Pay no attention to the rising foreclosure rate

Posted on January 3, 2007 by grim

From NJBIZ:

Home Mortgage Foreclosures Soar

Rising foreclosure rates in New Jersey are likely to remain on the upswing in 2007, but experts say the odds are slim that the increases will signal a crisis for the state’s housing market or its economy.

For the first 11 months of 2006, home mortgage foreclosures in the state were 25,472, up 78 percent from 14,311 for all of 2005, according to Foreclosures.com, a real estate advisory firm in Sacramento, Calif.

Big increases occurred throughout the state. In affluent Bergen County, foreclosures jumped more than tenfold, from 104 in 2005 to 1,367 last year. In Monmouth County, home to many shore communities, foreclosures rose from 883 in 2005 to 1,533 last year.

An increase in foreclosure rates tends to be symptomatic of an economic downturn, when homeowners lose jobs and therefore lack the income to pay their mortgages, says Jeffrey Otteau, president of Otteau Valuation Group, a real estate appraisal firm in East Brunswick.

But this doesn’t apply to current circumstances, says Joel Naroff, chief economist at Cherry Hill-based Commerce Bank. “It’s not as if the New Jersey economy is falling apart, and unemployment rates are rising, and people are losing their jobs,” says Naroff. “That’s just not happening.”

Instead, rising interest rates that have increased housing payments for adjustable-rate mortgage (ARM) holders, together with a weak housing market, have driven up foreclosure activity, Otteau says. Foreclosures are less common in healthy market conditions, he says, because homeowners are able to sell their homes quickly if they fall behind in their mortgage payments.

“But when you have people with an affordability issue on top of the fact that houses are taking a very long time to sell, that’s when the foreclosure market spikes,” he says.
…
With the housing slowdown, subprime borrowers increasingly feel the pinch. “Because of the imaginative mortgages kicking in, we’re now seeing foreclosures where we hadn’t ever seen them before,” says Naroff. “A lot of these mortgages are resetting, and as they reset, people are finding it difficult to either pay the higher reset levels or remortgage, especially in light of a housing market that’s softening.”

According to MBA’s National Delinquency Survey for the third quarter of 2006, 4.68 percent of subprime ARMs in New Jersey were in foreclosure, compared with 0.75 percent for prime ARMs.

Subprime foreclosures are clearly on the increase, according to the Center for Responsible Lending in Durham, N.C. It reported last month that subprime loans that originated last year in New Jersey have a projected lifetime foreclosure rate of 19.6 percent, compared with a projected 7.6 percent rate for such loans made between 1998 and 2001.

Mortgage lenders helped to proliferate the use of creative mortgages by relaxing their loan approval standards during the housing boom, Otteau says. Many lenders assumed that housing appreciation would continue, so they could recover the money that was borrowed if a loan went into default. “Mortgage lenders became very aggressive in trying to get their share of the market or increase their share of the market,” he says.
…
Most experts do not currently see the rise in delinquencies and foreclosures as cause for alarm. “The foreclosure inventory rate has increased somewhat from the very lowest point, but relative to where we’ve been in recent history, it’s still quite low,” says Mike Fratantoni, senior economist at the MBA in Washington, D.C. For the third quarter of 2006, less than 1 percent of the 1.2 million loans the organization tracks in New Jersey were in the foreclosure process, compared with 1.86 percent of loans during the recession in 2001.

“That the number of foreclosures is increasing was to be expected, because we were at an incredible low point here in terms of the amount of foreclosure activity in the market, so it could only go up,” says Otteau. The current numbers, he adds, are less than those in previous periods of high foreclosure rates, including the late 1980s and early 1990s, and the late 1970s and early 1980s.

While New Jersey may have more foreclosures and a faster rate of increase than other states, “that comes as no surprise,” says Otteau. “We have more households, we have a more active housing market, and we have a more expensive housing market than other states.”
…
However, says Otteau, “If we do get a recession in ’07, which is not likely but possible, that would be the perfect storm that would cause the foreclosure rate to increase more rapidly, and at that point it could become a serious factor for the housing market.”

