Farmland assessment must be fixed

Posted on December 2, 2011 by grim

The fix is simple, adjust the $500 minimum requirement (in 1964 dollars) for inflation, and ensure it adjusts for inflation every year going forward. $500 was a significant sum … in 1964 when the original law was passed. Had the original law adjusted for inflation, which it should have, the limit would be around $3,500 today. Since it didn’t, it is no longer a limit, it’s now a simple loophole. This new limit will have absolutely no impact on any real farmers.

From the Record:

‘Fake farmers’ get property tax break

Some New Jersey corporations, developers — and even a few politicians — get a tax break for growing as little as $500 worth of crops such as Christmas trees, using a law that critics say means higher property taxes for everyone else.

So-called “fake farmers” were faulted for taking advantage of a farmland tax break at a Senate Environment and Energy Committee hearing Thursday where lawmakers discussed doubling the minimum sales needed to qualify for the state’s farmland assessment.

“Time and again, we hear stories of this program being abused by owners of large, valuable residential properties to avoid paying their full property tax bill,” said Sen. Jennifer Beck, R-Monmouth.
…
The farmland assessment dates back to the 1960s, and was designed to help struggling farmers while also discouraging the development of open space in a state known for its high real estate prices.

But opponents now see the tax break as outdated, and something many wealthy landowners are abusing to avoid paying their full property tax bills. The average property tax bill in New Jersey averaged a record-high $7,576 last year, but bills easily top $25,000 on larger properties.

Beck is sponsoring legislation that would double to $1,000 the minimum gross sales required to qualify for the farmland assessment, which sharply reduces how much property taxes are due on the part of a property that is used for agriculture.

The bill would also compel landowners who claim their property as farmland to submit clear evidence of agricultural sales or income to the state Division of Taxation. And local tax assessors would have to receive training on farmland assessments.
…
Jeff Tittel, executive director of the New Jersey Sierra Club, cited an example of a 5-acre lot — the minimum allowed to qualify for the assessment — with an expensive home that uses only a fraction of the property to cultivate enough Christmas trees to qualify for the tax break.
…
No votes were taken on Beck’s bill Thursday, and it may not make it out of the Legislature before the current lame duck session ends early next year. But Beck, who’s been pressing the issue since she took office in 2008, pledged to keep pushing.

“It is time to close this ‘fake farmer’ loophole and ensure that only true farmers who produce substantial agricultural output be eligible for the program,” she said.

Posted in New Jersey Real Estate, Politics, Property Taxes | 203 Comments

Strong showing for October pending sales

Posted on December 1, 2011 by grim

From HousingWire:

NAR pending home sales surge in October

Pending home sales soared more than 10% in October and remain above year-ago levels, in a hopeful sign for the nation’s housing market, according to the National Association of Realtors.

NAR’s pending home sales index, a forward-looking indicator based on contract signings, surged 10.4% to 93.3 in October from 84.5 in September. The index is 9.2% above October 2010 when it stood at 85.5.

The index is based on signed real estate contracts for existing single-family homes, condos and co-ops. An index of 100 is equal to the average level of contract activity during 2001, the first of five consecutive record years for existing-home sales and coincides with a level that is historically healthy.
…
The PHSI in the Northeast rose 17.7% to 71.3 in October, 3.4% above October 2010. In the Midwest, the index jumped 24.1% to 88.7 in October and remains 13.2% above a year ago.

The South saw a smaller gain, 8.6% in October, to an index of 99.5 — 9.7% higher than October 2010.

Only the West saw slippage, but remains above 100. There, the index slipped 0.3% to 105.5 in October but is 8.1% above a year ago.

From the Otteau Group:

Home Sales Continue to Show Signs of a Bottom

New Jersey home sales in October recorded a 4.9% year-on-year increase as the housing market continues to show signs of stabilization. Home sales have now increased in 5 of the last 6 months, recording an average monthly increase of 5.5% over that period, as home buyers take advantage of both lower home prices and mortgage interest rates. That rate of rise will accelerate once job creation becomes more consistent.

