian says:

    What’s the takeaway from yesterday’s discussion about investors buying up properties in NJ? Are they driving the “recovery” or is it just one piece of the puzzle?

  18. Ignite the arson fire with little green pieces of Bernank.

  19. grim says:

    CoreLogic showing some strong price gains for NJ in April, I think this might be the strongest data point yet.

    NJ State Level – YOY
    Including Distressed Up 3.4%
    Excluding Disstressed Up 4.2%

    New York-White Plains-Wayne, NY-NJ
    Including Distressed Up 7.8%
    Excluding Distressed Up 8.1%

  20. grim says:

    What’s the takeaway from yesterday’s discussion about investors buying up properties in NJ?

    I look at the tax records every day, I’ll admit I missed the US Masters records, but I’ll also state that I don’t really monitor Hudson County activity (it’s a separate system and I already pay a small fortune in licensing and membership fees).

    If there is strong investor activity in NJ, it’s mom and pop investors, not big companies, I’m not seeing it in the tax records unless it’s obscured in randomly named LLCs.

    I wish I could just run an SQL query against the “tax database” summarizing a count of transactions by distinct owners, but I can’t, I am just routinely scanning tax records for patterns or standout names. I don’t know that I would know what to look for, in the case of say Blackstone, but it’s not stopping me from looking.

    The Aussies were a shocker because it’s the first time I saw anything amounting to large-scale investor activity, and once I jumped over to the Hudson tax records and knew what to look for, I saw them all (I posted the list of properties from the tax records, not the PDFs).

  21. JJ says:

    but to the NJ buyer it does not matter how NJ is doing as a whole just how the town they are interested in buying is doing.

    Sales prices will pick up. Some closings in April were December, January, Feb and March Sales.

    May and June Sales will be a higher price as they will be March-April Sales and I think the Market really turned in March.

    grim says:
    June 4, 2013 at 9:35 am

    CoreLogic showing some strong price gains for NJ in April, I think this might be the strongest data point yet.

    NJ State Level – YOY
    Including Distressed Up 3.4%
    Excluding Disstressed Up 4.2%

    New York-White Plains-Wayne, NY-NJ
    Including Distressed Up 7.8%
    Excluding Distressed Up 8.1%

  22. grim says:

    From Reuters:

    April home prices see biggest yearly gain in seven years: CoreLogic

    Home prices racked up their biggest annual gain in more than seven years in April as the recovery in the sector picked up traction, a report from CoreLogic showed on Tuesday.

    CoreLogic’s (CLGX.N) home price index rose 3.2 percent from March and surged 12.1 percent compared to April a year ago, the biggest year-over-year price gain since February 2006.

    Prices have been gaining for over a year as the housing market turned a corner, helped by low interest rates, a pick up in sales and less available supply.

    Excluding distressed sales, prices were up 3 percent from the month before and 11.9 percent from a year ago. Distressed sales include properties that have been seized by lenders and short sales, where the struggling homeowner is allowed to sell the property for less than the outstanding mortgage.

  23. grim says:

    Housing clearly doing well if a Philly area builder is married to a woman who looks like a hooker and they spend enough time in South Beach to be “regulars”

    Times must be tough for South Beach hookers.

    So tough, apparently, that they’ve now taken to beating up their competition — or at least that’s what a vacationing South Jersey woman claims in a civil lawsuit filed against the lavish, five-star W Hotel, where she says a gang of high-priced escorts attacked her.

    Anna Burgese, the petite wife of a wealthy suburban Philadelphia homebuilder, claims in the federal lawsuit that as many as 10 prostitutes pounced on her in the hotel lobby on Jan. 19. They mistakenly believed that she was encroaching on their turf, according to Miami Beach police.

  24. Anon E. Moose says:

    Brian [22];

    HA! I love it. Especially how that lovely photo compares with the ramshackle reality of the Bayonne investment properties for rent that Grim posted yesterday.

    USA is now the jerkwater developing nation drawings speculative investment from abroad. We had the South Seas bubble, now the South Seas are driving the next US bubble.