Posted in Housing Bubble, New Jersey Real Estate | 125 Comments

Rent-controlled goes condo

Posted on January 3, 2007 by grim

From the Jersey Journal:

Advocates: Housing crisis getting worse

The conversion of a rent-controlled Central Avenue apartment building into condominiums has raised questions about the availability of affordable housing in Hudson County’s still-hot residential real-estate market.

Originally built by the federal Department of Housing and Urban Development in 1963, the 16-story, 300-unit super-block-style building was designed as affordable housing for low-income families. All units currently occupied are rent-controlled.

Matthew Shapiro, president of the New Jersey Tenants Association, said conversions like this one are exacerbating Hudson County’s severe affordable housing shortage.

“We oppose massive conversion to more expensive housing. There is an extreme affordable housing crisis in New Jersey, and Hudson County is the king of conversion areas,” he said.

Union City Mayor Brian Stack has also voiced concern about the conversion.

“I’m deeply concerned any time a building converts to condominium when current tenants are still living there,” he said.

“I don’t have a problem with condos being built, but this is someone’s home. It’s a piece of their life being taken away,” Stack added.

Posted in Economics, New Jersey Real Estate | 1 Comment

Hudson County Pipeline

Posted on January 3, 2007 by grim

From the Jersey Journal:

BUSTIN’ OUT ALL OVER THE PLACE

With Donald Trump and the CEO of Reebok making a splash in Hudson County’s real estate market, 2006 was the year of the heavy hitter. The star power brought notoriety to Hudson County – even if Trump’s television apprentice Randal Pinkett snubbed Jersey City when he chose to work in Atlantic City instead.

But 2007 likely will be remembered as the year of the innovator, as a number of nontraditional projects are built, some far away from the Hudson County waterfront.
…
10 The historic Manischewitz factory on Bay Street in Jersey City is set to move its matzo-making operations to Newark early this year, setting the stage for a battle between preservationists and Toll Brothers, the new owner of the factory, which wants to follow Lloyd Goldman’s lead and build to the sky.
…
Toll Brothers, which bought the factory for $36.4 million, is expected to lay out plans sometime this year for a 40-story building, equipped with 400 housing units and 70,000 square feet of retail.
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6 Outsiders may laugh at the idea of redevelopment in red-hot Hoboken, but the truth is – despite all of its residential growth – there are still large pockets of the Mile Square City that need a facelift.

The city’s planners will draw up redevelopment plans to transform these industrial areas into residential projects. These areas include the southwest redevelopment plan, western edge redevelopment plan, the renovation of the Hoboken Terminal and the Neumann Leather building.
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5 The new Red Bulls soccer stadium, scheduled to open in July 2008, will be the centerpiece of a $1 billion redevelopment plan that will convert Harrison’s industrial waterfront into a modern, live-work-and-play transit village anchored by 800 apartments and dozens of stores and restaurants.
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4 Dubbed the CANCO Lofts, this onetime industrial complex is quickly becoming one of the more interesting residential spaces in Jersey City – and perhaps one of the more affordable ones.

Expect the developer, New York-based Coalco, to open sales offices in the first quarter of 2007 for the first round of roughly 200 units. The units will feature large bay windows, ceilings as high as 27 feet, and price tags starting in the high $200,000 range.
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3 The highly anticipated project is expected to launch this summer when shovels hit the ground, marking the start of construction for the first 500 or so civilian units at the old Military Ocean Terminal.
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The first round of approvals included 600 housing units, a 150-room hotel and some commercial/retail space, along with the right to convert two existing six-story Army warehouses into mixed-use facilities and put up a 22-story residential tower on 14 acres.
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2 For perhaps the first time, a large swath of Journal Square is now in the hands of one developer – opening the door for one of the most highly anticipated projects in the city’s history and promising to transform the face of the historic square for decades to come.

Jersey City-based developer Harwood Properties plans to break ground this year on two towers – one 52 stories, the other 46 – containing 1,034 apartments, 150,000 square feet of retail, and three levels of parking.
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1 Widely considered as the thermometer of everything not Downtown in Jersey City, the multimillion-dollar restoration of the historic Jersey City Medical Center will begin to take shape this year.

