I ain’t afraid of no ghost

Posted on August 23, 2012 by grim

From the WSJ:

Shadowboxing With the Recovery in Home Sales

The salvo of distressed home sales that was supposed to sink the housing recovery hasn’t shown up yet. Perhaps it never will.

The National Association of Realtors said Wednesday that sales of existing (translation: previously owned) homes rose 2.3% in July from May. And, as it has for several months now, the NAR said sales might have been higher if it wasn’t for a shortage of inventory.

It counted 2.1 million single-family homes on the market in July, down from a peak of 3.4 million in July 2007 and near the levels of a decade ago. Foreclosure sales accounted for 12% of total sales versus 17% a year earlier.

The NAR’s statistical acumen has a less-than-sterling reputation; in December, it said that it had overestimated home sales by 14.3% from 2007 to 2010, but what it is saying about inventory and foreclosure sales jibes with what regional real-estate associations and other sources have been saying. With household formation picking up, and new single-home construction running at half its level of 50 years ago (when the U.S. population was half the size it is now), inventory constraints could get tighter.

The major caveat is that there’s an unknown amount of “shadow inventory”—homes that are owned by banks, destined for foreclosure, and so forth—out there. As more of those homes hit the market, they could depress prices, restrain construction and put the nascent housing recovery that lately has been one of the brightest spots in the U.S. economy at risk.

It is worth remembering that worries that shadow inventory would buckle housing are no longer new. The delay merely may be that issues like banks’ unwillingness to accept losses and hamstrung courts have led to unanticipated holdups in distressed homes coming on the market. Or there may be other things going on.

One possible factor is that rather than getting put on the block, many distressed homes are getting converted by banks and investor groups into rentals. Indeed, the number of homes that were rented out in the second quarter was 685,000 higher than a year ago, according to the Census Bureau.

Another possibility: Many distressed homes may not have turned up on the market because they aren’t really sellable, either because of the condition they have fallen into or the neighborhoods they are in.
…
The shadow inventory problem is starting to look like a shadow of its former self.

Posted in Economics, Foreclosures, Housing Recovery, National Real Estate | 130 Comments

July Existing Home Sales

Posted on August 22, 2012 by grim

From Bloomberg:

Sales of Previously Owned U.S. Homes Probably Climbed in July

Sales of existing homes probably climbed in July from an eight-month low, adding to signs U.S. housing may pick up in the second half, economists said before a report today.

Purchases rose 3.2 percent to a 4.51 million annual rate, following a decline in the prior month, according to the median forecast of 73 economists surveyed by Bloomberg.

Buoyed by cheaper properties and record-low mortgage costs, demand for real estate is bolstering the industry that helped trigger the recession. Minutes of the Federal Reserve’s latest meeting, also due today, will be a reminder that policy makers are monitoring data such as housing to determine whether the world’s largest economy needs more stimulus.

“The healing in housing continues,” said Brian Jones, a senior U.S. economist at Societe Generale in New York. “We’re clearly in an upturn for the sector.”

The National Association of Realtors’ report is due at 10 a.m. in Washington. Bloomberg survey estimates ranged from 4.3 million to 4.8 million, following 4.37 million June.

Posted in Economics, Housing Recovery, National Real Estate | 91 Comments

Just when you thought the bailouts were over

Posted on August 21, 2012 by grim

From HousingWire:

Obama to renew push for wider mortgage refinance plan

The Obama administration will renew efforts to pass a wider refinance plan for more underwater homeowners when Congress reconvenes in September.

“The housing market is beginning to pick back up. But there are a lot of people underwater,” Obama said during a press conference Monday.

Senate Democrats introduced three possible bills.

Sens. Robert Menendez, D-N.J., and Barbara Boxer, D-Calif., would expand the Home Affordable Refinance Program again for Fannie Mae and Freddie Mac borrowers. Some Republicans were on board with eliminating repurchase risk for new servicers who refinanced the old loan. The bill would also remove all appraisal requirements for any loans that still require it.

Nearly 423,000 Fannie and Freddie mortgages refinanced under a partially expanded program in the first six months of 2012, more than all of last year, according to the Federal Housing Finance Agency.

More than 53,000 home loans above 125% LTV refinanced under HARP in June, up from less than 3,000 just the month before, the FHFA said. But most of the business is driven to the largest banks, who are seeing higher profits because of the program.