  25. grim says:

    22 – This looks different from the other Aussies – Are these guys just acting as an international brokerage? If this is the case, and they are leveraging local property management, I’m not sure how the hell I’d ever know that Shane McKangaroo is a foreign investor.

  26. chicagofinance says:

    I openly admit I am prejudiced, but when a foreigner gives U.S. based journalists a lecture on what the U.S. should be, then I call a big fcuk you a%%wipe on the correspondent……note the last 30-45 seconds of this tripe…

  27. grim says:

    By the way:

    Cheetah Richards? Is that some kind of inside joke?

    C’mon, even the picture looks fake. Or is she the South Beach hooker? I’m sure JJ has a good story about “Aftersales Service”

  28. Brian says:

    If you find Detroit an attractive investment…..

  29. grim says:

    All those foreign property investment companies remind me of the Florida bubble in the 1920s…

  30. Brian says:

    All in pursuit of yield….

  31. grim says:

    33 – They look like plain ol’ middlemen too, buying local and then reselling to foreigners. This is lightyears different from US Masters.

    32 – This case has nothing to do with yield, and everything to do with foreign property speculation.

  32. Brian says:

    I’m dying to know what percentage of purchases in the past few years are through residential property funds.

  33. Richard says:

    More importantly those don’t touch NYC metro. I guess the big apartment REITs is more NE style. Will be interesting to see if construction of new apt buildings ramps up quickly.

  34. grim says:

    35 – Impossible unless they are all owned and deeded to the same legal entity, otherwise it’s just a long list of different LLCs, Incs, Partnerships, etc with no ties between them.

    I came across one this morning that was deeded to “Real Estate Diva LLC” or something silly like that.

    Tons of properties are just deeded to LLCs set up with a name that includes the property address, for example, “2201 Main Street LLC”. That could be a builder, that could be a fund, a private investor that doesn’t want his name on the deed, who knows…

  35. grim says:

    This one is for Clot, from the WSJ:

    On Long Island, Suburbs Already Embrace ‘Add-On’ Apartments

    Cities around the U.S. are liberalizing their zoning codes to allow more basement apartments, backyard cottages and the like. But many of the suburbs on New York’s Long Island have allowed add-on apartments for decades.

    Babylon, about 45 miles east of New York City, today has 3,226 accessory apartments after legalizing the units in 1979. That is just a sliver of the households in a township that has about 213,000 people. But the apartments—which aren’t allowed in basements—have become an integral part of the housing mix, says Timothy Besemer, a lifetime resident and the town’s chief building inspector. They help keep families together, he says.

    Babylon has issued an average of 150 permits a year for the past three years. Those numbers don’t include the numerous add-on apartments that homeowners built without the town’s permission so that their property taxes won’t go up. Mr. Besemer says his best guess is that for every five legal units, there is one illegal one. He adds that the town is aggressive about going after them.

  36. grim says:

    Also from the WSJ:

    To get a sense of how America will pack more people into its cities, head north to an alley that runs behind Petersham Avenue here. That’s where Ajay Kumar built a $300,000, Moroccan-themed cottage that sits in his backyard and will soon be occupied by his parents.

    Mr. Kumar’s “laneway house” is part of a broader plan that encourages Vancouver homeowners to add rental units in their basements, attics and backyards. The hope is to reduce sky-high housing costs and increase population density throughout the city—including the single-family-home neighborhoods like Mr. Kumar’s that surround the city’s towering downtown.

    Cities across the U.S. and Canada are liberalizing their zoning codes to allow multiple dwellings on a single lot. Planners like these “accessory units” because they steer growth to developed land and infrastructure, reducing the cost of city services. Such housing can allow seniors to live near their children. And the dwellings are smaller and cheaper—helping cities create more affordable housing.

    Few cities have gone as far as Vancouver, which has seen real-estate prices soar after an influx of domestic and foreign buyers. In many U.S. cities, citizens might not tolerate changing the rules to boost population density. But other places, including those with high real-estate prices and housing shortages, are encouraging accessory units despite resistance from some residents.

    “These units are one front in a giant war for how our cities are going to grow,” says Alan Durning, executive director of the Sightline Institute, a Seattle think tank.

