New Jersey Real Estate Report

From the NY Times:

Where the Deals Are

FOR more than a year, home buyers who have been looking in the suburbs of Manhattan have struggled to reconcile market rhetoric with metro-area reality. Technically, the overstocked and sluggish market gave them the upper hand. But when it came to actual negotiations, sellers were clinging tightly to the past, and many scoffed at price reductions of more than a few percentage points.

Now, after a nearly nonexistent spring selling season and a summer marred by stock-market jitters, buyers and sellers are closer to a meeting of the minds. Real estate agents and market watchers throughout the region report that houses are selling at prices 5 to 18 percent lower than a year ago. When a property draws multiple bids these days, agents say, it’s usually because it’s in fantastic condition and priced for the current market.

“Homes that have come on the market in the last two or three months have started at prices that are more conservative,” said Savo Fries, manager of the Houlihan Lawrence offices in Yorktown and Croton-on-Hudson, both in Westchester County. “Sellers are finally more willing to listen.”

Even in the most exclusive enclaves, like Greenwich, Conn., where the median sale price has remained relatively flat this year at around $2 million, sellers impatient with the market are entertaining lower offers.
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Bargain hunters are likely to find sellers far more receptive elsewhere in the metropolitan area — but not everywhere. Prices in some towns are falling more steeply than in others. While it’s difficult to generalize across such a broad market, one overriding factor appears to be driving the differences: the proximity to Manhattan.

Jeffrey G. Otteau, president of the Otteau Appraisal Group in East Brunswick, N.J., picked out the pattern while analyzing the unsold housing inventory in towns on and around the commuter rail lines into New Jersey. Communities directly on the rail lines and fairly close to the city, like Maplewood, Montclair and Chatham, tend to have less than six months’ worth of inventory, a level more characteristic of a rising market than a falling one. Some towns still on rail lines but farther out have slightly higher levels, and those off the rail lines altogether, including Caldwell, Belleville and Harding, more consistently show 6 to 12 months of inventory, an indicator of a downward market.

Mr. Otteau surmises that metro-area suburbs are reverting to their pre-1980 dependence upon Manhattan for high-paying jobs. Since 2000, he noted, rising housing costs in the suburbs coupled with the slow rate of job growth outside the city, particularly in high-salaried occupations, have contributed significantly to a trend: more residents who are United States citizens left New York, New Jersey and Connecticut than moved in.

In New Jersey from 2000 to 2006, for example, the number leaving the state exceeded the number who moved in by nearly 278,000, according to census data.

Because the Manhattan economy remains strong and its roaring housing market has yet to slow, housing demand is being driven outward along the rail lines. The towns least accessible to the city, however, are more vulnerable.

“We’ve returned to a market where Manhattan is once again king,” Mr. Otteau said.
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Not all sellers have come around to the new reality. “We have homes overpriced by $300,000 or $400,000 out of just pure insistence,” she said.

From Bloomberg:

Realtors Cut Forecast, Say Slump Will Extend to 2008

The National Association of Realtors reduced its home sales forecast for the ninth time this year and said the housing slump will extend into 2008.

Existing home sales will fall 8.6 percent in 2007, exceeding the 6.8 percent drop estimated a month ago. New-home sales probably will decline 24 percent on top of an 18 percent fall in 2006, the Chicago-based trade group for 1.3 million real estate brokers said today in a statement.

The two-year housing decline is worsening amid a surge in credit costs and the collapse of more than 100 mortgage companies after defaults by homeowners. Federal Reserve policy makers, who meet next week, said at their last session “tighter” credit is putting the U.S. economy at risk.

“There’s been an unusual hit to home sales, starting in March when subprime problems emerged and more recently when problems spread to jumbo loans,” Lawrence Yun, an economist for the group, said in the forecast. Jumbo loans are those over the $417,000 limit guaranteed by Fannie Mae and Freddie Mac and are typically given to borrowers with good credit.

New home sales won’t reach a bottom until the first quarter of 2008, the organization said. A month ago, the Realtors said the low point would be at the end of this year.
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“To say home prices are going to go up next year, you have to wonder what the NAR is thinking,” said Alex Barron, an analyst who follows homebuilders for Wayzata, Minnesota-based Agency Trading Group Inc. “We’re going to see a drop in volume and prices.”
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The U.S. housing decline may last as long as four years until 2009, Moody’s Investors Service said in a report yesterday. That would match the length of the downturn that ended in 1991. Home sales will take a “substantial hit” in the next several months, Moody’s said.
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“The Realtors keep splicing a little more off their outlook to make it more gloomy, but they are still more optimistic than we are,” Meyer of Lehman said today in an interview. “The data from the mortgage and credit markets is all pretty dismal.”

