Sorry West

Posted on January 30, 2023 by grim

From the Washington Examiner:

Huge hit to home prices in west in 2023, Goldman warns: Phoenix, SF, Seattle

Houses in several overheated cities in the western United States will see massive price declines in 2023, researchers at Goldman Sachs predict.

In a report released this week, the bank’s economists noted a stark regional divide in expectations for home prices, with cities west of the Mississippi facing steep price corrections in the face of elevated mortgage interest rates.

“On one hand, the model suggests that expensive [metropolitan areas] in the Pacific Coast and Southwest regions could see cumulative incremental home price declines of 15-20%, given how dramatically affordability has declined over the past couple of years. On the other hand, the model suggests that the Mid-Atlantic and Midwest regions will likely face limited price declines,” the economists wrote.
…
Meanwhile, Miami and Baltimore are the two urban areas Goldman Sachs identified that are expected to see housing price increases both this year and next. Philadelphia, New York, and St. Louis are forecast to see a slight decline in housing prices this year, but then see prices go back up in 2024.

The researchers said that price trends at the metro level will be dictated by a “tug-of-war between housing demand and supply” over the next two years.

“[Metropolitan statistical areas] with stronger affordability like Chicago and Philadelphia — for which payments on new mortgages only cost roughly a quarter of monthly income — should see smaller home price declines than metros with poor affordability like many cities in the West — some of which are seeing mortgage payments claim three-quarters of monthly income,” the report reads.

Posted in Demographics, Economics, Employment, Housing Bubble, National Real Estate | 79 Comments

Sounds like more of the usual

Posted on January 28, 2023 by grim

From NJ Business:

Year-end NJ Housing Data Shows Market Softening

Rising interest rates, low inventory, and climbing prices have cooled the housing market in 2022, with closed sales down 17.8% over 2021, according to year-end data reports from New Jersey Realtors.

“The 2022 market has softened due to the rise in interest rates and elevated home prices,” said 2023 New Jersey Realtors President Nick Manis. “However, there’s still buyer interest and activity on the inventory that is available.”

Closed sales for single family homes were down 18.6%, with 73,613 units sold during the year, compared to 90,416 sold in 2021. The median sales price for single family homes rose 8.7% to $473,000.

The townhouse/condo market saw a similar decrease in closed sales of 17.8% to 25,214. Units were on the market for an average of just 35 days during 2022, a decrease of 12.5% over 2021.

Inventory remains a concern, with just 13,595 single family homes for sale in the month of December in 2022, a decrease of 9.8% over an already-low 15,066 units for sale in 2021.

Posted in Economics, Housing Bubble, Mortgages, New Jersey Real Estate | 59 Comments

Worst behind us?

Posted on January 26, 2023 by grim

From the NY Post:

Here’s when US home price declines could end, Goldman Sachs says

The ongoing plunge in US home prices may be nearing its end, Goldman Sachs analysts said in a note to clients this week.

Long-term mortgage rates have cooled by nearly a full percentage point after surging above 7% as the Federal Reserve enacted a series of interest rate hikes last year. The trend should improve housing affordability and cause price declines to reach a floor, according to the Wall Street Bank.

“The sharpest declines in the US housing market are now behind us,” Goldman analysts Ronnie Walker and Vinay Viswanathan said in a client note released on Monday.

The strategists added that they “expect a peak-to-trough decline in national home prices of roughly 6% and for prices to stop declining around mid-year.”

Overheated housing markets on the West Coast and in the Southwest will likely experience “larger declines” in home prices compared to the national rate due to a glut in inventory, the note said. Meanwhile, markets located in the Mid-Atlantic and Midwest regions will see “more most declines.”

The surge in mortgage rates has caused a major correction in the US housing market in recent months, sending prospective buyers to the sidelines and causing sellers to rethink their plans or slash their asking prices to lure interest.

Other firms, including Pantheon Macroeconomics, project larger declines in home prices before a floor is reached. In December, Pantheon’s Ian Shepherdson said prices could fall by up to 20% during a multi-year market correction.

Posted in Demographics, Economics, Employment, Housing Recovery, Mortgages, National Real Estate | 120 Comments

Shocker, Americans Misinformed

Posted on January 25, 2023 by grim

From the Hill:

Survey finds Americans wildly misinformed on housing market 

A new survey finds Americans are woefully misinformed about the nation’s mercurial housing market, even as millions of them prepare to buy homes.  

Twenty-eight million Americans plan to purchase a home in 2023, according to a survey released Tuesday by NerdWallet, the personal finance company. On average, they hope to spend $269,200. 