    Late last year Salt Lake City passed an ordinance to allow accessory units within a half mile of the city’s two dozen light-rail stations. Washington, D.C.’s planning department is recommending giving owners that already have an accessory structure in place the right to rent them out without seeking zoning approval, as they must now. Seattle has allowed backyard cottages since 2009, and homeowners have applied to build 168 of them.

    Of course, an idea that seems desirable to urban planners and builders enrages many homeowners who see new dwellings popping up in their neighborhoods. After the college town of Missoula, Mont., voted in May to allow accessory units in single-family home neighborhoods, Myra Shults, 71 years old, was concerned it would lead to scant parking and noisier streets, reducing her home’s value in the process. “I just think the whole character of the neighborhood will change,” says Ms. Shults, a retired lawyer. She says she moved to her neighborhood to live among other single-family homeowners “and now that’s going away.”

  37. grim says:

    Maybe I should alter my basement reno plans to include a full kitchen too

  38. Brian says:

    37 – Somehow the NYTimes was able to put the data together back in March.

    Cmon Grim…Slacker….. :P

  39. JJ says:

    Most mexican busboys who will be renting your basement eat at the restaurants anyhow.

    grim says:
    June 4, 2013 at 1:17 pm

    Maybe I should alter my basement reno plans to include a full kitchen too

  40. Fast Eddie says:

    Maybe I should alter my basement reno plans to include a full kitchen too.

    We’re on our way to being West Mogadishu so why not?

  41. JJ says:

    No joke when I lived in Astoria the 200 square foot studio apt that came furnished across street for $400 a month was split six ways by mexicans that worked in a 24 hour diner nearby. Two from each shift. It was a real hot sheets place, one out on in to same bed. They used to have milk crates out front with a portable radio and would hit bodega across street to use payphone, get calling cards to call home and get beers and stuff. The sidewalk was living room. Utilities were included. Since it was illegal so could not have a second meter. So they were paying $67 bucks a month rent each

  42. chicagofinance says:

    TRENTON, N.J. — New Jersey Gov. Chris Christie says he wants to hold a special election in October to fill the U.S. Senate seat left vacant by Frank Lautenberg’s death on Monday.

    He says he doesn’t plan to appoint someone to fill the seat in the meantime.

    The approach would relieve the Republican governor of having to make a treacherous decision about whom to appoint to serve in a seat previously held by a Democrat.

    Democratic Newark Mayor Cory Booker announced months ago that he intended to run for the seat in 2014.

  43. Juice Box says:

    re # 46 -who wrote that Chi?

    BI has it as follows.

    “I don’t know what the cost is, and quite frankly, I don’t care,” Christie said at a press conference in response to those criticisms. “We’re not going to be penny wise and pound foolish around here.”

    Christie did not announce an interim replacement for the Senate seat, but said he would do so soon. He also hinted that he would choose a Republican.

    “I do have a preference for one party over the other, so that might color my judgement a little,” Christie said of an interim replacement.

    Read more:

  44. JSMC says:

    #46, 47

    Why not do both? From MSNBC:

    Republican New Jersey Gov. Chris Christie called for a special election in 2013 to choose the successor to the late Democratic Sen. Frank Lautenberg.

    Christie announced at a press conference on Tuesday that he had opted against appointing a successor to Lautenberg to serve until the 2014 election, and had set a general election on Wednesday, Oct. 16. The primary will be held in August.

    Christie also said he would appoint an interim senator to serve between now and November, though he explained that he had not decided on that temporary appointee yet.

    The governor’s announcement is expected to face a court challenge from Democrats.

  45. grim says:

    Somehow the NYTimes was able to put the data together back in March.

    But … I could care less about California, Nevada, Arizona, Florida, etc..

  46. Brian says:

    Grim un mod that one if you wouldn’t mind. Not sure why it was moderated.

  47. Brian says:

    Easy big guy, I was just teasing you anyway. It looks like the data was put together by surveying a sample of realtors so, I’m not sure I trust it that much.

