How does real estate perform in a recession?

Posted on December 2, 2008 by grim

From Bloomberg:

Recession in U.S. May Be Just Beginning as Job Losses Mount

The U.S. economy, now officially in recession, may be in the midst of the longest slump in the post- World War II era as job losses mount and credit dries up.

The economic slump began in December 2007 when payrolls reached a peak, the business cycle dating committee of the National Bureau of Economic Research, a private, nonprofit group of economists based in Cambridge, Massachusetts, said yesterday. The last time the U.S. was in a recession was from March through November 2001, according to NBER.

“We’re going on 12 months already, and we’re just getting started,” said Stephen Stanley, chief U.S. economist at RBS Greenwich Capital in Greenwich, Connecticut. “We’re looking at some pretty severe numbers for the fourth quarter, and the first quarter of 2009 will be pretty bad as well. The economy isn’t going to turn around definitively until the credit markets unclog.”

The NBER designation means the U.S. was the first country to have slipped into a contraction. While definitions differ, the economies of both the euro area and Japan fell into a slump in the second quarter of this year, making it the first simultaneous recession in the three regions in the postwar era.

The longest economic slumps since 1945 were the 16-month downturns that ended in March 1975 and November 1982. The Great Depression lasted 43 months, from August 1929 to March 1933.

“This may be referred to as the Great Recession,” because of its length, said Norbert Ore, chairman of the Institute for Supply Management’s factory survey. “It looked like we were headed for a shallow recession earlier in the year because of higher energy prices. With the meltdown in the financial sector, it has become something more serious.”
…
The loss of 1.2 million jobs so far this year was the biggest factor in determining the starting point of the U.S. recession, the NBER said. By that measure, the contraction probably deepened last month.
…
“It is clearly not going to end in a few months,” Jeffrey Frankel, a member of the NBER committee and a professor at Harvard University, said in an interview. “We would be lucky to get done with it in the middle of next year.”

Posted in Economics, Housing Bubble, National Real Estate | 219 Comments

“It’s not enough to have a rail station, but it’s a really good start.”

Posted on December 1, 2008 by grim

From the Record:

A route to higher home values

And, yes, it is an oncoming train.

But in this real estate market — more than any other — that’s a good thing.

Homes in towns with rail stations at their heart or nearby fare much better than those in any other market, said real estate guru Jeffrey Otteau, who has been analyzing New Jersey real estate for 30 years.

“It’s not enough to have a rail station,” Otteau said. “But it’s a really good start.”

In an October report, Otteau found that nine of the top 10 New Jersey housing markets either have a train station or are less than a mile away from a rail stop. In Bergen County, Midland Park and Ridgewood made the list.

That top designation was determined by how long it would take to sell out the homes currently on the market, Otteau said. Statewide, the figure is 13 months; in rail-friendly towns it ranges from two to five months.

Homes near train stations are also worth more. In a 2005 survey of towns in Essex, Union, Somerset and Morris counties, Otteau found that homes within walking distance of a rail station sold for 5 percent more than those houses where residents would have to drive to the station.

Those increased values were even more evident in a slow market. This year Otteau revisited that survey, in central New Jersey, and found that homes within walking distance had values 10 percent higher than their counterparts’. Otteau said the findings would “certainly” hold true for Bergen County rail towns.

“This is true in the northern half of New Jersey,” he said. “The closer you get to Manhattan, the greater the effect.”

Posted in Economics, New Jersey Real Estate | 299 Comments

“It may be 2016 before home prices match the highs of 2006.”

Posted on November 30, 2008 by grim

From the Daily Record:

Home prices drop 7% in Morris

The average price of a home in Morris County dipped back below a half million dollars in the first half of the year, according to a new data analysis that found the Morris housing market faring slightly worse than the rest of New Jersey.

A Gannett New Jersey analysis of state Department of Treasury sales data shows that for the first half of 2008, the average Morris home sold for about $492,000, almost 7 percent below the sale price for the first six months of 2007. That compares with a statewide decline of nearly 5 percent in the average sale price, to about $370,000.

At the same time, the number of homes sold in Morris dropped by nearly 44 percent to 2,034, compared with a 43 percent statewide plunge.

The analysis underscores the fact that Morris, which tends to fare better than New Jersey on most measures, has been hard hit by the downturns in the economy in general and in the real estate market in particular.

“Morris County is going to be somewhat more vulnerable to the restructuring of Wall Street,” said James Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University. “People also could have overextended themselves.”

Sima Wolf, owner of Exit Realty Gold Service in Mountain Lakes, said, “We are definitely seeing a lot of short sales.” She estimated that nearly half of the sales they see involve a home being sold for less than the amount left on its mortgage.

“It used to be more prevalent in other areas of the state, but now we’re seeing more of it in Morris County,” Wolf added.

