Not all brokers doing poorly

Posted on October 8, 2007 by grim

From Inman News:

Business booms for REO specialists

Business is booming for Ralph Barone, a New Jersey real estate broker, thanks to the housing market decline.

Barone owns New Jersey REO Asset Management and Realty — the largest brokerage company in the state focused on bank-owned foreclosure properties, also known as real estate-owned or REO homes.

Real estate agents and brokers who are experienced in handling REO properties are well-positioned to weather the market downturn, and membership organizations that serve REO brokers say they have seen rising interest as the number of foreclosures has climbed nationwide. Real estate professionals can choose from several groups, each with its own set of qualifications, events, publications, directories and dues. Barone is a member of two major REO membership organizations: the National REO Brokers Association and REOMAC.

Foreclosure data provider RealtyTrac reported last month that foreclosure filings rose 115 percent in August compared to August 2006, and rose 36 percent from July 2007 to August 2007. Foreclosure filings rose in all but three states in August compared to the same month last year. The rate of foreclosure filings per household was highest in Nevada in August, followed by California, Florida, Georgia and Ohio.

Foreclosures have become the “flavor of the month,” said Mike Krein, president of the 9-year-old National REO Brokers Association (NRBA), a group with about 800 members. There are “so many new people in the REO business now,” he said, and also noted a rise in national media attention on foreclosures.
…
While Barone said that he has seen growing interest from agents and brokers seeking to work with REO properties, these days there are plenty of foreclosures to go around. “As the foreclosures go up I’m doing better — there’s more (business) out there.”

Agents and brokers who seek REO listings may get a rude awakening, he said. “The REO arena is very paper-intensive, and everything is deadlines, everything is time-sensitive. It requires a lot more follow-up than you would typically find in the retail industry.”

The REO market has changed as fewer properties are purchased by investors at auctions, he said — many borrowers are so heavily in debt that there is too little equity in foreclosure auction homes to attract investors. That means banks in his market area are buying back about four out of every five properties, he said, and the inventory of REO properties available for agents and brokers to sell has swelled as a result.

Posted in Housing Bubble, New Jersey Real Estate | 2 Comments

“The reality is that New Jersey is deep in a financial hole”

Posted on October 8, 2007 by grim

From the Times Trenton:

State can’t afford to drag feet on debt

The continuing barrage of numbers reflecting the amount of money New Jersey needs to meet its basic responsibilities has become mind-numbing.

Almost weekly, a new report arrives from a new sector with a new batch of figures. An estimated $69 billion to cover future health care costs for public employees, including $11 billion from municipal governments. $25 billion in unfunded pension liabilities for those employees. $3.25 billion to complete court-ordered school construction in the Abbott districts.
…
U.S. Sen. Everett Dirksen used to say: “A billion here, a billion there, and pretty soon you’re talking about real money.” It’s safe to say that New Jersey is in need of real money.

The latest finding, from the state Department of Transportation, is that New Jersey’s bridges require $13.6 billion worth of work over the next decade. Some of that total would fix deteriorating spans like the Minneapolis bridge that collapsed suddenly last summer with tragic consequences. The rest would be used to improve structures that were designed by the grandparents and great-grandparents of today’s engineers to handle far smaller traffic loads.

The bill for bridges is on top of amounts needed for other infrastructure work, including $4 billion or more to relieve two notorious transportation choke points: the Turnpike north of Exit 8A and the century-old rail tunnels beneath the Hudson River.

A few of the state’s spending obligations can be deferred. But delays produce added costs in dollars and other currency. Lives aren’t endangered by roads and bridges that simply are inadequate rather than broken, but the economy takes a beating.
…
The reality is that New Jersey is deep in a financial hole, and its government leaders should be devoting much of their waking time to figuring out how to climb out. We aren’t seeing much of that in the current election campaign.

Posted in Economics, Property Taxes | Comments Off on “The reality is that New Jersey is deep in a financial hole”

Weekend Open Discussion

Posted on October 6, 2007 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 | 126 Comments

Racing against foreclosure

Posted on October 6, 2007 by grim

This Bergen County property was purchased in July of 2004 for $675,000.

While I don’t have any details about the original financing, or if the loan was refinanced between purchase and today, I do know that the outstanding mortgage balance is currently $750,000, more than $75,000 more than the original purchase price. It might have been a cash-out refinance, or a greater than 100% loan, perhaps even some negative amortization.

