Foreclosure bill doesn’t go far enough to prevent zombies

Posted on June 25, 2016 by grim

From HousingWire:

Senate to consider wide-ranging bill to address zombie foreclosure “crisis”

Mortgage lenders and servicers could soon have a whole new set of responsibilities for maintaining foreclosed homes, as Sen. Bob Menendez, D-NJ, introduced a new bill on Friday that would address what his office calls the “zombie foreclosure crisis.”

Zombie foreclosures are homes that are vacant or abandoned during the foreclosure process, and in the last several years, several states have undertaken efforts to stem the rising tide of abandoned homes.

In many cases, the town or city in which the property is located is left on the hook for maintaining the abandoned property due to the property being left in “legal limbo,” Menendez’s office said.

Late last year, Menendez and his fellow New Jersey senator, Cory Booker, D-NJ, sent a letter to the heads of the Department of Housing and Urban Development, the Federal Reserve Board, the Consumer Financial Protection Bureau, the Federal Housing Finance Agency and others, telling the agencies that the prevalence of zombie foreclosures in the state is seriously impacting the state’s residents and its economy.

According to Menendez’s office, New Jersey had the highest foreclosure rate in the nation in 2015 with over 35,000 foreclosure filings. Menendez also noted a recent report from RealtyTrac, which showed that he state has the most vacant zombie foreclosures in the nation with 4,003.

“Zombie foreclosures threaten our communities and scare away new homebuyers and investors, which leads to neighborhood blight and plummeting values of surrounding properties,” Menendez said Friday.

“We need to do all we can to keep families in their homes and ensure mortgage lenders are invested in the communities they serve,” Menendez added. “This legislation stands up for New Jersey’s struggling homeowners, and prevents the banks from turning their backs on borrowers, on their neighbors, and on the community at large.”
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Menendez announced the bill in East Orange, New Jersey, surrounded by housing advocates and local officials, all of whom pledged their support for Menendez’s bill.

“Our neighbors and neighborhoods are still trying to recover from the foreclosure crisis and the outbreak of zombie foreclosures that have menaced our communities,” said Staci Berger, president and chief executive officer of the Housing and Community Development Network of New Jersey.

Posted in Foreclosures, Housing Recovery, National Real Estate, New Jersey Real Estate | 17 Comments

Investors out as cash sales fall?

Posted on June 24, 2016 by grim

From HousingWire:

CoreLogic: Fewer buyers paying cash for properties

Cash sales made up 33% of total home sales in March 2016, a decrease of 2.4 percentage points annually, according to a recent report by CoreLogic.

Monthly, cash sales fell by 2.8 percentage points from February. For the first three months of 2016, cash sales averaged 34.7%, the lowest start to any year since 2008.

Though below the peak of 46.6% in January 2011, cash sales are up from the pre-crisis average of 25%. If cash sales continue to fall at the same rate it did in March, they could hit the pre-crisis level by mid-2018.

Real estate owned sales had the highest percentage of cash sales at 57.2%. Resales came in second with 32.9%, followed by short sales at 30.6% and newly constructed homes at 14.4%.

While REO sales have the highest percentage of cash sales, REO transactions accounted for only 6.8% of all market sales in March. When cash sales hit their peak in 2011, REO sales made up 23.9% of market sales.

Resales, while having less of a percentage of cash sales than REOs, make up more of the market share at about 80%, and therefore have a larger impact.

Posted in Employment, Housing Recovery, National Real Estate | 106 Comments

Home sales strong in May

Posted on June 23, 2016 by grim

From the Record:

Home sales climb in May to the highest level since before the recession

In a sign of growing demand for housing, eager home buyers scooped up properties quickly this spring: Sales of existing homes in May reached their highest levels since before the recession, the National Association of Realtors said Wednesday.

The increased demand, coupled with reduced inventory, is sparking a return to bidding wars in some towns, North Jersey real estate agents say.

