Schiff’s scathing commentary on the recovery

Posted on June 5, 2013 by grim

From Forbes:

Great Reflation Produces Mirage Of Recovery In Housing

Investors and politicians are being treated to some of the “best” home price data since the frothy days of 2006 when home loans were given out like cotton candy and condo flipping was a national pastime. The Case-Shiller 20 City Composite Home price index was up a startling 10.9% for the 12-month period ending in March. Prices in all 20 cities were up, with some (Las Vegas, Phoenix, and San Francisco) notching gains of more than 20%. Meanwhile the National Association of Realtors announced that April pending home sales volume reached the highest level in nearly three years.

The strong housing data are taken as proof that the economy has turned around and that a recovery is under way. Cooler heads may simply see how government policies have channeled money into real estate in order to reflate a bubble that has been collapsing for the last five years. Although the money is entering the market through slightly different paths than it did in 2005 and 2006, its effects on housing, and the broader economy, are the same as they were before the bubble burst. When the inevitable happens again, the ensuing damage will be eerily familiar.

After five years of dismal real estate performance and a lackluster economy, it’s hard to fault people for believing that rising home prices are a good barometer of economic health. There can be little doubt that rising home prices feel good. Even single digit appreciation can make modest home buyers feel like mini-moguls.
…
The truth is that most buyers cannot afford today’s prices without the combination of government guarantees and artificially low mortgage rates. The Federal Reserve has been conducting an unprecedented experiment in economic manipulation. By holding interest rates near zero and by actively buying more than $40 billion monthly of mortgage-backed securities and $45 billion of Treasury bonds, the Fed has engineered the lowest mortgage rates in generations.

At the same time, federal control of the mortgage industry has become nearly complete, with government agencies Fannie Mae , Freddie Mac , and the FHA buying or guaranteeing virtually all new mortgages. In addition, a variety of Federal programs, such as the Home Affordable Modification Program (HAMP) are in place to help keep underwater homeowners in homes that they could not otherwise afford. Taken together, these programs create far more favorable terms for home buyers than those that existed before the crash.
…
This trend has allowed a recovery in home sales even while the national home ownership rate has dropped to 65%, the lowest rate since 1995 (down from almost 70% during the last decade). Now that most of the available foreclosures have been picked through (with the rest log jammed with litigation and red tape), many of the new classes of investment buyers are striking deals directly with the large home builders to buy homes before they are even built. It is no coincidence that the southern tier markets with the fastest appreciation, and the fastest declines in inventories, have been those with the greatest participation of institutional investors.
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The current combination of low rates and investor demand has succeeded in pushing up prices, but that doesn’t mean the market is healthy. For the first quarter of 2013, the Federal Reserve reports a 10% delinquency rate for residential mortgages (those with payments that are at least 90 days past due). This is more than 6 times the rate in the first quarter of 2006. In contrast, credit card delinquencies currently stand at 2.65%, the lowest rate in decades and 31% lower than the rate in the first quarter of 2006. Whether it is by choice, or simply by the ability to pay, Americans are clearly placing a low priority on paying their mortgages.
…
In the meantime, by blowing more air into a deflating housing bubble, the Fed is misdirecting money into a sector that investment capital should be avoiding. A successful economy can’t be built on housing. Rather, a robust real estate market must result from a healthy economy. You can’t put the cart before the horse. As a nation, we do not need more houses. We built enough over the last decade to keep us well sheltered for years. Private equity funds should be using their investment capital to fund the next technology innovator, not wasting it on townhouses in Orlando and Phoenix.

Of course the real risks in housing center on the next leg down, in what I believe will be a continuation of the real estate crash. We can’t afford to artificially support the market indefinitely. When significantly higher interest rates eventually arrive, the fragile market will again be impacted. We saw that movie about five years ago. Do we really want to see it again?

Posted in Economics, Housing Bubble, National Real Estate | 90 Comments

North Jersey Contracts – May 2013

Posted on June 4, 2013 by grim

Here it is! The first look at pending home sales (contracts) for Northern NJ.

