Hank Paulson hasn’t heard about the real estate crash

Posted on April 29, 2010 by grim

From the WSJ:

Paulson’s $4.6 Million D.C. Crib Hits the Market

Former Treasury Secretary Henry Paulson is asking $4.6 million for his three-bedroom house in Washington, D.C.

The former Goldman Sachs CEO, who defends the bailout of Wall Street in his recently published memoir, “On the Brink,” bought the home with his wife, Wendy, in 2006 for $4.3 million. The three-story home sits on 0.44 wooded acres and has beamed ceilings, an office and a master suite with a living area. The entry level of the home has some of the bedrooms; the lower floor has living space that leads out to stone terraces.
…
Adjacent to a park, the home was built in 1940 and gut-renovated in 2001. It has sold several times in the last 10 years; broker Anne Hatfield Weir of Washington Fine Properties, who shares the listing with her sister Heidi Hatfield of the same firm, says owners have kept selling as they’ve left the area. “It’s a charming house,” she said. The Paulsons are moving to Chicago, according to an item in the Washington Post Wednesday.

Posted in Lowball, National Real Estate | 502 Comments

Small is the new black

Posted on April 28, 2010 by grim

From the Star Ledger:

Homebuilders have a new mantra: Small will sell

The pair of new houses that sit at the top of Truman Place off Route 1 in NorthBrunswick fit right in with the upscale style that has dominated residential architecture for the past decade.

Brick-and-vinyl facades with contemporary lines. Hardwood floors, oak railings and 9-foot ceilings.

But the twin colonials have one feature that proves they were built for the next generation homeowner: Each has three bedrooms, two-and-a-half bathrooms, all packed into 2,000 square feet — a third less space than the definitive McMansion of the past, and three-quarters the size of the typical home built in 2008.

Call it a McBargain.

“The idea was, in this economy, the most important thing is probably the price,” said Gregory Ginzburg, who bought the lot in 2008, aiming to build two houses on a space that earlier in the decade would have held just one. “From the reply from the public, from the calls, I had so many offers on that house you can’t even imagine.”
…
The two homes are reflective of the new mantra among homebuilders trying to get the market started again in New Jersey: Smaller will sell.

The recession destroyed the new home industry, which
had been chugging along by churning out big-footprint, big-ticket homes. Builders are retooling by downsizing, with floor plans that use less space and smart design. New homes will continue to shrink, according to the Otteau Valuation Group in East Brunswick. Homes that are being planned now are about 200-square-feet smaller on average than at the height of the housing boom at 2,650 square-feet in 2007, the appraiser said.

Price has a lot to do with it, builders say, and it has led to a shift in home design, as well. A separate living room is out, replaced by a “great room” that sits in a central location in the house, said Andrew Zastko, a real estate agent who sold one of Ginzburg’s homes. Lower property taxes also entice buyers to smaller homes, he added.
…
“I honestly got a great deal,” said Narsinghani, 28, who paid about $360,000. “For a 15-year-old home with the same amount of rooms, it was costing me $450,000 — maybe even $500,000. I mean, I’m getting a brand new home with a brand new bath and a basement.”

Posted in New Development, New Jersey Real Estate | 331 Comments

Happy days are here again!

Posted on April 27, 2010 by grim

From the APP Opinion Page:

Recession over? For whom?

There’s a reason why the number of economist jokes seems to rival the number of lawyer jokes. Economists are in the habit of making pronouncements that are so far removed from the real lives of real people as to be laughable.

Take the proclamation from Rutgers University researchers last week that New Jersey has emerged from the recession and will reach its pre-recession employment peak in 2016. OK, if the recession can be reduced to a series of mathematical equations and numbers can tell the tale, then the economists are right, at least in terms of the hermetically sealed bubble in which they operate.

But even there, they have to squint their eyes and toss around phrases such as “jobless recovery,” an oxymoron if ever there was one. And even if jobs are what those practitioners of the “dismal science” refer to as a “lagging indicator,” waiting until 2016 before employment levels get back to where they were hardly seems worthy of breaking out the party hats and champagne bottles.

People are still hurting, mortgages are still under water, jobs are gone that are not coming back.

Silver linings are hard to find. Yet consensus is something and the consensus among these Rutgers folks is that the worst is behind New Jersey.
…
It’s going to be a long, slow slog back to economic health and wealth. But the journey has to start somewhere. Maybe with a semi-rosy prediction from the number crunchers.

