Happy days are here again!

Posted on May 27, 2011 by grim

From the Record:

“Liar loans” still available, but not for everybody

Stated-income mortgage loans, which do not require borrowers to verify their income, came to be known as “liar loans” during the subprime lending bust when many of the loans went bad and widespread lying about incomes came to light.

Surprisingly, more than 2 1/2 years after the crash of Lehman Brothers, despite a nascent government crackdown on reckless lending, stated income loans are still available to those who know where to look in this slow market.

Hudson City Savings Bank, which is known as a conservative lender, has been making stated income loans for 15 years or more, and still makes them. Spencer Savings Bank, based in Elmwood Park, stopped doing them a few years ago but brought them back in February.

It’s still legal to make such loans, which are also called “low-doc” or “no-doc” loans, but for borrowers they are more expensive and lenders make it hard to lie.

“We don’t want people to tell us they’re a kindergarten teacher making half a million dollars a year,” said Thomas Laird, chief lending officer at Hudson City, the largest New Jersey-based bank.

“The asset position has to be commensurate with the income they are purported to have. They’ve got to be very high quality credit borrowers and they have to have 35 percent or more down in order to qualify,” Laird said.

Borrowers also pay an interest rate half a percentage point higher than conventional loans.

“We are extremely careful with this product,” said Mercedes Pedrick, vice president and director of mortgage originations at Spencer Savings, which has 19 branches in Bergen, Passaic, Morris, Essex, and Union counties.
…
“If they have a savings pattern that shows they are making the kind of income they are telling us they are making, even if they’re not necessarily showing it to Uncle Sam, they may qualify [for a stated income loan],” Laird said.

Eventually investment bankers started buying the loans and securitizing them, Alverson said. During the real estate bubble in the mid 2000s the loans were made to many amateur real estate speculators of modest means, and many of those loans soon were in default, Alverson said.

“Everybody wanted to be the next Donald Trump.”

Posted in Housing Bubble, New Jersey Real Estate, Risky Lending | 147 Comments

“It is an industrial-strength upgrading.”

Posted on May 26, 2011 by grim

From the APP:

CEOs more optimistic about N.J. economy

New Jersey’s chief executives are more upbeat about the state’s economy than previously, but many plan to cut costs this year, a survey released Wednesday said.

The survey, presented at the New Jersey Economic Policy Summit, showed a significant positive attitude adjustment by chief executive officers toward the state’s economy and business climate.

Nearly three-quarters of CEOs rated New Jersey’s economy as fair or good, up from just over a third in a late 2009 survey, according to the results outlined by economist James W. Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University.

And 59 percent said the economy will get better over the next 12 months, a rosier outlook than the previous survey in which that sentiment was shared by just 38 percent.

“This is a sharp rebound for the state,” Hughes said. “It is an industrial-strength upgrading.”

It comes as the state continues to struggle with job growth. After shedding 117,700 jobs in 2009, New Jersey gained 5,200 private sector jobs in 2010. In the first four months this year, the state added 19,800 private sector jobs.

“We are certainly moving in the right direction,” Hughes said. “Despite the new positives, New Jersey, like the nation, remains in a deep employment hole.”
…
“While many challenges lie ahead, this is a very positive survey showing that the state’s economy and its policies affecting business are improving and heading in the right direction,” said Phillip Kirschner, president of the New Jersey Business and Industry Association, an organizer of the New Jersey Economic Policy Summit.
…
New Jersey’s economy has gotten better during the past 12 months, 42 percent of respondents said, while 8 percent think it has worsened.
…
Nearly a third, 32 percent, expect to hire New Jersey employees this year, up from 15 percent in the last survey. Almost three-quarters expect higher revenues in 2011, up from 64 percent in the late 2009 survey.

Almost 75 percent have hired employees during the economic recovery following the Great Recession, while 68 percent have increased wages.

Still, there were rough spots, as 78 percent said they planned to reduce, or continue to reduce, costs in 2011, up from 76 percent in the last survey.
…
“While the results also show that New Jersey is still viewed as having a long way to go in terms of its tax structure and regulatory environment as compared to other states, attitudes clearly have gotten better,” Hughes said.

