Locked In: Why you better learn to love low inventory

Posted on March 15, 2014 by grim

From the NY Times:

Fallout From Refinancing

Homeowners who refinanced when fixed mortgage rates dropped below 4 percent will be less inclined to put their homes on the market as interest rates climb. And as a result, the limited property supply already impeding sales in many markets may not ease anytime soon.

A recent survey by Redfin, a national real estate brokerage based in Seattle, suggests that even those beneficiaries of low-refinance rates who do decide to move may want to make money renting out their homes while waiting for prices to rise, rather than sell right away.

Redfin questioned 1,900 people nationwide who said they planned to buy a home within a year; 42 percent said they already owned one, and of those, 39 percent said they planned to rent it out after they moved. The survey also asked buyers about their frustrations with the process, and “low inventory” topped the list.
…
“These are the folks that will think twice before they pay off that mortgage that is such cheap money,” he said. “They’re going to explore all types of options before they do that.”
…
But he views another scenario as more likely for low-rate holders: Those who can’t afford to move on without selling will essentially be “locked into” their homes. As interest rates rise, even buying another home at the same price will result in a higher mortgage payment.

In a recent analysis of the effect of lock-ins, Mr. Hendershott predicted that if rates continue to rise, the result will be substantial declines in housing turnover in strong housing markets, in which large numbers of households refinanced at low rates.

“We had a big episode of this in the 1980s,” he said, recalling when soaring interest rates locked in large numbers of homeowners.

Research cited in his analysis found that during that period, household mobility declined by 15 percent for every 2 percent increase in rates.

Posted in Demographics, Economics, Housing Recovery, Mortgages | 75 Comments

A new era for property taxes?

Posted on March 14, 2014 by grim

From Bloomberg:

New Jersey’s Property Taxes Increased 1.7% Last Year to Record

The average property-tax bill in New Jersey, which already has the highest in the U.S., rose 1.7 percent last year, Governor Chris Christie said.

More than 80 towns, school boards and other local governments saw their taxes drop, while about 160 had increases of less than 1 percent, according to an e-mail from the governor’s office.

New Jersey’s property taxes, which are collected by local governments, increased about 7 percent annually in 2004, 2005 and 2006 before the rate began to slow. Christie, a second-term Republican, has controlled the growth after enacting a 2 percent annual cap. Still, the tax climbed to a record of more than $8,000 per household, from the previous high of $7,885 in 2012, according to calculations by Bloomberg.

“This is the lowest rate of growth in 24 years in this state,” Christie said yesterday at a town-hall meeting in Mount Laurel.

Posted in Economics, New Jersey Real Estate, Property Taxes | 94 Comments

Bye bye Freddie and Fannie?

Posted on March 12, 2014 by grim

From Bloomberg:

U.S. Wind-Down Bill Clips Fannie Mae, Freddie Mac Shares

Leaders of the U.S. Senate Banking Committee announced long-awaited plans to dismantle Fannie Mae and Freddie Mac, pushing the companies’ common shares to their biggest intraday drop in 10 months.

Fannie Mae shares tumbled as much as 44 percent, paring the losses to 31 percent to close in New York at $4.03, after Edwin Groshans, a managing director at Washington-based equity research firm Height Analytics LLC, described the proposal as holder-negative. Freddie Mac fell 27 percent to close at $4.04. Preferred shares also dropped, some by as much as 12 percent.

The bipartisan measure, drafted with input from President Barack Obama’s administration, would replace the U.S.-owned mortgage financiers with government bond insurance that would kick in only after private capital suffered losses of at least 10 percent, Senate Banking Committee Chairman Tim Johnson and Senator Mike Crapo said in a statement yesterday. The bill would require most borrowers to make down payments of at least 5 percent.

“This starts the ball rolling to get housing finance reform done,” Jaret Seiberg, policy analyst at Guggenheim Securities LLC’s Washington Research Group said in a telephone interview. “This issue remains alive and kicking and whatever happens in the next few weeks is going to tell us whether we get to the finish line or not.”

