New Jersey Real Estate Report

From Bloomberg:

Mortgage Bankers to Ask U.S. to Lift Home-Loan Limits

The U.S. Mortgage Bankers Association plans to ask the Federal Housing Finance Agency to increase the limit for Fannie Mae and Freddie Mac purchases or guarantees of single-family mortgages to $625,500 to bolster the housing market.

The mortgage bankers’ residential board of governors is scheduled to vote today on the recommendation, which would call for an increase of 50 percent above the current limit of $417,000 in most areas, at the trade group’s annual conference in San Francisco.

“It will be stimulative,” Garry Cipponeri, senior vice president of Chase Home Finance LLC in Iselin, New Jersey, and head of the mortgage bankers’ capital markets committee, said in an interview. “This market needs liquidity.”

A higher limit guaranteed by the government agencies is needed to spur lending in the most expensive housing markets, such as California and New York, Cipponeri said. The availability of mortgages above $417,000, known as non-conforming loans, “has gotten worse” amid a tightening of credit standards, he said.

Congress approved raising the limit temporarily to $729,500. That increase expires at the end of the year and lawmakers would decide whether to raise the limit permanently, with the Federal Housing Finance Agency having oversight of Fannie Mae and Freddie Mac.

From Bloomberg:

World May Be Lucky to Get Worst Recession Since 1983

The world may be heading for its worst recession in a quarter of a century — if it’s lucky.

A steep slump looks likely as the credit squeeze crunches economies from the U.S. to Singapore and panic engulfs global financial markets.

“It’s certainly going to be the worst since the 1980s,” says Bradford DeLong, an economics professor at the University of California at Berkeley who worked at the U.S. Treasury Department from 1993 to 1995. “The hope is that it won’t become the worst unemployment business cycle since the Great Depression.”

Of special concern: The two big bulwarks of the global economy in recent years — U.S. consumer spending and the rapid growth of emerging markets — may be finally giving way in the face of the 14-month-old financial turmoil.

That raises the odds that the coming economic decline will be long and deep, despite U.S. Treasury Secretary Henry Paulson’s $700 billion financial rescue plan, similar efforts by European leaders and the coordinated interest-rate cuts engineered by Federal Reserve Chairman Ben S. Bernanke and other central bankers last week.

“This is the worst crisis I’ve seen in my 50-year career,” William Rhodes, senior vice chairman of Citigroup Inc. in New York, told fellow bankers in Washington yesterday. “We still have to deal with the effects on the real economy here and elsewhere.”
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Household finances are also being pinched. The steep decline in U.S. stock prices last week alone wiped some $2.16 trillion from investors’ wealth. And banks are getting stingier with credit: Borrowing by U.S. consumers fell in August by the most on record as lenders shut access to loans, according to data from the Fed.

The consumer pullback is already sending ripples throughout the economy. Vacancies at U.S. neighborhood and community shopping centers rose to a 14-year-high in the third quarter, New York-based real-estate research firm Reis says.

A sharp reduction in household spending could turn what is shaping up to be the biggest recession since the early 1980s into something worse, Bruce Kasman, chief economist at JPMorgan Chase & Co. told a meeting of the Institute for International Finance in Washington yesterday.

From CNN/Money:

For states, it’s ‘worst-case scenario’

States and municipalities are facing their worst budget crunches in decades – and it’s only going to get worse.

As the weakening economy undermines consumers and businesses alike, governments are facing a rare confluence of declines in personal and corporate income taxes, property taxes and sales taxes. This is forcing officials to raise taxes and fees, lay off workers and slash spending – cutting aid to hospitals, schools, Medicaid and more.

At the same time, as unemployment and inflation rise, demand for public services and the cost of delivering them is on the increase.

On top of all that, the credit crunch has made it virtually impossible for some governments to borrow to cover short-term financing needs, forcing states such as California to appeal to Washington for help.

Worst of all, most experts are predicting the fiscal squeeze will only deepen.

“It’s all just starting,” said Chris Hoene, director of the Center for Policy and Research at the National League of Cities. “It’s going to be at least three years of pretty tough sweating.”
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Other states, however, have no choice. Michigan and Maryland enacted tax increases, while New Hampshire and New York are increasing cigarette taxes, according to the Center on Budget and Policy Priorities. New Jersey, meanwhile, is eliminating property tax rebates for households with incomes of more than $150,000 and is reducing property tax rebates for some other residents. A public utilities tax that was scheduled to end in 2010 will continue to 2013.

