Divining the 2010 market

Posted on December 24, 2009 by grim

From Inside Jersey:

Trying for a comeback: New Jersey’s housing market in 2010

After putting the nation’s economy through the spin cycle, the real estate market this year could take a break.

Home prices look as if they’ve reached their lowest points, and people are starting to take deep breaths and buy again. It’s beneficial, too, that the federal government has helped keep mortgage rates down, in the 5 percent range, and Congress extended and expanded tax credits so they reach almost all potential buyers — not just first-timers anymore. Together, this means houses remain more affordable than they were for decades.

However, it’s tough to pay your mortgage without a job, and New Jersey’s labor market is key to a recovery in home prices.

“The worst is behind us, but the labor market is the big cloud going forward,” says Rutgers economist Joseph Seneca. If the economy does what’s being called a “double dip” or a “W,” more people could lose their jobs, and eventually their homes. But for now, most local markets have already stopped their price slide, and some markets are even coming back.

Overbuilt Hudson County will continue to struggle. Manhattan’s weak market is sapping demand from Hudson County, and deep South Jersey is hurt by being far from major job centers — Philadelphia and New York — and by Atlantic City’s losing streak.
…
Good news for home sellers is that while they don’t exactly have the upper hand, they may not feel as desperate to sell before prices fall any further. “It gets better from here,” Otteau says. “Some markets will be experiencing modest, gentle price increases.”
…
Still, sellers will be up against more competition from the “shadow market” — something that’s not quite as spooky as it sounds. This market is composed of sellers who had been waiting on the sidelines, because they figured it wasn’t worth putting their homes on the market when buyers were scarce. They’ll come out, adding to the supply.
…
BEST THING THAT COULD HAPPEN:
Home prices rise slowly. It could take years to get back to the highs of 2005 and 2006. Jeffrey Otteau, who tracks home prices, predicts no change in 2010 prices. However, New Jersey should see a 3 percent rise in 2011.

WORST THING THAT COULD HAPPEN:
The economy retreats, consumers and employers get scared, and more people lose their jobs. The government pulls back support, mortgage rates rise and sales fall. Foreclosures and fear send prices down again.

Posted in Economics, Housing Bubble, New Jersey Real Estate | 213 Comments

Jersey agents being sent back to school

Posted on December 23, 2009 by grim

From the Today’s Sunbeam:

Bill in New Jersey Legislature calls for real estate professionals education

A measure sponsored by Senate Majority Leader Steve Sweeney, which would require real estate professionals to complete continuing education courses as a condition of their license renewal was approved last week by the Senate Commerce Committee.

“The real estate market crisis of the past few years was caused, in part, by home buyers securing loans and purchasing properties that they simply could not afford,” said Sweeney, D-3rd Dist.

“The role of a professional real estate agent is to guide potential buyers, and help them to select the property that best fits their needs, that is also within their price range. As the federal government continues to work to improve the real estate market, it is imperative that real estate professionals know ins and outs of the market, so that they can best advise their clients on making responsible purchases.”

Sweeney’s bill, S-2068, would require real estate brokers and agents to complete continuing education requirements as a condition of their license renewal. The New Jersey Real Estate Commission would be responsible for determining the course content, and the number of credits needed to gain the biennial license renewal.

“Buying a home is the most expensive purchase that most people ever make, and those purchases should be guided by professionals who have the needs of their clients in mind,” Sweeney said.

Posted in New Jersey Real Estate, Politics | 205 Comments

LoanPerformance: Metro area prices down 11.1% in the past year

Posted on December 21, 2009 by grim

From LoanPerformance:

National HPI for September – Home Prices Down 9.8% vs 2008

National home prices, including distressed sales, declined by -7.8 percent in October 2009 compared to October 2008, according to First American CoreLogic and its LoanPerformance Home Price Index (HPI). This was an improvement over September’s year-over-year price decline of -9.5 percent.* On a month-over-month basis, however, national home prices declined by -0.7 percent in October 2009 compared to September 2009.
…
Including distressed transactions, the HPI has fallen -30.1 percent from its peak in April 2006. Excluding distressed properties, the national HPI has fallen -21.5 percent from the same peak.