(Source GSMLS, except Bergen- NJMLS) – Updated with 2011 Data

May Pending Home Sales (Contracts)
——————————-

Bergen County
May 2011 – 732
May 2012 – 879
May 2013 – 1087 (Up 23.7% YOY, Up 48.5% Two Year)

Essex County
May 2011 – 352
May 2012 – 392
May 2013 – 569 (Up 45.2% YOY, Up 61.6% Two Year)

Hunterdon County
May 2011 – 109
May 2012 – 119
May 2013 – 172 (Up 44.6% YOY, Up 57.8% Two Year)

Morris County
May 2011 – 441
May 2012 – 460
May 2013 – 679 (Up 47.6% YOY, Up 54.0% Two Year)

Passaic County
May 2011 – 178
May 2012 – 233
May 2013 – 336 (Up 44.2% YOY, Up 88.8% Two Year)

Somerset County
May 2011 – 268
May 2012 – 359
May 2013 – 462 (Up 28.7% YOY, Up 72.1% Two Year)

Sussex County
May 2011 – 100
May 2012 – 157
May 2013 – 183 (Up 15.9% YOY, Up 83.0% Two Year)

Union County
May 2011 – 344
May 2012 – 355
May 2013 – 466 (Up 31.3% YOY, Up 35.5% Two Year)

Warren County
May 2011 – 78
May 2012 – 95
May 2013 – 111 (Up 16.8% YOY, Up 42.3% Two Year)

Posted in Economics, Housing Recovery, North Jersey Real Estate | 79 Comments

Recovery at the high-end lags

Posted on June 3, 2013 by grim

From the Star Ledger:

Million-dollar homes haven’t fully emerged from recession yet

The upper end of the housing market was the last to feel the recession, and will be the last to see a recovery, housing experts say.

According to data compiled for The Star-Ledger by Trulia and Otteau Valuation Group, the percentage of homes for sale over $1 million peaked between 2006 and 2008 in New Jersey. The recession officially began in 2007.

But million-dollar-and-higher home sales fell sharply by 2009, from 4.2 percent of total market in 2007 to 2.7 percent two years later, according to Otteau. Trulia, which tracked a smaller market area in New Jersey, reflected a similar plunge from 3.2 percent to 2.4 percent.

Jeffrey Otteau, president of Otteau Valuation, said the plummet coincided with the crash of the brokerage firm Lehman Brothers in 2008.

“Following the collapse of Lehman Brothers and the commencement of the recession,” he said, “that market share began to decline steadily.”

It’s not, however, that the rich suddenly became poor.

“What the affluent have is the ability to pick the time they want to sell,” Otteau said. “They can ride out tough times. They didn’t experience unemployment like the lower-income households did. They are more liquid and can ride out rough patches.”

According to Otteau, the decline of high-end homes on the selling block was about half of what occurred elsewhere. While the overall market dropped by 25 percent, it fell only 12 percent in towns that have easy access to New York City.

Joseph Seneca, an economics professor at the Edward J. Bloustein School of Planning and Public Policy at Rutgers University, saw other factors at play as well.
“You could make the other case that a lot of finance jobs were lost,” he said. “Employment losses in the financial sector were also significant.”
…
“In the good years of the decade, we probably saw more houses priced at $1 million and that’s why the rate of increase in those years is higher,” he said. According to Trulia, the percentage of homes more than $1 million rose from 1.5 percent of sales in 2003 to 3.2 percent in 2008.

“More homes were pushed above $1 million in those years,” Seneca said. “And then we had the bust and all sales collapsed. But the share of million-dollar-homes didn’t go down as quickly as the total market did,” he said.
…
A study by Otteau Valuation of home sales between 2011 and 2012 showed that while sales rose 21 percent, the segments with the largest increase were homes under $400,000 (22 percent), and homes between $400,000 and $600,000 (21 percent). Homes priced between $1 million and $2.5 million rose 12 percent, and homes above $2.5 million were up 3 percent.

Otteau said the post-recesssion economic isn’t creating a new crop of noveau-riche and is unlikely to jolt the upper-end housing market.

Posted in Economics, Housing Recovery, New Jersey Real Estate | 111 Comments

Another strong month for NJ contracts

Posted on June 1, 2013 by grim

From the Otteau Group:

Home Sales Shift into 3rd Gear in April

Home purchase contracts in New Jersey soared in April, recording a 28% increase compared to one year ago. Given that the pace of sales rose by 23% in April-2012, purchase demand has expanded by an astounding 58% over the past 2 years. The “buy now, pay less” mood among home buyers is creating a sense-of-urgency that is likely to raise purchase demand in 2013 to pre-recession levels last seen in 2006.

Posted in Housing Recovery, New Jersey Real Estate | 27 Comments

Will rising rates push sales even higher?

Posted on May 31, 2013 by grim

From the LA Times:

Rising mortgage rates could fuel already hot housing markets

Mortgage rates have risen half a percentage point since setting record lows last fall, and many economists expect them to continue rising for the foreseeable future.