“We’re preparing for the worst-case scenario,” said Tom Vincz, spokesman for the New Jersey Office of the State Treasurer.

From Reuters:

Coldwell sets 10-day price cuts to spur home sales

One of the largest U.S. real estate brokerages on Monday said it is asking its sellers to cut listing prices by as much as 10 percent to kick-start U.S. home sales in a market plagued by a two-year price slump and near-record unsold supply.

Coldwell Banker Real Estate said some 25,000 sellers listing homes with its brokers will cut prices during its first national, 10-day sales event starting on Friday that aims to lure potential buyers off the sidelines of the worst housing market since the Great Depression.

Most owners still are unrealistic when pricing their homes, and a reduction of 10 percent or less would push the properties “over the tipping point to a sale,” according to Coldwell Banker, which is based in Parsipanny, New Jersey, and is part of Realogy Corp.

“The main driver is to bring buyers and sellers together and to increase the activity in the marketplace,” Jim Gillespie, president and chief executive officer of Coldwell Banker, said in an interview.
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Many sellers have been reluctant to slash asking prices, however, and face competition from the large number of foreclosed homes on the market at discounted prices.

A recent Coldwell Banker survey found that more than half of the real estate agents said listing prices in their market are too high to attract qualified buyers. Brokers, however, believe that, depending on the market, a price cut of up to 10 percent will be enough to stoke sales.

Kathryn Taylor is one seller who hopes that’s the case.

“The economy. No movement for our home, or even any interest, just because people are scared,” she said, explaining her decision to cut the asking price on her parents’ home in Silver Spring, Maryland, by 10 percent for 10 days.

The two master-bedroom, two-bathroom home in an over-55 community was listed in May at $458,000, undercutting several nearby sellers of the same model.

“This is the first time we’re lowering it, and we really didn’t want to do that because we listed it to sell,” she said. “We knew things were tough, but the home is a really desirable unit in a neighborhood that rarely has anything come open so we didn’t think it would have any problems selling.”
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Taylor, a retired government employee, is getting “more antsy” about selling. Her father passed away last year and her mother is moving to a nursing home that costs $9,000 each month.

With stock wealth being roiled, “it’s getting more and more important to keep her afloat by selling this house,” she said of her mother.

Sellers can opt to keep their asking prices lower after the 10-day sale, according to Coldwell Banker.

From Bloomberg:

Home Prices in 20 U.S. Cities Declined 16.3% in July

House prices in 20 U.S. cities declined in July at the fastest pace on record, signaling the worst housing recession in a generation had yet to trough even before this month’s credit crisis.

The S&P/Case-Shiller home-price index dropped 16.3 percent from a year earlier, more than forecast, after a 15.9 percent decline in June. The gauge has fallen every month since January 2007, and year-over-year records began in 2001.

The housing slump is at the center of the meltdown in financial markets as declining demand pushes down property values and causes foreclosures to mount. Banks will probably stiffen lending rules even more in coming months to limit losses, indicating residential real estate will keep contracting and consumer spending will continue to falter.

“The fact that house prices quickened their slide before the worst point in credit markets hit this month does not bode well,” said Derek Holt, an economist at Scotia Capital Inc. in Toronto.

Home prices decreased 0.9 percent in July from the prior month after declining 0.5 percent in June, the report showed. The figures aren’t adjusted for seasonal effects so economists prefer to focus on year-over-year changes instead of month-to-month.
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Prices dropped in 13 cities month-over-month, compared with 11 in June. Las Vegas saw values fall 2.8 percent in July, the largest decline.

Economists forecast the 20-city index would fall 16 percent from a year earlier, according to the median of 23 estimates in a Bloomberg News survey. Projections ranged from declines of 14.5 percent to 16.5 percent.

Compared with a year earlier, all 20 areas showed a decrease in prices in July, led by a 30 percent drop in Las Vegas and a 29 percent decline in Phoenix.

“While some cities did show some marginal improvement over last month’s data, there is still very little evidence of any particular region experiencing an absolute turnaround,” David Blitzer, chairman of the index committee at S&P, said in a statement.