Not even that hot…

Posted on January 7, 2023 by grim

From Insider:

The most honest man in real estate thinks the housing market isn’t going to crash

Miller is a polymath: he has guided Floridians through understanding how Miami could adjust and profit off of the influx of New York-based buyers in 2020; he’s predicted how a downtown Manhattan office-turned-condo building could cause a surplus of residences for sale that will push down sales prices in the area for years to come; and in the spring, he explained the impact of the ultra-luxury market on real estate in the bougie ski destination of Aspen, Colorado. 

His most relevant hot take right now isn’t even that hot: Miller opposes the idea that the US housing market will crash now the way it did during the Great Recession. Like many of his peers, he argues that there are too few properties on the market compared to those seeking homes for that to happen, and that the market varies too much locally. 

‘When things are bad, I say they’re bad’

His honesty has not always been welcome. 

In the years that preceded the Great Recession, he said, he had to start requiring mortgage-broker clients working for banks to pay his company before the appraisal because so many refused to pay if they did not get the valuation they wanted. 

In order to attract and keep business, other appraisers would assess properties higher than their actual value in New York City, he said. One time, he even saw a luxury condo appraised at $15 million over its actual value. 

“We weren’t morally flexible,” he said. “And that made us a pariah for mortgage brokers.” 

So Miller Samuel had to pivot away from relying so heavily on institutional players, which had made up 75% of its business. He instead started catering to individuals who needed appraisals, like private lawyers or co-op boards, to keep the company from going under, Miller said. 

Posted in Economics, National Real Estate, NYC | 87 Comments

Jobs Day!

Posted on January 6, 2023 by grim

From the NYT:

U.S. Labor Market Expected to Slow

The Labor Department’s latest reading on nationwide employment is due at 8:30 a.m. Eastern time on Friday. Forecasters expect the report to show that payrolls grew by about 200,000 in December, down from an average of 272,000 over the previous three months.

Even with the prospect of a deceleration in job creation, the resilience of the labor market has been striking. Employers’ desire to hire remained strong going into December, the Labor Department announced this week, with only a slight decline in job openings in November and a rising share of workers voluntarily quitting their jobs.

The number of people filing initial claims for unemployment insurance reached a three-month low at the end of December, as employers remained broadly reluctant to let go of staff members despite high-profile layoff announcements from large tech firms.

That mismatch between supply and demand, particularly in the service industries where compensation drives prices, has continued to heat up wage growth faster than the Federal Reserve would like to see. The Fed’s program of interest-rate increases is meant to cool the labor market, and with it, the climb in wages.

Posted in Economics, Employment, National Real Estate | 123 Comments

NJ beats the US Avg.

Posted on January 5, 2023 by grim

From the Philly Fed:

State Coincident Indexes – November 2022

The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for November 2022. Over the past three months, the indexes increased in 35 states, decreased in 11 states, and remained stable in four, for a three-month diffusion index of 48. Additionally, in the past month, the indexes increased in 30 states, decreased in 13 states, and remained stable in seven, for a one-month diffusion index of 34. For comparison purposes, the Philadelphia Fed has also developed a similar coincident index for the entire United States. The Philadelphia Fed’s U.S. index increased 0.8 percent over the past three months and 0.3 percent in November.

Pennsylvania

In the three months to November, the coincident index for Pennsylvania rose 1.2 percent. The level of payroll employment increased over the past three months but remained slightly lower than that of February 2020. The unemployment rate fell during the three-month period. However, average hours worked in manufacturing fell. Overall, Pennsylvania’s economic activity as measured by the coincident index has risen 6.5 percent over the past 12 months.

New Jersey

In the three months to November, the coincident index for New Jersey rose 1.7 percent. The level of payroll employment increased over the past three months. The unemployment rate fell significantly during the three-month period. In addition, average hours worked in manufacturing remained stable. Overall, New Jersey’s economic activity as measured by the coincident index has risen 5.5 percent over the past 12 months.

Posted in Economics, Employment, New Jersey Real Estate | 164 Comments

Manhattan prices dip

Posted on January 4, 2023 by grim

From Bloomberg:

Manhattan Home Prices Slip 5.5% in First Decline Since Mid-2020

Manhattan’s homebuying market weakened at the end of last year, but didn’t foreshadow a deep freeze heading into 2023.

Co-ops and condos traded for a median of $1.1 million in the fourth quarter, a 5.5% drop from the same period in 2021, according to appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. It was the first year-over-year decrease in prices since sales stalled at the beginning of the pandemic, in the second quarter of 2020.

The quarter, though, doesn’t appear to be the start of a steep tumble.