A bill from Sen. Dianne Feinstein, D-Calif., introduced in May, would allow refinancing for underwater borrowers holding mortgages backed by the Federal Housing Administration. It creates a $6 billion fund to insure the new loans.

Sen. Jeff Merkley, D-Ore., introduced a bill that would allow Fannie and Freddie to cover the closing costs if borrowers shorten their terms under a HARP refinance. Though many borrowers are already choosing this option without the fee waivers.

In his State of the Union address, Obama proposed plans to help the more than 11.4 million borrowers refinance and save an average $3,000 a year on mortgage payments.

Such plans remain a long shot, considering staunch Republican opposition and a pressing need for both sides to agree on more pressing budgetary concerns. The so-called fiscal cliff threatens the fragile housing and economic recovery Obama alluded to.

Still, Obama said on Monday these savings would give a boost to the economy, though detractors argue the plan transfers money that would be spent by mortgage investors to the borrower.

Posted in Economics, Housing Recovery, Mortgages, Politics | 119 Comments

Bye bye tax cut

Posted on August 20, 2012 by grim

From Bloomberg:

N.J. Revenue May Be $540 Million Off Target, Analyst Says

New Jersey’s revenue collections were as much as $540 million less than targeted by Governor Chris Christie through the fiscal year ended June 30, according to a memo from the nonpartisan Office of Legislative Services.

The total was $24.2 billion, compared with $24.7 billion projected by Treasurer Andrew Sidamon-Eristoff, according to David Rosen, legislative budget officer. The gap will narrow by as much as $300 million after year-end accounting adjustments, Rosen wrote in a letter yesterday to Senator Barbara Buono, a Metuchen Democrat who requested an analysis.

“Even allowing for typical adjustments of $200 million to $300 million, that means we will have started off this fiscal year with about half of Governor Christie’s projected surplus already gone,” Buono said in a statement.
…
Collections for all of the state’s major revenues were 2.5 percent higher last month than in July 2011, Sidamon-Eristoff said in a statement. Corporate taxes were 26 percent higher and sales levies were 4.4 lower, while income taxes were up by 10 percent.

“The fact that July collections were significantly higher is a clear signal that the economy continues to grow,” Sidamon- Eristoff said.

Christie has traveled the state touting a “Jersey Comeback,” an economic-recovery plan that includes a tax cut. The $31.7 billion budget for fiscal 2013 didn’t include a tax reduction because Democrats, who control the Legislature, weren’t certain whether revenue would meet Christie’s targets. His plan maintained a surplus of more than $600 million.

Posted in Economics, New Jersey Real Estate, Politics, Property Taxes | 118 Comments

Lenders really helping delinquent borrowers?

Posted on August 18, 2012 by grim

From the NY Times:

Help for Distressed Homeowners

LUIS CEREZO’s eyes welled up as he awaited the outcome of his latest attempt to resolve the 18-month backlog of mortgage payments he owes on the town house in Elizabeth where he and his wife and son have lived for the last 16 years.

“I couldn’t sleep last night knowing that today we’ve got to make the decision, do we stay in the house or not,” said Mr. Cerezo, holding hands with his wife, Marjorie, after the two met with a Bank of America mortgage specialist to plead their case for a loan modification.

The Cerezos were among the hundreds of people who filtered through a three-day homeowner assistance program held by Bank of America at the Hilton Hotel here in early August. A second Bank of America event was scheduled for the following week at the Atlantic City Convention Center, and several more will be held throughout the country this year. Wells Fargo held a similar public workshop at the Meadowlands Exposition Center in Secaucus this month. The goal of these sessions is to use in-person meetings to help underwater or delinquent homeowners find a solution short of foreclosure.

“We’re a bank,” said Tamika Eubanks, a vice president of Bank of America in charge of the recent New Jersey events. “We’re not in the business and have no desire to foreclose on anyone’s home. We want to do everything we can to keep you in that house.”

Preparing for the Newark session, the bank contacted 6,000 customers who lived within a 30-mile radius of the city and were more than 60 days in arrears on their mortgage payments, urging them to attend. By the start of the event, 375 people had registered for meetings with one of 50 bank officers on site. The workshops also involve independent financial counselors, so participants can get help with other money issues. The process takes three to four hours, with about 40 percent of cases being resolved on the spot, Ms. Eubanks said.
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Wells Fargo will hold 33 “home preservation” workshops around the country this year. For its program at the Meadowlands on Aug. 8 and 9, the bank contacted 38,000 customers, 760 of whom registered to attend. The bank’s last New Jersey workshop, in Newark in January 2011, drew 542 customers. Marie Day, a regional service director for Wells Fargo Home Mortgage, said that two-thirds of those who attend these events “will find an option that doesn’t include foreclosure.”
…
The Cerezos had been hoping to get an answer before leaving the Bank of America workshop in Newark, but were told the wait would be a bit longer, because the Federal Housing Administration holds their mortgage. Even so, Favio Cerezo said, the session provided the family with some relief.