But that figure falls more than $100,000 short of the median home price, which was $388,100 in December, according to the real estate brokerage Redfin. Home prices crossed the $269,000 threshold sometime in 2013, Federal Reserve statistics show. 

If prospective homebuyers sound oddly optimistic about prices, that may be because they are pessimistic about the state of the housing market. Two-thirds of Americans surveyed said they expect an imminent crash. 

Real estate economists do not. Lawrence Yun, chief economist for the National Association of Realtors, forecast an average sale price of $385,800this year, about the same as last year. Redfin predicts a 4 percent drop: bad news for sellers, but hardly a crash.   

“Home prices already have been falling, especially on the West Coast, and prices will fall in some cities in 2023,” said Holden Lewis, a home and mortgages expert for NerdWallet. “But a drop in home prices isn’t necessarily a crash.”  

Another head-scratcher: 61 percent of Americans told pollsters current mortgage rates are unprecedented, meaning that they have never been seen before.  

Posted in Demographics, Economics, Humor, New Jersey Real Estate | 84 Comments

Landlords making Newark unaffordable?

Posted on January 23, 2023 by grim

From Patch:

Corporations Own Most Of Newark’s Homes. New Laws Are Pushing Back

It wasn’t long ago that a study from the Rutgers Center on Law, Inequality and Metropolitan Equity made a startling claim about home ownership in New Jersey’s largest city: nearly half of Newark’s residential properties are owned by corporations.

Researchers said the phenomenon is one of the leading reasons behind the rising cost of rental housing in the area. But according to Mayor Ras Baraka, action is being taken on one of the longest-running sources of wealth inequality in the Brick City.

Affordable housing has been a perennial hot-button issue in Newark, where many residents and activists have been complaining about the high cost of living for years.

On Thursday, Baraka detailed several ways that city officials have been fighting to keep housing affordable. They include the creation of new local ordinances, rolling out programs for first-time homeowners, and establishing a municipal “land bank” that helps turn abandoned properties into homes for local residents.

“In cities and even suburbs across America, limited liability companies (LLCs) are eroding the American dream of homeownership as they convert owner-occupied homes into corporately owned rental units,” Baraka said.

“In Newark, where we have worked hard to expand homeownership, we have created a strategy to do everything possible to fight this dangerous trend,” he continued.

Posted in Economics, Employment, New Jersey Real Estate, Politics | 130 Comments

Hey 2010!

Posted on January 21, 2023 by grim

From Reuters:

U.S. home sales slump to 12-year low; glimmers of hope emerging

U.S. existing home sales plunged to a 12-year low in December, but declining mortgage rates raised cautious optimism that the embattled housing market could be close to finding a floor.

The report from the National Association of Realtors on Friday also showed the median house price increasing at the slowest pace since early in the COVID-19 pandemic as sellers in some parts of the country resorted to offering discounts.

The Federal Reserve’s fastest interest rate-hiking cycle since the 1980s has pushed housing into recession.

“Existing home sales are somewhat lagging,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York. “The decline in mortgage rates could help undergird housing activity in the months ahead.”

Existing home sales, which are counted when a contract is closed, fell 1.5% to a seasonally adjusted annual rate of 4.02 million units last month, the lowest level since November 2010. That marked the 11th straight monthly decline in sales, the longest such stretch since 1999.

Sales dropped in the Northeast, South and Midwest. They were unchanged in the West. Economists polled by Reuters had forecast home sales falling to a rate of 3.96 million units. December’s data likely reflected contracts signed some two months earlier.

Home resales, which account for a big chunk of U.S. housing sales, tumbled 34.0% on a year-on-year basis in December. They fell 17.8% to 5.03 million units in 2022, the lowest annual total since 2014 and the sharpest annual decline since 2008.

Posted in Demographics, Economics, Housing Bubble, Mortgages, National Real Estate | 90 Comments

32 months of job growth

Posted on January 20, 2023 by grim

From the NJ Department of Labor and Workforce Development:

NJ’s Job Gains Continue with Slight Uptick in December

New Jersey’s labor market grew slightly in December, adding 1,400 nonfarm jobs to a seasonally adjusted level of 4,265,700, according to preliminary estimates produced by the U.S. Bureau of Labor Statistics.  

Private sector employment rose by 100 jobs for the month, continuing a streak of 32 consecutive months of growth starting in May 2020. The unemployment rate held steady at 3.4 percent.  

November employment estimates were revised upward by 6,400, for an adjusted gain of 18,100 jobs between October and November. The unemployment rate remained unchanged, at 3.4 percent. 

