New Jersey Real Estate Report

Please don’t raise rates

Posted on October 12, 2023 by grim

From CNBC:

Housing industry urges Powell to stop raising interest rates or risk an economic hard landing

Top real estate and banking officials are calling on the Federal Reserve to stop raising interest rates as the industry suffers through surging housing costs and a “historic shortage” of available homes for sale.

In a letter Monday addressed to the Fed Board of Governors and Chair Jerome Powell, the officials voiced their worries about the direction of monetary policy and the impact it is having on the beleaguered real estate market.

The National Association of Home Builders, the Mortgage Bankers Association and the National Association of Realtors said they wrote the letter “to convey profound concern shared
among our collective memberships that ongoing market uncertainty about the Fed’s rate path is contributing to recent interest rate hikes and volatility.”

The groups ask the Fed not to “contemplate further rate hikes” and not to actively sell its holdings of mortgage securities at least until the housing market has stabilized.

“We urge the Fed to take these simple steps to ensure that this sector does not precipitate the hard landing the Fed has tried so hard to avoid,” the group said.

The letter comes as the Fed is weighing how it should proceed with monetary policy after raising its key borrowing rate 11 times since March 2022.

Posted in Economics, Mortgages, Politics | 114 Comments

No cheaper over there

Posted on October 11, 2023 by grim

From the Long Island Business News:

LI home prices hit new highs amid scant supply

Long Island home prices hit record highs again last month as limited inventory and higher mortgage rates slowed sales.

The median price of closed home sales in Nassau County climbed to $733,550 in September and the median price of closed sales in Suffolk County reached $590,950, according to preliminary numbers from OneKey MLS. Home prices have now set new high-water marks for each of the last three months.

Real estate brokers say those all-time high prices can be directly attributed to the limited number of homes on the market, as listing inventory remains at historically low levels.

There were 5,095 Long Island homes listed for sale with OneKey MLS as of Tuesday, down 24.7 percent from the 6,760 homes listed for sale at the end of Sept. 2022 and 28 percent fewer than the 7,075 homes listed for sale in Sept. 2021.

There were 1,941 homes contracted for sale last month in Nassau and Suffolk counties, that’s down 11.1 percent from the 2,183 homes contracted for sale in Sept. 2022 and 33.7 percent fewer than the 2,929 Long Island homes contracted for sale in Sept. 2021, according to OneKey MLS.

In the first nine months of the year, there were 19,156 Long Island homes contracted for sale, a drop of 15.2 percent from the 22,597 pending home sales in the first nine months of 2022, and 31.2 percent fewer than the 27,874 pending sales from January through September of 2021.

Posted in General | 81 Comments

Who wants mortgages?

Posted on October 9, 2023 by grim

From HousingWire:

Fannie Mae’s chief economist: ‘We don’t expect spreads to come down anytime soon’

When mortgage rates blew past the 7% level earlier this year, the securitization market “froze up temporarily,” according to Doug Duncan, senior vice president and chief economist at the government-sponsored enterprise Fannie Mae.

“Investors who would buy a mortgage-backed security [MBS], which is backed by mortgages that have a 7% coupon, believe that when the Fed eases interest rates, the people with those 7% mortgages will refi,” Duncan said on Friday during the AIME Fuse 2023, the Association of Independent Mortgage Experts’ conference held in Las Vegas.

Duncan added: “So what you also almost immediately saw was buydowns of interest rates. The market responded within two weeks. The market set the problem and responded with a solution to keep consumers in the game.”

Until it happened again. Duncan said that now the rates have shot up to the 7.5% to 8% range, the same thing is true.

“The question is: Is there a way to encourage investors to continue to buy mortgage-backed securities, which is a major funding mechanism for home purchases and refinancings, with the knowledge that it’s likely that when the Fed gets inflation back, interest rates going to fall, those mortgages will refinance and those mortgage-backed securities will disappear?” Duncan added.

One caveat: “If you’re saying even more extended buydowns, [even] for those [lenders] who have had strong profit margins, the profits at some point are going to be exhausted.”

With fewer buyers in the MBS market, the average coupon yield on 30-year agency MBS was at around 6.4% at the end of September, The Wall Street Journal reported. That was a 1.8 percentage point premium to the 10-year Treasury yield versus a 21st-century average of around one point.

When you add mortgage originators’ profits, the 30-year fixed rate averaged 7.49% as of Oct. 5th, up 28 basis points from 7.31% in the previous week. At HousingWire’s Mortgage Rates Center, rates were 7.6% on Friday.