Posted in Economics, Housing Recovery, Mortgages, Politics | 156 Comments

Affording the unaffordable – HAMP fails again

Posted on March 11, 2014 by grim

Calling HAMP the flagship program is a bit of a joke since it’s been a failure since day 1.

From the Washington Post:

With clock ticking on mortgage relief, homeowners wonder what’s ahead

Five years after the federal government bailed out more than 1 million struggling homeowners, many who got the relief may end up losing their homes after all.

Already, nearly 30 percent of those who qualified for relief have defaulted again. And roughly 800,000 borrowers who remain enrolled in the government’s flagship program will see their mortgage interest rates gradually rise starting this year — eventually increasing payments by more than $1,000 a month in some cases, according to a recent federal analysis.

As the higher payments kick in, regulators and consumer advocates fear that homeowners won’t be able to stay current on their mortgages, placing an unwelcome strain on the housing market and potentially on economic growth.

“The program was a temporary Band-Aid,” said Greg McBride, a senior financial analyst at Bankrate.com. “Five years later, that Band-Aid is going to be ripped off.”

The initiative was based on the flawed assumption that the economy would bounce back more quickly, undoing the damage wrought by plunging home prices and high unemployment. The program lowered the monthly mortgage payments of qualified borrowers for five years, presumably long enough for them to regain their financial footing.

But since the initiative’s launch in 2009, the average household income has been flat for all but the highest earners. And while home prices have climbed in the past two years, many borrowers continue to owe more on their mortgages than their homes are worth, making it difficult to sell their properties or refinance their way out of trouble.

Obama administration officials defend the Home Affordable Modification Program (HAMP). But they say they are prepared to respond if there is a significant uptick in delinquencies among the homeowners.

The outcome could determine how far the administration is willing to go on behalf of homeowners, experts tracking the issue said. Funding for the initiative came from the $700 billion that the Treasury Department used to bail out banks and other firms considered vital to the nation’s financial stability.

“The question becomes: Will Treasury help them get back on their feet in the same way it helped the banks get back on their feet?” said Christy Romero, the special inspector general for the Troubled Asset Relief Program, which oversees the handling of the bailout money.

Posted in Economics, Foreclosures, Housing Recovery, Risky Lending | 57 Comments

Rent your shore house yet? If not, too late.

Posted on March 10, 2014 by grim

From the Star Ledger:

Jersey Shore rental homes going fast despite harsh New Jersey winter

With such a bitter winter, vacationers are ahead of the game and already booking their rental houses down at the shore.

From Sea Isle City to Wildwood and Cape May, shore rentals have been snatched up quickly in anticipation of a warm summer.

Along the coast in Sea Isle, a common trend of grabbing those rentals is to book online starting as early as December and January.

“We are slightly ahead of where we were last year. For the areas we cover with rentals, we have very little left,” Noah Freda, rental agent with Sea Isle Realty, Inc. said.

Specifically, shore homes are already taken for the busiest months of the year — late July into mid-August — but in other spring and summer weeks, there are still decent rentals available, according to Freda.

Compared to last year, the snow has been much more frequent and for those travelers who wish to see the rentals in person, the snow has put them behind schedule, Freda continued.

“You have people who like to come down and see the houses, wait for the weather to clear but the snow has hurt us a little bit,” Freda said.

While the busy summer months are already filled, down throughout Wildwood, people began reserving rentals back in October.

Rental homes for July 4 into August are already claimed, leaving vacationers with less options for the holiday summer month.

“This seems to be the highest volume (of rentals) over the past five years. The vast majority are booked,” Island Realty Group broker Joe Zarroli said.

“A lot of people are calling and unfortunately have to look into other dates.”

Posted in Economics, New Jersey Real Estate, Shore Real Estate | 64 Comments

Number of underwater borrowers continue to decline

Posted on March 7, 2014 by grim

From MarketWatch:

Homes in five states account for more than one-third of negative equity across U.S.

First, the good news: Rapidly rising home prices last year helped millions of troubled homeowners regain equity in their properties, data released Thursday show.

Now the bad: The recovery remained lopsided, and just five states made up more than one-third of the negative equity in the U.S. in the fourth quarter.

