America hates New York City

Posted on April 8, 2016 by grim

Don’t read New Republic but this popped up on my feed this morning and I thought it was especially interesting in the wake of Cruz getting booted from NYC. From New Republic:

New York Campaign Ads Are a Tale of Two Cities

Muslim women in American flag headscarves. A shopkeeper speaking Spanish to his customers. Orthodox Jewish men walking down a city street. This is the New York depicted in a recent Hillary Clinton ad: a cultural melting pot that showcases America’s openness and tolerance.

Both Clinton and Bernie Sanders have released uplifting ads about the Empire State in recent days. But these are not indicative of how New York is generally portrayed on the campaign trail. Not since the early 2000s, when politicians were tripping over themselves to praise New Yorkers after September 11, have campaign ads shown the state in such a positive light.

More often, New York is used as a symbol of greed, excess, and general depravity. It represents the source of the country’s problems, not its best aspects. It shows the fundamental clash between wealthy, powerful elites and down-to-earth people in real America.

In his 2014 memoir God, Guns, Grits, and Gravy, Mike Huckabee described a great culture war gripping America that pitted New York against rest of the country. Fancy Manhattan restaurants, he wrote, never served grits. Guns were all but outlawed, and people stared at his cowboy boots on the subway. This is the New York most commonly depicted in campaign commercials, a city cordoned off from the American heartland and its wholesome values.
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Political ads are often about identifying a villain: someone or something that makes voters either angry or afraid. Commercials about Wall Street, featuring sleek office buildings with tinted windows, do both. Look at these bankers who threw the country into a recession! You should be angry! What’s going on behind those ominous dark windows? You should be afraid! That is what makes these ads so effective—and Wall Street such an obvious target.

Less effective are the ads that attack the city as a whole. In January, Ted Cruz released a commercial in Iowa that featured an old newsreel of Trump saying, “I mean, hey, I lived in New York City or Manhattan all my life, so you know my views are little bit different than if I lived in Iowa.” The announcer concludes: “Donald Trump, New York values, not ours.” The idea was that there was something rotten about New York itself—and the people it produces.

This is a difficult idea to sell because it requires viewers accept the premise that all of New York’s eight million people are fundamentally corrupt. “It’s harder for citizens to draw the link,” Fowler said. “It’s easier to vilify the big banks than the city itself.” It’s particularly tricky territory for Republicans, who like to assail coastal elites for their moral apathy but often invoke the heroism of New Yorkers on 9/11 when discussing their counter-terrorism policies. When Cruz released the “New York Values” ad, “it didn’t end up playing very well,” Fowler said. Trump could simply write off the critique with a testament to the bravery he witnessed in New York immediately after the Twin Towers fell.

Posted in Humor, Unrest | 88 Comments

Millennials want a big house in the ‘burbs

Posted on April 7, 2016 by grim

From MarketWatch:

First-time buyers are skipping the starter home and saving for the big house in the suburbs

Forget the starter home. Today’s first-time buyers want a place they’ll live in for a long time — possibly even into retirement. And this ideal home is most likely in the suburbs.

That’s according to a new Bank of America poll of more than 1,000 adults 18 and older who would like to buy a home in the future. “Folks are waiting to buy their first home until later in life,” said Kathy Cummings, consumer education and consulting executive for Bank of America. And by that point, they’re probably better able to anticipate their future needs, which may be a home in which they can raise their families — places with ample square footage, backyards and sought-after school districts.
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The report found 75% of first-time buyers would rather bypass a starter home, even if they’d have to save more to do it. And 35% said they’d want to retire in this home.

Also, despite many reports about the lure of city life over recent years, especially among millennials, the report found that 52% of first-time home buyers want a home in the suburbs. Only 26% said they wanted to live in the city and 22% said they wanted to live in a rural area. A full 75% of first-time home buyers want a single-family home.

Posted in Demographics, Economics, Housing Recovery, National Real Estate | 112 Comments

Slowly heading back to normal, whatever normal is now.

Posted on April 6, 2016 by grim

From HousingWire:

Mortgage lending boom? Equifax reports massive increase in home credit

Contrary to some fears that the Consumer Financial Protection Bureau’s new disclosure rules would severely dampen mortgage lending in 2015, a new report from Equifax shows that exactly the opposite took place, as mortgage lending grew by a drastic margin in 2015.