George Filopoulos, president of Metrovest Equities, said he has sold 85 percent of the Beacon’s first 315 available units for a price range of $320,000 to $750,000. Owners are expected to move in this spring, and the company plans to begin offering its next phase of units by the end of the year.

Posted in New Development, New Jersey Real Estate | 3 Comments

“Market conditions continued to weaken…we have not yet seen tangible evidence of a market recovery”

Posted on January 2, 2007 by grim

From the AP:

Lennar Sees Weaker 4Q Earnings Results

Homebuilder Lennar Corp. said Tuesday its fourth-quarter results will be hurt by inventory valuation adjustments and writeoffs.
The company said it sees a quarterly loss of 88 cents to $1.28 per share after valuation adjustments and writeoffs. Excluding items, fourth-quarter earnings are forecast between 70 and 75 cents per share.
…
“Market conditions continued to weaken throughout the fourth quarter and we have not yet seen tangible evidence of a market recovery,” President and Chief Executive Stuart Miller said in a statement. “Given the steep decline in many of our markets, we are completing our asset-by-asset review and will adjust asset balances to reflect fair value in the current market environment.”

From Bloomberg:

Lennar to Post 4th-Quarter Loss on Charge of Up to $500 Million

Lennar Corp., the fourth-biggest U.S. homebuilder by revenue, said it will post a loss in the fiscal fourth quarter due to a one-time charge of as much as $500 million.

The loss in the three months ended Nov. 30 will be as much as $1.28 a share, the Miami-based company said today in a PRNewswire statement. The charges include inventory writedowns and costs related to land it no longer plans to buy.

Posted in National Real Estate, New Development | 125 Comments

Impact of age-restricted development

Posted on January 2, 2007 by grim

From the Record:

Does senior housing cater to seniors or developers?

Housing developments targeting empty nesters and senior citizens are sprouting up in large numbers throughout North Jersey, where the region’s graying baby boomer population is fueling a demand for age-restricted housing.

From Bergenfield to Clifton to River Edge, these senior housing units are the darlings of developers, who are acutely aware that their proposals may be more likely to receive the municipal stamp of approval if they are designed for adults 55 and older, a group coveted by municipalities for their tax dollars and relatively minor impact on services.

But some observers and critics question whether local leaders are too eager to give such projects the green light, minimizing the potential impacts of age-restricted housing. And they wonder whether some of the luxurious senior housing projects, which start at upward of $300,000 and feature upscale amenities, actually meet the needs of the region’s seniors who want to downsize from large homes and high tax bills.

“We have to keep the big picture of planning intact,” said Donna Schiavone, a councilwoman in Hillsdale, where a zoning ordinance allowing senior housing is likely to be approved this month. “What might be good today may not be good 15 years from now, and then you are stuck with it.”
…
Though it is unclear how many building projects specifically targeting empty nesters are under way or in the planning stages, the New Jersey Builders Association estimated that nearly 50 percent of all housing built in 2005 was of the age-restricted variety. Still, demand often far outstrips the supply, observers and industry experts say.

“There’s a shortage of housing for seniors in New Jersey,” said Marilyn Askin, chief legislative advocate of the New Jersey office of AARP. “If [seniors] sell their houses, they might be able to afford the new apartment, but they might not be able to afford the property tax. Seniors want to stay in the community but it’s become impossible because of taxes and the high cost of living.”

Posted in New Development, New Jersey Real Estate | 6 Comments

Will tax cuts “end the exodus”?

Posted on January 2, 2007 by grim

From the Asbury Park Press:

Property tax reform back on the table

With major reforms stalled, New Jersey legislators return to work this week after missing their Jan. 1 deadline to tackle the nation’s highest property taxes.

The Legislature left for a holiday break on Dec. 14 after failing to adopt any major property tax-cutting proposals recommended by special committees that spent months debating how to cut property taxes that are twice the national average.

Meanwhile, plans to give most homeowners a 20 percent property tax cut have yet to be formalized by majority Democrats, who vowed to give the 20 percent break to households who earn $100,000 or less per year. Households earning up to $250,000 per year would get 15 and 10 percent breaks under the plan.