The increase, a reaction to the improving economy and housing markets, could fuel already hot housing markets as potential home buyers look to seal a deal before rates rise any further.

From MSN/Money:

Homebuyers, beware: Mortgage rates are rising

Tuesday’s good economic news about the housing market recovery — with home prices surging at the fastest pace in about seven years — was tempered by a jump in mortgage rates, with averages reaching a 12-month high, according to the Mortgage Bankers Association.

So with all the buzz about housing’s revival, why are mortgage rates rising? Lenders are boosting them because of concern that the Federal Reserve could decide to slow its stimulus policies, which have kept interest rates near record lows.

“Mortgage rates increased to their highest level in a year,” MBA research executive Mike Fratantoni said in the group’s newsletter. “Rates rose in response to stronger economic data and an increasing chance that the (Federal Reserve) may soon begin to taper their asset purchases.”

From Reuters:

Surge in U.S. mortgage rates could force buyers off the fence

Worries the Federal Reserve may begin to slow its stimulus efforts sent U.S. mortgage rates last week to their highest level in a year, a surge that could be a headwind to the nascent housing recovery should they march much higher.

At the same time, the jump in rates appears to have spurred some prospective buyers to lock in cheaper prices while they can, according to data from the Mortgage Bankers Association released on Wednesday.
…
“People who were on the fence, they tend to get a sense of urgency as they see interest rates rise,” said Bob Walters, chief economist at Quicken Loans. Rates averaged between 5 and 6 percent over the last decade, Walters said.

Posted in Economics, Housing Recovery, Mortgages, National Real Estate | 81 Comments

NJ better prepared, or do we just lie on surveys?

Posted on May 30, 2013 by grim

From the Star Ledger:

Garden Staters in better financial shape than most, more ready for ‘rainy day’: study

New Jersey residents are in better financial shape than most others across the country, according to a new study by one of Wall Street’s regulators.

But the results still show Garden Staters need to do more to make themselves secure financially.

The nationwide survey, conducted by the Financial Industry Regulatory Authority’s investor education arm, has found that New Jerseyans are more likely than most to spend less than what they earn, set aside money for rainy days and save for their children’s education.

About 46 percent of New Jerseyans said they don’t spend above their paycheck, while 45 percent have an emergency fund. Meanwhile, 40 percent of those with dependent children have a college fund for their kids. By comparison, 41 percent of people across the country said they spend less than what they earn, while 40 percent have a rainy day fund. Just 34 percent said they are saving for college for their kids.

Similarly, New Jerseyans are more likely to pay off debts than the rest of the country: 55 percent say they pay off their credit card each month, compared with 49 percent nationwide. Additionally, 19 percent of New Jerseyans said they have overdue medical bills, compared with the 26 percent nationwide.
…
Gerri Walsh, president of FINRA’s Investor Education Foundation, said the current survey data do not say why New Jersey leads the pack. But factors such as higher levels of income and education tend to be tied to stronger financial capabilities, she said.

“That may well be the case in New Jersey,” she said.
…
One surprising result was that New Jersey — hard-hit as it was by the housing crisis — scored a slightly better-than-average result when it came to homeowners who are underwater on their mortgage. Just 13 percent said they owe more on their home than what it was worth, compared with 14 percent nationally.
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Still, there’s work to be done, Walsh said. About 31 percent New Jersey respondents said they underwent “a large unexpected drop” in income over the prior year. Yet Walsh noted that half of the state’s respondents said they did not have an emergency fund for hard times.

Posted in Demographics, Economics, New Jersey Real Estate | 125 Comments

Is the confidence justified?

Posted on May 29, 2013 by grim

From the NY Times:

Home Prices Rise, Putting Country in Buying Mood

Americans are in a buying mood, thanks largely to the housing recovery.

The latest sign emerged Tuesday as the Standard & Poor’s Case-Shiller home price index posted the biggest gains in seven years. Housing prices rose in every one of the 20 cities tracked, continuing a trend that began three months ago. Similar strength has appeared in new and existing home sales and in building permits, as rising home prices are encouraging construction firms to accelerate building and hiring.

The broad-based housing improvements appear to be buoying consumer confidence and spending, countering fears earlier this year that many consumers would pull back in response to government austerity measures.

In January, the two-year-old payroll tax holiday ended, stripping about $700 from the average household’s annual income, according to the nonpartisan Tax Policy Center. Federal government spending cuts that started in March are also serving as a drag on economic growth, economists say. And some recent data on other parts of the economy, like manufacturing and exports, have also disappointed.