According to the Equifax National Consumer Credit Trends Report for March 2016, the total balance of new first mortgages originated in 2015 was $1.82 trillion, which represents a 42.9% increase over 2014’s total of $1.27 trillion.

In other words, 2015 saw more than $546 billion in new first mortgages originated in 2015 than in 2014.

In terms of the total number of new first mortgages originated, 2015 also saw a sharp increase from 2014, albeit not quite as much as the total dollar amount.

According to Equifax’s report, there were 7.71 million new first mortgages originated in 2015, an increase of 31.6% over 2014’s total of 5.86 million first mortgages originated.

Additionally, based on Equifax’s totals, the average dollar amount of new first mortgages also rose in 2015, from $217,390 in 2014 to $236,057 in 2015, which is an increase of 8.59%.

And it wasn’t just overall new first mortgage lending that was up in 2015.

According to Equifax’s report, subprime lending also saw a large increase in 2015.

Equifax’s report categorizes subprime borrowers as those with an Equifax Risk Score of 620 or below, and the report shows that lending to those borrowers rose significantly in 2015.

According to Equifax’s report, the total balance of new first mortgages originated to subprime borrowers was $59.7 billion in 2015, an increase of 41.3% over 2014.

Equifax’s report also showed that there were more than 366,900 loans originated to subprime borrowers, which represents an increase 25.2%.
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“We saw a nice jump in mortgage lending in 2015 that was driven by both rising home-purchase activity and solid refinancing volumes,” said Amy Crews Cutts, senior vice president and chief economist at Equifax.

“While low interest rates are helping, continued gains in employment and consumer confidence are key,” Cutts continued. “What we are not seeing is any meaningful loosening of underwriting, at least with respect to credit scores.”

According to Cutts, the median credit score on new first mortgages in the fourth quarter of 2015 was 750 and 90% of first mortgage borrowers had a score in excess of 646, values that are “essentially unchanged” for the last three years.

Posted in Economics, Housing Recovery, National Real Estate | 114 Comments

Negative equity improves … except for the low-end

Posted on April 5, 2016 by grim

From CNBC:

How are millions still underwater as home prices rise?

Fast-rising home prices brought 1.5 million borrowers up from underwater on their mortgages in 2015, but there are still twice as many drowning. In total, 3.2 million homeowners nationally still owe more on their mortgages than their homes are currently worth, according to a new count by Black Knight Financial Services.

That brings the average negative equity rate to 6.5 percent, a vast improvement from the worst of the housing crash, but still well above historical norms. More concerning is that negative equity is now concentrated at the bottom price tier of the market. More than 16 percent of borrowers in these homes are underwater, which means they are frozen in place, unable to sell without losing money; these are the homes the market needs most, in order for young renters to become homeowners.

“Even after four years of improvement, the recovery has not reached all corners,” said Ben Graboske, senior vice president of Black Knight Data & Analytics. “When we looked at the population by home price levels, we found that over half of the nation’s underwater properties are in the lowest 20 percent of their respective markets. That’s the highest share on record.”
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Looking beyond states, at the lowest end of local markets, the bottom 20 percent in terms of price, Memphis, Tennessee, Cleveland, Detroit and St. Louis show negative equity rates at more than 40 percent. Again, these borrowers cannot move without paying into their homes and are 10 times more likely to default on their home loans than those who have even a small amount of equity.

Ironically, the negative equity on the low end of the market is fueling overheated price growth across even the midtiers of the housing market. That is because it plays heavily into the severe lack of supply of homes for sale this spring. Underwater borrowers are less likely to move. On top of that, homebuilders are not focused on the low end, because they can’t make enough money on cheaper homes to offset their rising costs for land and labor. The resulting short supply pushes prices higher for what is available on the low end.

Posted in Housing Recovery, Mortgages, National Real Estate | 60 Comments

Early indicators of the next building boom?

Posted on April 4, 2016 by grim

From HousingWire:

March job creation bodes well for housing inventory crisis

March job numbers brought welcome news as more jobs were added to the construction market, which bodes well for the current lack of inventory in the market.