Gov. Corzine supports the property tax credit concept, but said he won’t approve the tax breaks unless lawmakers agree to cap annual property tax increases at 4 percent and create the position of state comptroller to investigate spending by state and local governments.

Yet neither of those plans has advanced toward law. The tax-cap plan hasn’t been introduced. The comptroller bill was twice pulled from December Senate votes amid disagreements among Corzine and lawmakers over the post’s authority and scope.

Assembly committees are slated to meet Thursday, with both houses scheduled for Jan. 8 voting sessions.

Despite missing their self-imposed deadline to adopt reforms by year’s end, Democrats continue to express confidence progress will be made early this year. Corzine said reforms need to be adopted by Feb. 27, when he must introduce his budget proposal for next fiscal year.

“Progress is being made toward ensuring that property tax relief will not be lost in a sea of outdated mandates and antiquated bureaucracy,” said Assembly Majority Leader Bonnie Watson Coleman, D-Mercer. “We already have done more in one week to promote systemic reforms than had been done in years.”
…
“They promised property tax relief and reform by the end of 2006 and utterly failed to deliver on that promise,” said Assembly Minority Leader Alex DeCroce, R-Morris. “Is it any wonder thousands of New Jersey families are fleeing the state each year for more tax-friendly environments? It’s time to end the exodus.”

Posted in New Jersey Real Estate, Property Taxes | 10 Comments

“Am I going to be a peak-of-market buyer and is the market way, way overpriced?”

Posted on January 1, 2007 by grim

From the Asbury Park Press:

Clouds gather over housing market

If nothing else, 2006 will be remembered as the year the housing market came back down to earth.

Area home prices, which nearly doubled in the first five years of the decade, rose more modestly in ’06 and, in at least one quarter, declined. Homes that would have been snapped up in a matter of weeks a year earlier, sat on the market for months. Realtors and home builders alike struggled to attract buyers who, sensing that the market was turning down, sat on the sidelines waiting for the dust to settle.

And then in October, in the most graphic example of how quickly the market had declined, Kara Homes Inc., one of the state and region’s largest home builders, went into bankruptcy court, seeking protection from creditors who were owed $270 million in loans, bills and back wages. Among the creditors: about 300 customers who had made hefty downpayments on their homes and now wondered if they would ever move in or recoup their deposits.

“The psychology changed dramatically from “I have to get on board the housing train before it leaves the station’ to “Am I going to be a peak-of-market buyer and is the market way, way overpriced?’ ” said economist James Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University. “We switched from that fear or greed of not being able to participate in the boom to fear that the market is going to slide downward.”

The situation was evident in the numbers:

The median sales price for an existing home in the region that includes Monmouth and Ocean counties rose 9 percent in the first quarter, fell 0.1 percent in the second quarter before rising 7.3 percent in the third quarter, according to the National Association of Realtors.

Those were down from the double-digit increases in the previous five years.

Economists pointed to rising mortgage rates earlier in the year and said that income levels had not kept pace with the increases in home prices.

The number of unsold homes on the market increased in Monmouth and Ocean counties, according to the latest figures from The Otteau Valuation Group Inc. of East Brunswick.

In the third quarter, 6,919 homes were for sale in Monmouth County, up 51 percent from the 4,594 on the market in the same period in 2005. In Ocean County, 6,870 homes were for sale, up 53 percent from the 4,499 on the market in the third quarter in ’05.

It amounted to an 11-month supply of houses in both counties. In the same quarter a year ago, the market had a five-month supply, according to The Otteau Report.

Meanwhile, the number of homes sales fell. In Monmouth County, the average number of monthly sales in the third quarter was 621, down 29 percent from the average of 871 homes sold in the same period in 2005. In Ocean County, there were an average 654 sales a month in the third quarter, also down 29 percent from the average of 915 sold in the third quarter of ’05, The Otteau Report states.

Posted in Housing Bubble, New Jersey Real Estate | 147 Comments

“So what will rescue the U.S. economy from the collapse of the housing bubble?”