    So, the two biggest investors, Blackstone and Colony capital don’t seem to have any SFH’s in NJ as far as I can see. I wonder why.

    50.grim says:
    June 4, 2013 at 2:18 pm
    Somehow the NYTimes was able to put the data together back in March.

    But … I could care less about California, Nevada, Arizona, Florida, etc..

  48. Brian says:

    52 –
    – Maybe state laws that side with the tenant?
    – Property Taxes?
    – The variety of local inspection codes and fees (in every little fiefdom….)
    – Foreclosures that are slow to come to market (because we’re a judicial state)

  49. JJ says:

    100 Freeport Ave, Point Lookout NY, 11569

    Looking at rentals, and this popped up. This looks like the smallest house in the world to me. I cant believe what people rent.

  50. joyce says:

    Why shouldn’t they rent? Think of all the investments they can make with the extra money saved

  51. JJ says:

    What money after renting, this house is a $133,000 a month rental
    8 Aqua Dr, Southampton NY, 11968 (Active )

    8 beds, 7 Full/1 Half baths, 11,000 sqft
    MLS# 2522957

  52. Dissident HEHEHE says:

    Well it took five years but now my rent in Hoboken is back to its bubble level. BTW Maxwell’s is closing shop end of July. Not sure what is moving in but the way the town is moving a combo Baby Gap/Applebees isn’t out of the question.

  53. grim says:

    53 – Was under the impression that the large funds looking to play in this space are looking to acquire properties through bulk sales/REO dispositions, and not as purchases on the open market.

    For example, Blackstone is rumored to have purchased 1,400 homes in Atlanta, in a single transaction, through the GSE bulk sale program.

  54. Dissident HEHEHE says:

    All the players are blowing the RE bubble again. Friend at AIG says they are back in the mortgage CDS game. Lenders lowering standards. They don’t even need to offload the stuff to third parties just to each other and then “hedge” against one another so if one goes down the all will.

  55. chicagofinance says:

    All that is happening is people have been dead in the water for 4-8 years. All of a sudden, everyone is heading for shore at once…….this will dissipate….and I hate to sound like clot…..but it will end badly….

  56. chicagofinance says:

    Don’t worry about anything… me….

    “In Congressional hearings, it is quite possible that we will be required to present this information on-the-record, but that will be well after the actuarial review is released and the initial media coverage takes place.”

    FHA Losses Could Hit $115 Billion in Extreme Scenario

    The Federal Housing Administration’s projected losses over 30 years could reach as high as $115 billion under a previously undisclosed stress test conducted last year to determine how the government mortgage-insurance agency would fare under an extremely severe economic scenario, according to documents reviewed by a congressional committee.

    The forecast was significantly worse than the most severe estimate included in the agency’s independent actuarial review that was released last November. The agency’s outside actuaries modeled the analysis along the lines of the annual stress test employed by the Federal Reserve Board, which gauges how the nation’s largest financial institutions would fare in the event of a significant economic shock. The FHA isn’t required to produce the specific Fed test.

    The findings are part of an investigation by the House Oversight and Government Reform Committee, headed by Rep. Darrell Issa (R., Calif.). In a letter sent last week, Mr. Issa asked Carol Galante, the FHA’s commissioner, why the agency hadn’t disclosed the figure, which he called “troubling.”

    “We are reviewing this matter and will respond to the committee appropriately,” said Addie Whisenant, a spokeswoman for the Department of Housing and Urban Development, which oversees the FHA.

    The FHA doesn’t make loans but insures lenders against losses on mortgages that meet its standards. It is required to maintain enough cash to pay for projected losses on all loans it insures. In its annual audit, the agency disclosed that under current conditions, its projected total losses would exceed its reserves by $13.5 billion over 30 years.

    A more recent analysis, released in April by the White House’s budget office, showed that the agency would require $943 million this year due to losses in the agency’s reverse-mortgage program, which allows homeowners who are 62 years or older to take cash out of their homes. The FHA’s main mortgage program hasn’t required taxpayer support in its 79-year history.

