New Jersey Real Estate Report

Updated the S&P Case Shiller Home Price Index graphs with the December release data. These graphs show all indicies for the NY Metro Commutable Area. As the name implies, this price index covers regions that are within commutable distance to New York City and does include other states. New to the series is the condo index, which has been added to the graphs.

The aggregate index shows home prices in this region peaking in June of 2006. The total price decline to date in the aggregate index is 14.98%. The tiered price index gives us a bit more visibility into the price movement of different categories of homes.

Low Tier (Under $320407) – Peaked in October 2006 and is down 17.21% from peak

Mid Tier ($320407 – $476338) – Peaked in September 2006 and is down 15.50% from peak

High Tier (Over $476338) – Peaked in June 2006 and is down 11.77% from peak

Aggregate (Overall Market) – Peaked in June 2006 and is down 14.98% from peak

The first graph is the year over year change in the index.

(click to enlarge)

The second graph is straight index value.

(click to enlarge)

It is still too early to be calling for any kind of bottom in the region. Unlike other regions that show home price declines beginning to slow, the declines appear to be accelerating in our region. In fact, the most recent data point is the steepest decline since the last cycle. The rate of decline peaked at 8.9% in March of 1991. See below:

S&P CS NY Commutable Year over Year Price Change
Jan 07 -0.34%
Feb 07 -0.91%
Mar 07 -0.91%
Apr 07 -1.56%
May 07 -2.35%
Jun 07 -2.94%
Jul 07 -3.20%
Aug 07 -3.35%
Sep 07 -3.60%
Oct 07 -4.09%
Nov 07 -4.61%
Dec 07 -5.48%
Jan 08 -5.80%
Feb 08 -6.70%
Mar 08 -7.48%
Apr 08 -7.98%
May 08 -7.74%
Jun 08 -7.04%
Jul 08 -7.03%
Aug 08 -6.60%
Sep 08 -7.12%
Oct 08 -7.67%
Nov 08 -8.63%
Dec 08 -9.19%

From the Herald News:

Taxing times for homeowners

Homeowners will likely file a mountain of tax appeals this year, hoping the real estate crash will provide a silver lining — relief from the nation’s highest property taxes.

But they shouldn’t count on winning.

Although home prices in North Jersey dipped 11 percent in the last year alone, proving in tax court that your home is overassessed is another matter.

The burden is on homeowners to use data to show their home value, as of October 2008, is too high based on other sales. That could be hard in a year when sales were few and far between, providing little evidence for homeowners to make their case.

“We’re anticipating a substantial number of tax appeals,” said Louis Izenberg, an appraiser who represents towns and large property owners. “Having said that, at the end of the day, the New Jersey Tax Court relies upon evidence, and for the first time I can recall, we really don’t have an abundance of data.”

And some towns — which have a 15 percent margin of error on home assessments — have already adjusted for softer market prices. In addition, an analysis by The Record of 25 North Jersey municipalities found that 19 met a key state test measuring whether property taxes are distributed fairly among homeowners.

Homeowners could actually take an extra hit this year if failing businesses win their tax appeals, shifting the town’s overall tax burden from commercial to residential owners.

Still, there are some signs this year could be better for homeowners than years past.

While the percentage of winning tax appeals statewide hasn’t climbed much since the market peaked in 2006, the number of settlements — deals cut before a decision is reached in tax court — have steadily increased to 35 percent.
…
Some of the strongest candidates for reductions are homeowners whose towns last did property assessment updates around the height of the housing boom, and owners of high-end properties, experts say.
…
A massive drop in value is what drove more than 100 residents of Winston Towers, a condominium development in Cliffside Park, to file appeals. The luxury apartments — which offer New York views and use of an Olympic-sized pool — went for $740,000 at the height of the market. They are now selling for about $500,000.

No one knows how many appeals will be filed this year because the deadline is April 1. But county and local officials are expecting an increase, and tax lawyers and personal appraisers are reporting a spike in client interest.

“We have currently about 2,500 appeals pending, and we’re ready to file about 1,000, and I’m going to see another 1,000 after that,” said Livingston property tax attorney Lee Holtzman. “They’re coming out of the woodwork here. Everyone’s complaining.”

(Note: 46 Windermere was featured in Comp Killer in early February, you can find the details here.

From the NY Times:

A Market Going Downhill Fast
By ANTOINETTE MARTIN
Published: February 19, 2009

Montclair

IN the heady real estate days of the summer of 2005, a well-maintained house in a decent school district would not last long on the market. That was when a three-bedroom ranch house at 46 Windermere Road here achieved its peak-value moment.

