Anyone surprised?

Posted on August 29, 2013 by grim

LISTEN UP!

Clear your calendars now, I don’t care what you committed to.

Today – 6:30 PM — Montecristo Lounge at J&R Cigars, 301 Route 10 East, Whippany, NJ 07981

No excuses.

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From the Washington Post:

Regulators relax proposed mortgage rule

Federal regulators on Wednesday softened a proposed rule that would require banks to keep a stake in home loans that they parcel out to investors, for fear that the policy would disrupt the nascent housing recovery.

The move will likely quiet the outcry from industry groups and housing advocates who have cautioned against strict rules that could freeze home buyers out of the market. Banks have warned that a pile-on of new mortgage regulations would raise their costs and ultimately make it more difficult or expensive for consumers to get a loan.

In response, six agencies, including the Federal Reserve, have loosened the definition of the types of home loans — known as qualified residential mortgages or QRM — that are deemed secure enough to be exempt from the extra requirements.

Regulators initially defined qualified residential mortgages as those with at least a 20 percent down payment and no more than a 36 percent debt-to-income ratio. That 2011 proposal raised fears that the definition was so strict that it would limit access to credit for low- and moderate-income Americans.

The new 505-page proposal has eliminated the down-payment requirement and raised the debt-to-income ratio to 43 percent. On loans that do not meet that threshold, banks and bond issuers will have to keep a 5 percent interest in the mortgages as they get bundled into securities for investors. That’s to make the banks retain some of the risk and prevent a repeat of the shoddy mortgage securities created during the financial crisis.

Posted in Foreclosures, Politics, Risky Lending | 48 Comments

June home prices up 12% YOY – Much smaller locally

Posted on August 28, 2013 by grim

From Forbes:

Home Price Growth Beginning To Slow Down, Says S&P/Case-Shiller

Home prices continued their upward march in June, if at a slightly slower pace.

U.S single-family home prices in 20 metropolitan areas rose a seasonally-adjusted 0.9% in June from a month earlier, according to the S&P/Case-Shiller Home Price Index, after rising 1% in May.

The gain puts home prices 12.1% higher than they were a year ago, as all 20 metro areas welcomed price increases on both a monthly and annual basis, led by Las Vegas (24.9%) and San Francisco (24.5%). S&P/ Case-Shiller’s 20-city composite index also posted a 7.1% increase in the second quarter and a 10.1% increase over the past four quarters.

Yet the biggest takeaway from the new report is the fact that the pace of home price growth is showing signs of slowing down, as rising mortgage rates begin to weigh on home sales. Thirteen of the 20 cities saw their returns weaken on a monthly basis.

“Overall, the report shows that housing prices are rising but the pace may be slowing,” says David Blitzer, chairman of the Index Committee at S&P Dow Jones Indices. “As we are in the middle of a seasonal buying period, we should expect to see the most gains. With interest rates rising to almost 4.6%, home buyers may be discouraged and sharp increases may be dampened.”
…
“I think there is a risk of a softening housing market,” warned Robert Shiller, Yale economics professor and co-creator of the Case-Shiller home price indexes, on CNBC Tuesday morning. He noted that housing has been a “speculative market” thanks to the prevalence of real estate investors that include Wall Street institutions and house flippers. Last week he warned that rising rates will hurt home prices as the increasing cost of borrowing cuts into buyer demand.

Still, news that the home price surge may be slowing isn’t necessarily unwelcome. Economists like the National Association of Realtors’ Lawrence Yun have warned that prices have been rising “too fast” and at these double-digit rates of appreciation are “unsustainable”.
…
Economists and real estate experts don’t expect rising rates — or any other factor of “stabilization” — to derail the housing recovery. Trulia chief economist Jed Kolko notes that home prices are still low relative to rents in every major city across the country: a 30-year fixed mortgage at a rate of 4.5% with 20% down means it is still more than a third cheaper to buy a home than rent one on average nationally. “Not every market will remain cheaper to buy but on average across the U.S., buying will stay cheaper than renting until rates reach 10.5% — a level we haven’t seen since 1990,” Kolko recently explained in an interview with FORBES.

He says the first market that will tip in favor of renting is San Jose, Calif., when rates hit 5.2%. Behind that San Francisco, New York, and Honolulu will follow, at just under 6%.

CoreLogic chief economist Mark Fleming has also crunched affordability numbers. Nationally, at the current rate of price growth versus median income growth, mortgage rates would have to hit 6.5% before housing becomes less affordable than economic fundamentals could support.