Posted in Housing Recovery, New Jersey Real Estate | 98 Comments

“People need to feel like they’re getting a great deal.”

Posted on November 30, 2011 by grim

From the WSJ:

Home Prices Edge Downward

Home prices declined in September and are poised for a grim winter as banks step up their efforts to take back and sell foreclosed properties.

Prices fell 0.6% from August, according to the widely watched Standard & Poor’s/Case-Shiller index of 20 major metropolitan areas, breaking a five-month run of increases during the spring and summer, when higher sales volumes typically firm up prices.

For the third quarter, prices were down 3.9% nationwide compared with a year earlier, a slight improvement from the 5.8% annual decline recorded at the end of June, according to the Case-Shiller National Index.

Prices remain under pressure as the housing market continues to digest high volumes of foreclosed and other “distressed” properties that tend to sell at a discount. Though sales picked up at the end of the summer, analysts said buyers were only closing deals they perceive as a bargain, which could help explain why prices are sliding again.

“Buyers don’t want to tell their friends ‘I bought a home.’ People look at you sideways. But if it’s a foreclosure, they pat you on the back,” said John Burns, president of a home-building consulting firm in Irvine, Calif. “People need to feel like they’re getting a great deal.”

Posted in Economics, Housing Bubble, Housing Recovery, National Real Estate | 88 Comments

Foreclosures? Not in NYC.

Posted on November 29, 2011 by grim

From HousingWire:

NYC foreclosures drop 32%

New York City foreclosure filings dropped 32% in the third quarter over last year.

Lenders filed 3,168 foreclosures on single-family and multifamily properties during the quarter, according to a study from New York University Furman Center for Real Estate and Urban Policy. The notices, the first stage in the foreclosure process, also dropped 5.4% from the previous three months and were down more than 46% from the peak in 2009.

Roughly 73% of all filings occurred in either Brooklyn or Queens. Over the last two quarters, notices have been more evenly split between homeowners and landlords.

“Given persistent unemployment and delinquency rates nationally, it remains unclear whether the past four quarters of reductions in foreclosure notices is the result of the slow pace of foreclosure proceedings, or a promising sign that more homeowners are now able to meet their mortgage obligations,” said Vicki Been, faculty director of the Furman Center.

Court rule changes and a massive backlog pushed the average completion time to beyond 900 days, the longest in the nation, according to RealtyTrac, which monitors filings across the country.
…
Meanwhile, the 5,615 property sales in third quarter dropped 3.6% from last year. Home values declined in every borough but Manhattan.

“Sales volume continued to lag in the third quarter of 2011, showing little change since last quarter and remaining well below the sales volumes we’ve seen in the city in the past decade,” said Ingrid Gould Ellen, faculty co-director of the Furman Center.

In New York City, values are down more than 20% from the peak, which crested sporadically across all major boroughs just before the financial crisis struck in 2007.

Posted in Foreclosures, National Real Estate | 151 Comments

FHA: Nothing to see here, move along

Posted on November 28, 2011 by grim

From the WSJ:

What Housing Risk?

Before the 2007 housing bust, financial analysts who raised questions about Fannie Mae and Freddie Mac’s shaky finances were dismissed as cranks. So it’s worrying to see a thoughtful critique of another taxpayer-backed monolith—the Federal Housing Administration—receive a similar brush-off.

The flap centers around an American Enterprise Institute paper “Is FHA the Next Housing Bubble?” by Wharton real-estate finance professor Joseph Gyourko earlier this month. Mr. Gyourko notes that while the FHA’s loan exposure has grown to more than $1 trillion this fiscal year from $305 billion at the end of 2007, the agency hasn’t “increased its capital reserves commensurately.” Sure enough, the Department of Housing and Urban Development recently reported that the FHA’s capital reserves are 0.24%, a far cry from the 2% statutory minimum.