Job creation increased by 215,000 in March, while the unemployment rate remained stagnant at 5%, the U.S. Bureau of Labor Statistics reported Friday.
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“The mix illustrated the crosscurrents affecting economic growth in the past two quarters, with some improvement in construction showing up in 37,000 added jobs as a response to the short supply of homes for sale, and the recession-like weakness in manufacturing revealed in a decline of 29,000 jobs,” continued Duncan.

The job report posted that construction employment rose by 37,000 in March, with job gains occurring among residential specialty trade contractors (+12,000) and in heavy and civil engineering construction (+11,000). Over the year, construction has added 301,000 jobs.

“New construction jobs provided a double boost to the economy in March. These jobs not only helped feed strong employment growth but also provided a lift to the housing market, where the dearth of homes for sale has stymied homebuyers for the past year. Much of the decline in new housing starts is attributable the lack of skilled construction workers, so the 12,000-worker increase in residential specialty trade contractors is welcome news in today’s report, especially when paired with the pickup in new single-family construction we saw in February,” said Redfin chief economist Nela Richardson.

In February’s homebuilder confidence report, National Association of Home Builders Chairman Ed Brady, said, “Though builders report the dip in confidence this month is partly attributable to the high cost and lack of availability of lots and labor, they are still positive about the housing market. Of note, they expressed optimism that sales will pick up in the coming months.”

Posted in Demographics, Economics, Employment, Housing Recovery, National Real Estate, New Development | 85 Comments

Hello Spring Market! Best February since 2005.

Posted on April 1, 2016 by grim

From the Otteau Group:

Home purchase demand in New Jersey increased for the 18th consecutive month in February rising to more than 8,000 home-purchase contracts. This was the highest number of purchase contracts recorded in the month of February since 2005, reflecting an impressive 26% increase compared to the same month one year ago.

On a year-to-date basis (January-February) home purchase demand in New Jersey continues to expand, increasing by 22%. The majority of this year’s increase has been concentrated in homes priced below $600,000, as first-time ‘Millennial’ buyers begin to transition from rentership to homeownership.

While home purchase demand continues to rise, the inventory of available homes remains constrained in New Jersey. The number of homes being offered for sale in the month of February increased slightly by 1,400 homes (3%) compared to one year ago. Still, this is about 26,000 (-35%) fewer homes on the market compared to the cyclical high in 2011. Today’s unsold inventory equates to 5.9 months of sales (non-seasonally adjusted), which is less than one year ago when it was 7.2 months.

Currently, more than three-fourths of New Jersey’s 21 counties have less than 8.0 months of supply, which is a balance point for home prices. Hudson is presently experiencing the strongest market conditions in the state with fewer than 4 months of supply, followed by Union, Essex, Somerset and Morris Counties, which all have fewer than 5 months of supply. All of the counties with an unsold inventory level equivalent to a supply of 12 months or greater are concentrated in the southern portion of the state including Atlantic (13.6) and Salem (14.3).

Posted in Economics, Housing Recovery, New Jersey Real Estate | 150 Comments

Jed Kolko drops the bomb on the urbanization myth

Posted on March 30, 2016 by grim

From jedkolko.com (former Trulia economist):

Urban Revival? Not For Most Americans

The U.S. population is now less urban than before the start of the housing bubble. While well-educated, higher-income young adults have become much more likely to live in dense urban neighborhoods, most demographic groups have been left out of the urban revival.

In recent years, numerous studies and media reports have documented that college-educated young adults have been drawn to urban centers. At times some have claimed a broader demographic reversal in which cities grow faster than suburbs, and even the end of the suburbs.

But, in fact, the U.S. continues to suburbanize. The share of Americans living in urban neighborhoods dropped by 7%, from 21.7% in 2000 to 20.1% in 2014. Even looking at only the densest urban neighborhoods where about one-third of the urban population lives, the share of Americans living in these neighborhoods fell by 5%, from 7.4% in 2000 to 7.0% in 2014. (See note at end of post for details on data, methodology, and definitions.) Headlines about educated young adults flocking to Brooklyn and San Francisco aren’t wrong – but they are far from the whole story and are unrepresentative of broader trends. Other demographic groups are suburbanizing faster than the young and rich are piling in to cities.