LoanPerformance National HPI 12 Month Change: – 7.8%, Single Family Combined Series, October 2009

New York-White Plains-Wayne NY-NJ*

Single Family Combined -11.10%
Excluding Distressed -7.74%

*Includes the following counties:
Kings County (Brooklyn), NY
Queens County, NY
New York County (Manhattan), NY
Bronx County, NY
Richmond County
Westchester County, NY
Bergen County, NJ
Hudson County, NJ
Passaic County, NJ
Rockland County, NY
Putnam County, NY

Posted in Economics, National Real Estate, New Jersey Real Estate | 392 Comments

Jersey bucks the trend

Posted on December 20, 2009 by grim

From the Courier News:

New Jersey real estate trends don’t mirror national patterns

As the real estate market seems to be stabilizing nationally and the number of foreclosed homes across the country fell for the fourth straight month, according to Realty Trac, closer examination of local markets shows that New Jersey is not following that trend.

While New Jersey’s statewide foreclosure rate is 0.03 percent — a third of the national rate — Realty Trac, a national company that tracks real estate statistics indicates that the number of people behind on their mortgage payments is not falling every month. In fact, New Jersey figures for July through October are significantly higher than numbers for fourth-quarter 2008 and first-quarter 2009.

HARD-HIT PROPERTIES: While there are foreclosures in every town, communities with the densest populations and oldest housing stock – the more urbanized areas – have been hit hardest. In Central Jersey, the number of homes receiving foreclosure notices is about three times higher in Middlesex County than the combined number in Somerset and Hunterdon counties. Middlesex County also has more urban centers and a higher population than Somerset and Hunterdon counties.
…
Several reasons exist for the higher foreclosure rates in Middlesex County:

First, the least affluent homeowners live in the most urbanized areas, where housing has traditionally been less expensive because the homes are older and built closer together.

“Those owners are the least likely to have savings if they lose their job,” Crivello said.

Second, when the economy weakened, the jobs that disappear first are the lower-paying service and retail jobs that these homeowners were likely to have, according to Jeffrey Otteau, chief executive officer of Otteau Valuation Group, an appraisal company in East Brunswick that also studies industry trends and market forces.

Third, many of these homeowners were given subprime loans or no-documentation loans, mortgages that carried significantly more risk.
…
ames Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University in New Brunswick, pointed out that the key to stabilizing the housing market is a stable employment outlook — and New Jersey’s employment picture has been in decline for some time.

The state’s unemployment rate, at 9.7 percent, remains just below the national figure, but New Jersey will this decade with fewer jobs than when it started in 2000. The recession has only worsened the situation.

“Since the recession started in January 2008, we’ve lost 179,400 jobs,” Hughes said.

The prospects for job growth in New Jersey are not good, either. The state is losing high-paying jobs and replacing them with very low-paying jobs. In fact, from 2005 to 2008, household income has declined here, at a rate 100 times greater than the national average, according to Otteau.

“New Jersey is not attractive to business because of our high cost of living and of doing business, our high taxes and our restrictive practices,” Otteau said. Some of those practices relate to environmental, zoning and building regulations, among others.

Posted in Housing Bubble, New Jersey Real Estate, Risky Lending | 268 Comments

We’re all tourguides now

Posted on December 18, 2009 by grim

Didn’t we talk about this the other day?

From the New York Times:

Agent or No Agent?

Are real estate brokers — like travel agents and other middlemen coping with the increasingly digital culture — in danger of becoming expensive anachronisms?

After all, it is only logical that as people feel more empowered based on their access to information and their ability to connect without help, they are at least questioning the wisdom of the conventional way of buying and selling a home.