Posted in Economics, Housing Recovery, National Real Estate, New Jersey Real Estate | 78 Comments

Hammers swinging, multifamily rentals hot

Posted on August 27, 2013 by grim

GTG Alert –NJRER GTG now scheduled for Thu 8/29 from 6:30 PM ’til whenever; venue — Montecristo Lounge at J&R Cigars, 301 Route 10 East • Whippany, NJ 07981 (973) 887-0800 (http://www.jrwhippany.com/index.cfm?page=lounge).

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From the Record:

Rental properties spark leap in N.J. housing activity

Home-building activity in New Jersey has risen 32 percent so far this year, propelled by construction of rental apartments — another sign that the housing market is healing.

Through July, the state had issued building permits for 13,234 housing units in New Jersey, compared with just over 10,000 for the same period last year, the U.S. Census Bureau reported Monday.

“There’s an acceleration in activity,” said Patrick O’Keefe, an economist with CohnReznick, an accounting firm with an office in Roseland. “While we’re not back to the go-go days of 2005, we have gotten back to a more sustainable pace.”

The state is on track to start more than 22,000 housing units this year — above the nearly 18,000 begun last year, but below the housing-boom peak of 38,588 in 2005, and under the historical average above 30,000.

Multifamily construction accounts for more than 57 percent of the state’s permits so far this year. That has been the trend in recent years, as demand has climbed for rentals in the face of foreclosures and tighter mortgage lending standards.

Bergen and Hudson counties are the busiest construction markets in the state, with projects that include the Modern, a 47-story high-rise in Fort Lee that’s part of that town’s long-delayed downtown redevelopment; an AvalonBay building in Hackensack, next to the Shops at Riverside; and new buildings in Edgewater and Fair Lawn, as well as along the Hudson River in West New York.

Russo Development of Carlstadt is building a 296-unit apartment complex a half-mile from the Kingsland commuter train station in Lyndhurst.

“Multifamily is where the demand is now,” said Russo spokeswoman Lisa Sikora. “We’re seeing a lot of twenty-somethings who, before, only wanted to live in New York City or along the [Hudson River] Gold Coast. We’re seeing that demographic become more comfortable near a train station but with a more suburban lifestyle.”
…
ince the housing bust, “we’re just seeing that a lot of people don’t feel comfortable buying; they’d rather rent than own and take the risk of losing their equity,” said Joseph Langan, president of River Drive Construction. In addition, he said, mortgage underwriting standards are so tight that many people who’d like to buy can’t qualify for a loan.

Banks are generally much more willing to lend builders money to put up rentals, rather than for-sale homes, Langan said.

Last year, about 18,000 housing permits were issued in the state, an increase over the 13,000-a-year average that prevailed from 2009 to 2011. About 12,400 units were built in 2009, the fewest since World War II.

Nationally, home permits are running about 25 percent ahead of last year’s pace. About one-third have been for multifamily units.

The rebound in home building is not the only sign that the housing market is recovering from the worst bust in decades. Home prices are also rising in the state, although not as quickly as in the nation as a whole, O’Keefe pointed out.

“We’re recovering more slowly, but the momentum is at least in a positive direction,” he said.

Posted in Economics, Housing Recovery, New Development, New Jersey Real Estate | 91 Comments

NJ “not bad” for retirement, if you don’t have to pay property taxes

Posted on August 26, 2013 by grim

From the Star Ledger:

New Jersey isn’t ‘tax friendly’ for retirees, study shows

It’s no secret that New Jersey is not the friendliest place for retirees. It’s not the weather, the highways or even the politics. It’s the taxes.

A Kiplinger study released last week ranks New Jersey 41st when it comes to tax-friendliness for retirees. It could have been worse. Rhode Island tops the list as the least-amenable state, followed by Vermont, Connecticut, Minnesota and Montana.

“New Jersey is not that bad,” said Sandra Block, senior editor at Kiplinger’s, a financial publication.

“There are actually some aspects that are tax friendly,” she said. “New Jersey does exempt a lot of retiree income. It’s pretty generous in this respect. But property taxes are a real problem.“

According to the Tax Foundation, New Jersey has the second-highest state and local tax rate in the country, with more than 12 percent of income going to pay one tax or another. Income taxes alone for the wealthiest in New Jersey are 8.97 percent.

