New Jersey Real Estate Report

From the Pocono Record:

Monroe home sales drop 35 percent

Sales of homes in Monroe County took a sharp dip last month, falling 35 percent from May 2006.

Home sales fell from 291 to 190 for May 2006 and 2007, respectively, according to the Pocono Mountains Association of Realtors. The drop was about the same for both foreclosure and non-foreclosure homes sold.

Sales volume fell from $61 million to $41.6 million, a 35 percent decline.

The average home was on the market 32 percent longer before selling, from 82 days in May 2006 to 100 in 2007.

Inventory of unsold homes increased by 27 percent, from 2,464 in May 2006 to 3,123 in May 2007.

The largest dip in home sales occurred in Jackson Township, where sales fell almost twice as much as the rest of the county. Eldred was followed by Paradise, Stroud, Tunkhannock and Pocono townships.

The greatest rise in number of unsold homes was in Eldred Township, followed by the borough of East Stroudsburg, and Jackson, Price and Paradise townships.

“We are experiencing a situation similar to what happened in the late 1980s, but less severe at this time”, according to Eileen Chaladoff, vice president of the Realtors’ association and an agent with Prudential Associates. In the early ’80s, Monroe County experienced a real estate boom, characterized by rising prices and sales. Late in the decade, prices started slowing and sales along with them. At that time, sellers who bought at higher prices had to bring money to closing because they owed more than what they sold their house for.

From the New York Post:

NYC ‘DEBT’ RECKONING

A silent crisis is ripping through many city neighborhoods as more and more homeowners are unable to pay down their subprime mortgage loans.

In Brooklyn’s Bedford-Stuyvesant, one-fifth of subprime mortgages were more than 60 days in arrears as of April – and 10 percent of all subprime loans were in foreclosure, according to data provided to The Post by First Data LoanPerformance, a mortgage-tracking firm.

Other neighborhoods taking big subprime-foreclosure hits are East New York in Brooklyn; the Arverne section of the Rockaways and parts of Jamaica, Queens; Tottenville on Staten Island; and the Olinville and Bronxdale sections of The Bronx.

And the number of subprime loans in arrears and foreclosed has risen steadily all across the city over the last year, the data shows.

In one part of Bed-Stuy, the percentage of subprime loans 60 days or more in arrears rose from 15 percent in June 2006 to 23 percent in April of this year.

Thousands of New Yorkers’ homes are endangered by subprime loans, which can carry variable interest charges of more than 10 percent.
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Nobody is sure how the subprime crisis will affect the city’s homeownership rate, which, at 33.1 percent in 2005, was about half the national rate, according to New York University’s Furman Center for Real Estate and Urban Policy.

“New York’s real-estate market is fairly hot, and buildings are unlikely to sit vacant. There’s some skepticism as to whether the city is going to take a hit, or whether it’s going to be localized,” said the center’s Jenny Schuetz.

From the International Herald Tribune:

When does a housing slump become a bust?

Many Americans fear the consequences of a housing bust, but few know what one would really look like.

Think about it. How far do housing prices have to fall before a slump becomes a bust?

In the stock market, we have a pretty good idea what a crash is. Among stock market experts, there is a consensus that a 10 percent decline in a major index is a correction while a 20 percent decline is more significant: a crash or a bear market, depending on the time involved. For the macro economy, there is also agreed-upon terminology. For example, a recession means two consecutive quarters of declining gross domestic product.

But when it comes to declines in housing prices, there is no such framework. As experts debate whether we are headed for a housing bust, you would think that we should at least be able to define it.

The problem is that economists have not agreed on a definition. In part, that is because severe declines in housing prices tend to be rare events, not a common subject for discussion. The last really big decline in national housing prices occurred more than 70 years ago, during the Great Depression. Another reason is that the data measuring the housing market is far more opaque than that for the stock market.

But let’s work with the data we have. Start with the worst housing market on record. During the 1930s, housing prices fell sharply across the nation. According to the S&P/Case-Shiller home price index, a measure of national housing prices, the average price of a home fell 24 percent from 1929 to 1933.

More recently, there have been severe price declines in regional markets. The most severe was in the so-called oil patch during the 1980s. In the late 1970s, as global oil prices soared, oil-producing areas of Texas, Oklahoma, Louisiana, Colorado, Wyoming and Alaska experienced an economic boom. As oil prices collapsed in the early 1980s, those economies crashed, and housing along with them.

In the worst cases, nominal home prices fell 40 percent in Lafayette, Louisiana, and 33 percent in Casper, Wyoming, from 1983 to 1988, according to the Office of Federal Housing Enterprise Oversight. In Houston, prices fell 22 percent.

There were also sharp price declines in housing on both coasts during the early 1990s. At that time, a series of events, including the recession of 1990-91, the military downsizing after the Cold War and a commercial real estate collapse, led to a housing downturn.