Posted in Economics, Employment, New Jersey Real Estate | 116 Comments

Who said the high-end was immune?

Posted on May 25, 2011 by grim

From Bloomberg:

Greenwich’s Priciest Homes Languish With Four Years of Supply

It’s been more than 500 days since Stanley Cheslock put his 26,000-square-foot Greenwich, Connecticut, “dream home” on the market for $17.95 million.

The house and its surrounding estate — custom built by Cheslock in 2003, with a movie theater and 3,700-bottle wine cellar — is waiting for a buyer who sees the current asking price, $15.95 million, as a bargain.

“It’s a steal,” said Cheslock, a co-founder of an investment firm, who has knocked almost 50 percent off the price he was asking when he first tried to sell the property five years ago. “It’s way underpriced.”

Homes priced at $10 million and above are accumulating on the market in Greenwich, a town about 30 miles (48 kilometers) north of Manhattan that’s known as the U.S. hedge fund capital. They’re moving so slowly that it would take more than four years to sell them all, the biggest backlog since at least 2004, according to Mark Pruner, an agent with Prudential Connecticut Realty. Wall Street’s greater emphasis on deferred compensation, in which a portion of an annual bonus will be paid in the future, has stifled demand, he said.

“Our market moves very closely with the financial markets,” Pruner, based in Greenwich, said in an interview. “Deferred compensation has totally hammered the over-$10 million market because people just aren’t getting large amounts of cash, and that market has traditionally been a cash market.”

Fifty-two houses in that price range were listed for sale as of May 19, according to Pruner. Four have sold this year and two are in contract. At that pace, it would take 52 months to sell the inventory, he said. If that backlog remains through the end of the year, it would be the biggest in his data going back to 2004.
…
“Previously, if you got a $10 million bonus, buying a $5 million house wasn’t that big a deal” said Pruner, who estimates that about half of all homebuyers in Greenwich work in the financial industry.

“If you get $20 million — $3 million in cash and 17 in deferred compensation — are you going to borrow another $2 million in cash to buy a house? I don’t think so,” he said.

Posted in Economics, Housing Bubble, National Real Estate | 168 Comments

Pessimistic outlook for new home sales in April

Posted on May 24, 2011 by grim

From Bloomberg:

Purchases of New Homes in U.S. Probably Held Near Record Low

Purchases of new houses probably held close to a record low in April, showing the real-estate market remains a weak link in the U.S. expansion, economists said before a report today.

New homes sold at a 300,000 annual pace last month, the same as in March, according to the median forecast of 75 economists surveyed by Bloomberg News. Purchases sank to a 270,000 pace in February, the weakest in 48 years of data.

The prospect that foreclosures will keep driving down property values means that buyers may continue to shun new houses in favor of previously owned dwellings, hurting builders like D.R. Horton Inc. Unemployment at 9 percent, stagnant wages and credit restrictions add to the headwinds, signaling a housing recovery will take years to unfold.

“Until that overhang of existing homes works its way down, new-home sales will remain depressed and construction as well,” said Steve Blitz, a senior economist at ITG Investment Research Inc. in New York.

The Commerce Department’s report is due at 10 a.m. in Washington. Estimates in the Bloomberg survey ranged from 280,000 to 320,000.
…
Douglas Yearley Jr., chief executive officer at Toll Brothers Inc., the largest U.S. luxury-home builder, last week said the spring home-selling season has been “disappointing” and that “people are still scared.”

Posted in Employment, National Real Estate, New Development | 159 Comments

Jersey Shore Triptych

Posted on May 23, 2011 by grim

From Fox Philly:

Summer Shore Rentals On The Rise

As Memorial Day weekend, the unofficial start of the summer season, approaches, most people have their eyes on a Jersey Shore vacation, and some are saying vacation rentals are on the rise.