“They gave him a lot of hope that there’s not just one way out,” he said, speaking of his father. “It looks like it’s going to be accepted. Now we just have to wait.”

Posted in Economics, Foreclosures, Housing Recovery, New Jersey Real Estate | 34 Comments

Axe falls on Jersey jobs

Posted on August 16, 2012 by grim

From NJBIZ:

In dramatic reversal, N.J. posts 12,000 job losses for July

New Jersey employers shed 12,000 jobs in July after months of gains, while the state’s unemployment rate ballooned to 9.8 percent, pushing it further above the national unemployment rate of 8.3 percent.

“The national economy has been sluggish and, realistically, we can’t be exempt. Given the national softness and the strength of our job gains in May and June, some fallback was likely,” said Charles Steindel, chief economist for the New Jersey Department of Treasury, in a statement. “Considering we have seen job growth in nine out of the past 11 months, we anticipate that job growth should resume and start to put some downward pressure on unemployment.”

Both the private and public sectors posted job losses in July, and June estimates were revised down by 2,600 jobs, for a gain of 7,300. However, Steindel noted April to June was still the largest two-month job gain in 12 years, and the state’s “labor force participation rate and the percentage of our population who are employed remain above the national averages.”

James W. Hughes, dean of Rutgers University’s Bloustein School of Planning and Public Policy, said the state had outpaced stagnant national job growth until July’s jobs numbers were released today, which he said shows “it’s possibly payback time.”

“We just had big jumps on a month-to-month basis, and that’s always problematical. We take one and a half steps forward and then one step backward,” Hughes said. “As of last month, we almost matched total job growth in 2011, but now we’re behind. If we bounce back in August like we did in April, we will probably exceed last year’s job gain, but we may only barely surpass it.”

The professional and business services sector recorded the largest employment drop in July as it lost 3,900 jobs, which Steindel said resulted from cutbacks in administrative support and remediation. Other industries in the private sector that shed payrolls were manufacturing, which lost 3,000 jobs; construction, down 2,700; and financial activities, down 400.

All three levels of government squeezed payrolls in July, shedding a total of 4,900 public-sector jobs.

Posted in Economics, Employment, New Jersey Real Estate | 96 Comments

BoA/Merrill raises housing price forecast

Posted on August 16, 2012 by grim

From HousingWire:

BofAML revises home price forecast way upward

Shrinking inventory and a shift toward short sales is causing analysts at Bank of America Merrill Lynch to dramatically revise their predictions of how high home prices will travel this year and next.

After saying earlier in the year that national home prices in 2012 will rise just 0.5%, analysts at the bank now feel they will go as high as 2% this year.

Most Americans interviewed by Fannie Mae believe home prices will increase at least 1.4% over the next 12 months, the government-sponsored enterprise said.

The trajectory for the next several years changed little, however. The bank forecasts cumulative appreciation of 44% over the next ten years.

The revisions for 2012 and 2013 are a result of two national trends: inventory declining by more than analysts expected and a shift toward short sales as a means of liquidating delinquent loans.

The slower flow of distressed homes to the market and less non-distressed inventory is resulting in the depressed inventory. And housing turnover has fallen to a historic low, particularly for turnovers not due to foreclosure. A reduction in turnover not only translates to less supply, it also curbs demand.
…
A shift toward more favorable disposition strategies is also occurring. Over the past several months, the number of short sales has increased. Short sales typically sell at roughly a 15% discount to non-distressed properties while REO sales sell at roughly a 40% discount. The larger discounts for REO sales can be due to factors such as neglect of basic home maintenance as the home goes through the more extensive foreclosure process.

Posted in Economics, Housing Recovery, National Real Estate | 87 Comments

Fewer monsters lurking in the shadows

Posted on August 15, 2012 by grim

From the WSJ:

Shadow Inventory: It’s Not as Scary as It Looks

The housing market is improving because there are more buyers chasing fewer homes. Skeptics of a housing bottom, however, often point to a scary set of numbers: the “shadow inventory” of potential foreclosures—the millions of mortgages that are either in foreclosure or in default.