If the FHA were a private entity, these revelations would alarm investors exposed to the risk and force management to adjust. But the FHA is a bureaucracy, so its instinct is the opposite. In a blog post titled “The Continued Strength of the FHA,” Assistant Secretary for Research and Policy Development Raphael Bostic dismisses Mr. Gyouko’s “outrageous claims” and says the FHA’s books are “sound.” His arguments are worth mulling for what they reveal about what passes for FHA thinking.

Mr. Bostic focuses on the FHA’s expansion and recent reforms. Although the agency expects “record” payouts next year as borrowers default, it forecasts $9 billion of new business over the same period. FHA credit scores have improved markedly: At the end of 2007, 47% of borrowers had a credit score of less than 620, but today that figure is 3.5% and the average credit score tops 700. The Obama Administration has increased FHA premiums three times, made “reforms to credit policy, risk management, lender enforcement, and consumer protections,” and “total liquid assets are at their highest point ever,” Mr. Bostic notes.

In other words, the FHA wants to grow its way out of its problems by shedding subprime borrowers and expanding into prime loans, an area historically served by private insurers. Mr. Bostic makes this argument explicit, arguing that the FHA’s market dominance—the agency now backs nearly one-third of all new single-family mortgages—is “essential” to a housing-market recovery, adding: “Providing access to credit for homebuyers of all income ranges and in all communities, and stabilizing our housing market, has been FHA’s mission for nearly eight decades.”

And here we thought its mission was to make housing affordable for lower-income earners. But if the FHA now wants to dominate America’s housing market with taxpayer monies, that’s even more reason to examine the risks, not ignore them.

Posted in Economics, Housing Bubble, National Real Estate, Risky Lending | 121 Comments

No quick rebound for housing

Posted on November 27, 2011 by grim

From CNBC:

Housing Prices Won’t Recover Until 2013: Economists

U.S. home prices will stagnate through next year and only start recovering in 2013, according to economists polled by Reuters who also felt the stimulus options being floated will not do much to reinvigorate the market.

The housing market, considered by many as critical to any meaningful economic recovery, is still struggling to find its footing after collapsing by a third over the past several years, leaving many owing more than their homes are worth.

The poll of 27 analysts taken Nov. 17-22 was more downbeat than a survey taken two months ago, which predicted small home prices rises next year of less than 1 percent on average.

With an excess of unsold homes holding prices down and more foreclosures expected, lawmakers and experts have floated various options for propping up the market until the economy improves and Americans start buying homes again.

But most of the economists polled were sharply critical of two of the main proposals: more purchases of mortgage-backed securities (MBS) by the U.S. Federal Reserve and a reduction in loan principal for struggling homeowners.
…
As well, 19 out of 26 who replied said prices could eventually recover without a major program to write down principal payments.

Opponents of such a scheme argue it would come with a hefty price tag, and such a measure would likely be politically sensitive heading into an election year.

Advocates say it’s the only way to head off another wave of foreclosures by keeping underwater borrowers in their homes and will speed up the recovery. Seven economists said house prices would not recover without a writedown plan.
“We see little prospect that any policy action will meaningfully impact the housing outlook over the next year,” said Sam Bullard, senior economist at Wells Fargo.

“Unfortunately, a sustained improvement in housing will not likely get underway until the mountain of foreclosures is cleared and the price discovery process plays out.”
…
Home prices as measured by the S&P/Case-Shiller home price index are expected to finish out this year down 3.3 percent compared with the 3.8 percent decline forecast in the September’s poll.

But prices are seen slipping 0.3 percent next year compared to September’s forecast for a 0.8 percent gain. Prices are expected to rise a meagre 1.5 percent in 2013.

Eighteen economists said they see prices bottoming in 2012, with 12 of those expecting it will happen in the first half of the year. Just one economist each said a bottom won’t be found until 2013 and 2014, while 7 said it has already happened.