Posted in Economics, New Jersey Real Estate | 315 Comments

With or without it

Posted on April 26, 2010 by grim

From the Record:

Tax break draws first-time buyers

Maryeth and Andres Valle of Cliffside Park figured they’d buy a condo at the end of this year — until they realized that if they signed a contract by April 30, they could take advantage of an $8,000 federal tax credit for first-time buyers.

“My husband said, ‘Why not jump on it now?’ ” said Maryeth Valle, a 26-year-old nurse. The couple recently signed a contract on a two-bedroom condo in Hackensack, and expect to qualify for the tax break.

“It was definitely a big factor,” she said.
…
With the deadline only days away, a number of North Jersey real estate agents say first-time buyers are rushing to qualify for the tax credit. (A $6,500 tax credit for repeat buyers appears to be drawing less interest, agents say.)

National statistics point to a rise in activity related to the tax credit deadline.

Existing home sales jumped 16 percent in March from a year earlier, the National Association of Realtors reported Thursday. And pending sales — those in which contracts have been signed — were up 19 percent in February, compared with a year earlier.

“There’s definitely a spike, especially in places like Clifton, where the prices are geared to first-time buyers,” said Tony Sanchez, a Weichert agent in Clifton.
…
More than half of the 20 North Jersey real estate agents interviewed by The Record say the tax credit has motivated buyers.

But at least half a dozen said the activity was less than they expected. High unemployment rates have held back many would-be home buyers.

“The tax credit has been a bust this spring unless you’re in the $350,000-and-under market,” said Barbara Weismann of Friedberg Properties in River Vale. “There are still folks who are waiting to take any action on buying a home. They have no concerns regarding interest rates, and fully expect that the longer they wait, the better values will become. And there are also many people who are in fear of losing their jobs.”

Other agents said the tax credit by itself is not enough to motivate buyers, unless they’re sure they’ve found the right property at the right price.

Posted in Economics, New Jersey Real Estate | 402 Comments

Weekend Open Discussion

Posted on April 23, 2010 by grim

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 | 546 Comments

March Existing Home Sales

Posted on April 22, 2010 by grim

From the AP:

Home sales expected to rise in March

Home sales are expected to rise 5.2 percent in March, reversing three months of declines, as government incentives juiced the housing market and kicked off what’s expected to be a strong spring selling season.

Economists polled by Thomson Reuters forecast the National Association of Realtors will say sales of previously occupied homes rose last month to a seasonally adjusted annual rate of 5.28 million, up from 5.02 million in February. That was the weakest month since last July.
…
Sales nationally declined over the winter, eroding gains made last fall and summer. The downward direction troubled economists because the government has taken unprecedented steps to support the housing sector.

Home shoppers have felt less rushed after lawmakers extended the deadline to qualify for tax incentives. The government is offering a $8,000 credit for first-time buyers and a $6,500 credit for current homeowners who have lived in their property for the past five years.
…
Still, some housing market experts predict the market will take a dramatic “double-dip” once the government’s supports are gone. But others argue that there is enough pent-up demand to keep the market chugging. And prices have fallen dramatically since the boom years — as much as 50 percent in some places. So buyers can pick up bargain-priced foreclosures.

Posted in Economics, National Real Estate | 403 Comments

“The West Orange Line”

Posted on April 21, 2010 by grim

From the Star Ledger:

Take my house, please: Property taxes crushing residents in towns like West Orange

Rosary Morelli has been living in West Orange since 1963. To hear her tell it, she’ll be lucky to get out alive.

“I can’t pay the taxes on my house,” said Morelli at a Sunday afternoon anti-tax rally on the steps of town hall. “I can’t even sell my house. In fact, with the offers the realtors are giving me, I could just put a sign outside saying, ‘Take my house.’ Take it for free. Just pay for the Dumpster.”

Morelli might have been exaggerating a bit for dramatic effect. But maybe not. A check of one of those foreclosure websites on the internet shows more than 500 houses in West Orange up for sale. A big reason is the property taxes.

Also at the rally was Adam Kraemer, who is running for the board of education on today’s ballot. Kraemer, who has three kids in the public schools, was among the speakers calling for a “no” vote on a school budget that would raise property taxes another 7.3 percent. Combined with an expected increase in the municipal tax rate, that could put Kraemer’s house and many other houses in town over the West Orange Line.

