No recession in NJ’s industrial markets

Posted on October 10, 2022 by grim

From NJBIZ:

Industrial real estate sector closes Q3 with strong fundamentals

Rounding the corner on 2022, the industrial real estate sector closed the third quarter with strong fundamentals. The vacancy rate is under 3% while rents continue to grow as demand refuses to abate, despite potentially brewing economic headwinds. In the region, that differs slightly from the national picture where Cushman & Wakefield reported industrial supply outpaced demand for the first time in eight quarters.

But that isn’t the case in New Jersey.

Here, net absorption and demand are still neck and neck. Despite construction, fierce demand keeps preleasing strong with about 90% of under-development product spoken for. “As of yet, we have not seen the uncertainty in the national economy directly impact the imbalanced supply and demand curve found in our region,” said James Delmonte, vice president and director of research at NAI James E. Hanson.

“It’s the diversity of demand that is so key,” JLL Vice Chairman and Head of the Northeast Industrial Region Robert Kossar told NJBIZ just ahead of the close of Q3. “Industrial isn’t just e-commerce these days. Everyone’s trying to right-size their supply chain. Everybody’s trying to get closer to the customer, which goes super well for New Jersey.” On top of that, Kossar added that compared with most states, New Jersey has a “good labor story,” as well, which is becoming increasingly important to occupiers.

“[I]t doesn’t matter if you’re a brick-and-mortar store of a manufacturer, or any kind of wholesaler — it doesn’t matter what you do right now. You’re trying to expand your inventory because you don’t want to get caught without products and you’re wanting those products to be closer to the customer,” he said. “[W]hether they’re an appliance manufacturer and wholesaler or a retailer with physical brick-and-mortar stores and e-commerce, or a medical device manufacturer that needs to distribute locally. I mean, they’re all active right now.”

Construction is also on the upswing. According to JLL’s Q3 Industrial Insight, building is at “its highest level in history,” with approximately 27.2 million square feet under development – double that of 15 months ago – and 17.7 million square feet having broken ground in the Garden State year to date. According to NAI Hanson’s 3Q 2022 Industrial Report, 16.5 million square feet of new construction is expected to be delivered over the next five quarters across North and Central Jersey.

Posted in Economics, New Jersey Real Estate | 75 Comments

Hellooo 7 point o

Posted on October 8, 2022 by grim

From CNBC:

Unemployment rate falls to 3.5% in September, payrolls rise by 263,000 as job market stays strong

Job growth fell just short of expectations in September and the unemployment rate declined despite efforts by the Federal Reserve to slow the economy, the Labor Department reported Friday.

Nonfarm payrolls increased 263,000 for the month, compared with the Dow Jones estimate of 275,000.

The unemployment rate was 3.5% versus the forecast of 3.7% as the labor force participation rate edged lower to 62.3% and the size of the labor force decreased by 57,000. A more encompassing measure that includes discouraged workers and those holding part-time jobs for economic reasons saw an even sharper decline, to 6.7% from 7%.

September’s payroll figure marked a deceleration from the 315,000 gain in August and tied for the lowest monthly increase since April 2021.

“Depending on your view of optimism vs. pessimism, on the economy, there’s a little bit of something for everyone in this report,” said Liz Ann Sonders, chief investment strategist at Charles Schwab. “Obviously, the market is not happy, but the market is not happy in general these days.”
…
“This puts the nail in the coffin for another 75 [basis point rate increase] in November,” said Jeffrey Roach, chief economist at LPL Financial. A basis point is 0.01 percentage point.

Posted in Demographics, Economics, Employment, National Real Estate | 41 Comments

Jobs Day!

Posted on October 7, 2022 by grim

From CNBC:

Friday’s jobs report could be a case where good news isn’t really good

Investors are closely watching the nonfarm payrolls report due out Friday, but not for the usual reasons.

In normal times, strong job gains and rising wages would be considered a good thing. But these days, they’re exactly what the U.S. economy doesn’t need as policymakers try to beat back an inflation problem that just won’t seem to go away.