The red-brick ranch sold that July for $709,000 — fetching $50,000 over asking price — after just 10 days on the market.

Fast forward to the spring of 2008, and a market gone slack, not just in Montclair or Essex County, but in all 21 counties of the nation’s second-wealthiest state. The brick ranch was for sale again, and had been, on and off, for more than a year. The owner had given up on getting his price, and moved out. The bank had agreed to a “short sale” in which it would recover less than it was owed. The asking price was reduced to $599,000.

“That seemed like a really good price when we first saw it,” said John Strong, who finally bought the house with his partner, Heather Carter. “But there were no lights in the house — the electricity had been turned off — and later we could see there were problems, because it had been empty and not kept up.” The final price at the closing last month: $528,110.

Over the course of three and a half years, the New Jersey residential market has headed downhill fast. In September 2006, Jeffrey G. Otteau, whose Otteau Valuation Group gathers data on the residential market for many builders and brokers, said there were 68,000 houses sitting on the market unsold for a month or longer, more than he had ever seen in his experience in this market. By spring 2007, there were 71,000 unsold houses, his firm reported, and by May 2008, that number had climbed again, to 74,000.

At the same time, the pace of sales kept lagging, sometimes erratically, but always headed down, according to monthly reports from Mr. Otteau’s firm, based in New Brunswick. Each December, on a line graph depicting month-by-month sales during the year, the squiggly line ended in a deeper valley than it had the previous year.

More than a year ago, Mr. Otteau announced that his calculations indicated there would be a long wait before prices returned to 2005 levels. Not until 2014, he said at the time — and that prediction was made well before Wall Street quaked, the mortgage lending market foundered and unemployment statistics started to skyrocket.
…
As of January, the state had a 17-month supply of houses on the market, according to Otteau Group figures. That means that even if no other houses were put up for sale, it would still take 17 months to sell those already available, under current market conditions.

In Bergen County, it would take an estimated 15 years and 4 months to sell all the houses now on the market priced at $2.5 million or more. In Morris County, for homes priced from $1 million to $2.5 million, it would take seven and a half years, and in Warren County, for homes priced from $600,000 to $1 million, five years and one month.

With unsold-house inventories like those, and the probability that the economic malaise will continue for some time, Mr. Otteau’s most recent prediction is that New Jersey home prices will continue to drop.

Prices have declined by an average of 15 to 20 percent in every county in the past three and a half years, contract sales data indicates. At the start of 2009, some real estate professionals said they had noticed a few sellers starting to “see the light” and agreeing to slash asking prices by 10 to 20 percent, sometimes even 25 percent.

James Bednar, who writes the real-estate blog njrereport.com, said last month that it was high time for both buyers and sellers to face reality. He proposed a new mantra for them: “Home prices can fall. Home prices can fall. Home prices can fall further than I believe possible. Home prices are falling and will continue to fall.”

From the NY Times:

Trapped in Their Own Homes
By MARY JO PATTERSON
Published: February 19, 2009

ON May 1, 2007, a very different economic era, Janet Faello put her former marital home on the market for $829,000. She and her husband were divorcing.

“It’s not the Taj Mahal, but it’s a nice, well-maintained home,” said Ms. Faello, a 53-year-old massage therapist with two daughters in college who remains in the house, which she and her ex-husband still jointly own. Her ex-husband lives elsewhere. “I haven’t been entertained once with an offer, and I’m still not getting any bites.”

With the house unsold, Ms. Faello said she and her ex-husband are struggling to meet expenses. Taxes alone are $13,860 a year.
…
Would-be sellers in New York City’s suburbs understand her pain, whether they are trying to sell a Cape Cod for $300,000 or a center hall Colonial for $1 million. In a housing market characterized by eroding home values, high inventory and tight credit for borrowers, many feel stuck in a place they don’t want or can’t afford. As the recession becomes more severe and unemployment mounts, they fret each week their properties remain unsold, and fear losing equity. While buyers hunt for exceptional values, sellers feel like hostages. And their pain is sometimes drawn out when deals that seem to be done blow up just before the closing.
…
Nevertheless, all the reporting agencies are concluding that the number of sales of single-family homes in 2008 was down from 2007 in the New York metropolitan area, and prices in general were down. The median price for a home sold in the metropolitan area was $458,600 in the fourth quarter of 2008, down 11.7 percent from a year earlier, according to the National Association of Realtors. Those figures reflect the agency’s tracking of sales in Bergen, Hudson and Passaic Counties in New Jersey; and the Bronx, Kings, Putnam and Westchester Counties in New York.
…
A seller’s anguish may not be as sharp as the pain of a homeowner facing foreclosure. But the situation can alter life plans and jettison hopes.