At the same time, lack of supply is “severely limiting choices and pushing prices out of reach for plenty of prospective first-time buyers,” Lawrence Yun, NAR chief economist, said in a statement.

And prices overall remain below the levels of the housing boom a decade ago, which has kept many potential sellers from putting their homes on the market, further shrinking the supply of homes for sale.

In North Jersey, through May, single-family sales are up about 20 percent in Bergen County and 28 percent in Passaic, according to the New Jersey Realtors. And inventories have shrunk more than 28 percent in both counties over the past year. Both counties have about a six-month supply of homes at the current sales pace, compared with 4.7 months nationwide. Anything below six months is considered an indicator of prices rising in the near future.

Nationally, according to the NAR, homes have been selling, on average, in 32 days, the lowest number since the group began tracking it in 2011. Homes aren’t selling quite as quickly in the region, according to the New Jersey Realtors. Properties that sold in May had been on the market about two months in Bergen — down 20 percent from a year earlier — and three months in Passaic, which was unchanged from last year.
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Even with the increased demand, however, prices have not taken off. Nationally, according to the NAR, the median price for a single-family home rose 4.6 percent over the past year. In Bergen County, prices ticked down 1.1 percent over that period, to a median $460,000 in May. Prices in Passaic rose 5.3 percent to a median $300,000. Home values in North Jersey remain about 17 percent below their peaks in mid-2006.

Posted in Housing Recovery, National Real Estate, New Jersey Real Estate | 89 Comments

Housing expensive, rent or buy.

Posted on June 21, 2016 by grim

From APP:

With rent of $1,160 a month in Asbury Park taking up most of her family’s income, Susan Aquino began to search for a new apartment that would give her some breathing room.

The hunt didn’t last very long.

“We were looking for two bedrooms, and they were … $1,500 to $1,700 between October and March,” said Aquino, 43.

Aquino is part of a troublesome story playing out across New Jersey and the U.S. in the 10 years since the housing bubble peaked and then burst in a ruinous crash: As real estate has climbed back, homeowners are thriving while renters are struggling.

For many longtime owners, times are good. They’re enjoying the benefits of growing equity and reduced mortgage payments from ultra-low interest rates.

But for America’s growing class of renters, surging costs, stagnant pay and rising home values have made it next to impossible to save enough to buy.

The possible consequences are bleak for a state already grappling with economic inequality: Whatever wealth most Americans possess mainly comes from home equity. An enlarged renter class means fewer Americans can build that same wealth and financial security.
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Nearly two-thirds of adults still own homes. And some who rent do so by choice. Yet ownership has become a more distant dream for the many Americans who still regard it as a route to prosperity and pride. The problem has become especially severe in areas that offer the best job prospects as well as those that have been battered by foreclosures.

“It doesn’t paint a pretty picture,” said Svenja Gudell, chief economist at Zillow, the online real estate database company. “You’re really blocking out a group of buyers from owning a home. They’re truly living paycheck to paycheck, and that does not put them into a good position to buy.”
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New Jersey’s homeownership rate has dropped more precipitously – from a peak of 71.3 percent in the first quarter of 2005 to 60.9 percent 11 years later, according to data from Patrick J. O’Keefe, director of economic research for CohnReznick, an accounting firm.

That demand has driven up rents, which in turn have prevented or delayed people from buying first homes.

The government says if you spend more than 30 percent of your pretax pay on housing, you are “cost-burdened.” The total number of renters in that category has jumped more than 30 percent in the past decade, to 21.2 million. Half of all renters are now considered cost-burdened, compared with just 24 percent in 1960.

In the New York-Newark-Jersey City metropolitan statistical area, which includes Monmouth and Ocean counties, the trend is the same. Some 51.6 percent of renters are considered cost-burdened, up from 48.5 percent when the Great Recession technically ended in 2009, the AP data shows.

By comparison, 40.1 percent of homeowners are considered cost-burdened, down from 41.1 percent in 2009, according to AP’s data.