Yet consumer confidence reached a five-year high in May, according to a Conference Board report also released on Tuesday, with big improvements in Americans’ views about both the current economy and future economic conditions. Consumer spending has also been strikingly resilient so far this year, given the tax hikes.

“Five years after the start of the financial crisis in earnest, and four years and a week’s time from the beginning of the economic recovery, we’re finally starting to get more of a pickup,” said John Ryding, chief economist at RDQ Economics. “It’s been a very drawn-out process, but you have to remember what we’ve been digging our way out of.”
…
The positive impact of rising home values and the appreciating stock market is expected to offset at least a third of the fiscal tightening, according to Ian Shepherdson, chief economist at Pantheon Macroeconomic Advisors.
…
The double-digit housing price increase is being driven by a confluence of factors.

For one, employers have added jobs for 31 straight months, so families are willing to start buying again. At the same time, the inventory of homes available on the market remains unusually low, thanks to little new building in the last few years and the large number of homeowners who are still underwater on their mortgages, making them reluctant to sell at a cash loss.

Now there are signs that higher prices are beginning to encourage some would-be sellers to come off the sidelines and place their homes on the market. That could be healthy for the market, countering concerns that housing might become overvalued again.

“You’ve had this dynamic that has been favorable for price increases now, but it’s also favorable for supply to come back on market, so that will mean some moderation in the pace of price increases,” said Daniel Silver, an economist at JPMorgan Chase, who said that he expected home prices to continue growing but not necessarily at the double-digit rate seen in May.
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Also pushing up home price measures are the declines in distressed sales — that is, foreclosures and short sales. Homes in foreclosure typically sell at bargain-basement prices, which depresses the overall price levels reported.

Now the composition of homes sold includes fewer sales at the depressed prices that bring down the overall numbers, said Michael Gapen, senior United States economist at Barclays Capital. The decline in distressed sales and so-called shadow inventory (homes that are behind on mortgage payments or in foreclosure, but not yet on the market) had been pushing up prices, Mr. Gapen said, but that upward pressure will fade over time.

Finally, home prices in many areas experienced severe, unsustainable plunges during the recession. The recent increases are coming off a very low base, so the growth looks strong even if the level of prices is still well below the peaks of the housing boom in the middle of the decade.

“Some of the areas with the largest declines in house prices during the crisis have shown the strongest increases in prices more recently,” Mr. Silver said. In Phoenix, for example, home values have risen 22.5 percent from a year earlier; Las Vegas posted a 20.6 percent gain.
…
Economists generally expect home prices to continue rising, particularly as the economy improves and more young people move out of their parents’ homes and into homes of their own. And many dismiss concerns of a potential bubble, not only because household formation is growing but also because housing prices remain well below their highs. Even after 10 straight months of year-over-year gains, the 20-city Case-Shiller composite price index is 28 percent below its previous peak in July 2006, which is probably a good thing.

“Talk of a house price bubble seems premature,” said Ed Stansfield, an economist at Capital Economics. “In relation to incomes, rents or their own past, U.S. home prices still look low.”
…
“We usually think of bubbles as being driven by extremely easy credit, with people borrowing more than the outstanding value of the house and making little to no down payment,” said Mr. Gapen. “That’s not the case with credit standards today.”

Posted in Economics, Housing Recovery, National Real Estate | 73 Comments

Confirmation of a bottom, or is it too soon?

Posted on May 28, 2013 by grim

From the WSJ:

Suburban Sales Swell

House prices in the New York City suburbs, after a six-year roller coaster ride in which they lost roughly a quarter of their value, are climbing again.

The strongest rises were in the southwest Connecticut and northern New Jersey, while the recovery is weaker in parts of Long Island, where foreclosures still weigh on home prices.

Buyers who have been waiting have jumped back in, creating bidding wars for many desirable properties, brokers say. The number of new contracts signed is up; some homes are selling in a few days, often with multiple offers.

Market reports show that median home prices hit a bottom in late 2011 or early 2012 in northern New Jersey, New York’s Westchester County and Long Island and Fairfield County in Connecticut.

In the last two quarters, the market has risen out of the doldrums: Prices are up in all four markets from a year earlier. The second quarter also is off to a strong start.

“Across the board, it is on fire,” said Jeffrey G. Otteau, a New Jersey-based appraiser and founder of Otteau Valuation Group. “Buyers today once again feel a sense of urgency. Buyers are now convinced that waiting they will pay more.”