Property taxes vary by municipality, but with the median price of a home at $348,300, the median tax is $6,759, according to the Tax Foundation. Seven of the top 10 counties nationwide with the highest median real estate taxes are in New Jersey.

The math is simple for someone looking to get the most from their retirement funds. The median sale price of a home in the Miami-Dade area of Florida is $320,000, according to Zillow, a real estate firm, and the taxes are $4,200. That’s a $2,500 yearly savings on property taxes.

Posted in Economics, New Jersey Real Estate | 70 Comments

Getting better everywhere but here?

Posted on August 23, 2013 by grim

From the Philly Inquirer:

U.S. jobless claims dip, but Pa., N.J. still struggle

For the first time since the start of the recession in late 2007, the number of people filing initial claims for unemployment insurance in the month fell to 330,500 a week on average, the U.S. Labor Department reported Thursday.

The news buoyed Wall Street, but the national story isn’t what’s happening in the Philadelphia region.

“Philadelphia’s economy has struggled this summer,” said Ryan Sweet, an economist with Moody’s Analytics in West Chester.

The last time the national number was so low was in November 2007 – the month before the official start of what economists have described as the worst recession since the Great Depression.

“The economy seems to be picking up some steam as the labor market continues to improve,” said economist Joel Naroff of Naroff Economic Advisors in Bucks County.
…
Pennsylvania and New Jersey were identified in the report as two of 10 states with the highest unemployment among those covered by unemployment insurance.

“Philadelphia has taken a beating and has taken a while to recover,” said Sweet, who specializes in Pennsylvania’s economy.

“I think, going forward, that it will begin to heal more quickly,” he said.
…
In New Jersey, July’s unemployment rate dropped to 8.6 percent from 9.7 percent a year ago and 8.7 percent in June.

Pennsylvania’s unemployment rate has remained at 7.5 percent for the last three months, but is down from 8.1 percent a year ago.

In New Jersey, hiring increased in every sector over the year, but declined in most sectors over the summer.

In South Jersey, “it’s a problem in manufacturing,” said Sohini Chowdhury, the Moody’s Analytics economist who specializes in New Jersey.

North Jersey’s mainstay – the financial industry – saw increased hiring in the summer.

Posted in Economics, Employment, Housing Recovery, New Jersey Real Estate | 125 Comments

July home sales up 17%, hit 4 year high

Posted on August 22, 2013 by grim

From Bloomberg:

Sales of U.S. Existing Homes Rise to Highest Since 2009

Sales of previously owned U.S. homes jumped in July to the second-highest level in more than six years as buyers rushed to lock in mortgage rates before they increased any more.

Purchases advanced 6.5 percent to a 5.39 million annual rate last month, beating the 5.15 million median forecast of economists surveyed by Bloomberg, figures from the National Association of Realtors showed today in Washington. Sales were the strongest since a government tax credit temporarily boosted demand in November 2009, and second-highest since March 2007.
…
“Housing will be an important part of the recovery through the rest of this year and into 2014,” said Gus Faucher, senior economist at PNC Financial Services Group Inc. in Pittsburgh. PNC is the most accurate forecaster of existing-home sales over the past two years, according to data compiled by Bloomberg. “We have a better labor market and improved confidence, so the underlying demand is there.”
…
The 6.5 percent jump in demand last month from June would be the biggest since January 2002, excluding the periods in 2009 and 2010 that were influence by the government homebuyer tax credit and its extension.

Compared with a year earlier, purchases increased 17.2 percent in July on an adjusted basis, today’s report showed.

The surge in demand also boosted property values as the median price increased 13.7 percent in July from a year earlier, the most since October 2005. It climbed to $213,500 last month from $187,800 in July 2012.
…
There were 2.28 million homes for sales in July, up from 2.16 million a month earlier, according to the report. At the current sales pace, it would take 5.1 months to sell those houses, the same as in June. The inventory was down from 2.4 million a year earlier, and the lowest for any July since 2002.
…
“It’s not unusual, when you see a spike in mortgage rates, to see a couple months later a spike in closed sales,” said Lawler, a former senior vice president at Fannie Mae in Washington. “People saw the beginning of the trend and accelerated their pattern of buying. In all likelihood, within a month or two, you’re likely to see the pace of sales slow.”

Existing-home purchases are recovering from a 13-year low of 4.11 million reached in 2008. Annual sales peaked at 7.08 million three years earlier. A total of 4.66 million previously owned houses were sold in 2012.
…
Sales climbed in all four U.S. regions, with the biggest gain in the Northeast.