Rebounding from crash lows, residential prices zoomed up in 2013, and four million homes regained positive equity, according to a report from CoreLogic, an Irvine, Calif.-based analysis firm. Across the U.S., 13.3% of residential properties with a mortgage were in negative equity in the fourth quarter — meaning that owners owed more on a mortgage than their home was worth — down from 21.6% a year earlier.

“The plight of the underwater borrower has improved dramatically since negative equity peaked in December 2009 when more than 12 million mortgaged homeowners were underwater,” said Mark Fleming, chief economist, in a statement.

But the market hasn’t completely healed: almost 6.5 million homes were in negative equity in the fourth quarter, according to CoreLogic. And certain states are worse off than others. Properties in Nevada, Florida, Arizona, Ohio, and Illinois accounted for 36.9% of total national negative equity at the end of 2013.
…
Still, even beleaguered states have seen improvement. In Nevada, for example, 30.4% of mortgaged properties were in negative equity in the fourth quarter, down from 52% a year earlier. Similarly, Florida saw its share fall to 28.1% from 40.5%.

Posted in Economics, Housing Recovery, National Real Estate | 131 Comments

Good riddance, who needs you anyway…

Posted on March 6, 2014 by grim

From the Record:

New Jersey lost almost 88,000 taxpayers with income of $5.5 billion to other states in 2010, according to a report by RegentAtlantic Capital LLC, a Morristown-based investment adviser, citing Internal Revenue Service data.

About 41 percent of the net adjusted gross income that left the state went to Florida and 20 percent to Pennsylvania, said Eric Furey, a financial adviser, and David Bugen, chairman and managing partner of the firm that has $2.8 billion under management.

The so-called tax migration is rooted in New Jersey’s high property and estate levies, according to the report.

The state has the highest property taxes in the U.S. and depends on personal income taxes for 39 percent of its revenue. The data reflect people who filed their 2009 federal tax return in New Jersey and in 2010 filed in other states.

“You can accumulate assets in New Jersey — you can build a career here — but once that’s built you pretty much leave the state,” Furey said in a telephone interview.

At the same time as the “out-migration,” about 73,000 federal tax returns with adjusted gross income of $4.28 billion were added to the Garden State, the IRS data show.

The net loss was 0.34 percent of 4.29 million returns and 0.41 percent of $308.5 billion in taxable income, according to the data.

Posted in Demographics, Economics, Property Taxes | 80 Comments

2014 going to be another good year?

Posted on March 5, 2014 by grim

From HousingWire:

CoreLogic: Home price appreciation strongest since 2006

CoreLogic’s Home Price Index shows that home prices nationwide, including distressed sales, increased 12% in January 2014 compared to January 2013.

This marks 23 months of consecutive year-over-year increases in home prices nationally.

Louisiana, Nebraska, and Texas led in absolute, bottom-line home prices.

This data contrasts with recent reports from Standard & Poor’s Case-Shiller, which suggest that home price appreciation is softening in the first quarter of 2014.

“Excluding distressed sales, all 50 states and the District of Columbia showed year-over-year home price appreciation for January,” said Anand Nallathambi, president and CEO of CoreLogic. “Nationwide price growth like this should continue as the market comes out of hibernation for the spring buying season.”

On a month-over-month basis, home prices nationwide, including distressed sales, increased by 0.9% in January 2014 compared to December 2013.

“Polar vortices and a string of snow storms did not manage to weaken house price appreciation in January,” said Dr. Mark Fleming, chief economist for CoreLogic. “The last time January month-over-month and year-over-year price appreciation was this strong was at the height of the housing bubble in 2006.”

Posted in Economics, Housing Recovery, National Real Estate | 48 Comments

Subprime 2.0

Posted on March 4, 2014 by grim

From the Huffington Post:

Wall Street Has Found Its Latest Dangerous Financial Product, Activists Warn

Housing and consumer activists warn that Wall Street is about to crash the housing market — again.

The activists said they are particularly concerned about the growing number of companies looking to issue bonds backed by rental properties — bonds that a coalition of groups described as “eerily like” those mortgage-backed securities that helped fuel the last housing bubble.