According to Duncan, the Federal Reserve (Fed) is still the single biggest holder of MBSs worldwide, with about 21%. Banks and credit unions together own about 29% as a group.

“But the Fed no longer wants to hold them, so they are not buying; they are actually letting them run off,” Duncan said.

Posted in Economics, Mortgages, National Real Estate | 100 Comments

Welcome to Eight

Posted on October 7, 2023 by grim

From Mortgage News Daily:

Rates Surge Toward 8% After Jobs Data; Can “Spreads” Help?

Rates were already high coming into this week. As of last Friday, that meant an average 30yr fixed rate just under 7.5%. As of this Friday, we’re closer to 8%.

Certain lenders may be quoting lower rates, but that often involves the presence of discount points. The Freddie Mac survey (orange line above) doesn’t account for discount points. It’s also a weekly average and has not yet counted the rates seen on Thursday or Friday.

Friday brought a sharp rise to the highest levels in 23 years. The most obvious culprit was the big monthly jobs report which showed job creation (nonfarm payrolls) increasing far faster than economists predicted. It was one of only a handful of months in the past few years that came in higher than the 12 month trailing average.

Posted in General | 86 Comments

What breaks first?

Posted on October 6, 2023 by grim

From the NYT:

Rates Are Jumping on Wall Street. What Will It Do to Housing and the Economy?

Heather Mahmood-Corley, a real estate agent, was seeing decent demand for houses in the Phoenix area just a few weeks ago, with interested shoppers and multiple offers. But as mortgage rates pick up again, she is already watching would-be home buyers retrench.

“You’ve got a lot of people on edge,” said Ms. Mahmood-Corley, a Redfin agent who has been selling houses for more than eight years, including more than five in the area.

It’s an early sign of the economic fallout from a sharp rise in interest rates that has taken place in markets since the middle of the summer, when many home buyers and Wall Street traders thought that borrowing costs, which had risen rapidly, might be at or near their peak.

Rates on longer-term government Treasury bonds have been climbing sharply, partly because investors are coming around to the belief that the Federal Reserve may keep its policy rate higher for longer. That adjustment is playing out in sophisticated financial markets, but the fallout could also spread throughout the economy.

Higher interest rates make it more expensive to finance a car purchase, expand a business or borrow for a home. They have already prompted pain in the heavily indebted technology industry, and have sent jitters through commercial real estate markets.
…
Policymakers have continued to watch banks for signs of stress, especially tied to the commercial real estate market. Many regional lenders have exposure to offices, hotels and other commercial borrowers, and as rates rise, so do the costs to finance and maintain the properties and, in turn, how much they must earn to turn a profit. Higher rates make such properties less valuable.

“It does add to concerns around commercial real estate as the 10-year Treasury yield rises,” said Jill Cetina, an associate managing director at Moody’s Investors Service.

Posted in Economics, Housing Bubble, Mortgages, National Real Estate | 122 Comments

Still comfortable at the top

Posted on October 4, 2023 by grim

From Mansion Global:

Manhattan’s Median Home Price Rose 2% Despite Market Turbulence

Manhattan’s home prices held steady in the third quarter, despite a gamut of challenges hitting the real estate market across the nation, according to a variety of market reports released by New York City brokerages on Tuesday.

Elevated mortgage rates—currently at a more than 20-year high—low inventory and a decline in signed contracts were all at play during the third quarter.

“It’s an unusual market we are experiencing,” said Coury Napier, director of research at Serhant. “Despite sales and pending activity falling, prices are stubbornly high.”

The median overall price for a Manhattan home stood at $1.175 million, a rise of 2% annually and a fall of 2% compared to the previous quarter, skewed by a fall in transactions under $1 million, according to data from Corcoran.

At the very top 10% of the market, meanwhile, the median luxury home price in Manhattan was $6 million, according to data from Douglas Elliman. The total is a 10.5% decline compared to the second quarter, but has ticked up 4.3% from last year, when the metric stood at $5.75 million.

The number of contracts signed across all segments of the market totaled 2,266 in the third quarter, according to Corcoran. That’s a 27% drop from the second quarter and down 15% from the same time last year. But the slump in activity is easing. Over the last three months, the year-over-year decline in new signed contracts was the smallest since the second quarter of 2022, the firm said.
…
“While [deals in] every price bracket declined, the homes sold between $5 million [and] $20 million retreated the least,” Serhant’s Napier said. “Homes that are more sensitive to volatile markets and higher rates were hit the hardest. There was a 27% drop off for sales at $1 million and below.”
…
“We don’t anticipate significant changes,” Peters said in the firm’s report. “Buyers, hemmed in by high interest rates and inventory shortages, anxious about the state of the world and the country, will step up only when they find the right thing at the right price. For some, that can take a year or even more. But as more and more people come back into their offices, the utility of having a home in the city continues to rebound.”