Posted in Demographics, Economics, Housing Recovery, New Jersey Real Estate | 229 Comments

Tan Man Walks

Posted on June 20, 2016 by grim

From Bloomberg:

Countrywide’s Mozilo Off Hook as U.S. Said to Abandon Suit

U.S. prosecutors have abandoned their case against Angelo Mozilo, a leader in selling the risky subprime mortgages that fueled the financial crisis, after a two-year quest to bring a civil suit against him.

The Justice Department sent a letter informing Mozilo, the co-founder of Countrywide Financial Corp., that it isn’t moving ahead with any action against him, according to people familiar with the matter. That effectively ends nearly a decade of U.S. scrutiny of a man who became a face of risky lending practices and later an emblem of the government’s mixed success in holding individuals accountable.

In recent years, the 77-year-old has been living in a 12,692-square-foot house in Santa Barbara, California, investing in real estate and writing a book about his life so his grandchildren will “know the truth.” Interviewed in late 2014, shortly after news of prosecutors’ civil pursuit became public, he denied any wrongdoing and said the national real-estate collapse, not Countrywide’s lending, was at the root of the crisis.
“Countrywide or Mozilo didn’t cause any of that,” he said at the time.

Justice Department officials in Washington and Los Angeles made the decision not to move forward with civil cases against Mozilo and other Countrywide executives, according to people familiar with the matter.

The Justice Department, through a spokesman, declined to comment.

“We are pleased and gratified with the Department of Justice decision” to close the investigation without any further litigation, said David Siegel, an attorney for Mozilo.
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Countrywide, which was bought by Bank of America Corp. in 2008, originated more than $408 billion of worth of loans in 2007, at the height of the housing market. Many of them went to poorly vetted and risky borrowers, the Justice Department has said.

After the 2008 crash in housing — and the accompanying meltdown of complex financial instruments containing nonperforming mortgage loans — the Justice Department opened widespread investigations into industry practices. Prosecutors in the U.S. Attorney’s office in Los Angeles dug deeply into Countrywide’s actions, including Mozilo’s stock sales in the months leading up to the bursting of the mortgage bubble. They brought no criminal case against him.

Lawmakers and public-interest groups complained that executives walked away from the housing bust enriched and mostly unscathed. Mozilo — who earned at least $500 million over a decade leading up to the crisis, according to compensation-research firm Equilar Inc. — paid a $67.5 million penalty to the Securities and Exchange Commission in 2010, without admitting or denying wrongdoing. Bank of America covered a portion of his penalties.

Posted in Foreclosures, Mortgages, Risky Lending | 57 Comments

A bad May for NJ jobs

Posted on June 18, 2016 by grim

From the Record:

NJ lost 6,800 jobs in May; unemployment rate ticks up

New Jersey lost 6,800 jobs last month, increasing the state’s unemployment rate to 4.9 percent, slightly higher than the national average, the Department of Labor and Workforce Development said Thursday.

The May job losses were owed largely to a strike by Verizon workers, “which idled approximately 5,000 workers in the information sector,” the labor department said.

“Like the national economic recovery, the New Jersey economic recovery is experiencing a slight pause. This is only temporary, however, and we have every reason to expect growth throughout the remainder of 2016,” James Wooster, chief economist for the state Treasury Department, said in a statement.

The rise in the unemployment follows a recent trend after Governor Christie celebrated recovery from the Great Recession. Christie boasted of the state’s unemployment rate dropping to 4.3 percent, below the national average, and of New Jersey having more people employed than at any time in history.

But over the last two months New Jersey’s unemployment has slowly edged up as the national average has dropped. In May the national unemployment rate was 4.7 percent, according to the Bureau of Labor Statistics.

Posted in Economics, Employment, New Jersey Real Estate | 42 Comments

Guess who is back?