In December, four out of nine major private industry sectors recorded job growth. They were education and health services (+4,400), trade, transportation, and utilities (+2,200), other services (+500), and information (+100). Sectors that recorded a loss for the month were construction (-3,400), professional and business services (-2,500), manufacturing (-500), financial activities (-400), and leisure and hospitality (-300). Month-over-month, the state’s public sector increased by 1,300 jobs. 

For all of 2022, preliminary estimates show job growth was broad-based, with all but one of the nine major private industry sectors recording job gains. The sectors that added jobs for the year were trade, transportation, and utilities (+38,700), education and health services (+38,200), leisure and hospitality (+37,600), other services (+15,600), professional and business services (+13,000), financial activities (+4,200), manufacturing (+2,400), and information (+300). Construction (-8,900) was the only sector to record a loss. Year-over-year, the state’s public sector added 7,800 jobs. 

Posted in Demographics, Economics, Employment, New Jersey Real Estate | 58 Comments

Thorough, in-depth, housing forecast from smart Harvard guy.

Posted on January 19, 2023 by grim

From the NY Post:

Why US home prices will fall another 10 percent, according to Harvard economist

Pain across the US housing market that began last year is likely just getting started if interest rates remain high, star economist Ken Rogoff warned on Tuesday.

Rogoff, a professor at Harvard University and former top economist at the International Monetary Fund, said home prices in both the US market aboard will fall “certainly another 10%” over the “couple of years.”

The economist cited the restrictive policy stances taken by the Federal Reserve and other central banks, which have caused a spike in mortgage rates and cooled demand among buyers.

“If, as I think, interest rates are going to stay high for some time to come, I think there’s still a lot of downward adjustments in the housing markets globally, not just in the United States,” Rogoff told Bloomberg Television during an appearance at the World Economic Forum in Davos, Switzerland.

The Federal Reserve is expected to implement more interest rate hikes early this year after a string of seven straight supercharged interests in 2022. Fed Chair Jerome Powell has signaled that rates will rise and then hover in restrictive territory until policymakers have clear evidence that inflation has cooled.

Rogoff noted that the housing and stock markets each tend to struggle whenever central banks hike interest rates – though downticks in home prices tends to occur a longer period of time.

“Equities and housing move in sync with interest rates, but equities move much faster. Housing famously, prices, especially down, move much more slowly. People sit on their house, they don’t want to sell their house,” Rogoff said.
…
Rogoff’s estimate for home prices is conservative compared to some other experts. Pantheon Macroeconomics chief economist Ian Shepherdson has predicted that prices will sink 20% by later this year.

Posted in Economics, Housing Bubble, Mortgages, National Real Estate | 134 Comments

Oh that’s a cute idea, good luck.

Posted on January 18, 2023 by grim

From NJ.com:

Companies are flocking back to the U.S. Let’s get them to move here.

It’s the time of year when many people make New Year’s resolutions. Some people might go on a diet, or start working out. New Jersey needs to do both for the sake of our economy before it is too late.

New Jersey’s high taxes are taking away from people, and, as a result, taking resources away from economic growth. The Garden State’s most consistent economic rating is ‘nation’s worst business environment’ and ‘dead last for fiscal health.’

We are at a critical stage in the global economy where many businesses will want to move back to the U.S. to avoid supply chain problems that occurred during and after the pandemic. New Jersey isn’t a destination for them, but it can be if we make simple changes.

First and foremost is gradually lowering our nation-high tax rate – and globally high if you consider the national tax on top of it – on businesses to 2.5%, which would be among the lowest in the nation. Pennsylvania is lowering its corporate tax rate to 5%. They are gearing up to take our businesses and the businesses that want to increase their domestic presence.

If you have doubts that lowering the corporate business tax to 2.5% will work, I have evidence that it does.

In 2013, North Carolina started gradually cutting its corporate business tax to that low rate. Every time revenue went up, the tax would lower a proportionate amount. That’s right, they cut their tax and revenue increased — which allowed North Carolina to cut its tax more and get more revenue out of it.

The state received more revenue because after cutting its business tax, it led the nation in economic growth for three years. More jobs, better pay, lower unemployment, and all-around economic growth.

Despite the efforts of the New Jersey Economic Development Authority, our state continues to be the worst state in the nation for business. I support the EDA, tax credits are a useful tool; but we need to help every business, not just those the government thinks are worthy. That should be New Jersey’s New Year’s resolution.

Posted in Economics, Employment, New Jersey Real Estate, Politics | 87 Comments

That’s it??