Posted in Demographics, Economics, Housing Bubble, Mortgages, NYC | 155 Comments

Nothing to see here

Posted on October 3, 2023 by grim

From the NY Post:

US office real estate prices headed for ‘severe crash,’ investors say

The commercial real estate market is headed for a severe collapse due in large part to sky-high interest rates and declining property values, according to a survey of investors.

Around two-thirds of those who responded to a Bloomberg News survey said they believe that the commercial real estate market will recover only after a crash.

When asked when they believe the price of office properties will hit bottom, 44% said they expect that to happen in the second half of next year while 22% said it will be in the first six months of 2024, according to Bloomberg News.

Just 6% of the 919 respondents said that prices would bottom out this year while 29% predicted that it would happen in 2025 or beyond.

The Fed has raised interest rates aggressively, which is increasing the cost of financing commercial properties at a time when there is also reduced need for them, which has hit rent levels.

Investors are bracing for a possible crisis triggered by default on $1.5 trillion in debt that is coming due by the end of 2025,.

Some $270 billion in commercial real estate loans held by banks are set to mature in 2023, according to Trepp.

Over the next four years, commercial real estate properties must pay off debt maturities that will peak at $550 billion in 2027, according to analysts at Morgan Stanley.

Earlier this month, a study released by economists from NYU Stern Business School, Columbia Business School and the National Bureau of Economic Research showed that vacancy rates are at 30-year highs in many American cities.

In New York City, the vacancy rate was 22.2% in Q1 of 2023.

Posted in Crisis, Demographics, Economics, National Real Estate, New Development | 104 Comments

Do mortgage rates even matter anymore?

Posted on October 2, 2023 by grim

From the APP:

Mortgage rates double. Here is why that hasn’t killed Jersey Shore home bidding wars

With mortgage rates rising to 22-year highs, the prospects for the sale of the house at 321 14th Ave. in Belmar could have dimmed. But within a week of going on the market, its owners had shown the home to nearly 60 prospective buyers and were left to decide among 10 written offers.

By the end of the process, the listing’s agent, Eric Bosniak with Coldwell Banker Realty in Rumson, said the big surprise wasn’t that the home sold above its asking price of $899,000, but that it didn’t receive even more offers given the interest.

“I feel that, yes, mortgage rates are ticking higher, but there’s still significant buyer demand with still limited inventory,” Bosniak said. “And here’s the kicker: limited good inventory.”

The conflicting data has puzzled real estate veterans, who can’t remember a set of conditions like this. It was only two years ago that home buyers and owners took advantage of record-low mortgage rates. Now, they seem frozen in place, leaving real estate agents and mortgage brokers to wait for rates to begin to decline and for the market the thaw.

Less clear is how long the head-scratching environment will last. And they wonder: If homes are getting above asking price despite high interest rates, what will happen to prices when rates fall?

“All of a sudden, rates go down to, say, the mid-5’s, well, then are you going to be bidding against 20 other people?” asked Kenneth Gunther, senior loan officer for NJ Lenders Corp., a mortgage banker in Shrewsbury. “So that’s the unknown question that I think about at night. … What is the market going to look like down the road?”

Posted in Demographics, Economics, Housing Bubble, Mortgages, New Jersey Real Estate, Shore Real Estate | 44 Comments

The new New York City

Posted on September 30, 2023 by grim

From Business Insider:

NYC and its suburbs won’t build new housing, so New Yorkers are flooding into Jersey City and driving up prices

New Yorkers have been taking notice of Jersey City real estate for years, and its popularity as an alternative to the ever-less-affordable housing market in the city is growing. These days, fans call it the sixth borough, largely thanks to Jersey City’s efforts to build a ton of new housing — and at a much faster rate than the actual five boroughs.

Between 2010 and 2018, Hudson County, which includes Jersey City, built housing at more than twice the rate that New York City did. Jersey City’s population grew by nearly 60% from 2010 to 2020. Many of the old rail yards and factories on the city’s waterfront have been replaced with luxury high-rises.

But amid the city’s home-construction boom — a “renaissance,” as the city’s mayor, Steven Fulop, previously described it to Insider — rents are rising fast. The rental platform Zumper lists Jersey City as the second-most-expensive US city to rent an apartment, and rents for a two-bedroom apartment are up 25% year over year.