“You’re going to see a modest decline in pricing over the year, but not a correction,” said Jonathan Miller, president of Miller Samuel.

Tight inventory is “underpinning” property values and keeping them from falling more dramatically, according to Miller. As is the case across the US, Manhattan sellers are reluctant to settle for discounted prices or give up the low mortgage rates they secured before the Federal Reserve began raising interest rates in early 2022.

There were 6,523 homes on the market at the end of the fourth quarter. While that’s up  5.1% from a year earlier, it’s down 16% from the previous three months, and still a low level for Manhattan.
…
Even as short-term comparisons might suggest that Manhattan is struggling, the fourth-quarter data show a market that’s stronger than just before the pandemic. While prices have retreated from their highs, they’re still 10% above the $999,000 median at the end of 2019, and closings totaled nearly 6% than three years ago.

“The overall narrative is more negative than it actually is,” Miller said. 

Posted in Housing Bubble, NYC | 130 Comments

Canada blocks foreigner home purchases

Posted on January 3, 2023 by grim

From CNN:

Canada is banning some foreigners from buying property after home prices surged

Canada in 2023 is closing its doors to foreign investors who want to purchase homes.

A new Canadian law took effect January 1 that essentially bans foreign buyers from buying residential properties as investments for two years. The law was passed because of a spike in Canadian home prices since the start of the pandemic – and some politicians’ beliefs that foreign buyers were responsible by snapping up supply of homes as investments.

“The desirability of Canadian homes is attracting profiteers, wealthy corporations, and foreign investors,” said the campaign website of Prime Minister Justin Trudeau’s party this past year. “This is leading to a real problem of underused and vacant housing, rampant speculation, and skyrocketing prices. Homes are for people, not investors.”

The law provides exceptions for home purchases by immigrants and permanent residents of Canada who are not citizens. 

But the steep rise in home prices in 2020 and 2021 was already reversed in 2022, well before the law took effect. Average home prices in Canada peaked just above $800,000 Canadian in February and have fallen steadily since then, dropping about 13% from that peak, according to the Canadian Real Estate Association. 

The Bank of Canada has been raising interest rates, resulting in higher mortgage rates in the country – just like in the United States and other countries that have been hiking rates.
…
CREA also expressed concern that the ban could prompt retaliation by the United States and Mexico to prohibit purchases in those countries by Canadians, especially retirees looking for winter homes away from the Canadian winter.

“Canadians purchase vacation and residential properties in many countries, but particularly in the United States,” said the group.

CREA said Canadians are the largest foreign purchasers of American properties, with more than half of the properties purchased by Canadians in Florida and Arizona. 

“These provide Canadians with a place to spend the winter months and are a form of savings for Canadian retirees,” said the group. “If Canada places a ban on Americans owning property in Canada, we should expect them to respond in kind.”

Posted in Politics | 62 Comments

Predictions 2023!

Posted on December 31, 2022 by grim

Break out your crystal ball and let’s hear ’em!

Recession / Economic

Real Estate

Stocks/Securities

Commodities

Inflation

Posted in General | 66 Comments

Home price gains continue to slow

Posted on December 28, 2022 by grim

From the WSJ:

Home Prices Fell in October for Fourth Straight Month’

Home prices declined in October from the previous month as higher mortgage interest rates continued to weigh on home-buying demand.

The S&P CoreLogic Case-Shiller National Home Price Index, which measures average home prices in major metropolitan areas across the nation, fell 0.5% in October compared with September, the fourth straight month-over-month decline.

On a year-over-year basis, the index rose 9.2% in October, down from a 10.7% annual rate the prior month.

A surge in mortgage rates this year brought an end to a pandemic-driven housing boomthat drove up sales prices and pushed many buyers out of the market. Existing-home sales fell for 10 straight months through November.
…
Many economists expect prices to continue to slide from their spring peaks, with some calling for year-over-year price declines in 2023. So far this year, prices are down 3% from their June highs, according to the Case-Shiller index. Prices are declining fastest in West Coast markets, such as Phoenix and Las Vegas, where from September to October they fell 1.6% and 1.8%, respectively.

“As the Federal Reserve continues to move interest rates higher, mortgage financing continues to be a headwind for home prices,” said Craig Lazzara, managing director at S&P Dow Jones Indices. “Given the continuing prospects for a challenging macroeconomic environment, prices may well continue to weaken.”
…
The Case-Shiller 10-city index gained 8% over the year ended in October, compared with a 9.6% increase in September. The 20-city index rose 8.6%, after an annual gain of 10.4% in September. Price growth decelerated in all of the 20 cities.