“The West Orange Line” is a term I made up to describe a New Jersey invention I observed in an earlier visit to the town where Thomas Edison lived.

Our state seems to be the first in America to have pushed property taxes so high that in a town like West Orange, the tax bill may exceed the mortgage payment on a typical house. That would seem to be the case in Kraemer’s neighborhood. The tax bill on his four-bedroom house on a quarter-acre lot is $25,972, he said. That will go up to about $27,600 if the budget is adopted as written, he estimated.

Posted in New Jersey Real Estate, Property Taxes | 282 Comments

Pay up, suckers.

Posted on April 20, 2010 by grim

From the NYT:

N.J. Voters Asked to Pay More for Less at Schools

School budget talks have become so contentious in this township that 700 people recently packed a school board meeting — and 100 of them stayed more than nine hours, until 4 a.m.

At stake is Edison’s $204.8 million school budget for next year, which calls for increasing the local property tax levy by 8.6 percent. Even with such an increase — which required a waiver to the state’s 4 percent cap — Edison plans to lay off 92 teachers, cancel summer school, cut kindergarten to a half day and eliminate middle school athletic teams.

But first voters have to approve the budget, which is on the ballot Tuesday, as are budgets in most of New Jersey’s 600 school districts. Many school officials are expecting the toughest elections in years, as districts seek not only to raise property taxes but also to slash popular programs to offset the unusually large reductions in school aid proposed by Gov. Christopher J. Christie, who is trying to close an $11 billion state deficit.
…
The increases have angered taxpayers like Denise Bernacki, a retired project manager for a laboratory who has watched her property taxes rise to more than $10,000 a year during her 22 years in Edison. “We’re ready to move out of the state,” said Ms. Bernacki, a Republican who voted for Governor Christie. “I’ve had enough, and I think a lot of people feel that way.”
…
Teaneck, with 4,000 students and a $94.9 million budget, is proposing an increase of 10.2 percent to the tax levy, which works out, on average, to an extra $475 a year per homeowner. The district also plans to reduce its staff by 21 positions, buy fewer textbooks and supplies and postpone replacement of the roof at Teaneck High School.

The Randolph district, with 5,300 students, is calling for a 6.5 percent tax levy increase in an $81 million school budget. Owen M. Snyder, the superintendent, said that as state aid has decreased, homeowners have been forced to shoulder a larger share of the school budget because, in a township with few businesses, there is simply no one else to do it.
…
“What are you going to do, the kids need school,” said Mr. Szalay, 72, who plans to cut back on dinners out to help cover the tax increase. “And the schools are crowded and they need a lot of things and they don’t get them.”

Posted in New Jersey Real Estate, Property Taxes | 600 Comments

Positive Equity … in 2017

Posted on April 19, 2010 by grim

From the NYT:

Forecasts for Underwater Owners

FOR the New York City area’s underwater homeowners – that is, those whose mortgage debt exceeds the value of their homes – this could be a very long decade.

According to a report released last month by First American CoreLogic, www.facorelogic.com a real estate consulting business, these homeowners may not begin to see positive equity until 2017, possibly even later.

Sam Khater, a senior economist at First American and the author of the report, said the average shortfall was 39 percent. He predicted that housing prices would stabilize, then rise slowly over the next seven years, but that owners would recover equity mostly by paying down the loan during that time.

Recovery forecasts, Mr. Khater said, are based on historical data from housing market cycles and the average home-price appreciation over the last 30 years.

“The danger is that seven years might be a little optimistic,” Mr. Khater said, referring to the predicted recovery time for New York’s underwater borrowers. “We may not revert to the average long-term appreciation in the next five or six years.”
…
The average mortgage holder in the New York area has a loan of 70 percent of the home’s value, Mr. Khater said. (There are no estimates for the number of homes owned outright, but about half of the homes in the United States are not mortgaged.)

Of the roughly 1.1 million mortgage holders in the New York City area, including sections of northern New Jersey and Westchester County, about 116,000, or over 10 percent, are underwater, according to First American.

Posted in Economics, Housing Bubble, New Jersey Real Estate | 495 Comments

Weekend Open Discussion

Posted on April 17, 2010 by grim

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 | 667 Comments

Cheap Nompounds go Mainstream (huh?)