Typically, a big increase in housing supply would be expected to push prices down, but the sheer magnitude of the New York metro area’s housing deficit has kept Jersey City from experiencing that. As the region suffers a severe housing-affordability crisis, North New Jersey is “carrying the entire tristate area’s housing-supply burden,” said Alex Armlovich, the senior housing-policy analyst at the Niskanen Center, a nonpartisan think tank.

“Jersey City is unique. It’s one of the YIMBY-ist cities in the country in terms of actual building permits per person,” Armlovich told Insider. “They’re one of the only reasons that New York, generally as a region, is not more unaffordable than it is.”

Posted in Crisis, Demographics, Economics, Gold Coast, New Development, New Jersey Real Estate, NYC | 56 Comments

Sorry renters

Posted on September 29, 2023 by grim

From RentCafe:

Competition for Apartments Intensifies in Midwest This Rental Season, but Miami Holds Onto 1st Place

While the Midwest is flexing its muscle in peak rental season, we’re seeing rising competition in the Northeast,as well. The main reason for this is New York’s remarkable progress in recovering from the pandemic’s economic effects: The city is very close to fully restoring its employment levels, according to a recent report by the NYC Economic Development Corporation.

However, New York is not an affordable place to live, so North Jersey (RCI score 113) is the perfect choice for people who want to live close to the attractions in the Big Apple, but who are not willing to pay steep living costs. Thus, North Jersey is the third-most competitive rental market nationwide and the hottest renting spot in the Northeast.

Including places like Jersey City and Newark — as well as smaller locations scattered across the counties of Bergen, Essex, Hudson, Morris, Passaic, Sussex and Union — America’s third-most competitive rental market is still seriously undersupplied, even with a 1.19% increase in recently built apartments. That’s why 71.4% of renters here renewed their leases, pushing the occupancy rate to 96.3% in peak rental season. On average, available units are occupied within 34 days, with 15 prospective renters competing for one vacant apartment.

Coming in 11th nationwide, Brooklyn, NY, is a hot renting spot for those who love the thrill of New York Cityas it offers a great combination of more affordable housing than Manhattan, in addition to convenience and amenities. Here again, the borough’s supply of apartments is far from keeping up with demand: Recently built units only account for 0.16% of the total housing stock, which prompted two-thirds (66.2%) of renters to stay put this summer. This led to an occupancy rate of 96.1% in peak rental season. Meanwhile, the average vacant apartment is filled within 38 days, with nine people competing for it.

What’s more, the number of office workers returning to Manhattan is on the rise, which is helping boost the local economy and create jobs — all while fueling competition for rental apartments. So, Manhattan joins our top 20 for the first time since the pandemic, claiming 13th place. Plus, with zero apartments opened recently, 66% of apartment dwellers chose to stay put during peak rental season. As a result, Manhattan has an occupancy rate of 94.7%. There are also nine renters vying for each vacant unit, which becomes occupied within 38 days, on average.

Posted in Demographics, Economics, Employment, Housing Bubble, New Jersey Real Estate, NYC | 119 Comments

GenX poised to take the lead

Posted on September 28, 2023 by grim

From the NYT:

The Greatest Wealth Transfer in History Is Here, With Familiar (Rich) Winners

Trillions of dollars in family wealth are set to be passed down in the next few years — and the transfer will largely reinforce U.S. inequality. Total family wealth in the U.S. has tripled since 1989, reaching $140 trillion in 2022.

Of the $84 trillion projected to be passed down from older Americans to millennial and Gen X heirs through 2045, $16 trillion will be transferred in the next decade. The top 10% of households will be giving and receiving a majority of the wealth. The top 1% — with about as much wealth as the bottom 90%, — will dictate the broadest share of the money flow. The bottom 50% will account for 8% of transfers. A reason there are such large soon-to-be-inherited sums is the uneven way boomers benefited from price growth in the financial and housing markets. The average price of a U.S. house has risen about 500% since 1983, when most were in their 20s and 30s.

There are few aspects of economic life that will go untouched by the knock-on effects of the handover: Housing, education, health care, financial markets, labor markets and politics will all inevitably be affected.

Posted in Demographics, Economics, National Real Estate, Unrest | 112 Comments

Welcome Back!

Posted on September 27, 2023 by grim

From CNN:

US home prices rose in July to record-high levels

US home prices continued to rise in July, hitting a new record high and marking the sixth successive month of gains, as historically low inventory pushes up the cost of a home.