The owner listed the property for sale shortly after purchase, for just shy of a million dollars. It was listed in March of 2006 for $990,000. The listing expired 212 days later, despite having been reduced to $945,000.

The property was listed for sale again in May of 2007 for $859,000. A month later the price was reduced by $30,000, bringing the asking price to $829,000. The listing was withdrawn after 91 days.

The listing has come back to market again, at the end of September, listed at $774,900. However, the listing description now carries an interesting caveat, “All offers subject to third party bank approval”. In today’s market, it’s a dead giveaway that the property is being sold short. If it wasn’t for the short sale, the seller would have had to bring roughly $20,000 to closing in order to sell this house.

A quick look at the Bergen County Sheriff Sale list shows that the owner is facing foreclosure. The property auction is scheduled for October 19th, less than two weeks from today.

The judgement amount? $751619.19

Posted in New Development, Risky Lending | 17 Comments

North Jersey September Residential Sales

Posted on October 5, 2007 by grim

Preliminary September sales and inventory data for Northern New Jersey is in. Please note that this data is subject to revision.

The first graph plots the unadjusted sales data (closed sales) for the counties listed. Please note the lower bound of the graph, it is set to 1000, not to zero. I do this to emphasize the seasonal nature of the Northern NJ market.


(click to enlarge)

The second graph is another view at the sales data for the full year. Please note that this graph does cross at zero.


(click to enlarge)

The third graph displays only September sales, 2000 to 2007 YOY.


(click to enlarge)

The fourth graph displays an overlay of Sales and Inventory from 2003 to 2007.


(click to enlarge)

The last graph displays the year over year change in inventory on a monthly basis.


(click to enlarge)

Contract-sales data can be found in spreadsheet form here: contracts.xls

Sales and inventory data can be found in spreadsheet form here: salesinvoverlay.xls (large file)

Posted in Economics, New Jersey Real Estate | 142 Comments

Price Reduced $850,005 (46%)!

Posted on October 5, 2007 by grim

I’m not sure what I’m more amazed by, the fact that this property has been reduced by almost half, or the fact that the original asking price was a pipe dream. Another great example of trying to chase the market down. This property has been on the market for more than two years, and has seen price reductions totalling more than $850,000, a whopping 46% off of the original list price.

History:
Address: Tiger Lilly Lane, Harding NJ
Original List Price: $1,850,000
Current List Price: $999,995 (Price reduced 46%)
Time on Market: 2 years, 1 month

MLS# 2105400
Listed: 09/03/05
Original List Price: $1,850,000
Reduced to: $1,750,000
Days on Market: 192
Withdrawn

Relisted as MLS# 2256702
Listed: 03/13/06
Original List Price: $1,750,000
Reduced to: $1,649,500
Days on Market: 173
Expired

Relisted as MLS# 2315799
Listed: 09/03/06
Original List Price: $1,575,000
Days on Market: 119
Expired

Relisted as MLS# 2370403
Listed: 02/01/07
Original List Price: $1,575,000
Reduced to: $999,995
Days on Market: 246
Active

Posted in New Jersey Real Estate, Price Reduced | 7 Comments

One last gasp

Posted on October 5, 2007 by grim

From the Record:

Foxtons hunts buyer for listings

Foxtons, the failed discount real estate company, is looking for another company to buy its 4,400 sale listings.

The seven-year-old company announced last week that it was going out of business because of the housing slump. It laid off 350 of its 380 employees.
…
But several industry veterans observed that other brokerages might not be eager to buy the listings because they would have to honor the lower commissions – typically 3 percent to 4 percent — offered by Foxtons. Most traditional real estate agents charge 5 percent to 6 percent.
…
In addition, agents were reluctant to show homes listed by Foxtons because their split of the commission would be lower than the usual amount.

The announcement that Foxtons was folding came as a surprise to many of its clients who had recently signed listing agreements. Marshall McKnight, a spokesman for the state Real Estate Commission, said he could not comment on how many complaints the state has gotten from Foxtons customers, because they are open investigations.

Barnett Silverstein of Leonia had listed his house with Foxtons and wanted to get out of the list-ing after he heard the com- pany planned to shut down. But other real estate agents told him he was stuck unless Foxtons released him from the listing contract.