Sales of existing homes will continue to fall through the middle of next year and then level off before gaining in 2009, the Lehman report said.
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“Home prices need to come back down to more affordable levels so that people can take that inventory off the market,” Barron said in an interview. “Everything I see points to lower prices, much lower prices.”

From CBS News:

Housing Market Slump Forces Couple To Open Brothel

The downturn in the housing market appears to have driven two Westchester homeowners to desperate and illegal measures. New Rochelle Police raided a 3-bedroom home on North Avenue Friday night arresting four alleged prostitutes and the homeowners. The house, they say, had been turned into a brothel complete with heavy shades over all the windows and a red ribbon placed out by the sidewalk to indicate they were open for business.

Richard Werner and Heather Mezzenga are charged with promoting prostitution. The two are both mortgage brokers who moved out of the house roughly two years ago so they could begin renovating a home on Mountain Road in Pleasantville.

New Rochelle neighbors told CBS 2 the house had originally been listed for $750,000 but didn’t sell even after the price had been dropped to $600,000. David Saperstein said, “He couldn’t get his price, then he rented,” but a series of families came and went and the house fell into apparent neglect until new occupants apparently arrived two weeks ago. Saperstein says the lawn was cut, and heavy shades were put up on all the windows but he never saw the new neighbors. “The air conditioning was running all day and no one’s there,” he told us. “But at night there’s 5, 6, 7 cars there.”
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One of the couple’s Pleasantville neighbors seemed pretty sure business problems were at the root of the shocking news. “I know they’re mortgage brokers,” Peter Passidomo said “and I know it’s been a tough business, so I assume they might have had financial difficulty.” He said the front of the Mountain Road home had been under renovation for the entire two years the couple had lived next door with their little boy, who appeared to be of Kindergarten age.

From the Wall Street Journal:

End of Boom For Housing Hits Title Firms
Recent Jump in Claims, Drop in New Business Pressures the Insurers
By LIAM PLEVEN
September 10, 2007; Page C1

Problems confronting title insurers may offer fresh clues about economic stress points in the nation’s housing market.

Title insurers issue policies that essentially guarantee a homebuyer is the rightful owner of a property. The industry’s fortunes are closely tied to the health of the real-estate industry — and some major firms are seeing claims rise sharply, particularly on policies issued during recent boom years.

One of the nation’s largest title insurers, First American Corp., recently said paid claims jumped 52% in the second quarter, compared with the same period last year.

Rising title claims are significant because they can be a broader sign of economic pain than foreclosures. Claims are often filed even in the absence of a foreclosure. And they can be triggered not only by homebuyers, but also by complaints from another party, such as a subcontractor who has filed a lien for unpaid work on a house. Claims data also can include commercial properties.

“In times of economic loss, title claims go up,” says Theodore L. Chandler Jr., chief executive of LandAmerica Financial Group Inc., another big title insurer based in Richmond, Va. There was a severe spike in claims, for instance, during the recession in the early 1990s.

Moreover, some title insurers are reporting a drop in new business. While that might not sound particularly surprising, given the real-estate slowdown, it could be a glimpse of more trouble ahead: Title-search orders usually come at least several weeks before a buyer takes out a mortgage.

“If you want to know what’s going on with mortgage activity, you look at title orders,” says Nik Fisken, an insurance-industry analyst at Stephens Inc.

First American says average daily title orders were down 6% in July from June and that preliminary results indicate another 9.3% drop from July to August. Fidelity National Financial, a major title insurer based in Jacksonville, Fla., says there was a nearly 8% decline between April and June.

Fidelity National hasn’t disclosed additional data about more recent months. But Chief Financial Officer Anthony Park says, “It’s slowed down considerably, particularly in the month of August.”
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In discussing the claims they are getting, for instance, First American and LandAmerica both pointed particularly to claims on policies issued between 2004 and 2006. In those years, investors and homebuyers were gobbling up houses and lenders were shoveling out loans, in some cases to buyers who provided little or no documentation of their assets or ability to pay.

“It appears that many of these claims involve fraud, forgery and other factors often seen where loans are made to borrowers in financial distress,” First American’s CEO, Parker Kennedy, told investors last month.