This post looks at the change in urban living for detailed demographic groups, using individual-level data from the Census. The findings are consistent with analyses of the most recent county data and of detailed neighborhood data, both of which confirm that the American population overall continues to suburbanize. What’s new is that individual-level data show us how skewed the urban revival is toward rich, young, educated Whites without school-age kids.

Posted in Demographics, Economics, Employment, Housing Recovery, National Real Estate | 121 Comments

National home prices up 5.4% in January

Posted on March 30, 2016 by grim

From Forbes:

Home Prices Rise A Steady 5.4% In January, S&P/Case-Shiller Says

Home sales prices rose 5.4% in January, continuing at a moderate and steady pace despite ongoing inventory shortages, a report released Tuesday said. Home prices are rising twice as fast as both inflation and wages.

January’s 5.4% year-over-year increase was slightly up from December 2015′s (downwardly revised) 5.3% pace of home price appreciation, according to the S&P/Case-Shiller U.S. National Home Price Index, which tracks repeat sales for homes in all nine Census divisions. Homes in America’s largest 20 metro areas appreciated at a slightly faster pace, welcoming 5.7% annual sales price growth in January, while prices in a select 10-city index rose an annual 5.1%. Again, both indices were slightly up from the annual gains in December.

“Home prices continue to climb at more than twice the rate of inflation,” said David M. Blitzer, chairman of the Index Committee at S&P Dow Jones Indices.“The low inventory of homes for sale–currently about a five month supply–means that would-be sellers seeking to trade-up are having a hard time finding a new, larger home.”

Price appreciation, which reached breakneck double-digit increases during housing’s recovery, moderated to around an annual 4-5% nationally by late 2015. But across the country and in all the cities that Case-Schiller tracks–except for Chicago (2.1%) and Washington, D.C.(2.2%)–home prices are still rising far faster than the core 2.3% rate of inflation (all items less food and energy). They’re also growing at a faster rate than wages, which have been stuck at about 2.25% annual growth for the past two years.

A shortage of housing for sale continues to push up prices, particularly at the lower end of the market. Last week Trulia released a report showing that the inventory of starter and trade-up homes is down more than 40% since 2012, making it difficult for would-be buyers to get into the market. Starter home inventory is down most in the West and South, with affordability particularly bad in California, according Trulia.

Underscoring the points of Trulia’s report, Tuesday’s S&P/Case-Shiller data reports high year-over-year price gains in Portland (11.8%), Seattle (10.7%), San Francisco (10.5%), and Denver (10.2%). Eleven of the cities recorded greater annual price increases in January than December. After Denver, the next highest annual gain was in Dallas (9.2%), followed by Tampa (7.4%), and Los Angeles (6.9%). Phoenix’s annual gain dipped to 6.1%, ending a year-long streak of increasing annual gains each month. Price gains were weakest in the Northeast region of the country; Boston had an annual 3.6% gain, New York 2.8%.

Posted in Demographics, Economics, Housing Recovery, National Real Estate | 44 Comments

Pending home sales jump in February

Posted on March 29, 2016 by grim

From Reuters:

U.S. pending home sales hit seven-month high in February

Contracts to buy previously owned U.S. homes rose sharply in February, reversing the previous month’s deep decline, as the volatility of the data continues to make it difficult to parse the strength of the housing market.

The National Association of Realtors said its pending home sales index rose 3.5 percent to 109.1 last month, the highest level in seven months. January’s reading was revised to show a 3.0 percent decline, which was deeper than initially reported.

Economists polled by Reuters had forecast contracts rising 1.2 percent last month. Contracts were up 0.7 percent from a year ago.

Regionally, signed contracts climbed 11.4 percent in the Midwest, with more modest gains in the South and West., the Associated Press reported. In the Northeast, the number of contracts dipped 0.2 percent, according to the AP.

Posted in Economics, Housing Recovery, National Real Estate | 44 Comments

A long way to “recovery”

Posted on March 28, 2016 by grim

From the Star Ledger:

N.J. home prices slowly recover from housing bubble

Slowly but steadily, New Jersey’s housing market is recovering.

The average home sale price in New Jersey in 2015 was $397,279, according to the state Division of Taxation. But most towns throughout New Jersey are still showing average sales below the pre-housing bubble peaks.

“We’re not out of the woods yet,” said Tg Glazer, president of the New Jersey Realtors Association. “There’s still work to be done, but everything is looking very positive and I believe that things will continue to move forward throughout the year.”