Posted on January 1, 2007 by grim

From the Centre Daily Times:

No: Beware of shock waves

The big question for the U.S. economy now is whether we will make it through 2007 without a recession. Most of the top economic forecasters are predicting a “soft landing,” which means the economy will slow but not so sharply as to cause a recession.

But almost all of these same experts failed to forecast the last recession, and they missed the stock market bubble — the largest financial asset bubble in history. And most of them also missed the housing bubble until it began to burst. So it would not be prudent to rely solely on their forecasts at this time.

The timing of any downturn is not easy to predict. But a recession is likely, because of the enormity of the housing bubble and the impact of its collapse. Recall that our last recession in 2001 was caused by the bursting of a stock market bubble of about $7 trillion. The housing bubble is comparable in size — about $5 trillion at peak. And the bubble wealth is much more widely distributed: most Americans still have most of their assets in housing and little or nothing in stocks.

As this housing wealth disappears, people cut spending. We have already seen an enormous drop in the amount that people borrow on their homes, from $600 billion in 2005 to about $350 billion for 2006.

It was this borrowing, enabled by soaring house prices that allowed people to borrow more against the value of their homes that fueled the U.S. economic recovery since 2001.

Housing construction and sales are also a big sector of the economy, currently about 6 percent of GDP. If that falls 30 percent to 40 percent, as it has in previous downturns, that’s a drop of about 2 percent of GDP.

The recession caused by the stock market bubble bursting, which lasted only from March to November 2001, would have been a lot worse if not for the enormous demand created by the housing bubble. So what will rescue the U.S. economy from the collapse of the housing bubble?

It’s not easy to imagine what that would be. Personal savings rates are already negative, a phenomenon not seen since the Great Depression. How much can consumers borrow on their credit cards?

Posted in National Real Estate | 1 Comment

How big is too big?

Posted on January 1, 2007 by grim

From the Home News Tribune:

Towns seek to regulate “McMansions”

With an ever-shrinking amount of buildable land, some Central Jersey municipalities are asking a new question about houses: How big is too big?

Bernards, Chatham Township and Bedminster this year limited the width of houses on smaller lots, typically three quarters of an acre and smaller. In Bedminster, new or renovated houses can be no more than half the width of the lot.

Bernards is now re-assessing how tall a house can be. Like many municipalities, the township already limits houses to 2.5 stories, or 35 feet, in residential zones. Mayor John Malay said some builders have been creating “mounds,” allowing a walk-out basement where most first levels would be, and building up from there.

Doing so, Malay said, can save a builder from blasting through bedrock for an underground basement. New, oversized homes can dwarf existing dwellings — making an unattractive patchwork of homes in long-established neighborhoods, he said.

“You don’t want one house in the neighborhood towering above the other houses,” Malay said.
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James Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University, said affluent communities across New Jersey are dealing with the tear-down and in-fill trend.

“People are crowding into the winners’ circles,” Hughes said.

He said people are dividing larger lots that were used to build now-outdated ranches and split-levels in the 1950s or 1960s. As the land below homes has become more valuable than the structure on it, people are tearing down a home to build a new, bigger home from sideyard to sideyard.

“Then the problem arises — a home just looks too big for the lot,” Hughes said.
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While some neighborhoods in town are bound to regenerate, Banisch said the ordinance helps maintain neighborhoods of “affordable housing with a small ‘a.”‘

That way smaller Cape Cod homes will be available to someone who can’t can’t afford the “monster home” down the street, Banisch said.

The Bedminster Planning Board grappled with limiting home sizes as well, Planning Board Chairman Paul Henderson said. The board tried a number of formulas, including taking the average square footage of a homes on a street. Finally, the board decided a home can only be 50 percent of its lot width.

“The issue was houses were being knocked down and houses were being built that really dwarfed the other houses,” Henderson said.

Posted in New Development, New Jersey Real Estate | Comments Off on How big is too big?

Live in a condo … give up your rights?

Posted on January 1, 2007 by grim

From the Philly Inquirer:

Condos’ free-speech limits get a day in court

Twin Rivers has schools, businesses, a public library, and 10,000 units of housing.

But it’s not a town.

It’s a development where the rules are made by a homeowners association that is responsible for facets of life from trash collection to maintaining ball fields.