It’s true that home prices are unlikely to see brisk gains once they do hit bottom because it will take years to absorb this glut. But will this phantom inventory derail the incipient housing bottom? Maybe not, say a number of housing analysts.

There are several reasons why the shadow inventory isn’t as scary as it sounds: It’s concentrated in a handful of markets—it isn’t inherently a national phenomenon. It is being offset by improved demand, particularly from investors. And the housing vacancy rate is low, a product of very little new home construction over the past few years that could counterbalance continued high inventories of foreclosed homes.
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Barclays Capital estimates that at the end of May there were around 1.8 million mortgages in the foreclosure process and another 1.45 million where borrowers have missed at least three payments. That puts the total number of properties that could be repossessed and resold by banks at around 3.25 million mortgages.
…
If those homes hit the market all at once, housing would be in deep trouble. Last year, for example, there were 4.4 million sales of previously owned homes. The figure is still higher than any time before June 2009.

But it is down from a peak of 4.25 million in February 2010. And unless mortgage delinquencies begin to accelerate sharply, the shadow inventory won’t be growing. Barclays estimates that at the current rate, this figure could fall to around 2.4 million loans.

“The concept of a huge shadow inventory is preposterous,” says Christopher Thornberg, a housing economist with Beacon Economics in Los Angeles. “The number of mortgages in distress is way down from one year ago. It’s clear there are fewer distressed properties out there.”
…
Ms. Zelman published an in-depth research note earlier with the title: “Shining a bright light on the shadow: Why what’s lurking doesn’t concern us.” In it, she explains how it’s more important to focus on the pace at which foreclosures are being liquidated, and not the absolute number.

“Just like the Wizard of Oz, shadow inventory is not very intimidating once you pull back the curtain,” the report said. That isn’t to dismiss the magnitude of the problem and headwind it will continue to pose for any housing recovery, she wrote. “The bathtub is almost full, but the water has stopped rising, and we are most concerned with how fast it drains.”

Posted in Economics, Foreclosures, Housing Recovery, National Real Estate | 143 Comments

Affordability moves in the other direction

Posted on August 14, 2012 by grim

From CNN/Money:

Survey says: Fewer affordable homes

It just got a little harder for most Americans to buy a home, according to an industry survey.

Nearly 74% of the new and existing homes sold in the three months ended June 30 were affordable to families who earn the national median income of $65,000, according to the National Association of Home Builders (NAHB) and Wells Fargo. That’s down from 77.5% a quarter earlier, but still a very high level of affordability, historically speaking.

Rising prices were responsible for the decline in affordability. Median home prices were up in 92% of the markets surveyed, while median income didn’t budge.

Barry Rutenberg, NAHB’s chairman and a home builder from Gainesville, Fla., said the decline in affordability was a positive sign for the market.

“[It’s] another signal that the housing recovery is starting to take root, and it lends needed confidence to prospective buyers and sellers who have been reluctant to move forward in the current marketplace,” he said.
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The New York metro area was the least affordable market, with only 29.4% of homes within reach of the average family.

Posted in Economics, Housing Recovery | 108 Comments

Legislators trying to grease the foreclosure machine

Posted on August 13, 2012 by grim

From the Star Ledger:

Foreclosure bills advance from N.J. Senate Economic Growth Committee

A pair of bills sponsored by Senate Economic Growth Committee Chairman Raymond J. Lesniak which would begin to address New Jersey’s foreclosure crisis by creating an expedited process for foreclosure on abandoned, dilapidated properties, and by creating a mechanism to transform abandoned properties to affordable and market-rate housing was approved by the committee yesterday.

The bills represent different aspects of S-1566, legislation Senator Lesniak introduced earlier this year which was vetoed by Governor Christie.