    Last fall’s annual report included several stress scenarios, but none of them showed losses as large as those contemplated by the Fed’s stress-test methodology. Its most severe estimate of losses under a “protracted” economic “slump” would have resulted in a projected shortfall of $65.4 billion. The report was produced by Integrated Financial Engineering Inc. of Rockville, Md.

    Emails reviewed by the House committee suggest that the FHA didn’t want the bleaker forecast included due to the potential uproar it would create. Emails from FHA officials to IFE analysts in April 2012 initially floated the idea of using a stress-test scenario like the one conducted by the Fed in order to measure the costs of big unforeseen shocks, known as “tail risk.” When the FHA’s report was being finalized last October, the IFE analysts didn’t include the figure despite having referenced it in earlier drafts. Instead, officials went with the “protracted slump” forecast.

    In an email last October to an analyst at IFE, a senior FHA official said that while the agency still wanted to present the results of the Fed stress test to other government agencies, “we just do not want that analysis to be in the actuarial review report.” The email continued: “In Congressional hearings, it is quite possible that we will be required to present this information on-the-record, but that will be well after the actuarial review is released and the initial media coverage takes place.”

    Former agency officials defended that decision on the ground that the housing market was already recovering, which made the more severe stress test less relevant. Including the more negative scenario would have been “excessive,” said David Stevens, chief executive of the Mortgage Bankers Association, who headed the FHA for two years ending in 2011.

    Mr. Issa also sent a letter to IFE seeking further information about the report.

    “IFE was not coerced by the agency to change its conclusions or its evaluating methods,” said Stephen Ryan, a lawyer representing IFE. “We look forward to working with Chairman Issa’s staff to share our views with them.”

    The FHA has played a key role in supporting the housing market by backing mortgages to borrowers who make down payments of as little as 3.5%—loans that most private lenders won’t offer without a government guarantee. The FHA accounted for one-third of loans used to purchase homes last year among owner occupants. The agency has steadily boosted its fees to replenish dwindling reserves, and more recent loans are showing much better performance.

  57. Dissident HEHEHE says:


    Plus it is DC so you know the “extreme” scenario is much more likely than their typical rosey predictions.

  58. grim says:

    It’s getting very crazy out there – almost 1/3rd of the closings that hit today’s hot sheet on the MLS so far this afternoon, for today, are closing over asking, almost 1/3rd.

    Mohave, Branchburg – 264k ask, 265k close
    George, Plainfield – 75k ask, 80k close
    Watchung, Plainfield – 130k ask, 135k close
    Wheatsheaf, Roselle – 75k ask, 76k close
    Woolley, Union – 149k ask, 150k close
    Woodland, Westfield – 1.895m, 1.896m close
    Mitchell, Livingston – 750k ask, 790k close
    Cape, Millburn – 399k ask, 425k close
    Melrose, Montclair – 769k ask, 881k close
    Park, N Caldwell – 575k ask, 615k close
    Sheridan, W Orange – 349k ask, 370k close
    Woods End, W Orange – 350k ask, 355k close
    Crestwood, Chatham – 998k ask, 1.04m close
    Molino, Chatham – 1.1m ask, 1.136m close
    Acorn, Jefferson – 89k ask, 110k close
    Shawnee, Jefferson – 159k ask, 161k close
    Burch, Morris Plains – 450k ask, 455k close
    Duncan, Pequannock – 394k ask, 395k close
    Carellen, Randolph – 429k ask, 435k close
    Parkside, Wayne – 355k ask, 360k close

    THIS IS JUST FOR TODAY, this is pretty crazy.

  59. grim says:

    Couple more in BC:

    W Edsall, Palisades Park – 459k ask, 500k close
    Gerard, Waldwick – 389k ask, 397k close
    Demarest, Ridgewood – 859k ask, 870k close
    Warren, Ft Lee – 499k ask, 500k close

  60. Anon E. Moose says:

    JSMC [49];

    The governor’s announcement is expected to face a court challenge from Democrats.

    Challenge for what? The Dems are getting the best thing they could ask for — a special election even before the 2013 November general.

    Knee-jerk (pun intended) from non-news outlet MSDNC.

  61. Statler Waldorf says:

    NJ real estate bargains are not on the way any time soon. Any questions?