In a case to be argued Thursday, the state Supreme Court will weigh whether some of the association’s rules violate the constitutional rights of residents.

Residents sued more than six years ago, objecting to some of the rules, including one that bars them from putting up political yard signs wherever they want.

“People have rights,” resident Margaret Bar-Akiva told the Sunday Star-Ledger of Newark. “It’s a basic, fundamental right to express your views, and the fact that you live in a condominium or planned community cannot take that away from you.”

Scott Pohl, president of the homeowners association at Twin Rivers, said the rules were needed to maintain aesthetics and order in the community.

Some 57 million Americans – including 1.2 million in New Jersey – live in such planned communities. The American Civil Liberties Union of New Jersey says that’s why the issue is worth examining.

“This case is so important because these types of living arrangements are simply becoming the reality of modern life,” said Ed Barocas, legal director of the ACLU in New Jersey.

Posted in General, New Jersey Real Estate | 1 Comment

Weekend Open Discussion – 2k7 Predictions

Posted on December 31, 2006 by grim

This is the time and place to post observations about your local areas, comments on news stories or the New Jersey housing bubble, 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.

This post will remain at the top of the page during the weekend, any new posts will be displayed below.

Some suggestions for discussion:

1. 2007 Predictions – Let’s hear them!

2. The following post written by Clotpoll.

Although our friend writes with the subtlety of a flying mallet, he’s probably one of many recent homebuyers who has realized that- despite the nonstop predictions of disaster around here- the sun keeps coming up every morning.

He is also dead-on in his assessment of the plethora of arbitrage and relentless minutiae-crunching within many threads here. It’s like a pack of vultures picking at a dead rabbit…not much meat there. And what a way to assess owner-occupied RE! Call me stuck in the ’50s, but I contend “home” is supposed to be about family, comfort and good times. The market goes sour? Stay in your home thru the down cycle. Nobody just wakes up one day and suddenly realizes NJ is expensive. And, even though there are thousands of the proverbial “500K POS Capes” out there, there are affordable, nice places to live all over NJ…if one is willing to compromise just a tad. RE is a game of compromise, because not even millionaires can “have it all”…there’s always a tradeoff among the three factors of price, location and amenities of homes buyers consider (I contend the best anyone can do is get 2 out of 3 of those factors…the third factor will be out of the buyer’s control and must be accepted). No matter how bad things get in NJ, a 450K 4 BR Colonial in a top school district on the Midtown Direct line ain’t in the cards. Sorry; location DOES matter.

I have tried to grasp the merit in the idea of renting, hoarding cash and waiting for the big market crash in order to swoop in and obtain maximum value. However, I can’t help but think that the element of putting your life on hold that this strategy requires also has significant costs. Renting- in and of itself- implies transience, impermanence and absence of commitment (please don’t read this as an accusation of renters being shiftless drones who have 400 FICO scores, leased Escalades and closets full of $300 jeans). You can be in a beautiful place…great landlord…below-market rent…but you are essentially “on hold”.

And on hold for what? It seems that for many here, the only x-factor left is when to call the bottom of the market. All but the blind agree it’s down; the only question is how much further it will fall. 5%? 10%? 20%? Is the benefit of catching the absolute bottom worth the wait and uncertainty? And, what if the bottom is in…and you’re missing it now? Are you so invested in the “big crash” theory that you can’t pull the trigger in a rising tide?

Cost/benefit analysis requires an evenhanded assessment of both sides of a proposition. I, for one, see a lot of attention here to the cost side…while the benefit side of the ledger gets lip service (or worse). This blog doesn’t get the attention that comes its way because homeownership isn’t highly desired and valuable.

Posted in General | 213 Comments

“Our buyers need to make that mental transition from home to commodity…and that’s hard”

Posted on December 31, 2006 by grim

From the Record:

Financing incentives help seal the deal

Developer Pulte Homes is hoping to eliminate the home-selling obstacle facing buyers of its active adult village under construction in Wanaque.