“I believe the governor should reconsider this important legislation and have streamlined the process to hopefully address his concerns,” said Senator Lesniak, D-Union. “The foreclosure crisis in New Jersey is driving down residential property values, causing urban and suburban blight, contributing to increased crime rates, and exacerbating itself by making homes surrounding an abandoned, dilapidated property all but unsellable. We need to take action on this crisis, and begin to turn foreclosed, abandoned properties into affordable homes for New Jersey’s middle class.
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The first bill, S-2156, which was approved by a vote of 5-0, would establish an expedited foreclosure procedure for abandoned residential properties which have fallen into disrepair.
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The second bill in the package, S-2157, which was approved by a vote of 3-2, would require the New Jersey Housing and Mortgage Finance Agency (HMFA) to facilitate and finance the purchase of foreclosed residential properties from institutional lenders, and dedicate such properties as affordable housing units or market-rate housing. The agency would be able to use its bonding authority – without recourse to the state – federal funds and funds from the State Affordable Housing Trust Fund to finance the purchase of foreclosed homes by for-profit and not-for profit corporations.

Some properties could be deed-restricted with the consent of the affected municipality, to be used as affordable housing. The bill would also create incentives for municipalities to transition abandoned properties to affordable housing on their own, giving them a 2-to-1 match against their affordable housing obligation for affordable units created from foreclosed properties using funds from municipal affordable housing trusts. Under estimates from the original bill, Senator Lesniak said this bill could result in over 10,000 new affordable and market-rate units and over 10,000 less unoccupied, boarded-up properties.

“This bill is at the core of the effort to mitigate New Jersey’s foreclosure crisis,” said Senator Lesniak. “It would create a legitimate mechanism to boost the number of available affordable housing units, it would create new market-rate housing, and it would do it while cleaning up blighted, abandoned properties within our municipalities. It doesn’t get any better than that.”

Posted in Foreclosures, New Jersey Real Estate, Politics | 114 Comments

Lift Off?

Posted on August 10, 2012 by grim

From Bloomberg:

Home Prices Rise in 75% of U.S. Cities in Second Quarter

Prices for single-family homes climbed in three-quarters of U.S. cities and values nationally jumped the most since 2006 as real estate markets stabilized.

The median sales price increased in the second quarter from a year earlier in 110 of 147 metropolitan areas measured, the National Association of Realtors said in a report today. In the first quarter, 74 areas had gains.

U.S. housing prices are beginning to lift off the bottom after the worst housing slump since the 1930s as buyers compete for a tight supply of available properties. At the end of June, 2.39 million previously owned homes were available for sale, 24 percent fewer than a year earlier, the Realtors said.

“The turnaround in home prices feels pretty broad,” Celia Chen, a housing economist at Moody’s Analytics in West Chester, Pennsylvania, said yesterday. “There are still risks that home prices will dip a little more before they start appreciating with any consistency,”
…
The national median existing single-family home price was $181,500 in the second quarter, up 7.3 percent from the same period last year, the strongest annual increase since the first quarter of 2006, according to the Realtors group. Distressed properties, including discounted foreclosures and short sales, in which the price is less than the mortgage balance, accounted for 26 percent of second-quarter deals, down from 33 percent a year earlier.

The share of all-cash home purchases was 29 percent in the second quarter, down from 30 percent in the second quarter of 2011. Investors, who make up the bulk of cash purchasers and compete with first-time buyers, accounted for 19 percent of all transactions, matching the share a year earlier.

Posted in Employment, Housing Recovery, National Real Estate | 172 Comments

Is this the big jump in foreclosures?

Posted on August 9, 2012 by grim

From the Record:

Foreclosure activity picking up steam in NJ

Foreclosure activity in New Jersey doubled last month compared with a year earlier, as lenders resumed their efforts to evict homeowners in default, RealtyTrac reported Wednesday. One in every 1,566 homes in the state received a foreclosure filing in July.

Lenders had been stopped in their tracks for over a year in the state, as they dealt with questions about “robo-signing,” in which they were accused of abusing homeowners’ rights in their rush to take back distressed properties. Several court rulings and settlements have cleared the way for lenders to begin foreclosing again in the state.

“In states like Florida, Illinois and New Jersey, where processing and procedural issues slowed foreclosure activity to a crawl last year, foreclosure numbers continue to rebound off those artificially low levels,” said Daren Blomquist, vice president of RealtyTrac, a California company that tracks the foreclosure market.

Nationally, however, foreclosure activity declined year over year, RealtyTrac reported. One in every 686 housing units in the nation received a foreclosure filing during July, down about 9.8 percent from the previous year.

In Bergen County, one in every 2,381 residential properties received a foreclosure filing and in Passaic, one in every 1,294. RealtyTrac counts all filings, from the lender’s initial notice that a homeowner is in default on the mortgage all the way through to sale of the property at sheriff’s auction.