Posted in Economics, Housing Recovery, National Real Estate | 126 Comments

Cashing out at the top?

Posted on August 21, 2013 by grim

From Bloomberg:

The Housing Market Is Hot, So Re/Max Is Going Public

There’s money to be made in real estate again, and one of the big names in the industry is eager to catch the boat. Re/Max Holdings, the franchiser of real-estate brokerages, filed papers today to go public, hoping to turn the rebound in the U.S. real estate market into a successful payday as a publicly traded company.

If it’s completed, Re/Max’s public offering would become at least the third big IPO in the sector in the past year. To review: Realogy Holdings (RLGY)—parent of Century 21 and Coldwell Banker—went public in October, raising more than $1 billion. The stock has gained 58 percent. Trulia (TRLA) went public the same month and raised more than $100 million. Its shares are up 172 percent this year. Shares of establishment player Zillow (Z) (IPO: July 2011) are up 214 percent this year.

Re/Max: Us too, please.

From the NYT/Dealbook:

To Cover New York, Zillow Buys a Rival Site

It is the parlor game that has long been played in Manhattan’s upper social circles: guessing how much so-and-so paid for their apartment, and how nice it is.

That information, once closely guarded by real estate brokers, has become much easier to find in recent years, thanks largely to StreetEasy.

On Monday, the seven-year-old start-up is expected to announce that it has sold itself to Zillow, the giant of online real estate information, for $50 million in cash.

Though tiny, the acquisition will give Zillow a huge lead in one of the nation’s most desirable markets as it battles rivals like Trulia and Redfin amid a resurgence in real estate sales.

Both Zillow and Trulia have turned to acquisitions to help gain an edge. Trulia paid about $310 million in cash and stock this spring to buy another rival, Market Leader, in one of the biggest deals by far in the industry.
…
“New York is the biggest real estate market in the country,” Mr. Rascoff said. Calling himself jealous of his smaller rival’s success, he added, “It’s just a much better product in New York.”

StreetEasy’s strength led Zillow to hold more than three years of talks with its smaller rival.

Posted in Housing Recovery, National Real Estate | 200 Comments

Gold Coast Renaissance (Take #3)

Posted on August 20, 2013 by grim

From the NYT:

Have New Yorkers finally discovered Jersey City?

As property values soar even in Brooklyn neighborhoods once viewed as on the fringe, New Yorkers are looking across that other river that separates Manhattan from the rest of the world: the Hudson. And some of them are heading to Jersey City, which has a flintier personality than Hoboken, its preppy neighbor to the north. New Jersey’s second-largest city, it now has a branch of the popular Williamsburg arcade-bar Barcade; farm-to-table restaurants; and a new mayor who worked for Goldman Sachs, served in Iraq and rappelled down a skyscraper.

Jersey City has long attracted the Wall Street crowd to its splash of waterfront high-rises that promise cheaper rent and a speedy ride to Manhattan. But for years, the rest of the city was an afterthought with a reputation for high crime, failing schools and a lack of night life. But as the economy and housing market improve, other Jersey City neighborhoods are enjoying newfound attention, with boutique storefronts opening and New Yorkers steadily moving in.
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“Jersey City is good for 30- to 40-somethings who aren’t interested in hanging out in Williamsburg anymore,” said Kevin Pemoulie, the former chef of Momofuku Noodle Bar, who last year along with his wife, Alex, opened the restaurant Thirty Acres in the Van Vorst Park neighborhood. He, like many others who have moved to Jersey City, also liked the in-transition quality of the area.

With New York City rents reaching new highs, housing prices by comparison are still reasonable in Jersey City. The average rent here was $1,900 a month during the second quarter of the year, according to data provided by Trulia. In early July, the average listing price for a home downtown was $604,000 and in Hamilton Park was $426,000, according to data provided by Liberty Realty.

Richard LeFrak, chief executive of the LeFrak Organization, which began developing the Newport neighborhood in 1986 when it was rail yards and warehouses, is one who has noticed a change. “I would say, in the last three years, when you say you live in Jersey City,” he said, “people don’t look at you like there’s something wrong with you.” In the next decade, LeFrak plans to add condos, a hotel and an outdoor swim club to Newport.
…
“Brooklyn is just ridiculous — it’s expensive,” Mr. Pemoulie said. “It’s frustrating to be there. All of my friends ended up moving out.”