Prices rose 0.6% from the month before, according to seasonally adjusted data from the S&P CoreLogic Case-Shiller US National Home Price Index released Tuesday.

Compared to a year ago, the national composite index also rose, with prices up 1% from July 2022, the prior peak, according to Case-Shiller data. It was followed by home prices that fell through January of this year, declining by 5% over those seven months.

“The increase in prices that began in January has now erased the earlier decline, so that July represents a new all-time high for the National Composite [index],” said Craig Lazzara, managing director at S&P Dow Jones Indices, in a statement.

What’s more, he added, the recovery in home prices is broadly based. As was the case last month, 10 of the 20 cities in the sample have reached all-time high levels. In July, prices rose in all 20 cities after seasonal adjustment.

Cities with the most price appreciation in July from the year before were Chicago, up 4.4%; Cleveland, up 4.0%; and New York, up 3.8%. The same three cities also saw the most appreciation in June.

At the other end of the spectrum, the cities with the largest price year-over-year price drops in July were in the West. Prices in Las Vegas were down 7.2% from a year ago and in Phoenix prices were down 6.6%.

The Midwest, where prices were up 3.2% in July from a year ago, continues to see the most price strength. It is followed by the Northeast, up 2.3%. The West, where prices are down 3.8% from a year ago, and the South, with prices down 3.6%, continue to see annual price declines.

National home prices have risen 5.3% since January, but the monthly increases are not as big as they were earlier this year. This is because higher mortgage rates have put pressure on affordability, said Selma Hepp, chief economist at CoreLogic.

Posted in Crisis, Economics, Housing Bubble, National Real Estate | 117 Comments

Because Garden State Plaza Needs 1400 Housing Units

Posted on September 26, 2023 by grim

From Costar:

Unibail Seeks To Add Roughly 1,400 Housing Units to New Jersey Flagship Mall

Unibail-Rodamco-Westfield said it plans to build up to nearly 1,400 residential units as part of the major redevelopment and diversification of its large mall in North Jersey, one of the flagship U.S. properties that the global retail landlord decided to keep and is now looking to spruce up.

Paris-based URW and its co-developer Mill Creek Residential, based in Boca Raton, Florida, have kicked off the process of seeking local approvals from the Paramus Planning Board for their reimagining of the Westfield Garden State Plaza, one of the largest malls in New Jersey and a top-performing mall in the United States. The next borough hearing on the development is slated for Oct. 5.

URW, the owner and operator of shopping malls and other real estate in Europe and the United States, unveiled plans for the mall’s transformation into a mixed-use property in May 2019, with Mill Creek coming on board in August 2022. The vision is to create a town center, a community hub for a sprawling suburb, with new residences and green space complementing Garden State Plaza’s existing retail, dining and entertainment offerings.

The first phase entails the construction of about 575 luxury apartments that “will be integrated with the shopping center via a one-acre town green for residents, visitors, and shoppers to enjoy, and will also introduce a main street outdoor district featuring restaurants and everyday conveniences and services,” according to URW. An additional 809 residential units are on the horizon, the company said.

URW is one of a number of large retail landlords — a group that includes Simon Property Group and Pennsylvania Real Estate Investment Trust — that are busy diversifying their malls by adding new uses such as multifamily housing, fitness centers, hospitality properties, office space and healthcare locations. The goal is to attract foot traffic for the site’s retailers and other tenants.

Posted in Economics, Housing Bubble, New Development, New Jersey Real Estate, Where's the Beef? | 150 Comments

Good or Bad?

Posted on September 25, 2023 by grim

From NJ Spotlight:

Reconciling rising unemployment and strong job growth: NJ’s uncertain fiscal outlook

New Jersey’s unemployment rate has steadily risen over the past year and now ranks among the highest in the nation. But while some economists and others suggest that’s a cause for concern, the topline numbers may not tell the full story.

The state unemployment rate has soared from 3% to 4.2% over the past year, according to the latest jobs report released by the state Department of Labor and Workforce Development.

That easily tops the national jobless rate of 3.8%. It also puts New Jersey among the states with the highest unemployment rates in the country, with Nevada topping out at over 5%.

Yet at the same time, New Jersey has also enjoyed healthy employment gains over the past year. Nearly 70,000 jobs have been added over the prior 12 months, according to the latest jobs report.

Also running slightly ahead of last year’s pace in August were monthly state income tax collections, reflecting what Department of Treasury officials called a “steady job market” in a recent news release.

Posted in Demographics, Economics, Employment, New Jersey Real Estate | 71 Comments

All your money are belong to us

Posted on September 24, 2023 by grim