According to the National Association of Realtors, the percentage of homes sold nationally by their owners has actually declined, from 14 percent in 2004 to 11 percent in 2009. But Real Trends, a company that monitors the residential brokerage industry, considers those findings to be low, and estimates that the number of for-sale-by-owner, or FSBO, homes was almost one in five three years ago, when it stopped tracking them.

“I’ve been in this business for 33 years and I’ve always wondered why more people didn’t say, ‘I’m going to take a shot at this myself,’ ” said Steve Murray, the editor of Real Trends’ reports. “Now, with the technology available, that would seem to be inevitable. We tracked FSBO numbers through 2006 — before the market collapsed — and we were already seeing substantial differences between the attitudes and habits of people under 35 and those over 50.”

Younger people, he said, are far more likely to embrace the multitasking and risk taking involved in selling their own homes. If the decision to use an agent is becoming generational as well as situational, that would not augur well for real estate agents.

“This is going to sound bad, but I just don’t give a lot of credence to what brokers do,” said Cynthia LeStar, who is selling her studio apartment on the Upper East Side. “I mean, what do they do that I can’t do on my own?”

Posted in Economics, National Real Estate | 321 Comments

Harvard (Feldstein) says prices are going down

Posted on December 17, 2009 by grim

From Bloomberg (Hat tip CR!):

Harvard’s Feldstein Says U.S. Economy Still Mired in Recession

The U.S. economy remains mired in a recession, prospects for next year are weak and home prices may resume declines, Harvard University economics professor Martin Feldstein said.

“The recession isn’t over,” Feldstein said today in an interview on Bloomberg Radio in New York. “It will be a while before we have enough information to know if the recession ended.”

Feldstein is a former president of the National Bureau of Economic Research and remains a member of the group’s Business Cycle Dating Committee, the panel charged with determining when recessions begin and end. His comments are at odds with those of the panel’s chairman, Robert Hall, who said early this month that the recession may have ended.
…
Regarding the residential property market, where the recession initially emerged, Feldstein said the Obama administration’s effort to revive the housing market is a failure and home prices will continue to decline.

“It was just not well enough designed,” Feldstein said. “They ended up failing.” That suggests the housing slump will “continue to push down house prices,” he said.

“We saw a little pause in home-price declines in the summer but I think that was because of the first-time home buyers program,” Feldstein said. “We’re not going to get that boost.”

Posted in Economics, Housing Bubble, National Real Estate | 212 Comments

“The rich aren’t as rich as they used to be”

Posted on December 17, 2009 by grim

From Bloomberg:

Luxury Homeowners in U.S. Use ‘Short Sales’ as Defaults Rise

Homeowners with mortgages of more than $1 million are defaulting at almost twice the U.S. rate and some are turning to so-called short sales to unload properties as stock-market losses and pay cuts squeeze wealthy borrowers.

“The rich aren’t as rich as they used to be,” said Alex Rodriguez, a Miami real estate agent with JM Group USA Inc., whose listings include a $2.9 million property marketed as a short sale because the price is less than the mortgage, leaving the bank with a loss. “People have reached the point where they can’t afford the carrying expenses of a $2 million home.”

Payments on about 12 percent of mortgages exceeding $1 million were 90 days or more overdue in September, compared with 6.3 percent on loans less than $250,000 and 7.4 percent on all U.S. mortgages, according to data from First American CoreLogic Inc., a Santa Ana, California-based research firm. The rate for mortgages above $1 million was 4.7 percent a year earlier.
…
The Fed purchases haven’t affected the high end of the market because they exclude so-called jumbo loans. Mortgages above the $729,750 limit set by Congress for the nation’s highest-priced markets cost almost 1 percentage point more than conforming loans, according to Keith Gumbinger, vice president at HSH Associates, a mortgage-data company in Pompton Plains, New Jersey. That’s quadruple the historic spread.

“There is no refinance market for you if you are underwater and outside the Fannie and Freddie framework,” Gumbinger said. “High-end neighborhoods are all suffering from the same problems of diminished income at a time when there is little equity to work with.”
…
“The reason the low end stopped falling is because the government stepped in with affordable loans,” said Scott Simon, managing director at Pacific Investment Management Co., a Newport Beach-based investment firm that runs the world’s largest bond fund. “There is no political will to bail out a million-dollar house.”