In Ocean City, N.J., rentals are already up from last summer. Real estate specialists on the shore say that it might actually be difficult to find an available rental property this late in the season if you haven’t already started looking.

From the Record:

Shore tourism outlook is bright

The summer forecast is bright for Shore travel, which accounts for about two-thirds of the state’s $39 billion tourism industry.

An improving economy, along with vacationers’ desire to stay close to home in the face of high gasoline prices, will boost Shore visits this summer, according to a recent “shorecast” panel at Richard Stockton College in Atlantic County.

Tourism officials are already seeing signs of growth.

“Parking revenues, rentals, hotel accommodations and beach tag sales — all strong indicators of what kind of season we expect to have — are way ahead of last year’s pace,” Michele Gillian, executive director of the Ocean City Chamber of Commerce, said at the panel discussion. And last year was pretty strong, thanks to hot, dry weather.

In interviews, tourism officials said that website visits and requests for travel brochures are up significantly over last year. Diane Wieland, director of the Cape May County Department of Tourism, has seen an increase in vacation home rentals and hotel reservations in the southern Shore towns.

While the Shore draws most heavily from New Jersey, New York and Pennsylvania, tourism departments have increased their marketing in Quebec. The Canadian dollar is worth slightly more than the American dollar, making U.S. vacations more affordable for Canadians.

“There are an estimated half-million Canadians who travel to New Jersey each year,” Wieland said.

Lori Pepenella, a marketing executive at the Southern Ocean County Chamber of Commerce, said that weekend and day visits to Long Beach Island are already running ahead of last year.
…
But economic stresses continue to force visitors to economize where they can. Tourism officials say visitors are choosing shorter stays — day trips or weekend getaways — and asking about lodging that includes kitchenettes, so they can avoid spending on restaurant meals. That trend has been in place since the recession began in late 2007.

From the Philly Inquirer:

Taking the backroads to the Shore

Heading to the Shore over an expressway isn’t for everyone. Some folks prefer the backroads.

But for the experienced trekker, writing down the names of the roads can be tricky. Notes can include phrases such as “past the car dealerships,” “that farm stand with the peaches,” “that graveyard” and “666.”

Jersey Shore backroads can be hard to pin down. Except for adventurous drivers wandering off the Atlantic City Expressway or Garden State Parkway’s standard routes with a map or GPS in hand, most Shore routes were handed down by parents and grandparents. They started their summer vacations before the Atlantic City Expressway opened in 1964, and ahead of the Garden State Parkway’s completion in 1957.

“I grew up with parents trying to figure out the back way to avoid part of the Garden State Parkway by going through, parallel, and over it,” says Kathryn Quigley, 44. Her family drove from Northeast Philadelphia to Stone Harbor along a route that included “the TAC” (i.e. the Tacony-Palmyra Bridge), a “restaurant with a triangle-shaped roof, and the bathrooms were out back.”

Posted in Economics, Shore Real Estate | 141 Comments

It’s the end of the world as we know it (and the weekend open discussion)

Posted on May 21, 2011 by grim

Flash!

Armageddonbow spotted in Northern NJ at 6pm this evening! The end of the world is surely upon us (or G-d just has a sense of humor)

This is the time and place to post observations about your local areas, comments on news stories or the New Jersey housing market, open house reports, etc. If you have any questions you wanted to ask earlier in the week but never posted them up, let’s have them. Also a good place to post suggestions, requests for information, criticism, and praise.

For readers that have never commented, there is a link at the top of each message that is typically labeled “[#] Comments“. Go ahead and give that a click, you might be missing out on a world of information you didn’t know about. While you are there, introduce yourselves to everyone.

For new readers that have only read the messages displayed on the main page, take a look through the archives, a substantial amount of information has been put online in the past year. The archives can be accessed by using the links found in the menus on the right hand side of the page.

Posted in General | 111 Comments

So much for April

Posted on May 20, 2011 by grim

From the Washington Post:

Existing-home sales fall in April

Sales of previously owned homes dropped in April, falling short of many analysts’ expectations for this key month of the spring selling season.