So Silverstein drove to the company headquarters in West Long Branch last Friday and got a written release from his contract. He thinks he is one of the few Foxtons clients to do that.

He and his wife now have listed their property with another broker.

Posted in New Jersey Real Estate | Comments Off on One last gasp

Mortgages “going delinquent at the fastest rate this decade”

Posted on October 5, 2007 by grim

From the Financial Times:

Subprime defaults fastest in decade

US subprime mortgages written during the first half of the year are going delinquent at the fastest rate this decade, according to a report from Moody’s on Thursday that analyses home loans used to back bonds. The average rate of “serious loan delinquencies” in the 2007 bonds is higher than those created last year, a vintage considered to be one of the worst-performing ever.

The ratings agency defines “serious delinquency” as loans that are 60 days or more overdue, and includes properties in foreclosure and those already foreclosed upon. Typically, subprime mortgages are used to back bonds sold to institutional investors.

“The early performance clearly shows that the 2007 vintage is worse than last year’s,” said David Teicher, co-head of the Moody’s residential mortgage-backed securities group.

“What the ultimate performance will be remains to be seen.”

Almost 6 per cent of subprime mortgages written in the first half of this year and subsequently used to back bonds went into delinquency within three months of securitisation, Moody’s data showed.

In contrast, fewer than 4 per cent of subprime mortgages originated last year went into delinquency with­in the first three months of being securitised.

Among subprime-backed bonds more than six months old, 2006 was the worst year for serious delinquencies since at least 2000, the ratings agency said.

Posted in National Real Estate, Risky Lending | 1 Comment

Traders betting on home price declines

Posted on October 4, 2007 by grim

From the WSJ:

Home-Price Outlook Takes Another Shot
Trading on CME Indicates a Decline Into Late 2011
By JAMES R. HAGERTY
October 4, 2007; Page D6

The outlook for house prices is getting even gloomier as traders on the Chicago Mercantile Exchange bet on steep price declines and the number of homes for sale grows.

The contracts have been trading since May 2006 but last month were adapted so that traders could bet on prices as long as 60 months into the future. The trading is based on expected movements in the S&P/Case-Shiller house price indexes.

Trading is very light so far — about 20 contracts a day, a CME spokeswoman says. That means the contract values provide only a rough idea of the expectations of speculators and people hedging against house-price risks, says Anthony B. Sanders, a professor of finance at Arizona State University. But Dr. Sanders says the contracts are a useful signal, and he expects house prices generally to fall in the next couple of years.

“There are too many houses coming onto the market [in many areas], and the demand is just not there at current price levels,” he says.

The current contract prices show that traders expect prices in the Miami metro area in November 2011 to be down 28% from the mid-2007 level. (The indexes cover metro areas as defined by the U.S. Census Bureau.) The expected drops in other metro areas for the same period are 18% for Las Vegas, 12% for New York, 19% for San Diego, 26% for San Francisco and 13% for Washington, D.C.

Posted in Housing Bubble, National Real Estate | 129 Comments

High on taxes

Posted on October 4, 2007 by grim

From Forbes:

America’s Priciest Property Taxes

After navigating a tight credit market and securing a home loan, a big property tax bill really hurts.

And nowhere is it felt more than in New York and New Jersey, where residents pay more in these taxes than anyone else in the country. The hardest hit? Homeowners in western New Jersey’s Hunterdon County. Last year, the median yearly property tax bill amounted to a whopping $7,999 here, according to the Tax Foundation, a nonpartisan research group in Washington, D.C, which compiled data based on 2006 figures.

Things aren’t much better in New York. In Nassau County, Long Island, the median homeowner drops $7,706 a year, while up north, Westchester County residents pay $7,626 a year.

In fact, New York and New Jersey residents can expect to pay up to $6,500 more in yearly property taxes than the national average. The reason: The region’s homes are among the priciest in the country, and tax rates there are high as well.

“They spend more on government [in the Northeast],” says Gerald Prante, an economist at the Tax Foundation. “In New York and New Jersey, they’re high on every tax.”

Posted in New Jersey Real Estate, Property Taxes | 2 Comments

A Subprime Katrina?

Posted on October 4, 2007 by grim

From the Financial Times:

Democrats call for mortgage ‘tsar’

Democratic leaders in the US Congress called on Wednesday for the appointment of a “mortgage tsar” to co-ordinate government response to the home loan crisis.