“Bad news equals good news, good news equals bad news,” Vincent Reinhart, chief economist at Dreyfus-Mellon, said in describing investor sentiment heading into the key Bureau of Labor Statistics employment count. “Pretty much uniformly what is dominant in investors’ concerns is the Fed tightening. When they get bad news on the economy, that means the Fed is going to tighten less.”

Economists surveyed by Dow Jones expect the report, due out Friday at 8:30 a.m. ET, will show that payrolls increased 275,000 in September, while the unemployment rate held at 3.7%. At least as important, estimates are for average hourly earnings to increase 0.3% month over month and 5.1% from a year ago. The latter number would be slightly below the August report.

Any deviation above that could signal that the Federal Reserve needs to get even more aggressive on inflation, meaning higher interest rates. Lower numbers, conversely, might provide at least a glimmer of hope that cost of living increases are abating.

Wall Street forecasters were split on which way the surprise might come, with most around the consensus. Citigroup, for instance, is looking for a gain of 265,000, while Nomura expects 285,000.

Posted in Economics, Employment, National Real Estate | 84 Comments

Corelogic’s Losers

Posted on October 6, 2022 by grim

From Money.com:

5 Cities Where Home Prices Are Most Likely to Fall Next Year

It’s been quite a turnaround for the once-hot housing market: Home prices are already falling in many cities, and there’s more where that came from.

New data from real estate company CoreLogic predicts the cities that are most at risk of home price declines over the next year. Here are the top five:

  1. Crestview-Fort Walton Beach-Destin, Florida
  2. Bremerton-Silverdale, Washington
  3. Bellingham, Washington
  4. Boise City, Idaho
  5. Reno, Nevada

Each city on the list has a more than 70% chance that prices will fall, according to CoreLogic’s analysis.

In some cases, price declines are already underway. In August, home prices in Boise City were 3% lower than they were a year earlier, according to data from real estate brokerage Redfin. The city was also named by home-financing startup Knock as one of a handful of places where homebuyers now have the advantage over home sellers — a clear sign of a major shift in the real estate market there.

Posted in Economics, Housing Bubble, National Real Estate | 59 Comments

The Realtors Said What?

Posted on October 5, 2022 by grim

From the NAR:

Buckle Up: Home Prices Are Expected To Fall by a Lot—Even If There Isn’t a Recession

The U.S. Federal Reserve has completely upended the housing market, taking it from turbocharged to rapid deceleration.

The effects of the Fed’s rate hikes in its war against inflation are being felt in just about every crevice of the economy, as recession fears are quickly mounting. The stock market keeps falling, companies are scaling back on hiring or letting workers go, and mortgage interest rates are rising even more than anticipated, causing homebuyers to slam on the brakes.

Home prices in many markets have even begun falling from their peaks. Now, the question is how far they will drop—and what fissures will be opening elsewhere in the economy to propel these changes.

The red-hot housing market will likely “have to go through a correction” as “housing prices were going up at an unsustainably fast level,” Jerome Powell, chair of the Federal Reserve, said in a press conference last week.

While economists debate whether the nation is already in a recession or heading toward a downturn, it’s clear that the housing market has shifted dramatically.

“The Fed is determined to cool inflation, and they’re willing to throw housing under the bus to do so,” says Devyn Bachman, senior vice president of research at John Burns Real Estate Consulting. “When you raise [mortgage] rates to the point they’re at today, it breaks the back of housing.”

A year ago, homes were selling in mere hours as throngs of buyers tried to outbid one another by tens, if not hundreds, of thousands of dollars over the asking price. However, when the Fed began raising its rates, mortgage interest rates also went up, making it significantly more expensive for buyers to afford housing.

So home prices have begun coming down from the summer, and many would-be buyers aren’t purchasing homes. Sellers, realizing they missed the peak, are holding off on listing their homes. Many who need to sell are cutting prices.