But the number of households that fell seriously behind on mortgages in the first quarter is down, suggesting a smoother path ahead, if only the housing market could shed the foreclosures that continue to drag down home prices.

The findings come from two industry reports released Thursday, both of which signaled a slow housing recovery. Even though mortgage defaults are shrinking, the homes in foreclosure remain at an alarmingly high level, and a meaningful pickup in sales is needed to purge them.

Existing sales dropped 0.8 percent to a seasonally adjusted rate of 5.05 million in April from March, the National Association of Realtors reported. They were down 13 percent from a year earlier, when a federal home-buyer tax credit ignited a buying frenzy.

The Realtors group blamed the sluggish activity on unnecessarily tight lending standards. Low home appraisals also botched many potential sales, the group said.

Some economists expected sales to rise in part because the Federal Housing Administration, which backs low down-payment loans, raised its fees in mid-April. They thought buyers would rush to close on homes ahead of the increase, said Patrick Newport, an economist at IHS Global Insight. Going forward, the higher fees will hurt demand, he said.

From CNBC:

Home sales fall, despite uptick in 1st-time buyers

Fewer Americans purchased previously occupied homes in April, a troubling sign that the weak housing market remains a drag on the economy.

Sales fell 0.8 percent in April to a seasonally adjusted annual rate of 5.05 million units, the National Association of Realtors said Thursday. That’s far below the 6 million homes a year that economists say represents a healthy market.

Purchases made by first-time homebuyers did increase but not nearly enough to signal a housing recovery is on the way. First-time buyers are critical because they typically improve their properties and invest in their communities, a combination that helps home values rise.

Foreclosures, on the other hand, force prices down. They represented more than a third of all sales in April and more are expected in the months ahead.

Since the housing boom went bust, sales have fallen in four of the past five years and hit a 13-year low last year. Declining home prices and low mortgage rates haven’t been enough to boost sales this year.

Some who want to buy can’t, mostly because banks have tightened lending requirements and are insisting on larger down payments. Many buyers who can qualify for loans are holding off. They are worried that home prices have yet to bottom out.

Economists say it could be years before the housing market fully recovers.

Posted in Economics, National Real Estate | 153 Comments

April Existing Home Sales

Posted on May 19, 2011 by grim

From Bloomberg:

Existing-Home Sales in U.S. Probably Rose for a Second Month

Sales of previously owned U.S. homes probably rose for a second month in April as investors used cash to buy distressed properties, a reminder real-estate is struggling to gain traction almost two years into the recovery, economists said before a report today.

Purchases of existing houses rose 2 percent to a 5.2 million annual pace, according to the median forecast of 75 economists surveyed by Bloomberg News. Other reports may show fewer Americans applied for unemployment benefits last week and manufacturing expanded in the Philadelphia region.

The increase in home demand is helping clear the market of inventory even as renewed foreclosures will probably continue weighing on prices. Manufacturing has so far carried the economy, validating the Federal Reserve’s decision to maintain record stimulus until the recovery becomes self-sustaining.

“We are seeing a pickup in all-cash transactions,” said Yelena Shulyatyeva, a U.S. economist at BNP Paribas in New York. “All-cash bargaining power and investment activity is helping absorb the supply. We will continue to see a gradual pickup in demand.”

The National Association of Realtors will release the figures at 10 a.m. in Washington. Estimates for home sales in the Bloomberg survey ranged from 5.09 million to 5.40 million. Purchases reached a record 7.08 million in 2005, and slumped to a 13-year low of 4.91 million last year.

Posted in Economics, National Real Estate | 127 Comments

Congrats to Hunterdon!

Posted on May 18, 2011 by grim

From Bloomberg:

Hunterdon County, N.J., Has Highest Taxes

Residents of New Jersey’s Hunterdon County pay the highest property taxes in the U.S., according to the Tax Foundation.

The annual median property tax in Hunterdon, about 60 miles (97 kilometers) southwest of Manhattan near the Delaware River, was $8,216, a report issued today by the Washington-based organization shows. Suburban Westchester and Nassau counties, both bordering New York City, ranked second and third, respectively, at $8,206 and $8,160.