Foreclosures are up, as well. The number of properties in foreclosure in the first two-thirds of 2008 already surpassed the 2007 total. Through August, 323 properties had defaulted on their mortgages, according to the Morris County Sheriff’s Office, compared with 316 in all of 2007. And during the first eight months of 2008, the sheriff’s office had sold 179 properties, 43 more than in all of 2007.
…
Hughes and others cautioned that the analysis may not be the best indicator of the housing market because it does not compare sales of specific types of homes – for example, new construction, condominiums or single-family houses – nor does it take into account specific local factors affecting the market.

Still, its overall conclusion – that the housing market is down – is accurate.

“Clearly, the trend is down,” said Hughes, citing another study that showed prices down 17 percent over the last year when comparing specific types of houses to one another.

Jeffrey Fellers, manager of Coldwell Banker Residential Broker in Madison, said: “We are definitely off from the high of 2006. In October, it was as if the phones were shut off.”
…
According to the Gannett analysis, the largest sale price drop was registered in Mendham Township, one of two municipalities where the average home sold for more than $1 million in the first half of 2007. The average Mendham Township home price dropped by nearly $335,000, to about $860,000.
…
Hughes said prices could continue to fall for another year or more before slowly rebounding.

“I don’t think there’s going to be a quick resolution to this,” he said.

It took four years to recover from the last housing crash, in 1988, according to Hughes. If that pattern holds true, it’s unlikely that home prices will start back up until 2010.

“The turnaround is likely to be very slow,” Hughes said. “It may be 2016 before home prices match the highs of 2006.”

Posted in Economics, Housing Bubble, New Jersey Real Estate | 70 Comments

Weekend Open Discussion

Posted on November 28, 2008 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 labelled “[#] 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 | 298 Comments

T-Day Open Discussion

Posted on November 26, 2008 by grim

Getting late here and I’ll be flying back tomorrow afternoon, so I’ll open this one up early in case I don’t get a chance to do it tomorrow.

Happy Thanksgiving everyone! Wish you and your families the best!

Keep the turkey warm for me, I’ll be landing around 7:30pm.

How about sharing what you are thankful for this year?

Posted in General | 109 Comments

Mortgage Rates Plummet!

Posted on November 26, 2008 by grim

From Bloomberg:

U.S. Mortgage Rates Drop Most in Seven Years on Fed Debt Plan

U.S. mortgage rates dropped by the most in at least seven years as a Federal Reserve pledge to buy $600 billion of debt succeeded where seven cuts in the central bank’s benchmark rate had failed.

The average rate for a 30-year fixed mortgage fell to about 5.5 percent after starting at 6.38 percent yesterday, according to Bankrate Inc. It was the biggest one-day drop in at least seven years, said Holden Lewis, of the North Palm Beach, Florida, publishing and research firm.
…
“Home resales have hung up because rates are high and because mortgage money has been scarce,” said Neal Soss, chief economist at Credit Suisse Group in New York. The Fed’s move “may hasten the day when we finally find a bottom in housing.”
…
Still, stricter mortgage qualifications and growing job losses in a weakening economy will continue to hamper the market, even if the Fed plan manages to keep rates lower in coming days, said Sam Khater, senior economist for First American CoreLogic in Tysons Corner, Virginia.

“The market right now is not about rates, which are affordable, but about a supply of homes that is very high,” Khater said in an interview. “The market won’t turn around and prices won’t stabilize until supply and demand become more normal.”

From Reuters:

US mortgage rates post record 1-day drop

Rates on U.S. 30-year mortgages posted a record drop of 1-1/8 percentage point to 4-7/8 percent on Tuesday, after the Federal Reserve said it would implement a $600 billion plan to support the mortgage securities market.

The decline on the Mortgage Point Monitor is the biggest since the data series began in 1998, according to David Beadle, president of BestInfo. The drop is also a one-day record since at least 1988 using other data, he said.

From the AP:

Mortgage security rates fall after Fed action

Rates on Fannie Mae and Freddie Mac debt fell Tuesday — a promising sign that homeowners’ mortgage rates could decline, too — after the Federal Reserve said it will buy up to $600 billion in mortgage-backed assets.

The latest action by the Fed to prop up the financial system sent the yield on Fannie’s current 30-year mortgage-backed security down 0.58 percentage point Tuesday, according to a note from Miller Tabak & Co. analyst Tony Crescenzi. He said that rate is closely correlated to mortgage rates, which have remained stubbornly high even after huge efforts by the government to loosen the tight credit markets.

Freddie Mac said last week that the average rate for 30-year mortgages was 6.04 percent, Crescenzi pointed out, which means that if the rally holds, “30-year mortgage rates could fall below this year’s low of 5.48 percent, set in January when it was at its lowest since March 2004.”