Analysts attribute the bump to improved confidence in the economic recovery, signs of job growth, low home prices and historically low mortgage interest rates. The rental market also is tight and rents are rising, giving people looking for space fewer alternatives.

Mr. Otteau frets that the market is rising so fast that it could be the beginning of a new housing bubble that could burst if interest rates begin rising before robust job creation returns. Increased mortgage rates reduce the purchasing power of buyers and can dampen prices.

“Over the last year we have gone from the question of whether the recovery is real to whether it is moving too quickly,” he said.

Not all properties are flying. Many high-end suburban homes continue to languish. Houses that need work also can be tough sells, brokers say. And brokers remember how home prices and sales surged in 2010, when the federal government offered tax credits to home buyers, then ran out of steam the following year.
…
Northern New Jersey

Prices rose more than 3% in each of the last two quarters from a year earlier, after tumbling 27% from 2007 to 2012. The recovery began in neighborhoods like Summit, with an easy commute to Manhattan, and then spread more broadly, brokers say.

Last year, Susan Hunter, a vice president at Lois Schneider Realtor in Summit, said buyers were out looking, but “just weren’t making any decisions to buy.”

That has changed. “Now if the home is well-located in great condition, there is a very good chance it will get multiple bids,” she said, citing the improving economy, job security and credit conditions.

On the waterfront in Jersey City, Biyang Sun closed last week on the $568,000 purchase of her first home, a 925-square-foot, one-bedroom condo with a balcony on the 10th floor of 1 Shore Lane overlooking Manhattan,

The morning the apartment came on the market, she went to see it and made an offer close to the asking price. It had the southern exposure she wanted, a parking lot for her car, and was a 20-minute commute to Midtown Manhattan. “I have been looking for this kind of apartment for half a year,” she said.

The building opened during the boom, when prices were much higher. Her broker, Thomas Pichi of Metropolitan& Waterfront Residential Brokerage, said a few years ago, every owner in the building would have had to sell at a loss. Now, listings have dried up and prices are higher.

“The market is being driven by supply and demand,” he said. “As soon as a listing comes on the market it creates a feeding frenzy.”

Posted in Economics, Housing Recovery, New Jersey Real Estate | 86 Comments

New homes (and probably remodels) to get more expensive. Safer? Who knows.

Posted on May 27, 2013 by grim

From the South Jersey Times:

Home sprinklers touted by South Jersey fire officials; construction, synthetics major risks

True or false? Recently built family homes in the United States hold up better in a fire than those built 50 years ago.

If you thought “True,” you’re very much in the dark, fire officials say. And if more people don’t learn otherwise, the consequences could be deadly.

The South Jersey Times recently spoke to some area fire service leaders who, like others nationwide, argue that modern light weight construction and the synthetic materials used in home furnishings make home fires exponentially more dangerous. And that, they say, means sprinkler systems inside homes are critical to protecting the lives of residents and firefighters.

Fire officials say sprinkler systems contain fires before they become a major threat, often canceling out the dangers posed by current construction and furnishings.

With that in mind, many are staunchly supporting a bill making its way through the state legislature that would require fire suppression sprinkler systems to be installed in all newly built single and two-family homes, with certain exceptions.

The bill, known as the New Home Fire Safety Act, passed the Assembly by a 44-30 vote in January. It has not yet come to the Senate floor for a vote.

The bill would not require sprinkler systems for manufactured homes or those not connected to a public water system.
…
“Fifty years ago, the average American home had furniture made of natural materials — cottons, wools, things like that,” he explained.

“Now, everything is synthetic. It’s hydrocarbon-based, like crude oil. Things in homes are burning at higher temperatures than ever before, with higher fuel loads than ever before.”

Such synthetics, burning hotter and faster, compound the dangers firefighters face, Scardino and colleagues argue.

They also add to the potential hodge-podge of chemicals and compounds created in the burning process.

Add to that the typically weaker wood structures modern builders use. Among them are particle board, which is made from wood chips or shavings bound by resin.

Light-weight wood used in a truss, an arrangement of beams or bars supporting a structure, can give way quickly, leading to deadly roof or floor collapses.
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As for the cost to install a system, estimates vary. The Times spoke to several contractors for a previous article in March on the sprinkler system issue.

Of course, the cost varies with the size of the home. Contractors’ estimates ranged from perhaps $6,000 to even $10,000.