Posted on January 17, 2023 by grim

From Fortune:

Up from here? The free-fall in housing market activity just concluded, says Capital Economics

Not only did spiking mortgage rates prompt the Pandemic Housing Boom to fizzle out in the summer of 2022, they also pushed housing market transactions into free-fall mode. By December, mortgage purchase applications were down over 40% on a year-over-year basis.

But there might finally be some good news for builders and agents: Researchers at Capital Economics believe housing market activity is bottoming out.

“There are growing signs that housing market activity may be close to a trough. The decline in mortgage rates over the past couple of months has led to a small improvement in affordability and a rise in homebuyer sentiment, albeit from a record low. Corroborating this, mortgage applications for home purchase have ticked higher in the past couple of months, which should feed through to higher sales,” writes Sam Hall, property economist at Capital Economics.

It isn’t just Capital Economics. There’s a growing optimism among brokers and agents across the country. They’re hoping that loosening financial conditions, which saw the average 30-year fixed mortgage rate fall from 7.37% to 6.09% over the past two months, will help to give the looming spring season a little juice.

Let’s be clear: Even if housing market activity (i.e. home sales) have indeed bottomed, it doesn’t guarantee that home sales will have a swift recovery. After all, housing affordability remains “pressurized” to a historic degree. That’ll happen when U.S. home prices soar 41% in just over two years and mortgage rates spike from 3% to over 6% in just a 12-month span.

“But any recovery in housing market activity this year will be tepid. Stretched affordability, a weakening economy and falling house prices will all weigh on activity. As a result, we expect 2023 will be the weakest year for sales since 2011 and for starts since 2014,” write Capital Economics researchers.

Posted in Economics, Housing Bubble, National Real Estate | 108 Comments

Helping with the mortgage

Posted on January 16, 2023 by grim

From Yahoo Finance:

Housing expert: ‘Sellers are absolutely having to negotiate’

Housing expert: ‘Sellers are absolutely having to negotiate’

It’s the same housing story across the U.S., according to real estate agents in three U.S. cities. Sellers are offering more concessions as buyer demand wanes and listings linger on the market.

“Gone are the days of, ‘hey, my next door neighbor just sold last year for $100,000 over list price.’ Sellers are absolutely having to negotiate,” Dan O’Brien, an agent at Trueblood Real Estate covering Indianapolis, told Yahoo Finance.

And that’s good news for buyers.

“Now, we actually have buyers that are being protected by contingencies, like inspection and appraisal,” O’Brien said, “where a lot of times, those were out the window during the peak craziness of the COVID market.”
…
“Right now, sellers are operating to help with the interest rate increase. So they are offering 2-1 buydowns,” said Kathy Casey, a Coldwell Banker residential brokerage realtor in Denver. “What that means is for the first two years, your interest rate would be lower than the market rate right now.”
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Like other markets, Charlotte’s sellers are providing inducements to make deals, especially paying for closing costs and buying down the interest rate, according to Sir Ashley Harrison, a real estate broker at the Harrison Group with Fathom Realty in Charlotte. Pricing, though, isn’t moving as much.

“We’re seeing more inventory, but less new listings,” Harrison said. “And we are getting a lot more seller concessions, but pricing has remained very sticky.”

Posted in Economics, Housing Bubble, Mortgages, National Real Estate | 47 Comments

Hybrid NJ

Posted on January 14, 2023 by grim

From NorthJersey.com:

‘Working remotely is here to stay’: NJ considering new tax break for hybrid offices

New Jersey officials say they’re contemplating a new tax break designed to lure companies interested in having their staff work from home rather than in the office full time.

Teased by Gov. Phil Murphy in his State of the State address Tuesday, the proposal is still under development and would require approval from state lawmakers. It’s an attempt to align the state’s incentive programs with a new post-pandemic reality where employees expect flexible work schedules, said Tim Sullivan, CEO of the New Jersey Economic Development Authority.

“There’s economic opportunity for New Jersey residents to get good jobs in remote or hybrid work settings, and as long as those people are paying New Jersey taxes, then there’s a framework whereby it makes sense to incentive them,” he said in an interview.

Under the broad outlines sketched by Sullivan, the state would offer tax breaks to companies willing to buy small, satellite offices in New Jersey to serve as occasional workspaces for their local employees. Currently, those employees may be classified as working in New York, Philadelphia or wherever else their main offices are located. Under Murphy’s vision, they’d be considered New Jersey workers, steering more tax revenue toward the Garden State.
…
Plans for a new hybrid-work incentive were first reported by Politico New Jerseyon Wednesday.

According to Sullivan, the new tax credit could be funded by unused subsidies from other programs. The incentive would accompany and not replace the much larger NJ Emerge, a 2020 program that seeks to attract large employers to the state but has so far found few takers.