“The only source of revenue to pay for a broad spectrum of services in New Jersey is the property tax,” said William Dressel, executive director of the New Jersey League of Municipalities. “The property tax in many states is not the dominant source of revenue for local services.”
…
New Jersey Governor Chris Christie has made a 2 percent cap the centerpiece of his plan to control growth in New Jersey’s property taxes, which averaged $7,576 last year. Real estate levies, the main source of funding for schools and towns, have climbed 70 percent in the past decade.

Posted in New Jersey Real Estate, Property Taxes | 155 Comments

Strategic defaults on the decline

Posted on May 17, 2011 by grim

From HousingWire:

Signs show strategic default on the decline

The trend of borrowers choosing to default on their mortgage when they otherwise might have been able to afford payments is on the decline, JPMorgan Chase (JPM: 42.88 0.00%) analysts said Monday.

Definitions for what qualifies as a strategic default varies. But analysts took a deeper look in the report. One widely held requirement for strategic default is that the borrower stops making payments when the property loses equity, meaning the mortgage is worth more than the underlying home.

JPMorgan analysts used Standard & Poor’s/Case-Shiller indices and tracked prices against original loan amounts on a metro level. Then, analysts collected counts for all defaulted loans since 2007 and tracked those that started missing payments once the loan went underwater.

They found 60% of all defaults were strategic by the middle of 2009, more than double the percentage in January 2008. But analysts wanted to get more specific.

Using data from Equifax, the JPMorgan analysts looked at which borrowers did not experience a monthly payment increase before defaulting. Then, they added in which borrowers were still making payments on other debts after missing their first mortgage payment.

The final definition of strategic default used was the “percentage of defaults from underwater borrowers who started missing payments once underwater, continued paying their other debt, and had no payment increase on their mortgage.”

While the analysts admit they might still be overestimating the amount of strategic defaults when accounting even for all these variables, they noted the trend is going down.
…
“Overall, strategic defaults have stabilized as home prices flattened, and initial jobless claims declined,” analysts said. “A trend worth watching, no doubt, but we can comfortably say that strategic defaults are less than 30% of all defaults, and the pipeline of borrowers [delinquent more than 90 days] has even lesser strategic delinquencies.”

Posted in Housing Bubble, National Real Estate, Risky Lending | 145 Comments

“Not in this decade”

Posted on May 16, 2011 by grim

From the APP:

Real estate rebound will require jobs, time

New Jersey real estate pros are reading tea leaves, searching for positive signs — anything remotely positive, really — that point to a rebound in the state’s tortured housing market.

They want to tell home buyers and sellers there is hope, so they point to trends ticking slightly upward: low mortgage rates that indicate it’s time to buy, employment rates showing signs of life, even Jersey Shore summer rentals that are ahead of last year’s pace.

But the cold, hard data of sales, inventory and foreclosures remain in free fall, leading analysts to predict that the rock bottom of the real estate crash — once widely expected to arrive late this year or the start of 2012 — now may not arrive until 2013.

“Broad-based, all indications are that prices will probably finally bottom out in 2012 or 2013,” said James W. Hughes, dean of the Bloustein School of Planning and Public Policy at Rutgers University. “But then, we’re looking at a long period back.”

How long?

“Not in this decade,” Hughes said.

Much of the past week’s real estate market pessimism was spawned by a nationwide analysis by the Zillow website, which reported that home prices swooned at a rate not seen since 2008.
…
In New Jersey, the Zillow report showed, first-quarter median home prices fell 3.3 percent. During the past year, Garden State home prices have fallen a full 9 percent. That’s further and faster than our neighbors in New York (1.4 percent, 3.4 percent) and Pennsylvania (3 percent, 7.3 percent.)

Elsewhere, an Otteau Valuation Group report showed New Jersey median home prices falling twice as fast, 6.6 percent, in the first quarter of 2011.