“We are poised to experience another crisis if federal regulators fail to recognize and take corrective action to address red flags that are all too familiar,” more than 75 housing and consumer groups wrote in a letter Tuesday to federal bank and housing regulators.

The 2008 housing crisis happened because banks were willing to give even risky borrowers a mortgage, driving home prices to unsustainable peaks. Those mortgages got sold into bonds that defaulted once homebuyers stopped making their monthly payments.

This time, gun-shy bankers are hard-pressed to give anyone but the most stellar borrowers a mortgage, said the groups, which include California Reinvestment Coalition and the National Consumer Law Center. Yet, home prices are rising again.

That’s because Wall Street investors with deep pockets and the ability to pay cash for homes are muscling out ordinary buyers in places hard-hit by the housing crisis, like Phoenix and Atlanta. Once these wealthy investors have bought the homes, they flip them into rentals — often covering up large issues like plumbing and mold with cosmetic fixes.

The letter demands “immediate federal intervention” to rebalance the housing market in favor of qualified borrowers who currently can’t get affordable mortgage loans, and away from Wall Street and other cash investors who in some markets are buying nearly half of all available houses.

Posted in Housing Bubble, Risky Lending | 59 Comments

Out of sight, out of mind

Posted on March 3, 2014 by grim

From the Star Ledger:

Chris Christie signs order to speed razing of Sandy-damaged homes

Calling Hurricane Sandy-damaged homes that have not yet been torn down an “ongoing emergency,” Gov. Chris Christie signed an executive order aimed at speeding up the process of razing unsafe properties.

The order puts the New Jersey Department of Community Affairs in charge of overseeing the demolition efforts, which will be funded with $15 million in federal money.

The U.S. Department of Housing and Urban Development in January approved the state’s plan to shift funding in order to primarily provide more money to established housing grant programs. But the state also requested — and received federal approval — to establish a $15 million program to demolish unsafe properties.

That $15 million comes from the first round of nearly $1.83 billion in Community Development Block grants the state received from the federal government. The state in February outlined its plan to spend the next round of those flexible grants.

The governor signed the executive order Friday.

The order gives the Community Affairs commissioner the authority to “commandeer Sandy-impacted eligible structures,” as well as take possession of rights of way on any property needed to facilitate demolition.

According to the governor’s office, state code enforcement officials have been surveying private properties to identify homes that need to be razed. Property owners will be notified when that determination is made and then will have the opportunity to challenge it.

Posted in New Jersey Real Estate, Politics | 63 Comments

Geography Lesson

Posted on March 1, 2014 by grim

Can’t seem to find NJ anymore, can someone help?


(click to enlarge)

Posted in Economics, Foreclosures, New Jersey Real Estate, Politics | 68 Comments

Underwater homeowners drop below 20% (only important if you are a numerologist)

Posted on February 28, 2014 by grim

From HousingWire:

1 in 5 homeowners still underwater at year’s end

Just under 1 in 5 homeowners are still underwater, according to the latest Zillow negative equity report, meaning they still owe more on their mortgage than their home is worth.

The national negative equity rate ended 2013 below 20% for the first time in years, dipping to 19.4% of all homeowners with a mortgage.

More than 9.8 million homeowners are still underwater nationwide.

The fourth quarter of 2013 is the seventh consecutive quarter that home values have risen, freeing almost 3.9 million homeowners nationwide in all of 2013.

The national negative equity rate fell from 27.5% of all homeowners with a mortgage as of the end of the fourth quarter of 2012, and 21% in the third quarter.

But while negative equity is slowly but surely receding, a number of factors will help ensure it remains a factor in the market for years to come.

“We’ve reached an important milestone as negative equity has fallen below 20% nationwide, which has helped free up marginally more inventory and contribute to further stabilization of the market,” said Zillow chief economist Stan Humphries. “But a number of headwinds will prevent negative equity from falling at the kind of sustained, rapid pace we need before the market can completely return to normal, and it remains roughly four times what it is in a healthier market. High negative equity is just another sign of how distorted the market continues to be, and how far we still have to go on the road back to normal.”