Posted in Economics, Employment, Foreclosures, Housing Recovery, National Real Estate | 23 Comments

Town Mergers – Elegant solution or are we the suckers?

Posted on November 23, 2011 by grim

From the APP:

Gov: Mergers can help towns save tax dollars

Gov. Chris Christie threw state support behind the successful effort to consolidate the Princetons into one town, but said he is not sure how many more town mergers are in the forecast.

“This has been an effort in the works since 1953,” Christie said of the merger of Princeton Township and Princeton Borough, which is expected to be complete within a year and will reduce the number of New Jersey municipalities to 565.

“In New Jersey, as you know, it’s slow and steady. We eventually got there,” he said.

Christie held a town hall meeting Tuesday at the Princeton Public Library, here in the borough, taking a victory lap two weeks after residents of the two towns approved a merger referendum.

A study commission said combining the governments would save more than $3.2 million mostly through elimination of redundant administration and services. Christie sweetened the pot with a proposal for the state to pay for first-year consolidation costs and allowing towns to spread other transition costs over five years.

There had been three failed previous efforts to consolidate the Princetons, most recently in 1996.

Christie, accompanied by Princeton Township Mayor Chad Goerner and Princeton Borough Council President Kevin Wilkes, told an audience of 150 people that merging towns is one way to achieve local government savings and “challenge the status quo.’’

But consolidation is not for everybody, Christie said, and added that it can be encouraged by the state, but should not be mandated.

“I think locally driven discussions are the only way to do it,” he said. “It’s a contentious and emotional issue for some and also a complicated one.”

Currently, there is little other formal movement toward connecting towns aside from proposed unions of tiny Merchantville and larger Cherry Hill, and of Scotch Plains and Fanwood.

Posted in Economics, New Jersey Real Estate, Property Taxes | 156 Comments

October Home Sales Surprise (only slightly)

Posted on November 22, 2011 by grim

From the WSJ Developments Blog:

Behind the Numbers: Thankful for Existing-Home Sales

Here’s a reason for America’s real-estate agents to start celebrating Thanksgiving a few days early: Sales of previously owned homes in the U.S. — the biggest part of the market — unexpectedly climbed in October.

As we report, existing-home sales ticked up 1.4% from a month earlier, the National Association of Realtors trade group reports. Sales rose in the West, South and Midwest, but fell in the Northeast, which may have been slowed by an early-season snowstorm.

Economists surveyed by Dow Jones Newswires had expected home sales to fall by 2.2%.

While beating expectations is a good thing — and the hard-hit housing market could be near a bottom — demand remains weak because of the limping economy, elevated unemployment and tight lending standards that are preventing many would-be buyers from securing mortgage funding.

Plenty of consumers are also afraid that home prices, down 30% or more from the peak, aren’t done falling. And it doesn’t look like they are: October’s median sales price was $162,500, down 4.7% from $170,600 a year earlier.
…
Paul Diggle, economist, Capital Economics: “The modest rise in existing home sales in October may reflect the recent improvements in economic activity and the labor market. But a sustained and significant recovery in home sales is just not on the cards when large numbers of potential buyers are constrained by negative equity and tight credit conditions.”

Joshua Shapiro, economist, MFR: “Inventories are high relative to sales rates, and would be even more so if all those wishing to sell their home actually had the house on the market instead of keeping it off in the face of eroding prices.”

Ellen Zentner, economist, Nomura: “Despite more job gains this year, affordability remaining near record highs, and rising rents generally steering renters to buying, home sales have been unable to break out of a narrow range. Programs such as bulk sales to investors and speeding the process of foreclosure would go far in dispensing of the incredible overhang of REO properties.”

From Bloomberg:

Sales of Existing U.S. Homes Unexpectedly Increase

Sales of previously owned homes in the U.S. unexpectedly rose in October, a sign falling prices may be attracting buyers.