Posted on April 16, 2010 by grim

From the NY Times:

Happily Settling for a More Modest Country Getaway

BUYERS looking for a country house in the Hudson Valley or the Catskills in New York State have settled on a more modest ideal: between $200,000 and $250,000 for a home on a few acres, with a picturesque town not too far away.

“That’s what I think of as the ‘little black dress’ of the second-home market,” said David Knudsen, an agent with Catskills Buyers Agency in Sullivan County. “During the peak of the market the price expectation for that house was probably around $300,000, plus or minus $25,000.”

Although sellers have not all lowered their list prices to meet buyers’ expectations, brokers estimate that the price for the typical weekend retreat has dropped at least 20 percent since its peak in 2007. That has lured some city dwellers to take the plunge on a getaway home, even as economic worries, snowstorms and tighter lending standards provided a chilling backdrop for the real estate market this winter.

Some common themes emerge among people who have recently bought houses west of the Hudson River for less than $250,000. These shoppers are paying close attention to property taxes and heating costs, are not particularly interested in renovating and want a second home that is a manageable size. The ease of researching homes and price trends on the Internet has also given shoppers a clear idea about what they expect to pay.

“Buyers from the city are out in the market, but they want a great deal,” Mr. Knudsen said of his clients from the New York City area. “I think one of the big challenges we have right now is a wide gap between buyer expectations and seller expectations, unless there is some distress element on the seller side.”

That distress element is often divorce, death or debt, but two years into a grim economy the motivating factor for a price reduction can also be time.

Posted in Humor, National Real Estate | 428 Comments

72% of Americans believe now is a good time to buy

Posted on April 15, 2010 by grim

From Gallup:

Most Americans See Home Prices Stable or Rising

Lower but stabilizing home prices combined with continued low mortgage interest rates have persuaded 72% of Americans that now is a “good time” to buy a house — essentially the same percentage as a year ago, but up 19 points from 2008.
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More importantly, Americans’ expectations about housing prices have improved markedly from last year — potentially encouraging prospective buyers to take advantage of the current home-buying opportunity, and thereby making it easy for homeowners to sell. Thirty-four percent of Americans expect the average price of houses in their area to increase over the next year — up 12 points from last year, and the highest such expectations in Gallup’s monitoring since June 2007. When this is combined with the 43% expecting house prices to stay the same, a total of 77% of Americans see housing values in their area stabilizing or moving higher during the year ahead. To the degree that potential home buyers agree, this should significantly reduce their fear that the homes they buy could decline in value shortly after purchase.
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Expectations for housing prices are best in the East and the West, followed closely by the South; they are poorest in the Midwest.
…
While an overhang of foreclosures and distress sales continues to depress some areas, the basic problem facing housing in 2010-2011 is the same as that challenging the overall economy: jobs. Buying a home is the most important purchase and largest financial commitment most people make during their lives. For most Americans, it is hard to feel financially secure enough to make such a commitment in an economy in which 20% of the U.S. workforce is underemployed.

Posted in Economics, National Real Estate | 352 Comments

How sure are we that it “won’t get any worse”?

Posted on April 14, 2010 by grim

From the Star Ledger:

Housing experts predict a bumpy road back

Coming off one of the worst years for real estate since the Great Depression, most developers say the housing landscape still looks rocky.

An inevitable rise in historically low mortgage rates, high unemployment, foreclosures, a state budget in financial crisis and a lack of credit will continue to plague New Jersey home builders as the decade unfolds, according to a panel of industry experts at the Atlantic Builder’s Convention in Atlantic City yesterday.

“It’s not going to be one of those things where we’ll have an ‘aha’ moment and say: ‘That’s when it’s going to happen,’ ” said David Crowe, chief economist for the National Association of Home Builders, referring to a turnaround.

Now that the Federal Reserve has stopped buying bad loans, the six-month streak of falling interest rates seems to be at an end.

Last week, the average rate for a 30-year fixed-rate mortgage rose to an eight-month high of 5.31 percent.

And some estimates push that number to more than 6 percent by 2011, chipping away at affordability. “That will assure that our housing market will be constrained for a very long time,” said Jeffrey Otteau of the Otteau Valuation Group, an East Brunswick real estate appraisal firm.

Things don’t look too good for job growth, either.

Crowe said he expects the unemployment rate to hover around 8 percent for the next several years. And in New Jersey, where about one in five adults are employed by the government, Gov. Chris Christie’s budget eventually will affect housing.
…
The outlook, however, for the state’s real estate isn’t too sunny for at least the next several years.