Posted in Economics, Housing Bubble, National Real Estate | 271 Comments

Mixed Bag: Nov. Unemployment Rate Stable, But 9k Jobs Lost

Posted on December 16, 2009 by grim

From the APP:

Weak holiday hiring leads to loss of 9,400 jobs in November in New Jersey

New Jersey lost 9,400 jobs in November in part because retailers added fewer workers than expected for the holiday shopping season, the state Department of Labor and Workforce Development said today.
…
The November report showed that New Jersey’s labor market continued lose jobs despite signs that the economy is beginning to recover from the longest recession since the Great Depression.

The state lost 10,900 private sector jobs and added 1,500 public sector jobs during the month. All of the public sector job growth was at the local government level, the report said.

From the Record:

N.J. lost 9,000 jobs in November

New Jersey lost 9,400 jobs in November in sharp contrast to the modest job gains the month before, and the state unemployment rate stayed at 9.7 percent, figures released today show.

The state lost 10,900 private sector jobs, but added 1,500 government jobs, according to the monthly report by the New Jersey Department of Labor and Workforce Development.

New Jersey’s unemployment rate remained below the national level, which fell from 10.2 percent to 10 percent in November. Economists have predicted that the rate will continue rising well into next year.

New Jersey’s unemployment rate fell in October from 9.8 percent to 9.7 percent. The state reported a job loss of 1,800 that month, but revised the figure today to a gain of 1,200 jobs.

State labor commissioner David J. Socolow said the weak retail sector was a key factor in the November job loss.

From the Philly Inquirer:

N.J. jobless rate stable, but total jobs fall

The biggest job losses last month from October were in the trade/transportation/utilities category (down 9,700 jobs), construction (down 2,800), professional/business services (down 1,900) and financial services fields (down 1,200).

“The usual retail hiring increases at this time of year did not reach the levels recorded in prior years,” state Labor Commissioner David J. Socolow said.

From the Star Ledger:

N.J. unemployment rate holds at 9.7 percent

The unemployment rate in New Jersey stayed at 9.7 percent in November, even though the private sector lost almost 11,000 jobs, the state labor department said today.

Retail stores hired fewer people than usual for the holiday season this year, resulting in a loss of about 9,700 jobs when adjusted for seasonal hiring patterns.

But the numbers are not firm, and estimates are regularly adjusted from month to month. For example, the Department of Labor and Workforce Development now says the state actually gained 1,200 jobs in October, instead of losing 1,800 as previously estimated.

Also, not everyone was firing employees. The manufacturing sector gained about 2,500 jobs, and the leisure and hospitality industry gained 2,100 jobs in arts, entertainment and recreation. Local government payrolls helped the public sector grow by about 1,500 jobs.

Posted in Economics, New Jersey Real Estate | 81 Comments

Wednesday Open

Posted on December 16, 2009 by grim

Boarding a red-eye back to reality.

Open thread, game on.

Posted in General | 234 Comments

Buyer Commission Rebates Coming to NJ?

Posted on December 15, 2009 by grim

From the Star Ledger:

Law under consideration would let brokers pay real estate clients

Soon your realtor could be paying you.

It’s illegal right now, but pending legislation would allow realtors and real estate brokers to pay home-buyers a portion of their commissions at the close of a deal.

New Jersey is one of 11 states that don’t allow the incentive, said Sen. Nicholas P. Scutari (D-Union), one of the bill’s sponsors. It would be up to the individual real estate agent to decide whether to pay the client.

“We’re trying to help the real estate market and to allow real estate agents and brokers to make deals happen,” Scutari said.
…
The bill (S139/A373) cleared the Senate Commerce Committee todayy. It has passed the Assembly and now goes to the full Senate for consideration.