Posted on June 17, 2016 by grim

From the NYT:

Bidding Wars in the Suburbs

The listing Nadia Krivickova and Michael Krivicka had been waiting for popped up early last September: a pristine 2,500-square-foot 1924 colonial with a child-friendly backyard in the lower Westchester County village of Pelham Manor. Then living in an apartment in Manhattan, the couple (she’s an accountant, he’s a founder of Thinkmodo, which creates viral video campaigns) were in need of more space for their two toddlers. After their real estate agent, Arthur L. Scinta, an associate broker with Houlihan Lawrence, advised them to move quickly, they went to see the house the very next day.

By 5 p.m., they had submitted an offer for the full asking price of $942,000. The sellers wanted to give it more time. After several days, the couple raised their offer to $999,000. The sellers wanted another week. “We asked them to give us a number they would take it off the market for,” Ms. Krivickova said. “They said no.”

The couple really wanted the house. They huddled with Mr. Scinta, who analyzed recent sales prices of similar properties to help them strike a balance between a strong offer and an overzealous offer, which, if it exceeded the bank’s appraisal, could cause problems with financing.

Finally, on a Monday morning, they submitted their highest offer: $1,087,000, a full 15 percent premium. Mr. Scinta heard back that afternoon.

“Arthur called and told us there were nine other offers,” Ms. Krivickova said. “But we got it — by three or four grand.” And fortunately, the bank appraisal came in on the nose.
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The bidding wars that have become the norm in New York City are now also common in select suburbs within easy commuting distance. Buyers priced out of the city are heading for the ’burbs, driving up demand and creating a more fraught buying process in close-in towns that have long enjoyed reputations for good school systems, lively downtowns and ready access to the city.

“The city is this pot of water that’s spilling over on the sides, and that excess demand is going to the suburbs,” said Jonathan Miller, the president of Miller Samuel, a New York appraisal and research firm. “It’s all being driven by the lack of affordability.”
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Across Westchester, northern New Jersey, parts of Long Island and lower Fairfield County, Conn., the competition is fiercest for move-in-ready homes toward the lower end of the price scale — under $1 million in some markets, under $2 million in others — in places within a 40-minute rail commute to the city. Walking distance to a lively downtown, a train station or both heightens the appeal.

Well-priced homes in good condition in these markets often draw multiple offers within days of coming on the market. An analysis of first-quarter sales this year conducted by Miller Samuel showed the highest percentages of Westchester properties (23 percent to 44 percent) selling at or above asking price — signs of likely bidding wars — in places like Larchmont, Irvington, Bronxville, White Plains and Pelham. The average premium ranged from 1.7 percent to 4 percent, actually lower than a year ago at the same time, when buyers were paying more like 5 percent or 6 percent over the asking price.
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Mr. Miller’s firm does not cover New Jersey. But there, “the housing market is looking better than it has in a very long time,” said Jeffrey Otteau, the president of the Otteau Valuation Group in East Brunswick, N.J. Among the briskest markets are Hoboken, Glen Ridge, Maplewood, Montclair and South Orange, judging by their very low levels of inventory, he added.

Posted in Demographics, Economics, Housing Recovery, New Jersey Real Estate, NYC | 99 Comments

Brookings: Student loan debt not holding back homeownership

Posted on June 16, 2016 by grim

From Brookings:

The dividing line between haves and have-nots in home ownership: Education, not student debt

There is widespread concern that student loans are a drag on the housing market. Leading economic thinkers, including Larry Summers and Joe Stiglitz, have linked the slowdown in homeownership among young people to high levels of student debt.[i] They recommend easing loan burdens to keep student debt from acting as a brake on the economy.

But is student debt really hampering the housing recovery?

Frequently-cited analyses from the Federal Reserve Bank of New York do not provide compelling evidence for this hypothesis, since they rely on data in which college attendance is unobserved. The results are biased by unobserved variation in educational attainment, which is correlated with both home ownership and student borrowing. Better data from the Board of Governors of the Federal Reserve System nullify their key finding.[ii]

First, some background. A few years back, a blog post from the Federal Reserve Bank of New York fanned fears that student debt was holding back the economic recovery.[iii] The post compared homeownership rates of those with and without student debt. The key graph showed that, during the recession, homeownership took a sharp nosedive among 30-year-olds holding student debt, dropping faster than it did among those who did not hold student debt.[iv]

Many read into this graph that student debt is dragging down the housing investments of the college-educated, making them worse off than those who went to college and did not borrow.