Hughes said the first three months of 2011 represented a “double-dip,” with falling prices made to seem more steep by the artificial sales bump created by government tax incentives at the start of 2010.

Posted in Economics, General, Housing Bubble, New Jersey Real Estate | 202 Comments

Buying a house is big news these days

Posted on May 13, 2011 by grim

Required reading, from the NY Times:

Perhaps Not So ‘Grim’ Anymore

BIG news in the virtual neighborhood: “Grim” bought a house.

For the last six years, James A. Bednar — or “Grim,” as he is known in the blogosphere — has served as a passionate advocate of cool wariness about New Jersey real estate. Through his posts on njrereport.com, Mr. Bednar convened a community of skeptics, scoffers and scavengers for “true value” during times of spiraling prices — first up, then down.

Most regulars on the blog appear to have remained renters through at least one full housing market cycle, depending on how one measures the cycling. As did Mr. Bednar.

But on the morning of April 29, as Grim, he abruptly posted the announcement that he and his wife, Jayne, were closing on a three-bedroom ranch in Wayne. “Has J. B. lost his mind?” asked Grim about himself.

Posted in New Jersey Real Estate | 266 Comments

Foreclosures continue decline in April

Posted on May 12, 2011 by grim

From CNN/Money:

Foreclosures down for 7th straight month

The number of foreclosure filings issued in April plunged 34% from a year ago — the seventh straight month of declines.

And there were just 69,532 homes repossessed last month, a 32% fall from the peak last September just before the eruption of the “robo-signing” scandal, in which banks were found to be mishandling the foreclosure process.

Will the seeming good news continue? No way, said Rick Sharga of RealtyTrac, which issued the latest monthly figures on Thursday.

Even with the drop, there were nearly 220,000 foreclosure filings during the month, including notices of default, scheduled auctions and bank repossessions.

And there are 3.7 million borrowers at least 90 days late on payments. Normally a large percentage of them would already be in foreclosure. They are not — for two reasons.

One is that ongoing regulatory issues. Banks want to make sure their procedures are all in place.

Second, the banks have already saturated many markets with repossessions they’ve put back on the market.

“Banks can’t move inventory fast enough, at prices high enough, that they’re excited about foreclosing on any more homes,” said Sharga.

From MarketWatch:

Foreclosures hit 40-month low in April: RealtyTrac

The number of properties in the U.S. that received foreclosure filings dropped 34% in April from a year ago, bringing foreclosure activity to a 40-month low, according to market researcher RealtyTrac.

RealtyTrac said 219,258 properties got a filing in April, meaning one in every 593 housing units received a foreclosure filing during the month. The activity was down 9% from March, and on an annual basis notched its seventh straight monthly decline.

The declines continued to be attributed to major delays in processing foreclosures rather than a housing recovery, according to RealtyTrac.

Chief Executive James J. Saccacio said the delays occur in two stages. The first occurs between delinquency and foreclosure, when lenders and services are no longer automatically pushing loans that are more than 90 days delinquent. Saccacio said that delay was to allow for loan modifications, short sales and other alternatives. The second delay, according to Saccacio, is occurring after the foreclosure has started, as lenders are taking longer to complete the process.

Posted in Foreclosures, National Real Estate | 220 Comments

North Jersey “Dancing along the bottom”, Central still dropping?

Posted on May 11, 2011 by grim

From the Record:

Home prices stable in region

Condo and co-op prices dropped more than 10 percent in the New York metropolitan area, including North Jersey, in the first quarter, but home values overall were flat from the same period a year ago, the National Association of Realtors reported Tuesday.

The median price of a home in the area, which includes Bergen, Passaic and Hudson counties, as well as Westchester and New York City, rose 0.5 percent to $439,300, the NAR said.

Nationally, home prices were down 4.6 percent, to a median $158,700.

With values significantly below the levels of 2006 and 2007, sellers and buyers are still adjusting to the new price realities, real estate agents say.

Some buyers “just keep missing great deals because they want to keep low-balling their prices,” said Sheldon Neal, a Re/Max agent in Oradell. “On the sellers’ side, one of the toughest challenges is to make them realize the truth about their current market value of their home. Many are still wanting to push the list price higher.”