Indeed, some parts of Brooklyn have even eclipsed Manhattan in rent prices. The average rent for a one-bedroom in Williamsburg in July was $3,155 a month, a price point rivaling those of many Manhattan neighborhoods, according to a market report by MNS. Even less-developed Brooklyn neighborhoods are commanding a premium: in Bushwick in July, the average rent for a one-bedroom was $1,900.

Still, for many New Yorkers, crossing the Hudson is a psychological hurdle, even if Jersey City now has a Two Boots Pizza and a coffee shop that serves Blue Bottle Coffee.

“The PATH train is like the train to Hogwarts,” said Kip Jacobson, 41, alluding to the “Harry Potter” series. Mr. Jacobson moved to the Van Vorst Park neighborhood from Williamsburg a year ago with his wife, Samantha, and their young son.
…
Developers are building, and not just along the waterfront. Citywide, 2,610 units of housing are under construction and 11,405 more have been given the green light, according to the mayor’s office. In fact, the city has enough developable land available to fill all of Hoboken, which is one square mile. But the construction is still not keeping pace with demand. In July there was only a two-month supply of available homes downtown, according to Liberty Realty.

“If you see a vacant building in Jersey City,” said Joseph V. Covello, the owner of Liberty Realty, “someone is bidding on it or renovating it.”

Posted in Economics, Housing Recovery, New Development, NYC | 97 Comments

Southern Jersey Shore home prices begin to tick up

Posted on August 19, 2013 by grim

From the Press of Atlantic City:

South Jersey Shore’s home prices finally on the rise

The shore area of South Jersey finally may be joining the improving housing market elsewhere in the nation.

The median existing single-family home in the region sold for $7,800 more in the second quarter than one year earlier, according to recently released data from the National Association of Realtors, or NAR.

The price difference represents a nearly 4 percent increase on the median home sale in a region encompassing Atlantic, Cape May and Cumberland counties.

The median price — $226,500 in the second quarter — means half of homes sold for less, half for more.
Nationally, median sale prices increased about 12 percent during that same period, which the National Association of Realtors said was the strongest year-over-year price gain in seven years.

“Within the last two years, I’ve certainly seen prices stabilize. For a while, they were going in a downward direction,” said John McCann, co-owner and broker of record at McCann Realtors, which predominantly serves Sea Isle City and Ocean City. “There’s evidence of absolute improvement compared to where we were, but we still have a ways to go.”

McCann said interest rates, which are still relatively low but have been increasing the past few months, had been motivating some buyers.

“I’ve had several settlements over the past four months because of interest rates starting to move. After (the rates) came up, they became more aggressive with their searches. Now I’m seeing people looking and pulling the trigger,” he said.
…
But another measurement, this one by CoreLogic, a data and analytics company based in California, offered a different take on regional home prices.

The firm said Atlantic County prices, including distressed sales, increased about 1 percent in June from a year ago. Excluding those short sales and foreclosures, prices increased about 4 percent.

CoreLogic said Cape May County prices increased about 5 percent in June from a year ago, and nearly 6 percent excluding distressed sales.

CoreLogic said prices still declined in June in Cumberland County, by almost 3 percent from June 2012 including distressed sales. But excluding distressed sales, prices dropped even further — about 7 percent.

Posted in Housing Recovery, Shore Real Estate, South Jersey Real Estate | 66 Comments

Delinquencies improve, but procedural delays plague NY/NJ

Posted on August 17, 2013 by grim

From the NYT:

Delinquencies on the Decline

In another sign of an improving market, mortgage delinquencies and foreclosures are down significantly since last year — although procedural impediments have tempered progress on the East Coast, especially in New York and New Jersey.

The national mortgage delinquency rate — defined as borrowers at least 60 days past due on their payments — shrank by 26 percent in the second quarter, when compared with the same period in 2012, according to TransUnion, a credit information service.

The delinquency rate is now 4.09 percent — still about double prerecession levels, but on a downward trend, according to Tim Martin, the group vice president for United States housing in TransUnion’s financial services business unit. “We had a really good start to the year,” he said. “This is the third quarter in a row where we’ve had record improvements.”
…
Florida and Nevada have the highest delinquency rates — 9.9 and 7.7 percent. But just behind them are New Jersey, at 7.2 percent, and New York, at 5.7 percent.

“They are not the worst delinquency states,” Mr. Martin said, “but they’ve made the least progress since their peak out of other states in the country.”

Although neither New York nor New Jersey experienced the boom-and-bust scenario that dragged down the Florida and Nevada markets, their foreclosure timelines have been longer because of delays in the process, caused by logjams in state courts.