Posted in Economics, Housing Bubble, Mortgages, National Real Estate | 208 Comments

Evictions keep piling up

Posted on December 27, 2022 by grim

From the Star Ledger:

NJ continues to see backlog in eviction cases, but there are improvements

If a landlord filed to evict a tenant in Essex County this year, there’s a good chance the court hasn’t yet turned to the case.

Essex consistently records the most eviction filings in the state, the bulk coming from landlords in Newark. And after the Garden State paused most landlord-tenant proceedings for nearly two years during an eviction moratorium to keep people safely housed during the COVID-19 pandemic, and with a shortage of judges statewide, Essex now leads the state with the largest backlog of cases to sift through, at more than 15,500. 

That’s over a third of the 42,500 cases languishing statewide for more than two months, according to court data through the end of November. Hudson, Passaic and Camden counties are also slogging through a combined pileup of 14,000 cases. 

In some filings from 2020, “you need an accounting degree to figure out the amount really due and owing,” said Jose Ortiz, deputy director of Essex Newark Legal Services. Other cases involve landlords who received rental assistance, or tenants who had already moved out, and have yet to be dismissed, said Allison Nolan, senior staff attorney for Volunteer Lawyers for Justice.

And as judges trudge through the years-long backlog, the eviction filings are picking up, though not quite at pre-pandemic levels. The monthly average of 8,200 cases this year is not as high as the 12,600 that courts saw each month in 2019, but higher than 2021’s 4,000 monthly cases. Filings refer to the number of cases that landlords take to court, not the number of people removed from their homes or the number of families who move outside of the official legal process.

Posted in Economics, National Real Estate | 31 Comments

Enough slacking, get back to work

Posted on December 26, 2022 by grim

From NJ1015:

Looking for work? New Jersey is the 4th best state to get a job

There are so many people out of work across the country, it’s good to know that you can get a job in New Jersey much easier than in most other states.

With the labor force participation rate at 62.1%, one of the lowest rates in decades, WalletHub today released updated data on 2022’s States Where Employers Are Struggling the Most. If you scroll down, and farther down, and even farther down than that you’ll see that New Jersey comes in at 48 making us the 4th best state to get a job in.

The three places that came in lower than New Jersey were Connecticut, Washington, D.C., and New York.

You would figure it easier to get a job in New Jersey since we have so much diversity of offer in the workforce. No matter what you want to do or which career you’ve chosen, you can pretty much find it here.

Posted in Economics, Employment, New Jersey Real Estate | 11 Comments

Sales Plunge in November

Posted on December 23, 2022 by grim

From Reuters:

U.S. existing home sales fall for 10th straight month in November

U.S. existing home sales slumped to a 2-1/2 year low in November as the housing market continued to be squeezed by higher mortgage rates.

Existing home sales plunged 7.7% to a seasonally adjusted annual rate of 4.09 million units last month, the lowest level since May 2020, the National Association of Realtors said on Wednesday. Outside the plunge during the first wave of the COVID-19 pandemic in the spring of 2020, this was the lowest level since November 2010.

Sales have now declined for 10 straight months, the longest such stretch since 1999. They dropped in all four regions in November. Economists polled by Reuters had forecast home sales would drop to a rate of 4.20 million units.

House resales, which account for a big chunk of U.S. home sales, tumbled 35.4% on a year-on-year basis in November.

The Federal Reserve’s fastest interest rate-hiking cycle since the 1980s has had the most impact on housing. The U.S. central bank is seeking to slow unacceptably high inflation by bringing down demand for everything from housing to labor.

Reports this week showed confidence among homebuilders dropping for a record 12th straight month in December, while single-family homebuilding and permits tumbled to a 2-1/2-year low in November.
…
The median existing house price increased 3.5% from a year earlier to $370,700 in November. It was still the highest house price for any November and prices remain about 37% above their pre-pandemic level.

There were 1.14 million previously owned homes on the market, up 2.7% from a year ago. At November’s sales pace, it would take 3.3 months to exhaust the current inventory of existing homes, up from 2.1 months a year ago. A four-to-seven-month supply is viewed as a healthy balance between supply and demand.

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

You’ll all be famous

Posted on December 22, 2022 by grim

From the Star Ledger:

Netflix unveils huge $903M plan for N.J. production studios at ex-military base

Netflix unveiled plans Wednesday for an investment of $903 million into a production facility at the former Fort Monmouth in New Jersey that would serve as a central point in for the streaming entertainment giant’s East Coast operations.