Two economists with the Federal Deposit Insurance Corp., Cynthia Angell and Norman Williams, have studied housing cycles since 1978 and have come up with a definition of a housing bust. In a paper published in February 2005, they called it a decline of at least 15 percent in nominal prices, meaning not adjusted for inflation.
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Other economists, however, argue that 15 percent may be too restrictive a definition. Mark Zandi, chief economist of Moody’s Economy.com, says a better one would be a decline of 10 percent or more from peak to trough. “When you see a decline in home prices of 10 percent, you get significant credit problems, and it’s enough to wipe out equity in most cases,” he said.

Zandi also said that once prices have dropped 10 percent, there tends to be a self-reinforcing downward cycle. If borrowers can’t afford their mortgages and banks foreclose, their homes are generally sold at significant discounts to the market. That creates an added drag on overall prices, resulting in greater numbers of foreclosures, followed by even greater price slides.

Another reason Zandi argues for 10 percent is the tendency of housing-price measurements to underestimate declines. Sellers often provide discounts that may not show up in the measured price, but are still significant. Today, some homebuilders are discounting the sales price of new homes by an average of 5 percent, Zandi said.

So how far have prices actually fallen? The median price of an existing home has declined 4 percent, on average, since the peak in October 2005, according to the National Association of Realtors.

From the Express Times:

Home sales decline 20 percent in area

Home sales in the Lehigh Valley fell by one-fifth in May compared with last year, the latest data shows.

Adding to the slowdown, homes that do sell are staying on the market longer.
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One economist said the trends mean sellers, who benefited from several years of a booming real estate market earlier this decade, should temper their expectations.

“We are looking at a correction in the housing market,” said Kamran Afshar, a Bethlehem-based economist who follows local trends.

The average time on the market for properties sold in May was 51 days, up 16 percent from 44 days in May 2006, according to a report released this week by the Lehigh Valley Association of Realtors.

As for home sales, LVAR reported 663 last month, down 20 percent from the year-ago total of 825.

Afshar said a housing correction is typically marked by fewer sales and longer durations between purchases. He expects that trend to continue the rest of the year.
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LVAR also reports the number of new listings rose last month to 1,864. That’s up 16 percent from the May 2006 pace of 1,611.

From Bloomberg:

U.S. Mortgage Foreclosure Filings Rise 90% in May

U.S. foreclosure filings surged 90 percent in May from a year earlier as more homeowners fell behind on their monthly mortgage payments, RealtyTrac Inc. said.

There were 176,137 notices of default, scheduled auctions and bank repossessions last month, led by California, Florida and Ohio, the Irvine, California-based seller of foreclosure data said in a report today. The median price for a U.S. home slid 1.8 percent the first three months of 2007 as the housing slump entered its second year, according to the National Association of Realtors. The filings rose 19 percent from April.

A jump in foreclosures at a time of year that traditionally is the busiest for home sales means the slide in prices probably isn’t over, said James Saccacio, chief executive officer of RealtyTrac. Typically, more than half of all home sales occur in the April to June period, according to Freddie Mac, the No. 2 mortgage buyer.

“Such strong activity in the midst of the typical spring buying season could foreshadow even higher foreclosure levels later in the year,” Saccacio said in the report. That will add “to the downward pressure on home prices in many areas.”
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New Jersey was in the No. 15 slot, with one foreclosure filing for every 843 households, and New York ranked No. 30, with one foreclosure filing for every 1,818 households.

From the San Diego Union Tribune:

Housing slump into ’08 likely, study finds

The implosion of the subprime mortgage market is likely to prolong the national housing slump, Harvard University researchers said yesterday in their annual report on the state of the nation’s housing.
“At a minimum it will slow any recovery,” said Nicolas P. Retsinas, director of Harvard’s Joint Center for Housing Studies, which issued the report. “Add to that the overbuilding and the inventory correction and you can see why it appears, particularly for the new-home market, that this slump will last well into 2008.”

Housing-industry analysts say the riskiest subprime adjustable-rate loans were made in 2005 and 2006. As they reset at higher interest rates through 2008, they are likely to fuel the current surge in foreclosures.

As lenders move to tighten loose credit standards and prevent defaults, it will become harder and harder for subprime borrowers to refinance into more affordable loans, Retsinas said.

“One of the aftermaths of the subprime implosion was a tightening of credit,” he said.
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When housing is prohibitively expensive, the economy suffers, Retsinas said.

“The danger is . . . you’re going to lose skilled workers who will move to a part of the country where they can get a job and afford a place to live.”
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According to Harvard’s “The State of the Nation’s Housing 2007” report, everyone who attempted to profit during the nation’s housing boom – buyers, sellers, builders and investors – played a role in the market’s decline.

“ . . . This housing downturn has been driven largely by the market’s own excesses,” the report said.

The full report can be found on the Harvard Joint Center for Housing Studies website:

The State of the Nation’s Housing 2007