Sam Khater, the deputy chief economist of CoreLogic, a residential property information provider, described it this way: “The real issue in New York and New Jersey is, you had a slow drip of water coming through, and the drain was plugged. Even a slow drip will build up after a while.”

This regional backup is also evident in foreclosure inventory levels. The three states with the biggest inventories were Florida (8.6 percent), New Jersey (6 percent) and New York (4.8 percent). Connecticut came in fourth, at 4.2 percent. But nationally, the number of homes in some stage of foreclosure had dropped off by 28 percent, to roughly 1 million, as of the end of June, according to a CoreLogic analysis.
…
Mr. Martin predicted that it would take two more years for delinquency rates to reach normal levels. The rapid declines of the last several quarters will most likely slow with rising interest rates, which limits people’s ability to refinance and buy homes. But the rate could still dip below 4 percent by the end of the year, he said. Essentially, the nature of the delinquent mortgages no longer looks so ominous.

“People can stop getting scared off by this big number,” Mr. Martin said. “It’s just a bubble of folks who haven’t worked their way through the process.”

Posted in Economics, Foreclosures, Housing Recovery, Mortgages | 100 Comments

NJ job market kicked in the face in July (or perhaps just an anomaly?)

Posted on August 16, 2013 by grim

From the APP:

NJ lost 11,800 jobs in July; unemployment rate drops to 8.6 percent

This isn’t going to be easy, is it?

New Jersey’s job market lost 11,800 more jobs than it gained in July, the state reported Thursday, the first monthly employment loss since the beginning of the year.

The Christie administration and economists cautioned not to make too much of one monthly survey. But from a broader perspective it showed that despite an influx of billions of dollars in federal aid and insurance money since superstorm Sandy, New Jersey’s economy hasn’t gained traction.

“It’s like a roller coaster,” said Jim Wallace, 59, owner of Matawan Stained Glass. “You get a couple good weeks, and it dies off for a while. There’s, like, no rhyme or reason.”
…
New Jersey’s unemployment rate still managed to fall to 8.6 percent in July from 8.7 percent in June, the state Department of Labor and Workforce Development said, but the decline could be chalked up to fewer prospective workers actively seeking jobs.
…
The recovery has been slow. While the U.S. has regained more than 80 percent of the private-sector jobs it lost, New Jersey has recovered less than 60 percent, according to a recent study by Rutgers University.

The obstacles are widespread: New Jersey hasn’t benefited from a resurgent manufacturing industry; federal taxes rose in January; upstart economies in China, Brazil and India have slowed; and gasoline prices spiked in July, diverting consumers’ disposable income to their gas tanks, said Patrick J. O’Keefe, director of economic research for CohnReznick, a New York accounting firm.

There are more sweeping changes, too. Workers are emerging from the recession in a new digital age in which they are armed with tablet computers and smartphones, making them so productive that employers don’t need to go on a hiring streak, said Farrohk Hormozi, an economist at Pace University in New York.

“This week I’m on vacation, but believe it or not, I’m working more extensively than if I was in the office,” Hormozi said. “That’s the nature of the job market.”

Posted in Economics, New Jersey Real Estate | 205 Comments

No bubble in NJ – But we could be next to heat up

Posted on August 15, 2013 by grim

GTG Alert –NJRER GTG now scheduled for Thu 8/29 from 6:30 PM ’til whenever; venue — Montecristo Lounge at J&R Cigars, 301 Route 10 East • Whippany, NJ 07981 (973) 887-0800 (http://www.jrwhippany.com/index.cfm?page=lounge).

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From the Star Ledger:

No sign of a New Jersey housing bubble, according to report

Housing market watchers have been keeping a keen eye on the horizon for a bubble – when homes are selling for far more than they’re worth – to appear. The last time one did was in 2006. When it burst, it sent the economy into a tailspin.

With housing prices on the rise again, the fear of a new bubble has resurfaced.

But a report by Trulia finds prices are still undervalued relative to long-term fundamentals, especially in the New Jersey markets covered in the report.

“During last decade’s housing bubble, prices were as high as 39 percent overvalued,” Trulia chief economist Jed Kolko said in the report. “We estimate that national home prices are (now) 5 percent undervalued,” he said.
…
In the Newark area, home prices are up 3 percent over last year, but still undervalued by 3 percent. In Northern New Jersey and New York, home prices are up 5 percent, but the market is undervalued by 7 percent.
…
In the Edison-New Brunswick market, the market is overvalued by 3 percent – well within a safety range – as prices rose 8 percent.