But this graph and its underlying data do not (and cannot) show that debt is decreasing home ownership among the college-educated. Why not? These data contains zero information about education. Lumped together in the “No student loan debt” group are a) people who went to college yet did not borrow and b) people who never went to college. The composition of both of these groups is changing over time.

This odd comparison reflects the limitations of the data on which it is based: credit reports. Credit reports do contain detailed information about debt, including student loans, mortgages, credit cards and car loans. But they say little about the borrower herself. In particular, they include zero information about education.
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Researchers at the Board of Governors of the Federal Reserve System (Alvaro Mezza, Kamila Sommer and Shane Sherlund) pulled together the data needed for precisely this comparison.

The researchers combined credit reports with data on college attendance from the National Student Clearinghouse (NSC). These NSC data are nearly a national census of college attendance and are used extensively by researchers.[v] The NSC data include college enrollment information for all college students, not just those who borrow.

The results are striking.[vi]

Posted in Demographics, Economics, Housing Recovery, National Real Estate | 101 Comments

April foreclosures and delinquencies show continued improvement

Posted on June 15, 2016 by grim

From HousingWire:

April foreclosure inventory down about 25% from last year

Foreclosure inventory continues to decline, decreasing 23.4% annually in April, while completed foreclosures declined by 15.8% annually, according to the April 2016 National Foreclosure Report released by CoreLogic, a property information, analytics and data-enabled services provider.

Completed foreclosures averaged 37,000 nationally, down from 43,000 in April 2015. This is down 68.9% from its peak of 117,813 in September 2010.

Whereas foreclosure inventory represents the number of homes at some point in the foreclosure process, completed foreclosures are the homes lost to foreclosure.

“The number of homeowners who have negative equity has fallen by two-thirds since its 2010 peak, and the number of borrowers in foreclosure proceedings has also continued to drop,” CoreLogic President and CEO Anand Nallathambi said.

“Despite this progress, about four million homeowners remained underwater at the end of the first quarter, and these borrowers are more vulnerable to foreclosure proceedings if they should fall delinquent,” Nallathambi said.

That said, rising home prices caused 268,000 homeowners to regain equity in the first quarter of 2016, pushing the total number of mortgaged residential properties with equity to 92%, according to data from CoreLogic.

Last month, the number of homes in some stage of foreclosure and the number of seriously delinquent mortgages were at levels not seen since late 2007, according to the March 2016 National Foreclosure Report from CoreLogic.

April continued the trend and hit yet another low not seen since 2007, when foreclosures averaged 21,000.

In April, total homes in the national foreclosure inventory included about 406,000 homes, about 1.1% of homes with a mortgage. This is down from April 2015’s 530,000 homes, or 1.4% of all homes with a mortgage.

Posted in Foreclosures, Housing Recovery, National Real Estate | 61 Comments

Will the next bubble be the biggest yet?

Posted on June 14, 2016 by grim

From CNBC:

Experts sharply divided over whether surging home prices signal new bubble

We’re living in a very different housing world today — from tighter credit to stricter regulations — compared with the dark days of the crash, but rising residential prices are starting to spark concern again, according to a major real estate investor and a leading real estate attorney who appeared Friday on CNBC.

But Ethan Penner, managing partner at Mosaic Real Estate Investors, and Shari Olefson, attorney and director of The Carnegie Group think tank, disagree about whether the crosscurrents in the property market are pointing to a bubble.

The housing market has been putting out a lot of mixed signals in this spring buying and selling season. On the one hand, there’s solid, strong demand for housing. But on the other, low supply has pushed prices through the roof again, leading to weaker-than-expected home sales.