In a sign that the real estate market may be stabilizing, the number of sales in New Jersey was running at an annual rate of 109,500. While that’s down dramatically from the 180,000-plus sales pace of 2004 and 2005, it’s close to the rate of 2010, when 110,000 homes were sold in the Garden State. Sales were boosted in the first half of the year by an $8,000 tax credit for first-time buyers. The fact that sales have remained near the 2010 level, even without the tax credit, suggests that “the state’s housing market is building a solid foundation without a government incentive,” said Jarrod C. Grasso, CEO of the New Jersey Association of Realtors.

From the APP:

Local home prices fall 6.9 percent

The median price of a home in central New Jersey fell 6.9 percent during the first quarter, a trade group reported Tuesday, in a sign that the supply of homes on the market continues to outweigh the demand from buyers.

The figures gave credence to what real estate observers have suspected: Those who had hoped the housing market had bottomed out will have to wait longer.

“This is probably less of a spring market than we had hoped,” said Russell Tucker, senior vice president of Millburn-based ISB Mortgage Co., a subsidiary of Investors Savings Bank. “That’s the bottom line. We should be in full swing right now, but that’s not the case.”

The National Association of Realtors reported that the median price of a home in the region that includes Monmouth, Ocean, Middlesex and Somerset counties was $303,200, down from $325,800 the same quarter a year ago. The median means half of the homes sold for more and half sold for less.
…
Central New Jersey prices fell more than the national average. The median U.S. home price was $158,700, down 4.6 percent from $166,400 the same quarter last year, according to the Realtors’ group.
…
And first-quarter figures released by Jeffrey Otteau, president of the Otteau Valuation Group Inc., a research firm in East Brunswick, showed only one of 21 New Jersey counties saw prices appreciate during the past year. Somerset County was up 2.6 percent from last year.

Morris County fell 4.9 percent; Monmouth County fell 7.8 percent; Middlesex County fell 8.4 percent; and Ocean County fell 10.2 percent.

Posted in Economics, Housing Bubble, New Jersey Real Estate | 137 Comments

As the market changes, so do the scams

Posted on May 10, 2011 by grim

From the Philly Inquirer:

‘Flopping’ – a new type of scam in the housing market

Although reports of mortgage fraud nationally fell 41 percent in 2010 from 2009, the continuing downturn in the housing market has fostered new ways of perpetrating it, experts say.

Consider “flopping” – the intentional misrepresentation of housing value for purposes of illegal flipping.

Here’s how it works: A real estate agent or broker identifies properties with severely depressed values. These could be properties with mortgages that exceed the present values or they could be short sales or foreclosures.

A property is valued using a “broker price opinion.” The broker’s “opinion” is a low-ball price, because his intention is to profit from a quick resale for a higher price.

A lender, believing the broker’s assessment is legitimate and unaware of any scheming, agrees to the lower sales price.

The broker buys it at the greatly reduced price, arranges for a “straw buyer” to purchase it, then flips it for a higher price than negotiated with the lender. The broker pockets the profits.

The broker pays off any of the participants that enabled the scheme, and then moves to the next target property.

“This is a misrepresentation of value,” said Denise James, coauthor of an annual report on the topic by the LexisNexis Mortgage Asset Research Institute during a teleconference Monday.

She said such schemes could add to problems faced by regions with an abundance of distressed housing, since “lenders will grow concerned with false depreciation of values,” thus making the buying and selling of homes even more difficult in depressed housing markets.

“Flopping increases as desperation to get rid of rising inventory grows,” she said.
…
One of the fastest-growing ways homeowners are being bilked is by people posing as the new servicers of their mortgages, she said.

“They [the homeowners] get letters saying, ‘I’m your new servicer, send your payments to me,’ ” James said. “Homeowners who are not aware that there is a formal procedure involved in changing servicers” fall victim to this scam.

Posted in National Real Estate, Risky Lending | 107 Comments