Harry Reid, Senate majority leader, and Nancy Pelosi, speaker of the House of Representatives, called for $200m in fresh federal funding to help distressed borrowers avoid foreclosure. The cost would be less than the daily bill for the Iraq war.

Democrats likened the pending wave of evictions to the aftermath of Hurricane Katrina, and invoked the Bush administration’s handling of that crisis, which was heavily criticised as poorly co-ordinated.
…
“This crisis is the equivalent of a slow-motion, 50-state Katrina, taking people’s homes one-by-one, deva­stating their lives and destroying their communities,” Christopher Dodd, chairman of the Senate banking committee, said at a joint press conference.
…
The White House immediately rejected the proposal.

“We have a housing tsar, his name is Alphonso Jackson. He’s the secretary of housing and urban development.” a spokesperson said.

Spencer Bachus, Republican representative called on Democrats to “stop having press conferences” and be more bipartisan in their approach to the issue.

Posted in Housing Bubble, Politics | 2 Comments

Northern NJ – September Contracts Tumble

Posted on October 3, 2007 by grim

The Northern New Jersey real estate market continued to slump in September, with contracts for sale falling by the worst amount this year. September contracts fell approximately 21.5% year over year (GSMLS) and 25.7% (NJMLS) , with the largest declines seen in Bergen, Essex and Morris counties.

Looking at the GSMLS data, It is clear that the strength seen in the early part of this year has faded substantially. While first quarter contracts were at a respectable 0.2% decline (YOY), third quarter contracts were down a sizable 12.5% (YOY). NJMLS shows a similar pattern with first quarter sales showing considerable strength up 4.9%, only to fade to a -10.6% in the third quarter.

Contract sales in Bergen, via NJMLS, tumbled substantially in September, with a decline of 28.2% year over year. Even more sobering are the multiyear declines seen across all areas. From the peak in 2004, contract sales in Bergen are down more than 40%.

GSMLS Contracts Data


(Click for XLS Spreadsheet)

NJMLS Contracts Data


(Click for XLS Spreadsheet)

Posted in Economics, New Jersey Real Estate | 149 Comments

Mortgage finance and foreclosure forum

Posted on October 3, 2007 by grim

From the New Jersey Department of Banking and Insurance (DOBI):

DOBI announces public forums, education plan to address mortgage lending issues

The Department of Banking and Insurance today announced a series of measures designed to address recent difficulties experienced by New Jersey residents in relation to their home mortgages, including skyrocketing mortgage payments due to resetting adjustable rate mortgages and threats of foreclosure.

DOBI, hosted by local mayors, will conduct a series of community forums throughout the state to offer information and direction to homeowners who have or may have recently experienced difficulty in making their mortgage payments. DOBI is also working with the New Jersey Housing and Mortgage Finance Agency (HMFA), a state agency that makes below market-rate mortgages for first-time and urban home buyers, and distributes federal tax credits to promote the construction of low-income housing.
…
“Homeownership is the American dream, but for those who have bought into unconventional mortgage products and have seen their mortgage payment increase to an untenable level, it has quickly become a nightmare,” said DOBI Commissioner Steven M. Goldman. “Educating and informing the public is the best defense against business arrangements with potentially catastrophic consequences. That’s what this consumer education campaign is all about.”

Each forum will include information from U.S. Department of Housing and Urban Development (HUD) certified debt adjusters and credit counselors, mortgage bankers, and mortgage servicers. Representatives from additional agencies, as well as DOBI staff, will be available to discuss potential options with homeowners and address such topics as how to spot and avoid “foreclosure prevention” scams.

All forums are scheduled from 7 p.m. to 10 p.m. For additional information on the forums, consumers can call the DOBI Office of Public Affairs at (609) 292-5064.
…
OCTOBER 3
Paterson
The Christopher Hope Center
60 Temple Street
Paterson, NJ

OCTOBER 4
Berkeley Township
Central Regional High School
509 Forest Hills Parkway
Bayville, NJ

OCTOBER 10
Edison
City Council Chambers
100 Municipal Boulevard
Edison, NJ

OCTOBER 23
Atlantic City
Atlantic City Council Chambers
1301 Bacharach Boulevard
Atlantic City, NJ

OCTOBER 24
Vineland
Vineland City Council Chambers
640 East Wood Street
Vineland, NJ

OCTOBER 25
East Orange
East Orange Public Library
21 South Arlington Avenue
East Orange, NJ

OCTOBER 29
Trenton
Trenton City Council Chambers
319 East State Street
Trenton, NJ

Posted in New Jersey Real Estate | 5 Comments

August Pending Home Sales Decline

Posted on October 2, 2007 by grim

From CNN/Money:

Pending home sales at record low

The meltdown in the mortgage market in August dried up the supply of buyers for homeowners looking to sell their homes, as an industry group report showed the lowest level of homes under contract on record.