Camden saw prices climb 3 percent, while homes remain undervalued by 10 percent.

“Even though prices are less undervalued than one quarter ago, our chances of avoiding a bubble have gotten better,” Kolko said in an e-mail. “Price gains are slowing down, and asking prices dropped in July. Unlike in last decade’s bubble, prices today have started to cool before reaching dangerous heights.”

From CNBC:

Housing recovery radar: Where are the next hot spots?

Here are states/cities where real estate pros say could be the next hot spots where the housing recovery heats up. While these markets have seen some recovery, they’re still down significantly from their peak.

TATES – New York, New Jersey, Pennsylvania, Maryland, North Carolina, South Carolina, Florida

CITIES
Wilmington, Del.
Tampa, Fla.
Miami
Cape Coral-Ft Myers, Fla.
Orlando, Fla.
Chicago
Indianapolis
Minneapolis
Charlotte, N.C.
Newark, N.J.
Trenton, N.J.
Philadelphia
Reading, Pa.
Nashville, Tenn.
Memphis, Tenn.
Dallas
Houston
Ogden, Utah

Posted in Economics, Housing Recovery, New Jersey Real Estate | 187 Comments

Parents Just Don’t Understand

Posted on August 14, 2013 by grim

From the Star Ledger:

Parents willing to give grown kids a break in Northeast

Parents of grown children in New Jersey – as well as the rest of the Northeast – tend to be more lenient when it comes to letting their college graduates live at home, according to a new survey by Coldwell Banker Real Estate.

The Coldwell Banker poll of more than 2,000 people found most respondents said four years after college was too long for offspring to be living at home. But in the Northeast, five years was the breaking point.

Northeasterners were more lenient in other ways.

About 23 percent of Northeasterners said there is no time limit for how long grown children can live at home, compared with 17 percent of Southerners.

In the West, 15 percent said young adults should never live at home, while only 9 percent of Northeasterners held the same opinion.
…
“In terms of transitioning into independent adulthood, it’s almost as if 27 is the new 18,” psychotherapist Robi Ludwig, lifestyle correspondent for Madison-based Coldwell Banker Real Estate, said in the report. “Living at home can be a great opportunity for young adults who need some time to get on their feet, but it’s only beneficial if the time is used wisely. Our 20s are a very crucial time because the decisions we make and the lessons we learn then influence who we become as adults.”

A recent Pew report found that 36 percent of young adults between 18 and 31 were living in their parents’ homes – the highest share in four decades and up markedly from before the recession.

Posted in Demographics, Economics, Employment, National Real Estate | 109 Comments

Why a private mortgage market might not be a good idea

Posted on August 13, 2013 by grim

From the NYT:

In one bundle of mortgages, the subprime crisis reverberates

A subprime deal came back to haunt Fabrice Tourre, a former Goldman Sachs trader, when a federal jury in Manhattan found him liable for civil securities fraud.

He is not the only one feeling the pain of a subprime transaction six years on.

Hundreds of thousands of subprime borrowers are still struggling. Some of their mortgages ended up in another Goldman deal that was done at the same time as Mr. Tourre was working on his own financial alchemy.

In February 2007, just before everything fell apart, Goldman Sachs bundled thousands of subprime mortgages from across the country and sold them to investors. This bond became toxic as soon as it was completed. The mortgages slid into default at a speed that was staggering even for that era.
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This is the story of one of those bonds, GSAMP Trust 2007 NC1.

The name is the sort of gobbledygook that is common in the bond market, but it tells a story. The “GS” is derived from Goldman Sachs. The Wall Street firm didn’t actually make mortgages to subprime borrowers that were in the deal. Instead, Goldman bought them from a lender called New Century, the “NC” in the title.

It was New Century that lent to Wendy Fillmore, when she and her husband wanted to buy their house in Las Vegas in 2006. The home cost $276,000. New Century provided two loans, one for a $221,000 loan and a second mortgage for $53,000. Data for the Goldman deal shows that it contains the Fillmores’ larger loan.
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“I was wondering how we managed to get approved for as much as we did,” she said.
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A month before Ms. Fillmore got her mortgage, Daniel L. Sparks, Goldman’s head of mortgages, wrote in an e-mail that he was a “bit scared” of New Century and had reservations about Goldman taking more loans from the lender. The e-mail was contained in materials released by Congress as part of an investigation of Wall Street.
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Ms. Fillmore is still in her Las Vegas home. She estimates that the market value of the house is around half the combined value of her two mortgages.
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Three-fourths of the borrowers in the deal have fallen well behind on their payments at some point, according to a special analysis of the deal performed by the Federal Reserve Bank of Boston. Many of those people have lost their houses or will lose them. Nearly half the loans in the bond have been in foreclosure proceedings since it was issued, according to the Boston Fed.