Posted in New Jersey Real Estate | 294 Comments

The “worst state in America for businesses and taxpayers”

Posted on December 14, 2009 by grim

From the Press of Atlantic City:

Bottom Lines: List ranks New Jersey the worst for business, again

New Jersey has missed its last chance this year to be something other than the worst state in America for businesses and taxpayers.

In the Small Business Survival Index 2009, released this month by the Small Business & Entrepreneurship Council, New Jersey again ranks 50th – worst among the states.

Only the District of Columbia has worse conditions for small businesses, thanks mainly to its very high crime rate and exceptional number of government employees.

In September, the Tax Foundation’s annual study of state tax and regulatory environments also found New Jersey was the worst place for businesses.

Numerous lesser surveys typically place the Garden State at or near the bottom whenever taxes and business conditions are the main considerations. Chief Executive magazine, for example, this year ranks the state 47th as a place to do business.

Posted in Economics | 205 Comments

Willing to pay for it

Posted on December 13, 2009 by grim

From the NYT:

The Hottest Topic in Home Sales

RESIDENTIAL property taxes: Could there be a more potent issue for real estate right now in New Jersey?

Polls indicated that voter concern over high taxes — New Jerseyans pay the highest average of any state — was the defining issue last month in the gubernatorial election that swept Gov. Jon S. Corzine out of office after one term.

Brokers and sales agents report that tax rates are often the first thing on anyone’s lips when a home sale is discussed today.

“We’re now at a point, even in the high-end towns, where people are extremely aware of what they pay in taxes,” said Roberta Baldwin, an agent with Re/Max Village Square in Montclair. “And buyers are very aware of what they might be signing up for.

“You will have some setting limits at the outset on what they are willing to pay in taxes,” she added. “They’ll say, ‘I want the perfect house, but I don’t want taxes over $16,000.’ Or $20,000, or whatever.”
…
So what do typical homeowners do when their property taxes reach that point? Relocate?

The answer seems to be that despite vociferous disgruntlement over taxes and a record number of tax appeals this year — and despite recent numbers indicating more people moving out of New Jersey than moving in — buyers remain willing to pay high taxes if they have children in well-regarded schools that the taxes underwrite.

From 2000 to 2008, a period during which average property taxes rose by 50 percent, to top out slightly over $7,000, a total of 439,000 people left the state, according to James W. Hughes, the dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University. Over that same period, he said, 385,000 moved in, many of them immigrants.
…
Looking within the state — with its extreme tax rate disparities from county to county, town to town, and sometimes even house to house — it is also difficult to discern how, or if, taxes actually affect sales, or the desirability of a particular place.
…
Ms. Baldwin said she long ago confronted the issue of the high property taxes that she has paid as a resident of Montclair for more than 25 years.

“We thought we had reached a breaking point when we were going to have the kitchen redone in our home, and looked at the assessments, and found our house worth less than we had paid for it while our taxes had gone way up,” she said.

She said she and her husband cruised around “lake country,” looking at houses in Passaic County — and fantasizing.

Then, reality sank in: “We don’t want to move out to the country. We need to live in this wonderful town, with all these smart and artsy people we know and like, and wonderful culture, and so close to Manhattan. And we are willing to pay for it.”

Posted in New Jersey Real Estate, Property Taxes | 163 Comments

“everyone else was crossing the finish line while I was still putting on my sneakers.”

Posted on December 11, 2009 by grim

From the WSJ:

Confessions of an Underwater Homeowner

One in four Americans is underwater on a mortgage.

Count me among them.

My family’s modest, suburban New Jersey house is now worth about $30,000 less than our current balance. We never dreamed of walking away, but the idea of “strategically defaulting,” is something we had to at least consider. Many others have, too, as my colleague Mark Whitehouse reported in Thursday’s Journal (See American Dream 2: Default, Then Rent.)

We’re not home flippers or boom-era borrowers who opted for an exotic loan with no documentation. In buying our house, we believed we were making a life decision.