Penner told “Squawk Box” that he’s not worried about these factors causing a bubble. “We are clearly at very high pricing by historical standards. But that’s true of every financial asset. And in my mind, it’s more of a reflection of [Federal Reserve] interest rates policy than anything else.”

Average housing prices rose 5.2 percent in March, according to the S&P/Case-Shiller national home price index, which was just 4 percent shy of its 2006 peak after falling nearly 30 percent by 2012.

Olefson sees bubbles in some markets, citing the rate of housing price increases outpacing wage rises as a red flag.

Another factor sopping up supply and increasing prices is the return of the house flippers. Trying to take advantage of rising prices, investors are scooping up properties for cash, which tends to be more attractive to sellers. That’s leaving mortgage-dependent buyers out in the cold.

The other side of the low-supply coin are the 4 million would-be sellers stuck in place because they’re underwater, according to property analytics firm CoreLogic. In fact, about 18 percent of all homeowners with a mortgage have less than 20 percent equity, so they’re not selling yet.
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Additionally, Olefson said she’s concerned about how the 2008 housing crash has changed the way Americans think about homeownership.

“We have removed the stigma associated with foreclosures. Before the bubble and the crisis, nobody really knew what would happen if they went into foreclosure. No one knew what a short sale was. That is [now] common vernacular,” she contended.

“When Americans start looking at housing as something to speculate on,” she said, “that’s actually the biggest indicator I think in this modern-day housing world of a bubble.”

Penner countered by saying speculation should not be viewed as an overly worrisome sign. “Speculative orientations exist in every market all the time.”

Posted in Housing Bubble, Housing Recovery, National Real Estate | 122 Comments

Nobody ever said real estate was a rational market

Posted on June 13, 2016 by grim

From the WSJ:

The Psychology of Buying and Selling a House

It’s a fact of life: Homes come with far more emotional weight than any other investment we make.

A home is a refuge from the world, a place to raise a family and, for some people, an investment they hope will bring them a good chunk of money down the road. We fall in love with houses in a way that we never fall in love with a portfolio of stocks and bonds.

All too often, though, we don’t realize that how we feel about homes blinds us when it comes time to buy or sell. We let our emotions blind us to cold facts about the market or the realities of ownership. Or we prioritize one set of emotional needs over others that are just are strong but may not be evident at first. And ignoring them can lead us to make bad financial decisions that can affect us for decades to come.

For instance, people might focus on their desire for a house that’s a certain size or style, but ignore the fact that they want to spend as much time as possible with family. So they might buy a “perfect” house that requires them to make a long daily commute to work and keeps them away from home for two extra hours each day.

The home-selling side of the equation brings its own set of thorny issues. Homeowners often have an overly rosy view of their home and expect it to increase in value far beyond reasonable expectations. And when they put it on the market, they often stubbornly cling to their asking price—even if it means leaving it up for sale far longer than they planned, and risking the possibility of not selling it at all.

Posted in Demographics, Economics, National Real Estate | 50 Comments

Is it a bubble yet?

Posted on June 11, 2016 by grim

From Real Clear Markets:

How High Are Real House Prices?

“Home prices are back to near-record highs across the U.S.” said the Wall Street Journal in a June 1 front page story. They are, indeed, when measured in nominal terms. The Case-Shiller National House Price Index for the first quarter of 2016 is as high as it was in September, 2005 in the late-phase frenzy of the bubble. That was only nine months before the 2006 bubble market top, followed, as we know too well, by collapse. In addition to reaching its 2005 level, the National House Price Index has gone back to well over its trend line. All this is shown in Graph 1.

So the Federal Reserve has gotten its wish for re-inflated house prices (although not its wish for robust economic growth).

Are high house prices good or bad? That depends on whether you are selling or buying. If you are the Fed, it depends on how much you believe that creating asset price inflation actually leads to “wealth effects” and economic growth.

Of course, besides asset price inflation, the Fed truly believes in regular old inflation. It has often reiterated its intent to create perpetual increases in consumer prices. Since the bubble top in 2006, the Consumer Price Index has increased by an aggregate of 17%.