Purchases increased 1.4 percent to a 4.97 million annual rate, the National Association of Realtors said today in Washington. The median forecast of 75 economists surveyed by Bloomberg News was for a 4.8 million rate. The median house price dropped 4.7 percent from a year earlier, and the number of properties for sale was the lowest for any October since 2005.

Borrowing costs near a record low are helping homebuyers take advantage of housing that’s growing more affordable as prices drop. At the same time, the end of a temporary halt on foreclosures may push more properties onto the market, triggering further slides in value that may prevent the industry from recovering for years.

“The housing market is stabilizing, but it has a long road to a full recovery,” said Sal Guatieri, a senior U.S. economist at BMO Capital Markets in Toronto. “There are still a lot of depressed properties in the pipeline that will hit the market, and demand likely needs to strengthen above a 5 million annual rate to absorb the overhang of unsold homes and alleviate the downward pressure on prices.”

Posted in Employment, Housing Recovery, National Real Estate | 117 Comments

Bottoms up!

Posted on November 21, 2011 by grim

From the WSJ:

Housing Market May Be Nearing a Bottom

The housing market is starting to show a pulse.

For the first time in a long time, housing figures are coming in better than expected. The National Association of Home Builders’ sentiment index jumped three points this month to 20, its highest reading in over a year. Last week, the Commerce Department said building permits and construction of single-family homes rose in October. The Federal Reserve’s fourth-quarter loan survey showed a pickup in demand for mortgage loans.

Mission accomplished? Not quite. Construction is picking up but remains at historically depressed levels, and broader sales activity is still anemic. Indeed, the National Association of Realtors’ existing-home sales report, out Monday, is likely to show a second straight monthly decline in October to a seasonally adjusted annualized pace of about 4.8 million units. That would mean the sales rate has dropped by more than 10% so far this year.

Meanwhile, the foreclosure supply is ticking back up. After declining for three straight quarters, the percentage of loans on which foreclosure action has started rose in the third quarter, the Mortgage Bankers Association’s latest survey showed. This was partly due to remediation programs and the sunset of earlier foreclosure halts, the group said. The continued trickle of distressed properties is likely to keep downward pressure on home prices.
…
Bank of America Merrill Lynch economists expect the foreclosure process to speed up in nonjudicial states next year, with liquidations peaking in 2013. This is partly why they expect home prices to drop another 8% on average nationwide over the next 18 months before bottoming. This assumes a healthy pickup in sales; if customers shy away because of economic angst or tighter lending criteria, a rebound will take longer to materialize.

Still, six years after existing-home sales peaked, the market is at least edging toward a bottom. The biblical notion that seven years of famine follows seven years of feast may have something to it.

Posted in Economics, Housing Recovery, National Real Estate | 128 Comments

Under Pressure

Posted on November 20, 2011 by grim

Pressure pushing down on me
Pressing down on you
no man ask for
Under pressure – that burns a building down
Splits a family in two
Puts people on streets
It’s the terror of knowing
What this world is about
Watching some good friends
Screaming let me out
Pray tomorrow – gets me higher
Pressure on people – people on streets
(Under Pressure, Queen)

From the WSJ:

Homes Under Pressure

Those looking for signs of a recovery in New Jersey home values may need to take the long view, as more than 100,000 homeowners are dealing with foreclosures that are stalled in court and another 48,000 are way behind on mortgage payments.

The numbers were among the results of a national mortgage delinquency survey released this week that suggest a backlog of unresolved foreclosures in New Jersey could be a drag on home prices for years to come.

“Foreclosures place downward pressure on neighborhoods,” said Jeffrey G. Otteau, an appraiser and housing consultant. “Home prices are falling fastest in those urban and rural markets most affected by foreclosures.”

Sarah G. Laks, who runs a real estate and construction business, fought in court to head off a foreclosure auction on her five-bedroom home in Lakewood, NJ. She said the backlog of foreclosures was “hurting the building industry,” and she blamed the backlog on the difficulties in negotiating reduced payments with banks.

The delinquency survey, by the Mortgage Bankers Association, found that 8.1% of homes in New Jersey were in foreclosure in the third quarter.