Posted in New Jersey Real Estate | 17 Comments

Housing Cage Match: Cities vs Suburbs vs Exurbs

Posted on May 24, 2013 by grim

From the WSJ (Hat tip Orange):

U.S. Cities Growing Faster Than Suburbs

America’s biggest cities are continuing to outgrow their suburbs as the economy’s plodding recovery makes it harder for city dwellers to move to greener pastures.

The nation’s 51 largest metropolitan areas — those with populations over one million — saw their city populations grow 1.12% between July 2011 and July 2012, up from 1.03% a year earlier and an average of 0.42% between 2000 and 2010, according to an analysis of Census data by demographer William Frey of the Brookings Institution in Washington. By contrast, these cities’ suburbs grew just 0.97% last year, higher than 2011’s 0.96% but far below the average of 1.38% in the previous decade. In the New York-Northern New Jersey metro area, New York City — the nation’s largest, with over 8 million people — saw its population grow 0.8% between July 2011 and July 2012, much faster than the 0.3% growth of its suburbs. Between 2000 and 2010, the New York metro area’s suburbs generally grew faster than New York City.

Fewer people “are moving out of the big urban cores because the recession [and sluggish recovery have] tended to freeze people in place,” says Kenneth Johnson, senior demographer at the Carsey Institute and a sociology professor at the University of New Hampshire. The Chicago metro area exemplifies the trend: Chicago’s population grew 0.4% between July 2011 and July 2012, while its suburbs grew only 0.2%. In the 2000s, Chicago’s population dropped 0.5% on average, while its suburbs gained 0.9%.

For many decades, Americans tended to move out of major cities into nearby suburbs, especially as cars let them commute to work — driving up suburban populations at the expense of cities. Young people in particular have moved to cities for jobs, especially from rural areas, and then switched to suburbs in their 30s when they built families. The U.S. housing boom from 2002 to 2006 accelerated these trends, sending Americans scrambling to find properties to buy in outer suburbs and even exurbs — while luring them to new jobs in the West and South.

Census data last year showed this migration to the suburbs stalled in 2010-2011. A combination of fewer moves out of cities and increases in population from births and immigration pushed up the overall growth rate of city populations beyond that of suburbs — something that hadn’t happened since the 1920s, by some measures. Now the trend appears to be getting entrenched.
…
“We would have expected this to change — and it hasn’t,” said Brookings’ Mr. Frey. “The question is, is this just a short-term effect, or something long-term?”

America’s housing market has only recently turned a corner. Once it revs up and more Americans are buying houses, that may push more people into the suburbs, Mr. Frey says.
…
One possibility, Mr. Frey said, is the recent revival of cities is partly due to a “generational phenomenon.” Younger people may have put their lives on hold indefinitely because of the downturn, delaying marriage, kids and home-buying — or even watched older siblings get burned by housing decisions, making them wary of buying in the suburbs. Much of the growth of America’s exurbs, meanwhile, may never return, he said.

Posted in Demographics, Economics, Housing Recovery, National Real Estate | 65 Comments

No equity, no sellers, no sales

Posted on May 23, 2013 by grim

From the Star Ledger:

Lack of equity slows home sales in New Jersey

Although the number of homes in foreclosure or struggling to make mortgage payments in New Jersey has been slowly dropping, it hasn’t been translated into a rise in home sales.

Sales of existing homes rose in April, according to data released yesterday by the National Association of Realtors. Nationwide, resale activity was 9.7 percent above April 2012, but only 4.9 percent in the Northeast region, which includes New Jersey.

Distressed homes — properties that sold in foreclosure or for less than the mortgage was worth — accounted for 18 percent of April sales, according to NAR, down 28 percent from last year. Eleven percent of April sales were foreclosures, and 7 percent were short sales.

A study being released by the real estate company Zillow this morning, however, notes that nearly 40 percent of northern and central New Jersey homeowners can’t put their houses on the market because of insufficient equity.

About 17.5 percent of homes in the 12 counties that make up the central and northern parts of the state tracked by Zillow are at least 90 days behind on mortgage payments, Zillow found. But an additional 21.4 percent don’t have enough equity in the home to afford a down payment and closing costs on a new house, tying them to their property and limiting the number of homes on the market.

Zillow Chief Economist Stan Humphries said without enough equity, those costs come out of a homeowner’s pocket, “leaving many still stuck. Looking at the effective negative equity rate could explain why recent, healthy declines in the number of underwater borrowers haven’t yet translated into more homes for sale.”