After watching its 55-and-older buyers struggle to sell their homes in today’s slumping housing market, the builder joined the incentive package fray in November with a multi-phase program to help sell their homes.
…
“They can’t buy a home from us until they sell their existing home, so it’s a win for us and a win for them,” said Robert Teeling, sales manager for Wanaque Reserve by Del Webb. “We’ve definitely felt the effects of the market.”

For customers who have signed a contract to buy a unit, Pulte will pay for a home-staging company that suggests ways to prepare their homes for a quick sale. That might include new carpeting, painting or nothing more than removing clutter, said Teeling.

“Our buyers need to make that mental transition from home to commodity … and that’s hard,” he said.

If none of that works, then contracted buyers are offered “creative” mortgage deals.

The payment-free living program will pay up to six months of interest on a bridge loan and the $363 monthly fee covering maintenance, the staffed guardhouse, sewer and water fees and the activities director. It requires a 10 percent down payment and is the most popular of the two programs, said Teeling.

The second program requires a 25 percent down payment, but for that Pulte will pick up mortgage and interest payments for up to a year. Buyers can pay cash for either program, but a mortgage must be obtained through Pulte’s mortgage company, which offers competitive rates, said Teeling.
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Builders across the state have been using a variety of incentives for about a year now to move unsold homes, said Patrick O’Keefe, CEO of the New Jersey Home Builders Association.

“The incentive is there because there are units in the pipeline that the builder wants to make a deal and move off the books,” said O’Keefe.

He advised prospective buyers to make sure they can afford long-term payments while their homes are taking longer to sell.

“If I were a buyer, I would still go back to basics: Can I afford the house? Am I getting a mortgage that will make sense for time I’m occupying the house?” said O’Keefe.
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The state’s largest developer, K. Hovnanian in Red Bank, prefers enticing potential buyers with free popular upgrades, such as a $6,000 granite kitchen counters in a newer Montvale development.

“We’ve always done incentives and premiums,” said Hovnanian spokesman Doug Fenichel. “It’s just maybe these incentives are a little more pronounced now.” Mortgage incentive plans are also offered.

But in response to the market, Hovnanian has held back finishing buildings. It has also backed off buying land in West Milford, Mount Olive and Hackettstown where it would take too long to get a return on high land prices and costly permits, said Fenichel.

Posted in New Development, New Jersey Real Estate | 2 Comments

Not a good year for New Jersey taxes

Posted on December 31, 2006 by grim

From the Asbury Park Press:

New N.J. taxes top other states’ cuts

It was a good year for taxpayers in most states.

Awash in surplus money from an improving economy, 24 states cut taxes in 2006. Others increased the amount of money they spent on programs and boosted reserves to help the next time fiscal woes come calling.

New Jersey was not among them.

The Garden State increased sales, corporate, cigarette and other taxes by $1.84 billion, easily the largest total tax increase among states in 2006, according to a new report from the National Governors Association and the National Association of State Budget Officers. The second-highest, Texas, increased cigarette and tobacco taxes by $431 million, the report found.

The ranking riled state Republicans, who are in the minority in New Jersey’s Legislature.

“New Jersey taxpayers are being bled dry,” said Assembly Minority Leader Alex DeCroce, R-Morris.

While 14 other states also increased taxes in 2006, New Jersey alone boosted taxes nearly as much as the entire country cut them. Overall, states cut taxes $2.1 billion in 2006, the report found.

The findings were no surprise to Gov. Corzine who, along with fellow Democratic leaders, approved the tax hikes to close a projected $4.5 billion budget deficit. The move wasn’t easy: The legislative dispute around it shut down state government for a week and caused Atlantic City’s casinos to close their doors briefly.

“We have not been managing the finances of the state in a way that is reflective of sound fiscal policy,” Corzine said in a recent interview.

With a projected $2 billion deficit looming for 2007, New Jersey lawmakers will continue trying to repair the state’s finances as other states enjoy what Raymond C. Scheppach, National Governors Association executive director, described as a “good time to be governor.”

“The stable, healthy fiscal condition of states across the nation affords current governors options their predecessors did not experience,” he said.

New Jersey in recent years has increased spending on, among other things, poor city schools, child welfare reforms, debt and homeland security. Meanwhile, the state skipped public worker pension payments and relied on moves such as raiding an unemployment compensation fund and borrowing billions to balance spending.