It ranked second, after Florida, in the percentage of mortgages in foreclosure, surpassing Nevada, which was hard hit during the downturn. New York ranked fifth among all states, with 5.7% of homes in foreclosure, while Connecticut ranked ninth, with 4.8% reported in foreclosure. The figures are based on a survey of all homes with mortgages.

The high rankings were reported even though the region was spared the worst of the housing downturn, and has shown strong signs of stabilization: The shares of homeowners with newly delinquent mortgages were below average in the region, and a small fraction of those in Florida and Nevada.

The foreclosure figures were so high in the region because New York, New Jersey and Connecticut all require that foreclosures be handled through court proceedings. These in turn were delayed by complaints about robo-signing: bank employees signing documents without knowing they were accurate.

In New Jersey, major banks suspended most mortgage filings last December, until banks could demonstrate that there were no irregularities in their foreclosure practices. The banks were permitted to resume mortgage activity in August and September, but an appellate court decision in August added new requirements and uncertainty for banks, further delaying many foreclosures, court officials said.

Posted in Economics, Housing Bubble, Housing Recovery, New Jersey Real Estate | 29 Comments

NJ Unemployment Falls to 9.1%, 2,500 net jobs created in October

Posted on November 18, 2011 by grim

From the Star Ledger:

NJ unemployment falls and jobs increase as state shares in slowly growing U.S. economy

New Jersey’s unemployment rate dropped to 9.1 percent last month as private businesses added 4,000 jobs, state officials announced today.

It was the third month in a row that the New Jersey unemployment rate dropped.

“Since January, seven of the nine monthly changes have been positive,” said Rutgers economics professor Joseph Seneca. “The increase since that time, 38,600 private sector jobs, puts the state on the best pace for private sector job growth since the late 1990s.”

Seneca said it was a good sign that in the October unemployment report, the unemployment rate fell and the workforce expanded.

That differed from previous months such as September when the unemployment rate dropped despite lost jobs, perhaps because some people stopped looking for work and weren’t counted for the rate.

Even September’s mixed report got a little rosier this week as the state announced that an estimated loss of 11,000 jobs that month had been revised downward to only 5,000 jobs lost after more information was gathered from employers.

“The pace is not gangbusters, but it’s positive,” said Seneca. “In October, the country added 104,000 private sector jobs. New Jersey added 4,000 of those. It’s participating in the national expansion.”

A continuing negative in New Jersey’s job market was the loss of 1,500 public sector jobs, and Seneca said that trend is likely to continue as the state and local governments grapple with fiscal constraints. (I beg to differ, the fact that we can show gains while reducing the size of goverment is a huge positive – jb)

From the APP:

NJ unemployment dips as state creates 4,000 private-sector jobs

New Jersey’s economy pumped 4,000 jobs into the private sector in October, even as public employment shrunk, the state reported Thursday.

A survey found the state’s unemployment rate fell to 9.1 percent from 9.2 percent in September, according to the New Jersey Department of Labor and Workforce Development.

“This is an encouraging report,” said Rutgers University economist Joseph Seneca. “It affirms that private-sector growth is continuing in New Jersey.”
…
It comes as New Jersey’s labor market has tried to gain traction after a devastating recession cost the state 269,000 jobs.

In October, private-sector employment increased by 4,000 jobs, while the public sector, which is still contracting, dropped 1,500 jobs, the state said, for a net gain of 2,500 jobs.

“The rebound in the job count in October, along with the drop in the unemployment rate, suggests that the state’s economy continues to move forward,” said Charles Steindel, chief economist for the New Jersey Department of Treasury, in a statement. “The pace of improvement is much less than we all desire, but we are going the right way.”

Posted in Economics, New Jersey Real Estate | 99 Comments

What to make of “hyperlocal” recoveries? Noise? Something more?

Posted on November 17, 2011 by grim

From US News:

Are Things Looking Up for the Housing Market?