Figures from the New Jersey Realtors Association for 2015 show home sales rose 12.3 percent to 93,635 and there were small upticks in the median and average sales prices, according to figures from the New Jersey Realtors Association — a hopeful sign as the spring selling season gets underway.

The 22.7 percent jump in pending sales in December over the year before pointed to 2016 getting off to a strong start. But even as job gains, low mortgage rates and consumer confidence help boost home sales, the number of homes for sale has fallen.

In December, for example, there were 10.6 percent fewer listings — 49,829 compared to 55,720 at the same time in 2014.

“Our economy and housing sector are both better than where they were in the recession, but both have a ways to go before anybody would want to cheer at the pace of activity,” said Patrick O’Keefe, director of economic research at CohnReznick, an accounting and consulting firm.

Even though home prices are showing signs of increasing, there is still a large number of homeowners who are underwater on their mortgages and are reluctant to sell at a loss, he said.

“If they bought from 2005 to 2007, they paid prices that were still well above where the market is today,” O’Keefe said. “As a consequence, if they list their homes for sale, they’re going to get offers well below what they paid and unless it’s a distressed situation where they have to move, it would be irrational to sell the house at the discounts.”
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New Jersey housing prices continue to lag behind the national average, he said, citing the housing price index calculated by the Federal Housing Finance Agency.

Nationally, prices in the last quarter of 2015 were 0.3 percent higher than in 2007, while New Jersey’s prices were 13.8 percent less. But compared with New Jersey’s own peak in the second quarter of 2006, prices are down 21.3 percent.

“Those price factors are a major reason why the state’s housing recovery has lagged the rest of the country,” O’Keefe said. “Our prices ran up more sharply prior to the housing meltdown and have recovered far more slowly in the aftermath of the meltdown.”

Posted in Housing Recovery, New Jersey Real Estate | 33 Comments

Never going back again

Posted on March 26, 2016 by grim

New Jersey’s new state song:

From the Record:

55-year fight to name a New Jersey state song gains traction

Mascara, also known as Joseph Rocco Mascari of Phillipsburg, was a fixture at the State House for 55 years as he lobbied lawmakers to adopt his tune, “I’m from New Jersey” as the official state song. Mascara died last June at the age of 92 without realizing that dream.

“You would see him with a little can and in the can was some candy,” Assemblyman Ronald Dancer, R-Monmouth, recalled last week. “He would ask with a smile, ‘Have a piece of candy?’

And then he would add, “Remember, we need a state song.”

This month, the Assembly remembered when lawmakers in a 71-1 vote approved “The Red Mascara Act.”

The bill was a compromise that would designate five songs with various “official” labels.

As detailed in the bill approved this month, Mascara’s tune, composed in 1960, would be the “state song.” Another composition, “New Jersey, My Home” by Teaneck educator Patrick Finley, would be the “state anthem.” “In New Jersey,” with lyrics inspired by fourth-graders at a school in Bridgewater would become the state “children’s song.”

“New Jersey U.S.A.” by Nelson Trout, would be the “state ballad” and “Be Proud to Be in New Jersey” by Mark and Ellen Winter would be the “state popular song.”

But the compromise appears to have hit a snag in the Senate, where Senate President Stephen Sweeney has nixed the idea of having multiple state songs.

“The Senate president believes that the best way to celebrate New Jersey’s attributes in song is to designate one song rather than five,” said Richard McGrath, a spokes­man for the Senate Democrats. “A single song would be more distinctive and more memorable.”
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Mascara’s grandson Lee said he remains optimistic — like his grandfather — that something good ultimately will come of all this. His optimism is reflected in Mascara’s song, which includes these lyrics:

“I’m From New Jersey and I’m proud about it,
I love the Garden State;
I’m From New Jersey and I want to shout it,
I think it’s simply great.”

Posted in Humor, New Jersey Real Estate, Unrest | 34 Comments

Population patterns in NJ showing urbanization shift

Posted on March 25, 2016 by grim

From the Record:

Bergen County leads population growth trend, halts flow to other parts of N.J.

A decades-long population shift from northeastern New Jersey to other parts of the state has come to an abrupt halt, with Bergen and Hudson counties leading a new growth trend that has potentially broad financial, political and social implications.