    “It’s getting very crazy out there – almost 1/3rd of the closings that hit today’s hot sheet on the MLS so far this afternoon, for today, are closing over asking, almost 1/3rd.”

  62. Libtard at home says:

    Chifi missed the bottom, Chifi missed the bottom. :P

  63. chicagofinance says:

    I know you are kidding, but to be clear, I am making objective comments. I don’t care what happens…..except relative to my clients…..

    Libtard at home says:
    June 4, 2013 at 5:14 pm
    Chifi missed the bottom, Chifi missed the bottom. :P

  64. grim says:

    Cost to fill Lautenberg’s seat will run NJ taxpayers $20,000,000

    And why exactly do we allow zombies to hold office? Shouldn’t this guy have resigned a whole lot earlier, maybe at a time which would have fit within the normal election calendar? The guy refuses to resign, even though he was on his death bed, and now we’re stuck with paying $20 million to find a new jackass?

  65. JJ says:

    Chifi learned in business school those who bought at the bottom bought too soon.

    You are guessing when trying to catch a bottom, always better to let bottom be reached and make sure it is stable before jumping in. You may lose 5-10% upside but risk wise much safer

  66. grim says:

    Ok who is the joker that signed me up for that Colony crap, because now they are emailing me.

  67. Alan says:

    How funny is this. Anyone falls into this apparent trap made by big banks holding on to foreclosures deserves bloodshedding loss when another crash comes around.

  68. grim says:

    Who is trapping who?

  69. grim says:

    Just heard the single best explanation for why a special election in October.

    Christie doesn’t want Booker on the November ticket along with Buono, because everyone who comes out in support of Booker, will not be voting for Christie. Those voting for Booker, might not bother coming out in November, leaving Buono high and dry.

  70. Juice Box says:

    re # 74 – exactly. The Mayoral election for Jersey City held on may 14th only had 27 percent of registered voters turnout.

  71. Fabius Maximus says:

    Good news for the Yankees, we won’t have to watch AROD choke in the post season.

  72. Multiple all cash bids above asking says:

    US Masters is pouring $$$ raised from Australia individuals into Hudson County residential real estate. When Austrialian finance people invest Australian money outside their country, they tend to lose most if not all of it. US Masters will continue the tradition. Westfield bucked the trend, however.

    Tracking what US Masters is up to is easy because the company’s stock is listed on the Australian Securities Exchange, requiring disclosure of detailed financial statements at regular intervals. Plus, the company releases details of each property it buys and what rent it expects. In addition, online tax records make their purchases easy to track. By now, active Hudson County real estate agents know them, and these agents can be helpful sources of information.

    US Masters is raising money faster than they can spend it. They are overpaying with impunity, then launching renovations on which they spend too much and take too long. Rent targets are being missed right and left. Ultimately, the Australian finance guys running this vehicle will have to choose between cutting the dividend or evolving into a Ponzi scheme in which existing investors are paid with the proceeds of newly recruited investors. Perhaps it is a Ponzi scheme already. This stock is going to zero. If I could short it, I would.

    The single family rental model just doesn’t work at scale in the Northeast. It is unmanageable, as Redbrick found out several years ago. A bunch of “really smart guys” with fancy educations raised money to buy homes in places such as Trenton and New Haven. They dramatically underestimated the vacancy loss and the expenses involved in operating the properties and supervising the people operating the properties – just as US Masters is doing today. Things like cleaning up after murder victims weren’t in the pro-forma. Redbrick lost most of its investors money and quietly disappeared.

    The logical owner of single family rentals in the Northeast is a local entrepreneur with:

    1) construction background – repairs and maintenance are cheaper if you can do the work yourself
    2) second language ability – makes it easier to supervise cheap immigrant labor
    3) relationship with building and housing inspectors – many of them are bribeable, especially in Hudson County
    4) muscle – need to kick out drug dealers and other low quality tenants

    Neither the Redbrick nor US Masters masterminds possess these attributes.

  73. WCGUY says:

    Lautenburg’s last years reminded me of the movie “Weekend at Bernies”.

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