For-sale home inventories are dropping nationally while median sales prices are rising, according to new data released Wednesday, a rare but encouraging sign of renewed optimism in America’s feeble housing market.

Inventories declined 3.48 percent from September to October, according to Realtor.com, and are down 20.77 percent from one year ago. Median list prices, which have remained essentially unchanged since June, were up 2.65 percent nationally year over year.

“These developments can be viewed as a positive sign that the market has stabilized and in some parts of the country, has begun to recover,” the report said. “Lower inventories combined with generally stable list prices can be seen as a positive sign that the overall market is holding its own.”
…
To be sure, there’s still plenty of variation across the country. After all, real estate is nothing if not hyper-local. Markets remain fragile, particularly those with high unemployment rates and large numbers of seriously delinquent borrowers, which threatens to add to an already gigantic shadow inventory.
…
Still, some markets have begun to rally and show nascent signs of recovery, even as others continue to struggle. Parts of Florida, some of the hardest hit by the housing market decline, have consistently posted improving list prices and reduced inventories. Indeed, median list prices remain well below their pre-crisis peaks. Florida held the top five spots for markets with the largest year-over-year median list price increases in October. The Fort Myers and Miami metro areas saw the largest year-over-year increases, posting 33 and 25 percent price upticks respectively.

On the flip side, markets at the epicenter of the original housing market implosion—Las Vegas and parts of California—continue to lag. In addition, markets such as Chicago and Detroit, which didn’t see the meteoric run-up in building and home prices, are now experiencing some of the most severe price declines. Home prices in those midwestern cities sunk almost 13 and 11 percent respectively.
…
While the housing market still has a lot of ground to make up, key indicators are beginning to point in the right direction, experts say. Regional variation will persist as some markets fare better and others lag due to external economic pressures and the continuing fallout from foreclosures, overbuilding, and homeowners with negative equity.

Posted in Economics, Housing Recovery, National Real Estate | 124 Comments

Bye bye middle class burbs

Posted on November 16, 2011 by grim

Sound familiar? Where have all the middle class neighborhoods gone? Seems like in Jersey, it’s becoming more and more common to have to either stretch far above one’s income to afford a nice neighborhood, or have to settle for something much much worse. The middle ground still exists, but it seems like you need to move further out to find it.

Will the trend continue? If so, welcome to bizzaro-world, where stretching for the unaffordable home is a more fiscally sound option. Buying the affordable home, which exists within a neighborhood falling into disrepair seems like a sure way to lose money long term, as resale values suffer as a result.

From the NY Times:

Middle-Class Areas Shrink as Income Gap Grows, New Report Finds

The portion of American families living in middle-income neighborhoods has declined significantly since 1970, according to a new study, as rising income inequality left a growing share of families in neighborhoods that are mostly low-income or mostly affluent.

The study, conducted by Stanford University and scheduled for release on Wednesday by the Russell Sage Foundation and Brown University, uses census data to examine family income at the neighborhood level in the country’s 117 biggest metropolitan areas.

The findings show a changed map of prosperity in the United States over the past four decades, with larger patches of affluence and poverty and a shrinking middle.

In 2007, the last year captured by the data, 44 percent of families lived in neighborhoods the study defined as middle-income, down from 65 percent of families in 1970. At the same time, a third of American families lived in areas of either affluence or poverty, up from just 15 percent of families in 1970.

The study comes at a time of growing concern about inequality and an ever-louder partisan debate over whether it matters. It raises, but does not answer, the question of whether increased economic inequality, and the resulting income segregation, impedes social mobility.

Much of the shift is the result of changing income structure in the United States. Part of the country’s middle class has slipped to the lower rungs of the income ladder as manufacturing and other middle-class jobs have dwindled, while the wealthy receive a bigger portion of the income pie. Put simply, there are fewer people in the middle.

But the shift is more than just changes in income. The study also found that there is more residential sorting by income, with the rich flocking together in new exurbs and gentrifying pockets where lower- and middle-income families cannot afford to live.