We started thinking about buying in 2004, when my wife and I found out that we were having a baby. We were thrilled. Shortly after that, we learned we were having multiple babies, we were equally thrilled–and terrified. We’re going to need a bigger place, we thought.

We probably could have held out a few years in our sizable apartment in Metuchen, N.J., a bedroom community about 35 miles outside of New York City. But we knew interest rates were hovering at historic lows. It was impossible, working at The Wall Street Journal, to not read those headlines every day. At the same time, people all around me were buying homes and refinancing their mortgages to capture these relatively inexpensive home loans. It was like a race, and everyone else was crossing the finish line while I was still putting on my sneakers.

Posted in Housing Bubble, New Jersey Real Estate | 141 Comments

The New American Dream

Posted on December 10, 2009 by grim

From the WSJ:

American Dream 2: Default, Then Rent

Schoolteacher Shana Richey misses the playroom she decorated with Glamour Girl decals for her daughters. Fireman Jay Fernandez misses the custom putting green he installed in his backyard.

But ever since they quit paying their mortgages and walked away from their homes, they’ve discovered that giving up on the American dream has its benefits.

Both now live on the 3100 block of Club Rancho Drive in Palmdale, where a terrible housing market lets them rent luxurious homes — one with a pool for the kids, the other with a golf-course view — for a fraction of their former monthly payments.

“It’s just a better life. It really is,” says Ms. Richey. Before defaulting on her mortgage, she owed about $230,000 more than the home was worth.

People’s increasing willingness to abandon their own piece of America illustrates a paradoxical change wrought by the housing bust: Even as it tarnishes the near-sacred image of home ownership, it might be clearing the way for an economic recovery.

Thanks to a rare confluence of factors — mortgages that far exceed home values and bargain-basement rents — a growing number of families are concluding that the new American dream home is a rental.

Some are leaving behind their homes and mortgages right away, while others are simply halting payments until the bank kicks them out. That’s freeing up cash to use in other ways.
…
The U.S home-ownership rate has charted its biggest decline in more than two decades, falling to 67.6% as of September from a peak of 69.2% in 2004. And more renters are on the way: Credit firm Experian and consulting firm Oliver Wyman forecast that “strategic defaults” by homeowners who can afford to pay are likely to exceed one million in 2009, more than four times 2007’s level.

Posted in Economics, Housing Bubble, National Real Estate | 206 Comments

On track for a 3.9 million year

Posted on December 10, 2009 by grim

From Bloomberg:

U.S. Foreclosures to Reach 3.9 Million in Second Record Year

Foreclosure filings in the U.S. will reach a record for the second consecutive year with 3.9 million notices sent to homeowners in default, RealtyTrac Inc. said.

This year’s filings will surpass 2008’s total of 3.2 million as record unemployment and price erosion batter the housing market, the Irvine, California-based company said.

“We are a long way from a recovery,” John Quigley, economics professor at the University of California, Berkeley, said in an interview. “You can’t start to see improvement in the housing market until after unemployment peaks.”

Foreclosure filings exceeded 300,000 for the ninth straight month in November, RealtyTrac said today. A weak labor market and tight credit are “formidable headwinds” for the economy, Federal Reserve Chairman Ben S. Bernanke said in a Dec. 7 speech in Washington
…
A total of 306,627 properties received a default or auction notice or were seized by banks last month, or one in 417 U.S. households, and a similar number are expected for December, RealtyTrac said.

There have been 3.6 million filings from January through November, the most in RealtyTrac records dating to January 2005.

Three loans went bad for every one that improved in the first 10 months of this year, according to a Dec. 2 report from Lender Processing Services Inc.

The combined delinquency and foreclosure rate for all loans increased to 12.6 percent through October, the Jacksonville, Florida-based loan servicing and mortgage data company said.
…
Filings rose 65 percent from a year earlier to 9,227 in New Jersey. They dropped 3.7 percent to 2,114 in Connecticut, and jumped 69 percent to 4,401 in New York.

Posted in Economics, Foreclosures, National Real Estate | 231 Comments