The Fort Monmouth Economic Revitalization Authority voted to authorize Netflix’s plan when it met at 5 p.m. Wednesday, according to a joint announcement afterward from Netflix and Gov. Phil Murphy.

Though the deal will not be finalized until the due diligence period and local approvals process concludes, a supportive tweet from Murphy following the vote made it sound like a virtual certainty.

Netflix emerged in October as the top bidder among four seeking to acquire a 292-acre “mega parcel” that covers about a quarter of the longtime U.S. Army base, which closed in 2011.

The company disclosed the bid amount on Wednesday as $55 million with an additional $848 million planned to construct a massive, state-of-the-art Netflix Studios Fort Monmouth facility — a working but unofficial title, a Netflix spokesperson said.

Netflix is planning to develop 12 soundstages totaling nearly 500,000 square feet on the site, which is adjacent to Route 35 in Eatontown and Oceanport, among other additions. Renderings show multi-story production stage buildings and offices tucked behind the familiar Fort Monmouth archways.
…
Netflix estimates that, during construction, the project would generate up to 3,500 jobs. Once the facility is operational — Netflix did not provide a targeted opening date — it would provide anywhere from 1,400 to 2,200 jobs, the Netflix spokesperson said.

Posted in Economics, New Development, New Jersey Real Estate | 111 Comments

Chasing the Market

Posted on December 21, 2022 by grim

From Mansion Global:

Inventory in New York City Rose in November, as Did Price Cuts

After nearly three topsy-turvy years, the real estate market in New York City has started to look more like pre-pandemic times, according to a Tuesday report from StreetEasy. 

Rising borrowing costs resulted in home sales in the city dropping 35% in November compared to the same time a year ago, the data showed. In addition, 11.7% of sellers cut their asking prices, up 2.1% from last year. 

“The New York City market is drawing a resemblance to 2019, when rising inventory led to more price cuts and tempered sale prices,” StreetEasy economist Kenny Lee said in the report. 

Indeed, inventory was up 1.7% annually in November, marking the first yearly increase since July 2021. Plus, a typical home took an additional 11 days to sell—75 on average—than it did last year. 

“In the second half of 2021, resurgence in demand driven by record-low mortgage rates drew down available inventory, which intensified competition among buyers in spring 2022,” Mr. Lee continued. “Sales inventory is now rebounding as listings are sitting on the market for longer and more buyers wait on the sidelines.”

In Manhattan, the typical home sold for $1.1 million last month, about 0.5% below its peak in August, the figures showed. At the same time, new listings fell 16.7% year over year and nearly 11% of listings got price cuts. A typical listing with a price cut slashed its asking price by 5.3%l—the highest margin since October 2020, when the market was reeling from the early impacts of the pandemic. 
…
Meanwhile, in Brooklyn, sales were down nearly 35%, and 13% of listings saw price cuts, the figures showed. But there’s still fierce competition for higher priced homes. Inventory fell 8.2% year over year, while sales prices rose 2.5% annually to $695,000.

Posted in Housing Bubble, NYC | 115 Comments

NJ UE 3.4%

Posted on December 20, 2022 by grim

From NJ Business Magazine:

NJ’s Unemployment Rate Remains Steady at 3.4%

The state’s unemployment rate remained steady at 3.4% in November. Employment reached a seasonally adjusted level of 4,257,900, with nonfarm employment increasing by 11,700 jobs for the month on the continued strength of the private sector, which added 11,400 jobs. This is the 31st consecutive month of growth dating back to May 2020, according to preliminary estimates produced by the U.S. Bureau of Labor Statistics.

October employment estimates have been revised downward by 1,300 to a total loss of 2,500 jobs between September and October, yet employment growth was still in positive territory. The unemployment rate was revised lower by one-tenth of a point to 3.4 percent.

In November, six out of nine major private industry sectors recorded job growth. Sectors that recorded employment increases were education and health services (+5,300), professional and business services (+3,700), other services (+2,900), construction (+1,600), trade, transportation and utilities (+1,000), and financial activities (+100). Sectors that recorded a loss were leisure and hospitality (-1,800), information (-800), and manufacturing (-600). The state’s public sector increased by 300 jobs for the month.

From ROINJ:

Numbers game: Jobs are up, unemployment is down – and N.J. ranks ahead of other Northeast states

How the state compares to others in the Northeast may be even more noteworthy.