Posted in Economics, National Real Estate | 113 Comments

Who matters more? Rich or poor?

Posted on November 15, 2011 by grim

From Bloomberg:

NJ Taxes Cause Rich People to Move, Economist Says

New Jersey’s high taxes drive out wealthy residents, slowing the state’s recovery, said Charles Steindel, the state treasury department’s chief economist.

Property, income and estate taxes are the top reasons people leave, said Steindel, who released a study of federal tax data and a survey of financial advisers today at an economic forum in Trenton organized by the treasury department.

overnor Chris Christie, a first-term Republican, has twice vetoed measures sponsored by Democrats that would have raised income taxes on residents earning $1 million or more. Senate President Stephen Sweeney, the state’s highest-ranking Democratic lawmaker, said last week his party would push again for passage of a so-called millionaire’s tax.

“There is a relationship between state tax rates and where people move,” Steindel, a former senior vice president of the Federal Reserve Bank of New York, told reporters. “The higher tax-rate states generally lose more people every year.”

Steindel released the results of a survey of subscribers to the state’s online newsletter, which includes financial advisers to high-wealth clients. More than half of the respondents said their clients had recently left or expressed interest in leaving, Steindel said.

Three-fourths of those who expressed interest in leaving have annual incomes over $100,000, while 15 percent earn more than $1 million, according to the survey.
…
The survey by Christie’s administration is at odds with an August study by the Washington-based Center on Budget and Policy Priorities, which found that housing prices and job opportunities have more impact on migration patterns than tax rates. The group advocates more spending on government programs for the poor.

The center’s study, conducted by researchers at Stanford University, examined New Jersey’s 2004 tax increase on income exceeding $500,000. It found that migration among that group increased at a similar rate as those not subject to the tax.

“For two years we’ve treated millionaires with kid gloves and it has not worked,” Sweeney told reporters Nov. 10 in Trenton. “We’re going to fight with this governor when we know he’s wrong.”

Posted in Economics, New Jersey Real Estate | 120 Comments

White Elephant Returns to Jersey

Posted on November 14, 2011 by grim

From the Star Ledger:

McMansions swell the real eastate market as homebuyers think small

Ten years ago, when their grandchildren were young and visiting often, Frank and Rosemary Santoloci bought a brand new five-bedroom, four-bathroom home on four acres in Sparta.

There was ample room to play indoors, swim in the pool and and spend time outdoors.

But now the boys have gown up and don’t come over as frequently, so last spring, the couple put their home on the market. The house sold within four months — after they cut the price.

The Santolocis are among the lucky ones.

There is a glut of these McMansions on the market in the suburbs throughout New Jersey, real estate agents and analysts said.

Certain homebuyers once prized these large houses, tucked away on a few acres of land and featuring half a dozen bedrooms, grand entranceways, and three-car garages.

But in the face of the economic collapse, declines in personal wealth, a tight housing market, and a shift of what prospective homeowners want, all that has changed.

Major demographic changes could also make the market shrink even further in the next five years, as baby boomers retire and look to downsize. The generation behind them is smaller and has less money and a desire to live closer to urban centers.

“We definitely have an oversupply of inventory for the so-called McMansions,” said Mary Pat Spekhardt, a real estate agent with Coldwell Banker in Sparta who worked with the Santolocis.

“Houses are staying on the market double the time that they used to, and everyone is frustrated,” she said. “We can’t make buyers, though, that’s the problem. We market, market, market the house and make the house stand out, but the buyers are few and far between.”

In New Jersey, it would take 14.6 months to sell the current inventory of houses listed between $600,000 and $1 million, according to real estate analyst Jeffrey Otteau, president of Otteau Valuation Group. The only houses that are selling are those with unique features, like an inground pool or a media room in the basement, agents said.

And the issue is only going to get worse.

Posted in Economics, New Development, New Jersey Real Estate | 168 Comments