Posted in National Real Estate | 245 Comments

New Jersey Third Quarter Home Price Tracker

Posted on November 25, 2008 by grim

NJ Home Price Tracker has been updated with NJAR Q3 Data, OFHEO Q3 Data, and S&P Case Shiller September Data:


(click to enlarge)

Year over Year Price Changes by Index

S&P Case Shiller NY Metro Area Commutable (September 2008)
Low Tier – Down 10.4% (Under $326523)
Middle Tier – Down 8.1% ($326523 – $481833)
High Tier – Down 5.7% (Over $481833)
Aggregate – Down 7.3% (Overall Market)

OFHEO Home Price Index (Third Quarter 2008)
HPI – Down 4.9%
Purchase Only HPI – Down 5.3%

New Jersey Association of Realtors (Third Quarter 2008)
Median Price – Down 4.4%

Spreadsheet/Data can be found here:

New Jersey Home Price Tracker

Posted in General | 204 Comments

Home Sales and Prices Drop in October

Posted on November 24, 2008 by grim

From Bloomberg:

U.S. Economy: Home Sales Fall, Record Drop in Prices

Home resales in the U.S. dropped in October and prices fell by the most on record, signaling a deepening housing recession going into 2009.

Purchases of existing homes slid to an annual rate of 4.98 million, lower than forecast, a National Association of Realtors report showed in Washington. The median price fell 11.3 percent from a year earlier, the most since the group began collecting data in 1968.

Today’s figures indicate a renewed downturn in an industry that showed signs of stabilizing this year, hurt by the credit squeeze and record mortgage foreclosures. That may raise pressure on President-elect Barack Obama to aid homeowners and potential buyers as he assembles a record stimulus package.

“Home sales will continue to fall over the next few months because of tightening credit conditions,” said Sal Guatieri, senior economist in Toronto at BMO Capital Markets, which had the closest estimate for the sales level among 67 forecasts in a Bloomberg News survey. “Underlying demand appears very weak” because “many sales are coming from cheap prices on foreclosed properties,” he added.
…
Existing home sales were forecast to fall to an annual rate of 5 million, according to the median estimate in the Bloomberg survey.

Sales dropped 3.1 percent from the previous month and 1.6 percent from a year earlier. Resales totaled 5.65 million in 2007. The median-sales price declined to $183,300.

Today’s figures compare with the 4.86 million level reached in June, the lowest in a decade and 33 percent below the record reached in September 2005. Resales have fluctuated around a 4.96 million rate this year.

The number of previously owned unsold homes on the market at the end of October represented 10.2 months’ at the current sales pace, up from 10 months’ at the end of the prior month.

Posted in Economics, Housing Bubble, National Real Estate | 246 Comments

Weekend Open Discussion

Posted on November 21, 2008 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 labelled “[#] 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 | 504 Comments

Wednesday Random Discussion

Posted on November 18, 2008 by grim

Traveling today on business, will be out of contact for most of the day. I’m planning on being out of the country for the next few days. So please, keep things clean.

Random image of the day:

Discuss.

Posted in General | 294 Comments

Not everyone benefits when loans are modified

Posted on November 18, 2008 by grim

From the Wall Street Journal:

Investors Hit BofA Loan Modifications

Bank of America Corp.’s decision to embark on an $8.4 billion home-loan-modification program to settle charges brought by state attorneys general against Countrywide Financial Corp. was hailed as a milestone when the deal was announced this fall. But apparently nobody talked to one group that will shoulder much of the settlement’s costs: investors who hold securities backed by Countrywide mortgages.

ow, some of those investors are crying foul, adding to the confusion over what is becoming a central issue in efforts to resolve the wave of foreclosures that is at the root of the global financial crisis.

J.P. Morgan Chase & Co. and Citigroup Inc. recently announced foreclosure-prevention programs that aim to reduce interest rates, extend repayment schedules and, in the case of Citigroup, reduce loan amounts, to help borrowers keep their homes. But the programs have focused primarily on loans wholly owned by those companies because they feel they have more authority to rework those mortgages.

More than $2 trillion in mortgage loans were packaged into mortgage-backed securities and sold to investors by Wall Street, according to Inside Mortgage Finance. But opinions vary regarding the degree to which these mortgages can be modified.
…
Under terms of contracts with investors, mortgage companies generally have the authority to rework loans when it is likely to benefit investors. But just how much authority the mortgage companies have is open to debate.

Modifications also can benefit some bondholders at the expense of others. Reducing a borrower’s loan balance, for instance, may hurt holders of the riskiest piece of a mortgage securitization more than investors who bought securities that had higher credit ratings.
…
Last week, a group of about two dozen investors met in New York with attorneys at Grais & Ellsworth LLP, who believe they may have grounds to sue. Attorney David Grais told them that Bank of America was conflicted when it agreed to the settlement because Countrywide was both the originator of the mortgages and the servicer of the securities. “This is penalty shifting,” Mr. Grais said.