The percentage of homes with insufficient equity to move ranged from 47 percent in Hunterdon and Hudson counties to 31 percent in Morris County.

Humphries said “the only cure is patience, as rising home values continue to build equity to the point where more homeowners can realistically sell.”

Posted in Economics, Housing Recovery, Mortgages, New Jersey Real Estate | 94 Comments

April Existing Home Sales

Posted on May 22, 2013 by grim

From Bloomberg:

Sales of U.S. Existing Homes Probably Rose to Three-Year High

Sales of existing homes probably climbed in April to the highest level in more than three years, giving a lift to the U.S. expansion, economists said before a report today.

Purchases of previously owned residences rose to a 4.99 million annualized rate last month, the highest since November 2009, from 4.92 million in March, according to the median forecast of 78 economists surveyed by Bloomberg.

Housing has gained strength as borrowing costs near record lows and job gains rebuild confidence, spur demand and stabilize prices. The effects are rippling through the world’s largest economy, affecting builders including Ryland Group Inc., retailers such as Home Depot Inc. (HD), and mortgage lenders.

“The market is definitely a lot healthier than it has been for some time,” said Richard Moody, chief economist at Regions Financial Corp. in Birmingham, Alabama. “Other parts of the economy aren’t holding up their part of the bargain, but housing is holding up its end.”

Federal Reserve Chairman Ben S. Bernanke, who is to testify before Congress today on the economic outlook, will be able to point to the real estate rebound as a policy success even as manufacturing and other sectors cool. The central bank is boosting home sales and holding down interest rates with $40 billion a month in mortgage bond purchases.
…
The National Association of Realtors’ home-sales report is due at 10 a.m. Washington time. Economists’ projections in the Bloomberg survey ranged from 4.85 million to 5.1 million.

The projected pace of April sales would be the fastest since a homebuyer tax credit was first due to expire in November 2009. It would be the third-highest since July 2007.

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

Should public workers be forced to live here?

Posted on May 21, 2013 by grim

From the Star Ledger:

New Jersey’s captive workforce: Opinion

Every month, dozens of jittery public workers gather before a five-member tribunal in Trenton, to be grilled on their personal lives: Divorces. Child custody issues. Family illnesses. Financial woes.

Why? To beg permission to move out of New Jersey. A state law that quietly went into effect two years ago requires all public employees to live in this state.

To get a waiver, you’ve got to ask for an exception — a process not unlike standing before the mean judge on “American Idol.”
…
Which leads you to wonder: Why was it that we passed this law in the first place?

The idea behind it was simple: New Jersey jobs should go to New Jersey residents. And the taxpayer dollars that pay their salaries should stay in our state.

This law, passed in 2011, was the brainchild of Sen. Donald Norcross (D-Camden), who called it the “New Jersey First Act” — because it was all about putting “our own residents first,” he said.

Other states have similar residency rules for police officers or firefighters, so they can respond quickly to an emergency. But New Jersey was the first in the nation to enact such a broad requirement for all public employees — from state or municipal government to teachers at our public schools.
…
To the people at these hearings, though, it just sounds like a life sentence.

Hensley says she’s paid taxes here all her life, unlike the Pennsylvania residents who got grandfathered in. How could she have anticipated this law, or her husband’s death, when she first took her job more than a decade ago?

“I feel like I’m a prisoner of New Jersey and I never did anything wrong except being a taxpaying citizen,” she said. “Now I’m just stuck here until I retire or die, I guess.”

Siegert, who teaches language arts, took on extra work as a custodian and coach at his Franklin Borough elementary school to try to make ends meet. But his wife’s medical condition leaves them no choice but to seek help across the border, he says.

“It’s hard enough to swallow your pride to move in with family,” he told the panel. “But if I can’t do that — what are my other options?”
…
That’s what New York state Assemblyman Kenneth Zebrowski and 25 of his colleagues asked Christie in June. The lawmakers sent him a letter expressing their strong opposition to New Jersey’s residency law, but so far they haven’t gotten an answer.

Along with legislators in Pennsylvania, they argue this policy hurts the regional economy and reduces the talent pool for public jobs — while at the same time leaving them little choice but to propose identical laws to protect their own constituents, whose job prospects have shrunk.

“I don’t think it’s the right policy, but if a neighboring state like New Jersey is going to do that and limit the occupations open to New York residents, then New York is going to have to follow suit,” Zebrowski said. “I think it’s going to create a race to the bottom.”

Posted in Demographics, Economics, Politics | 86 Comments

Banks halt foreclosures … again.