In Bergen County, sheriff’s auctions rose to a total of 30 in July, up from six in July 2011. In Passaic County, 16 properties were auctioned in July, compared with seven in July 2011, according to Sheriff Richard H. Berdnik.

Posted in Foreclosures, New Jersey Real Estate | 139 Comments

Housing just got more expensive

Posted on August 7, 2012 by grim

From the WSJ:

Recovery or Not, Home Prices Keep Rising

Today CoreLogic, a real-estate data provider, weighed in with its view of what’s happening with home prices. According to the firm, prices were up 2.5% in June, compared with a year earlier, and rose 1.3% compared with May.

June’s gains cap four straight months of both year-over-year and month-over-month increases in prices. And what’s more, CoreLogic is upbeat about the future: It’s predicting a 0.4% monthly rise and a 2% yearly jump for July prices when they are released next month.

The data come on the heels of three other price indexes that generally are showing that home prices nationally are either rising slightly or starting to see a slowdown in their declines.

But it’s worth remembering that this is the time of year for home-price gains.

As Capital Economics points out, the CoreLogic numbers may look good, but they probably don’t indicate anything much better than home prices remaining flat. More people go home shopping in the spring and summer than in the fall and winter, so it’s hard to compare numbers from one month without adjusting for seasonal factors. CoreLogic doesn’t account for seasonal trends in home sales.

Of course, annual comparisons are more meaningful than monthly ones, and CoreLogic is showing significant improvement over last year. Most economists agree that home prices have bottomed, but the more salient issue today, and the one that has most people worried, is whether or not the recovery will remain sluggish, or gain any real momentum.

From CNBC:

In a Twist, Both Home Prices and Rents Rise

Asking rents rose in 24 of the 25 largest rental markets from a year ago, according to a new report from online real estate company Trulia. Rents are pushing double digit gains in San Francisco, Miami, Oakland, Denver, Seattle and Boston, and rents are rising faster than asking prices in 21 of the 25 largest rental markets year-over-year.

“For the first time, [home] prices are up year over year in a majority of metros, and asking home prices have increased for six straight months,” writes Trulia’s chief economist Jed Kolko in a release. “Rents, however, are rising even faster than prices in most markets. These price and rent increases, along with declining vacancies, should encourage new construction, which means housing will finally start contributing to the economic recovery.”

The question remains, where is the tipping point? As it becomes more expensive to rent than buy in more markets, more Americans should turn to buying, but so far they are not. Issues with negative equity, credit and confidence continue to plague home buying.

Posted in Economics, Housing Recovery, National Real Estate | 141 Comments

Has the starter home returned to North Jersey?

Posted on August 6, 2012 by grim

From the Record:


The return of the under-$300,000 house in Bergen, Passaic counties

Tired of paying rent, Jorge and Christine Garcia saved up and recently bought their first home: a move-in-ready colonial in Bogota. Though the property had sold for $393,000 in late 2008, the housing bust meant the Garcias were able to get it for only $275,000.

“The downturn in house prices allowed us to stay in Bergen County,” said Christine Garcia, 29, an assistant to a sports-industry executive and mother of a 1 1/2-year-old daughter.

The Garcias’ experience is a stark example of how the starter-home market has changed in North Jersey. In March 2005, The Record ran a story about North Jersey’s vanishing under-$300,000 home. Seven years later, with regional home values down about 27 percent since the market’s peak in mid-2006, it’s now easy to find a home for less than $300,000 in Bergen and Passaic.

In fact, it’s pretty easy to find a home for less than $250,000.

That’s what Sue Choe and Mike Park did. They recently hit “the jackpot,” in Choe’s words, on a Teaneck home in great condition for $241,000, after selling (and breaking even on) their Fort Lee co-op.

“For us to purchase a home so competitively priced allows me to stay home [with my year-old son] and not worry too much about the bills,” said Choe, 33, a former marketing manager. Her husband is a corporate supervisor.

While the drop in home prices is good news for young buyers like the Garcias and Choe and Park, it can be devastating for sellers, especially those who bought at peak prices.
…
In Bergen County last year, one in four home sales was for less than $300,000; that compares with only 11 percent in 2007, according to an analysis of property records by The Record. In Passaic County, more than half of home sales were for under $300,000, compared with one in four in 2007.