This means that house prices measured in real, inflation-adjusted terms look different from Graph 1. Real house prices from 1987 to now are shown in Graph 2. They have gone up a lot in the last few years, but not as much as in nominal terms. They have reached their level of October, 2003, rather than September, 2005.

Posted in Economics, Housing Recovery, National Real Estate | 59 Comments

Location and Access to Opportunity are Expensive

Posted on June 9, 2016 by grim

From MarketWatch:

Opinion: Home prices keep rising — mostly for the rich

Residential housing is robust again, perhaps even bubbly. But instead of threatening to inflict another economic collapse on the U.S., rising home prices in fact may be reflecting a lopsided market — where the wealthy are ensconced in cities that are mostly unaffordable to everyone else.

Ineed, it appears that inequality and lack of demand for cheaper homes characterize the housing market nowadays.

First, a comparison between median home prices and median household income shows that one year’s worth of income buys as small a percentage of a house (less than 20%) as it did at the peak of the bubble.

But comparing median income to the median sales price, though important, may not reveal all the nuances of the market. For example, according to a recent report from the Urban Institute (UI), the housing market looks healthier in that total housing equity now exceeds total housing debt, $13.2 trillion to $10 trillion. By contrast, from late 2006 through mid-2012 debt had exceeded equity.
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Affordability is defined as the maximum affordable price is the house price that a family can afford putting 20% down, with a monthly payment of 28% of median family income, at the Freddie Mac prevailing rate for 30-year fixed rate mortgage, and property tax and insurance at 1.75% of housing value.
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In fact, the data show unaffordability in 13 of 37 MSAs (Metropolitan Statistical Areas). And, according to a Zillow report using data from Harvard’s Equality of Opportunity Project, the worst affordability is in areas that historically have given parents the best opportunities to ensure better futures for their children. According to Zillow, “home values have increased sharply in the very same metro areas that offer a path to a prosperous future — and incomes have not kept up.”
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So powerful is the return on real estate that a recent Brookings Institution paper refuting the thesis of controversial economist Thomas Piketty (that greater return accrues to capital rather than to labor), allowed for an exception in residential real estate as an asset that has appreciated meaningfully.

The Brookings paper didn’t focus on where real estate has appreciated the most. But from 2004 through 2015, real estate appreciated by 21% in the most expensive zip codes, and by 13% in the bottom 90% of zip codes.

The price disparity in housing between the high- and low ends of the housing market is as large as it’s been since World War II. So while it’s unlikely there’s another debt-fueled real estate crisis that will tank the global economy, real estate now reflects a different set of problems.

Posted in Demographics, Economics, Employment, National Real Estate | 184 Comments

JC the new heart of the gold coast?

Posted on June 8, 2016 by grim

From the NY Times:

Jersey City: Growing, With Many Personalities

Elizabeth and Nick Flint were apartment hunting in Brooklyn two years ago when a friend suggested they consider Jersey City instead. The couple, who were renting in Williamsburg, wanted to buy a place.

“By the time we found something in Brooklyn, it was like 13 stops on the L, so we started to look at other places,” Ms. Flint said. They soon realized that Jersey City had a vibrant downtown with an accessible waterfront. It was also a short commute to Manhattan.

The Flints focused on Jersey City Heights, at the city’s northern end. “We found this area of the Heights that was untapped,” said Ms. Flint, 36, a yoga instructor. The sleepy enclave had a mix of one-, two- and three-family homes and large apartment buildings. While some blocks were handsome, others seemed rundown.

The couple, who now have a 3½-year-old son and a newborn daughter, paid around $385,000 about a year and a half ago for a house with three bedrooms, two and a half baths and a small yard on Jefferson Avenue. Ms. Flint misses the energy of Williamsburg; where she lives now “kind of reminds me of Greenpoint five years ago,” she said, referring to the Brooklyn neighborhood.

The Heights is one of many neighborhoods in Jersey City drawing people priced out of Manhattan and Brooklyn.