New data released Thursday by the Census Bureau show that the number of people living in Bergen County rose almost 4 percent from 2010 to 2015, nearly double the overall rate in the state; Hudson County’s population led the state’s 21 counties, with an estimated growth of more than 6 percent.

Those figures follow decades in which Bergen and Hudson had relatively low increases compared with the rest of the state.

That growth, along with increases in Passaic County, helped nudge upward the proportion of state residents concentrated in the densely populated northeast region — the reverse of a pattern dating to the 1970s.

So far the shift is small: The percentage of New Jersey’s 8.96 million residents living in the five-county region of Bergen, Passaic, Hudson, Essex and Union ticked up from 38.2 percent in 2010 to 38.8 percent in 2015.

At the same time, other parts of New Jersey saw their portion of the population drop.

Overall, the state’s population has increased 1.9 percent since 2010.

That’s well behind the national growth rate of 4.1 percent.

But the New Jersey numbers reveal how a renewed interest in living and working in and around New York City is trumping a long period of ever-outward suburban sprawl, said Rutgers University demographer James Hughes.

“The defining element of New Jersey post-World War II was suburbanization, first with people and then jobs. That trend has stopped dead in its tracks,” said Hughes, noting that most of the Metropolitan area’s job growth since the late-2000s recession has been in New York City.

“It changes the entire logic of the state,” Hughes said.

So-called millennials, people who grew up around the turn of the century, increasingly prefer the “24/7, l-w-p — live-work-play — environments” of New York City and communities bordering the city, Hughes said.

“A common attitude is, ‘We don’t want to live in the sticks. We are out of here. We want to go to the Hudson River [communities] and Brooklyn,’” he added.

Counterbalancing Hudson, at the other end of the state spectrum, was Sussex County, where the population dropped 3.7 percent and a six-county southern region including Camden, Atlantic and Salem, where the number of residents dropped by about one-half of 1 percent.

Posted in Demographics, Economics, Housing Recovery, North Jersey Real Estate, NYC | 33 Comments

Otteau: NJ home prices to rise 4% in 2016

Posted on March 24, 2016 by grim

From the Record:

N.J. housing expert sees 4 percent rise in prices this year

New Jersey home prices are likely to rise about 4 percent this year, as a thriving job market boosts a housing sector that’s still recovering from the worst downturn in decades, a housing analyst said Wednesday.

“Job creation fuels home purchases,” appraiser Jeffrey Otteau of East Brunswick, who researches the real estate market statewide, told an audience of real estate agents in Hasbrouck Heights.

Employers created more than 81,500 jobs in New Jersey last year, the best performance since 1999. Those new jobs, in turn, helped push the number of home sales in the state up 17 percent last year, to the highest level since 2005, Otteau said.

But New Jersey home values are still more than 15 percent below the peaks they reached during the housing bubble, and they will not reach those levels again till 2023, Otteau predicted. That was a less optimistic prediction than he has given in the past; at various points during the housing bust, he forecast that prices would return to their peaks in 2018, 2019 or 2020. His new forecast apparently reflects a slower pace of price increases than he earlier forecast. Average values rose about 1.5-percent annually in the last two years, Otteau said Wednesday.

Areas closer to New York City’s powerful economic engine have fared best, he said. In affluent towns with rail lines to New York, such as Ridgewood and Glen Rock, prices have recovered to their peaks, he said.

“The lowest unemployment rates and the best housing markets, for the most part, are in the places closest to New York City,” Otteau said. Bergen and Passaic counties both have less than a six-month supply of homes for sale at the current sales pace — an inventory level that points to rising prices as buyers bid on a small number of choices.

But sales along the shore are less robust, partly because of changes in flood insurance rules after Superstorm Sandy and partly because baby boomers are at an age where they’re less interested in buying beach homes, Otteau said. And demand for houses in Sussex and Warren counties is also sluggish, because those counties are beyond easy commuting distance to New York City, he said.

Most of the new construction in the state has been in multi-family rentals, Otteau noted. Millennials are renting longer than their parents did, in part because incomes have been flat and in part because young people have seen firsthand that home values can plummet.

“Young people don’t have the confidence in the investment value of homeownership that prior generations had,” Otteau said.