The Record’s look at property records found that under-$300,000 homes were a majority of sales in many towns that have traditionally drawn first-time home buyers, such as Bogota, Bergenfield, Elmwood Park, Garfield, Hackensack, Lodi, Clifton, Wanaque, West Milford and Pompton Lakes. But properties under $300,000 also made up 42 percent of the sales in Fair Lawn, 27 percent of the sales in Mahwah and 23 percent of the sales in Waldwick.

“The long process of downward price adjustments in the housing market has been painful in many dimensions,” said Joseph Seneca, a Rutgers economist. “However, it was, and remains, necessary, to clear what was a badly distorted housing market. Inventories are finally realigning and demand is returning.”

Several real estate agents said the lower prices — combined with mortgage rates below 4 percent — make a compelling case for buying, rather than renting.

“People who are looking under $300,000 or even under $250,000, a lot of times they can buy a house for less than what it would cost them to rent,” said Dominie Healey, an agent with Vikki Healey Properties in Maywood.
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If buyers are getting good deals, sellers are facing painful losses — including some so far underwater that they have to write a check to pay off the mortgage when they sell. But many decide to move anyway, because they need more space, have new jobs or want to be closer to their jobs or families, said Frances Rosado, a Coldwell Banker agent in Clifton.

“Some people just need to move,” Rosado said. “What are you going to do, stay in the house for the rest of your life? Or just bite the bullet and go?”

It’s certainly easier for sellers who bought decades ago and are still coming out ahead financially.

Ronald and Patricia Schiller, for example, bought their Clifton home 40 years ago. Now they are retiring to Florida and selling the house for $255,000.

“We would have liked to get more, but we see houses in our neighborhood just sitting there,” said Patricia Schiller.

Posted in Economics, Housing Bubble, Housing Recovery, North Jersey Real Estate | 158 Comments

Time to be greedy?

Posted on August 5, 2012 by grim

From the WSJ:

Finally, It Is Time to Buy a House

Warren Buffett famously once said: “Be fearful when others are greedy, be greedy when others are fearful.”

And if you’re not instinctively scared of the housing market, then global warming, saturated fat, running with scissors and the bogeyman probably aren’t keeping you awake at night, either.

The fact that everyone is scared to dabble in—much less commit to—housing makes it a close-to-perfect investment based on Mr. Buffett’s principle. But buying real estate is a good long-term investment for many more reasons, some of which have only become apparent in recent weeks.

The most striking: Housing prices rose sharply from April to May. The S&P/Case-Shiller Index rose 2.2% in 20 of the nation’s big cities. Prices shot up more than 3% in Chicago, Atlanta, San Francisco and Minneapolis. Even Detroit’s housing market scored a gain, inching up by 0.4%.

Nationally, the increase was the first in seven months. More importantly, the increase matched other data and empirical evidence this spring that foreclosures slowed and inventories were shrinking. Simple economics suggests that as the supply of distressed property slows, buyers will be forced into higher-price properties.

In addition, interest rates on 30-year fixed mortgages have tumbled below 3.5%. For those who can get credit, these aren’t just historically low rates; they are one-sided deals tilted toward borrowers.
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Here’s where the fear comes in. From 30% to 50% of existing mortgages in the U.S. market are underwater, depending on the estimate. That means many borrowers are trapped in their homes and loans. They either can keep paying and hope prices will improve or walk away, putting downward pressure on home prices.

Foreclosure rates have leveled off, but market analysts believe an increase is likely.

Here’s why. Since the financial crisis, 3.7 million homes have been foreclosed on, but an additional 1.4 million remain in the national foreclosure inventory, according to CoreLogic, a real-estate research firm.

Finally, a housing recovery won’t happen, or could be snuffed out, by a rotten economy. There’s never been significant growth in housing with high unemployment. And as Dow Jones’s Kathleen Madigan noted, “Potential buyers must feel secure with their job prospects before they commit to long-term mortgages. Higher loan standards mean banks want to see an applicant’s solid income history before lending.”

There is plenty to be afraid of when it comes to home buying. But in the current investing climate, housing presents an attractive long-term investment that should hold steady or even have upside surprise in the short term.
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Mr. Buffett would remind us that investments of any kind are not without risk. Each should be considered with the investor’s time horizon and appetites. But he also has acknowledged that real estate is especially attractive when financing is cheap, there is pent-up demand and prices have been driven down by a spooked market. Put another way, it’s time to be greedy.

Posted in Economics, Housing Recovery, National Real Estate | 62 Comments