New Jersey Real Estate Report

From Reuters:

Home prices to keep sliding with no bottom in sight

The U.S. housing market’s skid is nowhere near over and could extend for another five or even 10 years, according to one of the most-watched housing economists.

Robert Shiller, a Yale University economist and co-developer of Standard and Poor’s S&P/Case-Shiller Home Price Indices, told Reuters that declines in home values in the most vulnerable markets could well double the losses recorded thus far.

What’s more, Shiller, who is also co-founder and chief economist of the financial firm MacroMarkets LLC, said predictions for a bottom within the next year or so are probably wrong, with price declines in 2008 possibly worse than those seen this year.

“There is a probability of a continuing decline for a period of years, bringing prices in many cities down in the 10s of percent,” Shiller said in an exclusive interview.

“The bottom is hard to predict,” he said. “I do not see it imminent and it could be five or 10 years too.”

Shiller is famous as author of the best-selling book “Irrational Exuberance,” which sounded alarms about overblown stock market valuations just before the dotcom bubble burst in early 2000. More recently he has been a leading voice of worry about what had been a red-hot residential real estate market until 2005, saying the market for houses had become infected with “an investor psychology.”

“The housing situation that we got in is unique in history because there was an investor psychology that developed that was stronger than we have ever seen before,” Shiller said. “We have seen housing bubbles many times in history, but they have been much more local than this one.”
…
The S&P/Case-Shiller Home Price Indices showed further declines in the prices of existing single-family homes across the United States in August, marking the eighth straight month of negative annual returns and the 21st of decelerating returns.

The 10-City Composite index’s annual decline of 5.0 percent in August was the biggest monthly drop since June 1991. The biggest on record was an annual decline of 6.3 percent recorded in April 1991. In August, the 20-City Composite recorded an annual decline of 4.4 percent.

“Based on the futures market for the S&P Case-Shiller Composite Index, we are looking at home prices down another 5 percent in 2008,” Shiller said. And that might be on the low end.

From AM New York:

When will the real estate bubble burst?

News of a bursting bubble and increasing foreclosure rates is daily fare in reports of the American real estate market – unless it’s New York City’s market that’s being discussed. Then the picture seems oddly stable; some would even say sunny for the foreseeable future.

The average sale price for a home in the city climbed to $782,000 in the third quarter of 2007, an increase of 20 percent from the same period in 2006, according to figures released yesterday by the Real Estate Board of New York.

“New York City is still considered a cool place to be, and everybody wants a part of it,” said Richard Grossman, executive director of downtown sales for Halstead Property. “I have friends from all over country trying to move here.”

“Unless banks stops lending we [the local real estate market] is not going to fall,” he said.
…
Yesterday’s report found prices were highest in Manhattan, where the average home sold for $1.33 million, or around $1,176 per square foot. The average cost of a home went up in every borough except Staten Island, which saw a 2.8 percent drop.

The board’s findings is based on data collected by the city and includes all condominimums, co-ops and one- to three-family homes sold in July, August and September. Despite the glowing data, some cautioned against being too optimistic about the market’s apparent strength.

Gregory Heym, chief economist with Halstead, pointed out that there is the forecast of a downturn on Wall Street.

“Obviously, we don’t know what is going to happen with the Wall Street bonuses,” he said. “That is very important not just to real estate but to the whole economy of the city. If Wall Street starts to lay off large groups of workers, the market could turn.”

From the IHT:

New York City real estate market immune to malaise; home values rise again

None of the bad news about the U.S. housing market has seemed to matter to the big spenders lining up to buy homes and apartments in New York City.

The average sales price for a Big Apple dwelling climbed to $782,000 (€531,178) in the third quarter of 2007, an increase of 20 percent over the same period a year earlier, according to a report released Wednesday by the Real Estate Board of New York.

Prices were highest in Manhattan, where the average home sold for $1.33 million (€900,000), or around $1,176 (€799) per square foot. The cost of a home went up in every borough except Staten Island, which saw a 2.8 percent drop.

The price hikes stood in sharp contrast to what has been happening in the rest of the country, and even the New York City metropolitan region as a whole.

Home prices have been falling in the U.S. because of turmoil in the credit markets, worries about rising defaults of subprime mortgages and an oversupply of housing in some markets. The number of sales of existing homes has been dropping too.

But New York City has remained largely unhurt.

From the WSJ:

GETTING GOING
By JONATHAN CLEMENTS
Dump This House: Unloading
Your Property in a Slow Market
November 7, 2007

It could be the kindest cut of all.

Look at the prices of homes getting sold, and the property market’s decline seems no worse than a rough day in the stock market. Look at the number of unsold homes, and you realize there’s a world of financial pain out there.

True, these unsold homes may eventually get bought at decent prices. But in the meantime, the owners are often bleeding money — and many of them would be smart to slash their asking price and go for the quick sale.

Yet even as prices appear pretty much unchanged, the number of unsold homes has soared. At the current pace of sales, it would take more than 10 months to clear this backlog, according to the National Association of Realtors.

Sure, it would be emotionally draining to have your home on the market for more than 10 months. But it probably wouldn’t be a financial disaster — as long as you’re still in the house and you can comfortably cover the mortgage.

Maybe, however, you have an adjustable-rate loan that’s now unaffordable. Maybe you’re trying to unload a vacation home. Maybe you moved cross-country for a new job, but your old house still hasn’t sold.

The monthly cost of carrying a vacant home could equal 1% of a home’s value, figures Charles Farrell, an adviser with Denver’s Northstar Investment Advisors. After all, you still have to pay utilities, insurance, property taxes, maintenance and, of course, the mortgage.

What if the mortgage is paid off? There’s still an opportunity cost. The equity in your home could instead be invested in, say, bonds yielding 5%.

To make matters worse, “prices could be lower a year from now,” Mr. Farrell warns. “There’s also the risk of owning a physical asset. I’m thinking about things like fire, broken pipes, theft.”

Despite all this, sellers are loath to cut their asking price, which is the reason prices have barely budged — so far.

“People focus on what their home was worth two years ago, or how much they’ve sunk into it, or on their desire not to bring a check to the closing,” notes financial adviser Bert Whitehead, author of “Why Smart People Do Stupid Things With Money.”

His advice: Ditch these emotional hangups — and unload your property now. “If you really want to sell your house, you have to cut deep,” Mr. Whitehead says.