“As Manhattan becomes increasingly more densely populated, people are migrating to the next stop,” said Michael J. DeMarco, the president of Mack-Cali Realty, which is building 6,000 residential units near the Jersey City waterfront, including M2 at Marbella, a 311-unit rental opening this month. “Now they’re looking across the water and saying, ‘Isn’t that a lot closer than Bushwick or Williamsburg?’ ”

Countless restaurants are now downtown. Whole Foods Market plans to open near the Grove Street PATH station in 2020. “Everywhere you look around, there is something new happening,” said Nicole Sorgentoni, 33, a jewelry buyer for Loft who pays $2,320 a month for a one-bedroom in 70 Columbus, a luxury rental downtown.

Steven M. Fulop, the 39-year-old mayor, said of the city, “We’ve kind of hit our stride.” He and his fiancée, Jaclyn Thompson, are renovating a Victorian rowhouse that they bought last summer in the Heights.

Posted in Demographics, Economics, Housing Recovery, New Development, NYC | 60 Comments

How much further does the Gold Coast have left to run?

Posted on June 7, 2016 by grim

From the Real Deal:

Land ho!

The Gold Coast of New Jersey has gotten so hot for developers in recent years that in many areas near the waterfront there is hardly any land left to go around.

The land grab has pushed prices to record levels in some areas as buyers from around the world swoop in and snag the remaining plots. Developers forced to buy land at higher prices are now planning to build condominiums rather than rentals, a relatively new trend for even the most popular areas of Jersey City in Hudson County.

“Everything we had is under contract or sold,” Brian Whitmer, a senior director at Cushman & Wakefield in East Rutherford, told The Real Deal. “Now the expectations by sellers are that their land will be sold for condos because that pricing is much higher.”

Last June, Strategic Capital — the investment arm of China Construction America — paid a reported record $55 million, or $121,000 per unit, for the land to build a 37-story luxury condo building at 75 Park Lane in Jersey City. Strategic Capital is also planning to build a seven-story condo property with 48 lofts nearby at 2 Shore Drive North, the company said.

In November 2015, a much smaller site in the “Soho West” area of Jersey City sold to Hoboken Brownstone Co. for $6.5 million, or $118,000 per unit. Land priced for rental apartments in that neighborhood is significantly lower, around $70,000 per unit, Whitmer said.

Those deals follow in the footsteps of the $500-million mixed-use condominium building at 99 Hudson Street in Jersey City, which began construction a few months ago. The 79-story building, developed by China Overseas America, marked the first condo project in Jersey City in eight years. It will also be the tallest building in New Jersey once completed.

Land prices per square foot in Hudson County — one of the areas in closest proximity to Manhattan — nearly tripled to an average of $81.76 in 2015 from $32.66 in 2006, during the last boom market, according to data from CoStar.

The interest in Jersey City now extends deeper than the waterfront as well. Luxury high-rise developments going up around Journal Square are pushing up prices in that area. A small plot at 823 Newark Avenue sold in 2003 for $475,000 and then traded hands again in December for $1.2 million.

“People keep pushing further and further away from the waterfront, which points to the sustainability in this boom,” said Joseph Sollazzo, real estate economist at CoStar Portfolio Strategy.

Still, analysts are questioning how long the boom can continue. Average prices for land per square foot have dropped so far in 2016, even in Hudson County, though the year is far from over. And an analysis by TRD showed that total land sales volume in the first quarter of 2016 is down — in some cases significantly — versus the first quarter of 2014 and 2015 in Bergen, Hudson and Essex counties. Morris County bucked the trend, with much higher first-quarter sales volume year over year, while Passaic remained about the same. It may be that the pricing has become prohibitive for buyers.

“We’re in the seventh year of this recovery, so the question is will prices pull back a little or will they continue to rise?” said Brian Hosey of Marcus & Millichap.
For now, the influx of people who have been priced out of Manhattan and Brooklyn — and more recently Jersey City and Hoboken — is driving up prices in other parts of New Jersey.

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