Posted in Economics, Housing Recovery, New Jersey Real Estate | 71 Comments

Note to NJ – Stop making promises you can’t afford

Posted on March 23, 2016 by grim

From the Record:

Standard & Poor’s revises N.J.’s credit outlook to ‘negative’

New Jersey’s finances are still a mess, Standard & Poor’s said Tuesday, and the state’s weak credit outlook will not improve until officials make lasting reforms.

The Wall Street agency did not downgrade New Jersey’s “A” bond rating – already one of the lowest in the country. But Standard & Poor’s did revise New Jersey’s outlook from “stable” to “negative,” usually the first step before a downgrade.

Analysts pointed to a familiar problem, years in the making: a mountain of debt in the area of pensions and health-care packages for retirees.

John Sugden, an S&P analyst who studies New Jersey, said those costs continue to bring “significant long-term pressures” that could “worsen over the next year or two.”

Governor Christie has proposed a $34.8 billion state budget for the fiscal year that begins July. His plan would send $1.86 billion to the strained pension funds, or 40 percent of what actuaries say is needed to fully fund the retirement benefits public workers have earned. Next year, for his last budget, Christie plans to pay 50 percent of the total cost.

Those reduced payments mean that “the state’s underfunding of its pension is contributing to rapidly growing unfunded liabilities and reduced sustainability for its systems,” S&P said.

Fitch Ratings, Moody’s Investors Service and S&P have issued nine downgrades of New Jersey’s bond rating since Governor Christie took office in 2010, often citing the pension-funding predicament. But they all affirmed the state’s lower-than-average bond rating this year.

A spokesman for the state Treasury Department said S&P was the only major ratings agency to change its outlook to “negative” in recent days.

“This outlook change should serve as a wake-up call to Democrat legislators in Trenton: if they do not join the governor’s efforts to make public employee entitlements affordable for taxpayers, and if they continue to fight to enshrine these costs in the state constitution, it will be devastating to the budget and to the economy,” said Christie spokesman Brian Murray.

In a note to investors Tuesday, S&P called for “credible pension reform” and said New Jersey’s outlook would not improve to “stable” until it sees “a demonstrated significant and sustainable funding commitment to the state’s pensions that, at a minimum, reverses the trend of growing liabilities.”
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The state pension funds face $40 billion in unfunded liabilities according to the terms of state law, but using newly adopted federal accounting standards, the tab grows to $80 billion. Pension plans managed by local governments are in better shape.
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According to Fitch Ratings, the state faces more than $65 billion in unfunded liabilities for retiree health benefits.

Posted in Economics, New Jersey Real Estate, Politics | 80 Comments

Blame the blizzard … and the stock market

Posted on March 22, 2016 by grim

From the WSJ:

U.S. Existing Home Sales Tumbled 7.1% in February

Sales of previously owned homes sank in February, a sign that demand for housing could be cooling amid rising prices and low inventory.

Sales fell 7.1% in February from the prior month to a seasonally adjusted annual rate of 5.08 million, the National Association of Realtors said Monday. Economists surveyed by The Wall Street Journal had expected sales would fall 2.6% to a rate of 5.33 million in February.

While inventory ticked up slightly in February to 4.4 months’ supply from January’s 4.0, economist Joel Naroff of Naroff Economic Advisors, Inc., noted a more “normal, vibrant market” would have roughly six months’ supply.

“Without the product to sell, it is hard to sell homes and that is a factor to consider when determining the meaning of this report,” Mr. Naroff said in a note to clients.

Economists cited other factors that may have given buyers pause, such as January’s blizzard on the East Coast and a slump in the stock market.

“The biggest drop in single-family home sales was the 17% plunge in the northeast, the region most sensitive to the stock market,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. “If we’re right, the rebound in the market over the past month ought to mean home sales rebound in the spring, but momentum has stalled for now.”

Real-estate brokerage Redfin noted that the number of listings surged 12% in its major metro areas in February, signaling a stronger spring selling season on the horizon.

Lawrence Yun, the association’s chief economist, called February’s numbers a “meaningful slowdown,” but said the 5.25 million average for January and February was comparable to the same period a year ago.

Despite the fall, February’s sales are still 2.2% higher than February a year ago.

Posted in Economics, Housing Recovery, National Real Estate, North Jersey Real Estate | 108 Comments