Posted in Housing Bubble, National Real Estate, Risky Lending | 281 Comments

Least Affordable: NY Metro Area

Posted on November 17, 2008 by grim

Good News: Housing affordability is improving!

Bad News: Not for you! *

* NY Metro Area HOI came in at 10.6, better than the mid-single digit figures that were set during the peak of the bubble. However, we’re still a far way off from the 30-50% ranges seen pre-bubble.

From Wells Fargo/National Association of Homebuilders:

HOUSING AFFORDABILITY NATIONWIDE RISES TO HIGHEST LEVEL IN FOUR YEARS

With home prices decreasing and interest rates holding at historically low levels, the number of potential home buyers nationwide who can afford to buy new and existing homes has reached the highest level in more than four years, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI) released today.

According to the third-quarter HOI readings, 56.1 percent of all new and existing homes that were sold were affordable to families earning the national median income of $61,500, far more than the 40.4 percent of families who could afford homes at the peak of the housing boom.

“If there is a silver lining to this crisis, it would be that some housing markets have become more affordable with a larger inventory to choose from,” said NAHB Chairman Sandy Dunn, a home builder from Point Pleasant, W.Va. “But this is undeniably a crisis and Congress needs to act on housing stimulus to get the market moving again.”

The two most affordable major housing markets in the country during the third quarter of the year were Indianapolis, Ind., and Youngstown, Ohio, according to the HOI. In both Indianapolis and Youngstown, 91.0 percent of homes sold in the third quarter were affordable to families earning the areas’ median household incomes of $65,100 and $52,000, respectively.
…
New York-White Plains-Wayne, N.Y.-N.J., was the nation’s least affordable major housing market for the second consecutive quarter. In the New York market, 10.6 percent of the new and existing homes sold during the third quarter were affordable to those earning the area’s median family income of $63,000.

Other major metro areas at the bottom of the housing affordability chart included San Francisco-San Mateo-Redwood City, Calif.; Nassau-Suffolk, N.Y.; Los Angeles-Long Beach-Glendale, Calif.; and Miami-Miami Beach- Kendall, Fla., in that order.

Posted in Economics, New Development, New Jersey Real Estate | 113 Comments

“… Now we’re getting about 30 a day and 700 a month”

Posted on November 17, 2008 by grim

From the Press of Atlantic City:

Ocean County doubles rate of foreclosure

Cars line the curb and Halloween decorations still hang in the front yards of the houses on Reel Avenue, a short street in the Ocean Acres section of the township.

Two houses are set apart from the others by their emptiness, by the uncollected leaves covering their lawns and by an open, overstuffed mailbox. The two homes, which sit across from each other, are in foreclosure.

“It’s really a sad situation, but a lot of times it gives other people the opportunity to purchase a home,” said Jean Ball, a real estate agent with Remax who is listing the home at 148 Reel Ave.

Sad, but not unique. New Jersey’s rate of foreclosures jumped 75 percent this October compared with last year, according to the Research firm RealtyTrac. According to the California-based real estate Web site, New Jersey had the eighth-highest foreclosure rate in the nation.

In Ocean County, foreclosures this year have more than doubled since 2006. On average, about 30 people per day are losing their homes, said Beatrice M. Nitche, chief clerk to Ocean County Clerk Carl Block.

“In the past, in a month, we used to get four, five or six foreclosures a day. Now we’re getting about 30 a day and 700 a month,” Nitche said. “People are just really extending themselves.”

Posted in Foreclosures, Housing Bubble, New Jersey Real Estate | 189 Comments

Weekend Open Discussion

Posted on November 14, 2008 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 labelled “[#] 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 | 573 Comments

New Jersey Foreclosures Up 75%

Posted on November 13, 2008 by grim

From the Record:

Default activity in N.J. up 75%

Foreclosure activity in New Jersey rose 75 percent in the 12 months ended in October, RealtyTrac reported today. Nationally, the total was up about 25 percent.

“October marks the 34th consecutive month where U.S. foreclosure activity has increased compared to the prior year,” said James J. Saccacio, chief executive officer of RealtyTrac, which monitors foreclosures nationwide.

One in every 410 New Jersey households received a foreclosure notice in October, compared with one in every 452 households that received a filing nationwide.

Passaic County had the highest foreclosure rate in the state, with one of every 207 housing units affected. Bergen County was seventh of the state’s 21 counties, with foreclosure affecting one in every 368 households. In Hudson County, the number was one in 518, and in Morris, one in 805.

RealtyTrac counts all stages of the foreclosure process, ranging from a lender’s notice that a homeowner is in default on mortgage payments all the way through to bank repossession. Most homeowners who receive default notices are able to avoid bank repossession of their properties.

Posted in Foreclosures, New Jersey Real Estate | 94 Comments