Now, the state struggles to pay for public schools, property tax cuts, health care, open space preservation and state college and university aid.

Posted in Politics, Property Taxes | 5 Comments

Wall Street disconnect grows

Posted on December 31, 2006 by grim

From the NY Post:

HOUSING ILLUSIONS

HERE’S something to toast at midnight tonight: 2006 has been a great year to live, work and own real estate in New York.

Even those not lucky enough to toil at Goldman Sachs shared the riches. The stock market defied all odds and climbed more than 16 percent as measured by the Dow Jones industrials, while a reported $28 billion Wall Street bonus pool kept local real estate prices sky-high and stores and restaurants humming.

In fact, it’s fair to say that this year, Wall Street’s disconnect from the rest of the country grew wider than ever.

It’s little wonder then, that the street’s top economists, living here in hedge-fund land, are almost universally sanguine about the economy and the housing market as we head into 2007. In fact, in a recent Wall Street Journal poll, more than two-thirds of those surveyed believe the worst of the housing market decline is behind us.

Indeed, perhaps the most contrarian bet for 2007 would be that the U.S. housing market will get worse before it gets better. The case from the housing bears goes something like this: First of all, the so-called soft landing we’ve seen in the housing market in the year just passed isn’t enough to wash away the excesses of the bubble years from 2001 to 2006.

In fact, according to Merrill Lynch, the glut of unsold homes continues to grow – with a record 4.3 million residential units still for sale this fall. And with new construction still booming by historical standards, Merrill Lynch estimates it could be at least a year before the supply overhang starts to dry up.

In other words, any turnaround in home demand and prices will take us well into 2008.

Even Ben Bernanke’s Fed has put the nation on notice. In the statement following its December meeting, the Central Bank called the slowdown in the housing market this year “substantial” – clearly raising the red flag about a housing fallout in the months to come.
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It’s a bold prediction, but one that comes from the nation’s heartland – a place where they may not be partying like we are in Manhattan this New Year’s Eve, but a place where they may have a better sense of the pulse of the 2007 economy.

Posted in Economics, Housing Bubble | 2 Comments

November Otteau Report

Posted on December 30, 2006 by grim

From the Otteau Group:

NOVEMBER SALES SUGGEST HOUSING MARKET BEGINNING TO STABILIZE

November home sales declined only slightly from the October pace reflecting more of a seasonal trend than a slump for the New Jersey housing market. In November, contract-sales declined by 10% from the prior month suggesting that the housing market is beginning to gain traction and may be nearing the end of its current slide. By comparison, the month-to-month decline in contract-sales one year earlier in November 2005 was 17% which went beyond a normal seaonal decline and reflected the housing slump that has been gripping the market for the past year.

Upon comparing the November sales pace to November 2005, contract-sales were off by only 6% which is the lowest decline for all of 2006. By comparison, monthly home sales were off by 19% from January through October and a whopping 23% during April through September, which were the worst months of the market correction.

From an Unsold Inventory perspective, the number of homes being offered for sale declined for the 3rd straight month with a reduction of 5,000 homes in November alone. Despite these encouraging signs however, Unsold Inventory now stands at 9.1 months based upon the November sales pace, indicating that home prices will not increase any time soon. By comparison, there were 6.3 months of Unsold Inventory one year ago and 10.4 months in September 2006. Therefore, the improvements in the housing market over the past two months signal more ‘bottoming-out’ than ‘recovery’.

There is however cause for cautious optimism as continuing low mortgage rates, new job creation and rising salaries are creating additional demand for home sales. Based upon these factors, coupled with the improved market performance of the past two months, it appears that the adjustment in the housing market will be more Correction than Crash. However, new home-builders and home-sellers alike would be wise to recognize that recent improvements are driven primarily by lower home prices which have restored a measure of affordability for home buyers. Thus, any attempts to increase prices during the early phases of market recovery will likely be unsuccessful. Therefore, Right-Pricing! will remain essential to successful home marketing.

Posted in New Jersey Real Estate | 15 Comments