Posted on May 20, 2013 by grim

Will we ever get through the backlog? From the WSJ:

Some Banks Halt Foreclosures, Citing Regulator’s Bulletin

Some of the nation’s largest banks, including Wells Fargo & Co., suspended foreclosure sales in a number of states following guidance issued last month by federal banking regulators.

While some foreclosures have since resumed, the halt marks the latest dustup over how foreclosures are handled.

Banks said their actions were triggered by a four-page bulletin issued last month by the Office of the Comptroller of the Currency and the Federal Reserve. The bulletin outlined basic operating standards for foreclosure sales. Many of the nation’s largest banks were already operating under consent orders with the OCC or the Fed in response to foreclosure-processing abuses that surfaced in late 2010.

Officials at Wells Fargo and J.P. Morgan Chase & Co. said they had postponed scheduled foreclosures earlier this month in response to the latest guidance. J.P. Morgan has since resumed foreclosures, a spokeswoman said.

A Wells Fargo spokeswoman said the bank hasn’t resumed foreclosures but said it expected the pause to be “brief.” It wasn’t immediately clear what part of the regulatory guidance had prompted the suspensions or how many states were affected.
…
News of the foreclosure suspensions was first reported Friday by the American Banker.

During April, Wells Fargo completed around 80 foreclosures per workday for five Western states–California, Nevada, Arizona, Oregon and Washington–according to data compiled by ForeclosureRadar, which tracks filings in those states. But since May 6, Wells Fargo has completed no more than eight foreclosures on any day.

The bank said the guidance didn’t affect other parts of the foreclosure process outside of the final step, in which the lender takes title to the property.

The slowdown in foreclosures came as a surprise to market analysts because the OCC’s compliance letter “appears to cover all of these things the banks should have been doing,” said Sean O’Toole, president of ForeclosureRadar.

An OCC spokesman said regulators hadn’t directed any foreclosure pause. “However, if servicers are not certain they are meeting these standards, pausing foreclosures is a responsible and productive step,” said OCC spokesman Bryan Hubbard.

Posted in Foreclosures, Mortgages, National Real Estate | 68 Comments

Why home price gains are lagging here

Posted on May 19, 2013 by grim

Same dynamics apply to NJ. From Newsday:

Why Long Island home prices are rising slower than the U.S. average

U.S. home prices are up about 10 percent right now from the same time last year, multiple national reports have shown, yet local reports have indicated that Long Island’s appreciation is just half of that — or even less.

The closely watched Case-Shiller Home Price Index most recently reported a 9.3 percent nationwide increase, while a similar measure from market analytic firm CoreLogic, released May 14, found a 10.5 percent increase.

Meanwhile, a local report from Douglas Elliman, which excludes the East End, found median home prices down 2.6 percent annually and a report from the Multiple Listing Services of Long Island, which includes Queens, showed a 4.5 percent uptick. CoreLogic’s Nassau-Suffolk home price index measured a 3.2 percent increase in prices.

So no matter how you slice it, Long Island is underperforming relative to the rest of the country. And that’s especially surprising considering the historically low supply of homes on the local market. What’s to blame?

It’s mostly New York’s foreclosure process, industry experts explained. The state employs a judicial process that, on average, takes 1,089 days from the time a lender files a complaint to the time the property is officially foreclosed, according to a recent report from RealtyTrac. That’s tops in the United States, where the overall average is 414 days.

As a result, there’s a humongous inventory of distressed homes looming in the shadows awaiting clearance to be offered for sale. Nassau and Suffolk counties have more than 24 months supply worth of distressed homes that haven’t completed the foreclosure process and entered the sales market, according to the CoreLogic report.

Consider there’s only one other market among the nation’s 25 largest that even has more than 15 months worth of supply — the Edison-New Brunswick, N.J. region has a 16-month supply of distressed homes.

So while other localities have made significant progress clearing supplies of distressed homes — especially since the massive federal mortgage settlement in February 2012 — Long Island hasn’t. Nationally, between 20 and 30 percent of all homes sold in March 2013 were in some stage of distress in many of the largest markets compared to between 30 and 40 percent a year ago. The elevated, but decreasing share of distressed sales indicates that foreclosures are clearing through the market.

“That’s how you make a housing market recover,” Jonathan Miller, president of appraisal firm Miller Samuel, said in an interview. “You move the distressed properties from weak hands to strong hands. Until that happens you can’t truly recover.

Posted in Economics, Foreclosures, Housing Recovery | 36 Comments