Housing prices are now at 2004 levels. And there is a 16-year supply of age-restricted, or senior, housing in the state. Otteau said luxury housing will perhaps never fully recover.

He predicted housing prices won’t reach 2005 levels until at least 2020. The children of Baby Boomers won’t have the wherewithal to handle the mortgages accompanying their parent’s three-car garages, outdoor kitchens and McMansions, he said.

“What we’re going to see is a more European market model efficiency,” he said of future housing, adding that home prices will first come back in North and Central Jersey because of their proximity to business centers. “Homebuyers will seek to live close to jobs and transportation.”

The consensus among the panel’s three members was that at least the real estate market won’t get any worse.

“We are in for some good news,” Crowe said. “But this is a steady steep climb out of a deep hole.”

Posted in Economics, Housing Bubble, New Jersey Real Estate | 422 Comments

Living Small

Posted on April 13, 2010 by grim

Not an econ or markets piece, but I have a soft spot for living small (and well)…

From the Record:

Web hed: On a tiny lot in Jersey City, architects create an affordable, sustainable house
(click for pics)

Hired to design a house in Jersey City, architects Nicole Robertson and Richard Garber faced a tight budget and an even tighter space: a building lot that was only 23 feet wide and 56 feet deep.

And the owner wanted the home to be low-maintenance and environmentally sustainable.

The two solved these problems with a two-bedroom house that combines solar panels, precast concrete and cedar in a geometric shape that cuts energy costs by an estimated 30 percent. It also allows for abundant light and breezes — as well as views of the Statue of Liberty — through large windows.

“It’s a concrete house, basically,” said Garber, who also teaches at the New Jersey Institute of Technology’s architecture school.

Garber and Robertson, a married couple who live in Jersey City and are partners in the New York architecture firm GRO Architects, were recently honored by the American Institute of Architects’ New Jersey chapter for the home. Judges called it “inventive with a limited budget”; the 1,600-square-foot home was built for $250,000.

When the client, Denis Carpenter, approached the pair, he had only a few requirements: the house had to fit his budget, be environmentally sustainable and include a cat door. The architects started by designing a triangular roof facing south, covered with solar panels and tipped 30 degrees to catch the sunlight. With tax incentives and energy savings, the solar panels are expected to pay for themselves within about five years, the architects say.

Another major energy gain came from the use of insulated concrete, which provides a tight envelope around the house. Rather than try to use poured concrete at the site — which is expensive and labor-intensive — Robertson and Garber decided to use precast concrete panels that could be shipped to the site and welded together in place.
…
The house is in the Greenville neighborhood, next to a tiny, derelict park and a couple of blocks from the light rail tracks. New houses are mixed in with older homes throughout the neighborhood, part of the widespread revitalization of the city in recent years.

The architects see their house as part of that revitalization, and hope it can be a prototype for low-cost, energy-efficient urban infill development.

“We see it as an alternative to a lot of urban frame houses that are less durable,” Robertson said.

Posted in New Development, New Jersey Real Estate | 460 Comments

Economic worries persist

Posted on April 12, 2010 by grim

From the Courier Post:

Worries remain in N.J. about economy

One in five New Jersey residents is better off today than a year ago.
…
Still, it is instructional to take the official pulse of the people every once in a while. In a survey this month by Fairleigh Dickinson University’s Silberman College of Business, one in five New Jersey residents (21 percent) said they are better off than they were a year ago, a three percentage point improvement over a January poll.

Still, the Garden State is in a guarded state, with 36 percent of residents saying they are “very worried” their jobs will go away within the next 12 months. And 31 percent are hard pressed to keep up their credit card payments.

Fewer than half of the people polled (43 percent) believe they will be better off next year. That is the most pessimistic reading since October 2008, when the banking meltdown was in full boil.

Folks over 60 had the gloomiest outlook, with only 24 percent expecting better times ahead. Younger people, those age 18-29, were the most optimistic; 70 percent see brighter days on the horizon.

It is not surprising that the cold hand of joblessness has touched many people. In the poll, 65 percent reported that a close friend or family member had been laid off, compared to 54 percent in January 2009 and 38 percent in January 2008.

On the up side, 39 percent of New Jersey workers are “not at all worried” about losing employment. And only 8 percent expect their credit card balances to increase in the next year.

Posted in Economics, New Jersey Real Estate | 428 Comments