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

At least they’re not getting worse…

Posted on February 27, 2014 by grim

From the APP:

NJ leads nation in share of distressed mortgages

It’s been six years since the housing bubble collapsed, but foreclosures still weigh on New Jersey’s real estate market, according to a report released Wednesday.

The state’s share of distressed mortgages, the highest in the nation, is the main reason its housing prices have failed to keep pace with the nation, said Patrick J. O’Keefe, the report’s author and director of economic research for CohnReznick, an accounting firm.

“I don’t think there’s anything in the data to suggest things are getting worse,” O’Keefe said. “What we can say is they are not improving as rapidly, all things being equal, as they should be.”

The report provided more evidence that New Jersey’s economy is recovering from the recession more slowly than the rest of the nation.

The housing market has been trying to regain its footing after homeowners in 2007 began defaulting on loans they couldn’t afford, sparking a global financial crisis that saw the U.S. bail out banks, the unemployment rate soar and New Jersey home prices tumble more than 20 percent.

New Jersey’s housing market has stabilized, thanks in part to record-low mortgage rates. Real estate agents at the Shore talk about the lack of inventory. But the state’s foreclosure rate has remained persistently higher than the rest of the nation.
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The report found New Jersey is chipping away at its foreclosure rate; 7.9 percent of mortgages were in foreclosure at the end of 2013, down from 9 percent at its peak in the first quarter of the year.

Still, at the end of the year the state had the nation’s highest share of distressed mortgages — loans that were 90 days late or in foreclosure — 11.8 percent. And the state ranked 40th nationwide in annual housing appreciation.

New Jersey home prices have increased 3.6 percent since they bottomed out during the first quarter of 2012, but remain 17.7 percent below their peak in 2006.

By comparison, home prices nationwide have risen 14.5 percent since they hit bottom in the middle of 2011, but remain 8.9 percent below their 2006 peak, O’Keefe said.

One real estate agent said the state’s high foreclosure rate still amounted to a relatively small portion of the overall market, and it hasn’t had a big impact on sales of single-family homes.

Posted in Economics, Foreclosures, Housing Recovery, New Jersey Real Estate | 53 Comments

2013 was a good year for North Jersey home prices

Posted on February 26, 2014 by grim

From the Record:

Home prices in region saw boost in 2013

Home prices in the region rose 6.3 percent in 2013, while national values jumped 11.3 percent — the strongest nationwide showing since 2005, the Standard & Poor’s/Case-Shiller index reported Tuesday.

But U.S. prices are likely to rise by a more modest 5 to 7 percent this year, the index’s co-creator, housing economist Robert Shiller, predicted Tuesday.

“This is not a time of great enthusiasm for home purchases,” Shiller said — in part because consumers don’t expect home prices to soar in coming years. Home buying has also been held back by an uptick in mortgage rates and tight lending standards.

The national rise in single-family prices was boosted by outsized gains in California, as well as in markets like Phoenix and Las Vegas, which were battered in the housing bust. Prices in the New York metropolitan area, which includes North Jersey, have not rebounded as strongly, in part because they didn’t fall as far. In addition, the region’s economy relies on the financial services industry, which has trimmed jobs since the recession. And New Jersey faces an overhang of distressed properties headed into foreclosure.

Case-Shiller does not break out price gains by county, but according to the New Jersey Association of Realtors, Bergen County single-family prices rose 5.7 percent during 2013, to a median $460,000, while Passaic County prices rose 4.9 percent, to a median $300,000.

Posted in Economics, Housing Recovery, North Jersey Real Estate | 75 Comments

Is Inventory High or Low?

Posted on February 25, 2014 by grim

January Inventory (Active Listings)

Essex
2001 – 1713
2002 – 1896
…
2014 – 2398

Morris
2001 – 2010
2002 – 2284
…
2014 – 2625

Passaic
2001 – 1296
2002 – 1184
…
2014 – 1862

Somerset
2001 – 1300
2002 – 1455
…
2014 – 1650

Sussex
2001 – 1321
2002 – 1273
…
2014 – 1856

Union
2001 – 1416
2002 – 1322
…
2014 – 2148

Posted in General | 55 Comments