The National Association of Realtors’ pending home sales index fell to a record low of 85.5 from an upwardly revised 91.4 reading in July. That broke the previous low of 89.8 in September 2001, the period in which the terrorist attack shook buyer confidence. The trade group started the index in 2001.

This time the hit to home sales came from buyers having trouble finding the financing they needed to buy homes, coupled with the reluctance of some buyers to jump into the battered market.

“Fewer contracts were being written because of mortgage availability issues, and a separate internal survey of our members shows more than 10 percent of sales contracts fell through at the last moment in August, primarily the result of canceled loan commitments,” said a statement from Lawrence Yun, senior economist for the group. “The volume of activity we’re seeing today is below sustainable market fundamentals because some creditworthy people are trying to buy homes but can’t because of the credit crunch.”

The drop was worse than expected by economists surveyed by Briefing.com, who had forecast only a 2 percent decline from the previous reading to 88.1. The index fell 21.5 percent from year-earlier levels, the biggest 12-month drop ever recorded, as the one-month decline of 6.5 percent was third biggest drop on record, trailing only July of this year and the September 2001 period.

From Reuters:

Pending home sales fell 6.5 pct in August

Pending sales of previously owned homes fell by a larger-than-expected 6.5 percent in August as more borrowers seeking home loans were turned away by cautious lenders, a real estate trade group said on Tuesday.

The National Association of Realtors Pending Home Sales Index, based on contracts signed in August, fell to a reading of 85.5, the lowest since records began in January 2001. The previous low was 89.8 in September 2001.

The fall was sharper than the 2.1 percent decline in the index economists were expecting for August and comes after existing home sales for the month dipped to their lowest level in five years.

Notably, more than 10 percent of sales contracts fell through late in the process largely due to borrower trouble securing credit, according to an NAR survey.

From Bloomberg:

Pending Sales of U.S. Homes Fell More Than Forecast

The number of Americans signing contracts to buy previously owned homes fell more than forecast in August, another sign the housing recession will persist.
…
“The existing homes market is now in freefall,” said Ian Shepherdson, chief U.S. economist at High Frequency Economics Ltd., in Valhalla, New York. “The downside from here is still substantial.”

A Bloomberg survey of 30 economists forecast the index would decline 2.1 percent. Projections ranged from a decline of 4.7 percent to a gain of 3.4 percent.

Compared with a year earlier, pending home sales were down 22 percent.

Pending Home Sales Data can be found at the NAR website:

PENDING HOME SALES INDEX

Posted in Economics, National Real Estate | 174 Comments

Greenspan: A long way to go

Posted on October 1, 2007 by grim

From Reuters:

Long road to recovery for housing market: Greenspan

The housing market has a long way to go before stabilizing after the subprime crisis, spelling bad news for consumers in the world’s biggest economy, former Federal Reserve chief Alan Greenspan said on Monday.

Greenspan, who has been outspoken throughout the credit crunch, said more house price declines were likely given a surfeit of supply but pointed to signs the lending crisis could be coming to end as demand for more risky assets grows.
…
“As in similar situations of inventory excess, I would expect home price declines to continue until the rate of inventory liquidation reaches its peak,” Greenspan told an audience at Reuters in London.

“There is little relevant American history to guide us in judging the ultimate extent of home price decline or the timing of a new price recovery, or by extension, the economic impact on the rest of our trading partners.”

The U.S. housing market remains extremely fragile after a crisis in low-end mortgage borrowing spread fear of a global economic slowdown
…
“All that I conclude is that the process of inventory adjustment has just started and we have a long way to go before residential housing and mortgage markets stabilize in the U.S,” Greenspan said.

Greenspan said likely victims of sustained weakness in the housing market would include the consumer and, consequently, the world’s biggest economy.

Posted in Housing Bubble, National Real Estate | 5 Comments