One of Mr. Sparks’s former Goldman colleagues is Jonathan S. Sobel, who also left Goldman in 2008 and is also a defendant in the federal action. A year ago, Mr. Sobel and his wife acquired a duplex apartment at 740 Park Avenue, one of the city’s most coveted addresses, according to New York property records. They paid $19.3 million.
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The question today is whether loans like the one made to Mr. Haynes should ever have been put in the Goldman bond. Critics say the banks did not properly portray the full risks of the loans bundled into bonds.
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One-fourth of the loans in the Goldman bond have been modified, according to the Boston Fed’s analysis. Not all of those succeeded, though. Of the 9,393 loans originally in the deal, 14 percent have been modified and are still current on their payments.

Today, the borrowers whose loans were put in the Goldman bond say they have been chastened by their experiences with debt.

“If I could take everything back, I never would have got involved,” Mr. Haynes, the Brooklyn resident, said.

Posted in Foreclosures, Housing Bubble, Mortgages, Risky Lending | 247 Comments

Has the housing ship sailed?

Posted on August 12, 2013 by grim

From the WSJ:

Did You Miss Your Chance to Make a Real-Estate Killing?

Only a year and a half ago, none other than Warren Buffett told CNBC he would invest in “a couple hundred thousand” single-family homes if it were practical.

But in that short period, the national housing market has gone from the cheapest it has been in a quarter-century to slightly overpriced—at least according to some measures.

Relatively cheap mortgages still make it a great time to buy a home to live in, but anyone hoping to treat it as an “investment” should be wary.

In early 2012, homes did indeed look inexpensive. To measure home values, some researchers divide home prices by rents. The resulting price/rent ratio is similar to the price/earnings ratio commonly used to evaluate stocks.

By that measure, in the fourth quarter of 2011—when the ratio was 19.9—homes were the cheapest they had been since 1987, according to data from Morris Davis, academic director of the James A. Graaskamp Center for Real Estate at the University of Wisconsin.

Since then, though, the housing narrative has done an about-face. Money managers have launched private-equity funds and real-estate investment trusts designed to scoop up homes and rent them out, and real-estate agents once again tell of bidding wars for homes in some areas.
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In all, between May 2012 and May 2013, the latest month for which data are available, the S&P/Case-Shiller 20-city index of home values climbed 12%. Home prices in two of the index’s metro areas—Denver and Dallas, which missed much of the boom—hit all-time records.

Instead of signaling a bargain, the national price/rent ratio in June was at 22.8—already above the historic long-term average of 20.6.

That isn’t to say home prices will start dropping again. Even more so than the stock market, the housing market is a slave to momentum. Prices get out of whack but continue to spiral upward as stories of double-digit gains spread from owner to owner. The last bubble, for example, took many years to inflate before popping.

But for value-seeking investors, the recent brief era of cheap prices is over.

Since 1960, home prices have increased only by about 1.3% annually after inflation, according to Mr. Davis. He says that the current price/rent ratio suggests home prices will increase more slowly than rents over the next five to 10 years.

Based on different data, other researchers have found home prices over long periods merely keep up with inflation.

Other ways of valuing homes are slightly more optimistic but still don’t call for a continuation of last year’s boom.

Instead of comparing prices to rents, some economists prefer to compare prices to average household income for a quick measure of homes’ affordability.

Right now, that ratio stands at about 1.78, according to Moody’s Analytics, compared with 1.92 between 1989 and 2003, before the housing boom started. To get back to average, home prices would have to rise another 8% if incomes stayed constant, says Moody’s Analytics economist Greg Bird.
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A significant drop in prices is unlikely, says David Blitzer, managing director at S&P Dow Jones Indices, who also tracks the housing market.

“Mortgage rates, even though they’ve popped up a bit, are still close to as low as we’ve ever seen,” he says. “If you’ve been thinking of buying a house, you better get out and do it.”

Posted in Economics, Housing Recovery, National Real Estate | 137 Comments