Some sellers are losing hope.

Consider Mary Beth Lang of Shelton, Conn. She is 62, with grown children and a husband who retired as a buyer for a technology company. Her dream went like this: sell the house and move to their new custom home in Kentucky.

Her five-bedroom, four-bath house went on the market for more than $1 million in 2006. The price has since slid to $875,000, but there are no takers. Repainted, with many personal effects removed to look less cluttered, it no longer feels like home. The Kentucky house? It’s for sale, too.
…
James Bednar, a real estate agent representing buyers at DRI Real Estate Company in Ridgewood, N.J., said many sellers overvalue their homes.

“The industry has nailed into people’s minds that their houses are worth a certain amount,” said Mr. Bednar, who blogs about the New Jersey market at njrereport.com. “Sellers remember what neighbors sold their houses for two years ago and hold on to those unrealistic comparables. They need to accept the current reality of the market.”

Mr. Bednar said he knows that sellers do not always have the leeway to drop their price. Others will be asked to pay a steep price for features buyers consider undesirable.

“In a boom time, buyers tend to overlook things like a high tension line that’s a little close to the house, a street that’s a little too busy or an odd layout,” Mr. Bednar said. “In a down market like this, those preferences are magnified.”

JONATHAN GREENBERG paid $792,000 for a lake house in Montville, N.J., in 2005, attracted by its unusual architecture and striking views. Then he invested nearly $100,000 in improvements. At the time he was single, but is now married and a father. With its steep slopes and 30-foot drop to the lake, the property is not “kid-friendly,” said Mr. Greenberg, who sells investment properties for a living. He listed the house a year ago for $930,000. The price is now $670,000.

“People say they love it, but it doesn’t have some of the fundamentals families are looking for,” said Mr. Greenberg, 41, whose wife, Malu, is expecting a second child. “It’d be perfect for New Yorkers who need some kind of getaway. It’s stressful. We do feel stuck.”

From the Record:

Stimulus, warm weather could spur home repairs

With remodeling in a slump, home improvement companies reached out to potential customers Sunday at the annual New Jersey Home Show at the Meadowlands Expo Center.

“It’s been slower for sure,” Gary Griffith, vice president of Roofing Sales Co. in East Rutherford, said at the show. “Contractors say they have a lot of estimates out there. People are thinking about having work done, but I don’t think they’re ready to let go of the money.”

Roofing Sales Co., which sells building supplies to contractors, recently laid off three workers — the first layoffs in its 87-year history.

The company’s experiences are being repeated around the nation. Spending on home renovations dropped around 12 percent in 2008, according to a recent study by Harvard’s Joint Center for Housing Studies, which predicted that spending will continue to decline this year.

“Uncertainty in the housing market continues to stifle spending on homeowner improvements,” said Nicolas P. Retsinas, the center’s director. “In light of escalating job losses, consumers are reluctant to undertake major remodeling projects.”

“People are holding on to their money,” agreed Hector D. Castro, sales manager of Professional Carpet Co. in Hackensack and Wayne, which also exhibited at the show.

Customers who might have spent $2,000 to $3,000 to replace their carpet are now spending $500 to $600 to clean it instead, he said.

The steep decline in the number of home sales — down almost 40 percent in New Jersey since the peak in 2005 — also means a big drop in the number of carpets being ripped up and replaced, Castro said.

“Anytime the housing market suffers, everything inside the house suffers,” he said.

Both Griffith and Castro said they hope business will pick up in the spring, a traditionally busy time in the home renovation industry. They also said they hope the economic stimulus package will make Americans less anxious about spending.

From the Record:

Home prices down nearly 12 percent

Home prices in the New York metropolitan area, including North Jersey, were at a median of $458,600 in the fourth quarter of 2008, down 11.7 percent from a year earlier, the National Association of Realtors said today.

The volume of sales in the Garden State has also dropped dramatically. Only 112,600 single-families, condos and co-ops were sold statewide in 2008, down 18 percent from 137,400 in 2007 and down 39 percent from the 184,400 units sold at the peak of the recent housing boom in 2005.

Nationally, existing home prices were down about 12.4 percent, to a median of $180,100, the NAR said.

The declining prices are making homes more affordable for buyers, although some buyers are apparently holding back because they think prices may fall further or because they’re worried about their job security in a deepening recession.