According to statistics released by the labor department, the state fares well in year-to-year comparisons (based on the latest data, from October):

· New Jersey ranks 1st in year-over-year total nonfarm employment percentage growth in the Northeast at 4.2% (Massachusetts is next at 4.0%, followed by New York at 3.5%);

· New Jersey ranks 1st in private sector employment percentage change in the Northeast from a year ago at 4.6% (Massachusetts is next at 4.2%, followed by New York at 3.9%);

· New Jersey’s unemployment rate continues to be the largest year-over-year drop compared to other Northeast states. (The state’s unemployment rate was 5.5% in October of 2021).

Posted in Economics, Employment, New Jersey Real Estate | 128 Comments

Worrying our way into, and out of, a recession

Posted on December 19, 2022 by grim

From CNN:

Why recession fears are back: Americans are losing faith

From the executive suite to the grocery aisles to the halls of the Federal Reserve, the big question is: Can red-hot inflation be vanquished without tipping the economy into a recession?

Ironically, all this talking about a recession can actually help cause one. How people feel is a huge driver of consumer behavior and business planning. The famous British economist John Maynard Keynes coined the phrase “animal spirits” to describe what drives investors, consumers and business leaders. Fear, hope, uncertainty, and confidence are all hard to measure — and hugely important to how the economy fares.

Essentially, worrying about a recession and planning for one can be a self-fulfilling prophecy.

“At the end of the day, a recession is a loss of faith,” said Mark Zandi, chief economist at Moody’s Analytics. Consumers worry about losing a job and so pull back on spending, and business leaders worry their sales will decline and start laying off workers. 

“You get into this kind of self-reinforcing negative cycle,” he told CNN’s Early Start. “So when sentiment is this bad and starting to feed on itself, we run the risk of talking ourselves into one.”

The US economy grew at a 2.9% annual rate in the third quarter, and the unemployment rate is near a 50-year low. That’s not going to last. The Federal Reserve this week lowered its forecast for growth in the United States next year to just 0.5% and a jobless rate rising to 4.6% by the end of 2023.

“Look, we’re planning as if there’s going to be a mild recession next year,” United Airlines CEO Scott Kirby told CNN This Morning. “And a lot of people in the business world are trying to talk ourselves into one is what it sometimes feels like to me.”

But he added, “If I didn’t watch business shows or read the Wall Street Journal, the word recession wouldn’t be in my vocabulary because we just don’t see it in our data.”

Federal Reserve Chairman Jerome Powell and plenty of economists — including Treasury Secretary Janet Yellen — still see a path to a so-called soft landing, where the economy slows enough to lower inflation but not cause a recession. Yellen explained this week that recession risks permanently exist.

“There are always risks of a recession,” Yellen told CBS’s “60 Minutes” in an interview that aired on Sunday. “The economy remains prone to shocks.”

But Zandi said there can be a bright side to the dark worries.

“It may just, in an odd kind of way, help things out because if everyone’s so nervous about recession, they are cautious,” he said. “They don’t take big risks. They don’t take on a lot of debt. They don’t go out and make big expansion moves (and) that may cool things off sufficiently to bring inflation down so that (the Fed) doesn’t have to raise rates as much and we actually — weirdly enough — avoid a recession.”

Posted in Demographics, Economics, Employment, National Real Estate | 62 Comments

Flipper profits falling fast

Posted on December 16, 2022 by grim

From CNBC:

Home flipping profits drop at the fastest pace in over a decade

As the housing market cools quickly, house flippers are finding it harder to make fast profits.

In the third quarter, gross flipping profit, which is the difference between the median purchase price paid by investors and the median resale price, dropped to $62,000, according to ATTOM, a real estate data provider. That’s down 18.4% from the second quarter and down 11.4% year-over-year. It represents the smallest profit since the end of 2019 and the fastest quarterly drop since 2009.

With that drop in gross profits, the return on investment fell to 25% from 30% in the previous quarter. Not bad, but not as good. Still ATTOM notes it’s not the size of the profits, but how quickly they’re falling. 

With profits shrinking and higher mortgage rates hurting affordability for potential buyers, the share of home sales that were flips fell as well. Roughly 7.5% were flips in the third quarter, still historically high, but down from 8.2% in the second quarter. Flips, defined as homes bought and sold in a 12-month period, made up a 5.9% share of all home sales in the third quarter of 2021.

Home prices are weakening quickly, while renovation costs remain high. 

“It’s apparent that fix-and-flip investors aren’t immune to the shifting conditions in the housing market,” said Rick Sharga, executive vice president of market intelligence at ATTOM, in a release. “With demand from buyers weakening, prices trending down over the past few months, and financing rates significantly higher than they were at the beginning of the year, flippers face a much more difficult environment today, and probably will in 2023 as well.”

Posted in Housing Bubble, National Real Estate | 130 Comments