“We must recognize that in the new, post-pandemic business environment, not every new job created for a New Jerseyan is going to be housed in a physical office in New Jersey,” Murphy said in his State of the State address. “For many New Jerseyans, working remotely is here to stay.

Posted in Economics, Employment, New Jersey Real Estate, Property Taxes | 57 Comments

You take the good, you take the bad, you take them both, and there you have…

Posted on January 12, 2023 by grim

From the Times Union:

Hudson Valley housing prices exploded in 2020. What happens now?

In the late summer of 2019, when the word “pandemic” was most likely to call up images of the Spanish flu or the Black Death, the average house in Greene County sold for $185,000, according to figures from Hudson Valley Pattern for Progress.

Three years later, in the late summer of 2022, the average home sold for $330,000 —  an increase of 78 percent.

But as interest rates rise, will this trajectory be sustainable? Will it plateau? Or will there be a dreaded crash?

Gary DiMauro, the executive vice president at Four Seasons Sotheby’s, which sells high-end homes throughout upstate New York, called price increases in the Hudson Valley’s housing market during the pandemic “unheard of in U.S. history.”

The tale is by now well-known: The mad rush to escape the petri dish of New York City resulted in bidding wars for properties, often between cash buyers, that jacked up housing prices as demand lapped supply. Hudson and Kingston’s metropolitan areas (which included all of Columbia and Ulster counties, respectfully) had the biggest jump in net in-migration in the entire country, according to a New York Times analysis.

Posted in Demographics, Economics, Employment, NYC | 152 Comments

Is it really so bad?

Posted on January 11, 2023 by grim

From Fox Business:

Concerns over a ‘white collar recession’ grow as Goldman Sachs, Morgan Stanley, Amazon and others cut jobs

Concerns about a “white collar recession” grew Tuesday after Goldman Sachs began to lay off workers as part of a plan to cut 3,200 jobs in an effort to cut costs. 

Goldman Sachs is just the latest firm to reduce its size in recent months. Morgan Stanley announced that it would cut two percent of its staff in December, Amazon plans to cut over 18,000 jobs, and Salesforce announced it would cut ten percent of its workforce and close some offices last week.

While white collar workers were less affected by the COVID-19 pandemic lock-downs than their blue collar counterparts, many jobs were simply done remote instead of being cut, professionals are now bearing the brunt of the economic headwinds America faces. 

Goldman’s layoffs represent one of its biggest yet since the 2008 financial crisis.

“26,000 more layoffs announced today alone… from Amazon & Salesforce no less (they both have cash to weather this storm, but are taking the medicine) The white collar recession is very real & it will increase FB, Uber, MSFT, Google & Apple will all announce in Q1 I predict,” investor Jason Calacanis tweeted.

Posted in Demographics, Economics, Employment, National Real Estate | 107 Comments

Confidence improves … a little

Posted on January 10, 2023 by grim

From CNBC:

Consumer confidence in housing finally rises, thanks to falling home prices

Mortgage rates are still twice what they were a year ago, but home prices have been falling since June, and that’s finally making consumers feel better about what had been an overheated, highly competitive housing market.

A monthly housing sentiment index from Fannie Mae showed sentiment improving from November to December. The index is still lower than it was a year ago and just slightly off its record low set in October and November.

The share of respondents saying now is a good time to buy a home was still low, at just 21%, but it was up from 16% in October. The share saying now is a bad time decreased.

On selling, however, sentiment continued to drop. The share of respondents saying now is a good time to sell dropped to 51% from 54%, while the share saying now is a bad time to sell increased.

More consumers now believe home prices will fall in the next 12 months, and more also said they believe mortgage rates will come down.

Prices in November, the most recent measurement, were 2.5% lower than the spring 2022 peak, according to CoreLogic. They were still over 8% higher year over year, but that annual comparison is now half of what it was in June.

The average rate on the popular 30-year fixed mortgage hit a recent high of 7.37% in October but then fell back into the mid-6% range throughout November and into December. As of last Friday it had dropped to 6.2%, according to Mortgage News Daily.

“As we enter 2023, we expect affordability to remain the top challenge for potential homebuyers, as even small declines in rates and home prices — from the perspective of the buyer — may not produce sufficient purchasing power,” said Doug Duncan, Fannie Mae’s senior vice president and chief economist, in a release. “At the same time, existing homeowners may continue to wait to list their properties, since many have already locked in lower mortgage rates, creating minimal incentive to sell and buy again until rates are more favorable.”

Posted in Economics, Housing Bubble, National Real Estate | 99 Comments