“The deceleration in housing prices that we’re seeing should help bring … prices more closely in line with rents and other housing market fundamentals—and that’s a good thing,” Powell said last week. “For the longer term, what we need is supply and demand to get better aligned so that housing prices go up at a reasonable level, at a reasonable pace, and that people can afford houses again.”

Some fear the Fed’s course of action could be too much for the housing market to withstand. Prices have been falling from a peak in June. And while prices are still up from a year ago, many real estate experts predict they’re about to fall much further.

Posted in Housing Bubble, Mortgages, National Real Estate | 44 Comments

Correction or Crash?

Posted on October 3, 2022 by grim

From Bloomberg:

US Home Prices Now Posting Biggest Monthly Drops Since 2009

Median home prices fell 0.98% in August from a month earlier, following a 1.05% drop in July, Black Knight Inc. said in a report Monday. The two periods mark the largest monthly declines since January 2009.

“Together they represent two straight months of significant pullbacks after more than two years of record-breaking growth,” said Ben Graboske, Black Knight Data and Analytics president.

The housing market is losing steam fast with skyrocketing mortgage rates driving affordability to the lowest level since the 1980s. The Federal Reserve has sought to curb inflation, which has thrown cold water on the US real estate boom.

While prices are falling on a month-over-month basis, they’re still significantly higher than a year earlier when the buying frenzy was going strong. Values were up 12.1% from a year earlier in August.

The sharpest correction in August was in San Jose, California, down 13% from its 2022 peak, followed by San Francisco at almost 11% and Seattle at 9.9%, the company said.

Posted in Housing Bubble, National Real Estate | 111 Comments

Where o’ where will housing crash?

Posted on September 30, 2022 by grim

From Marketwatch:

Most economists see the U.S. turning into a buyer’s housing market in 2023. Here’s where you’ll see the biggest declines in value.

Frustrated by the housing market? Housing experts say they’re expecting the market to tip back into buyers’ court by 2023, according to a new report.

Mortgage rates are approaching 7%, but home prices are only slowly coming back down and inventory is still tight compared to pre-pandemic levels.

Still, the U.S. housing market will shift in favor of home buyers by the end of 2023, 44% of 107 economists and housing experts polled by real-estate company Zillow for its Home Price Expectations Survey said. 

And 12% of these experts believed that shift will happen sooner — that is, this year.

Yet roughly 45% of experts surveyed by Zillow say buyers will have to wait, and expect the market to shift in buyers’ favor in 2024, and beyond.

All survey respondents said to expect home-price deceleration in 2023.
…
Most of the housing experts surveyed by Zillow noted that the markets most likely to see home prices decline over the next year include pandemic boomtowns like Boise, Austin, and Raleigh; 77% of the experts surveyed expect declines in those cities. They saw a huge jump in sales amid the earliest days of the coronavirus pandemic.

Redfin, another real-estate brokerage company, also noted that Sun Belt home buyers are cancelling their home-purchase agreements at the highest rate as compared to the rest of the nation.
…
The markets least likely to see home prices decline over the next year include Midwestern cities like Columbus, Indianapolis, and Minneapolis, Zillow said. Only 36% of respondents expected home prices to decline in these areas over the next 12 months.

Posted in Housing Bubble, National Real Estate | 133 Comments

So much for the mortgage industry

Posted on September 29, 2022 by grim

From CNBC:

Mortgage refinancing drops to a 22-year low as interest rates surge even higher

Mortgage rates drove even higher last week after the Federal Reserve signaled it would continue its aggressive action to cool inflation. That, and rising uncertainty in the overall housing market, caused mortgage application volume to drop 3.7% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

After a strange rebound the week before, applications to refinance a home loan declined 11% for the week and were 84% lower than the same week one year ago. They are now at a 22-year low because there are very few borrowers who can benefit from a refinance at today’s higher rates.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 6.52% from 6.25%, with points rising to 1.15 from 0.71 (including the origination fee) for loans with a 20% down payment. That is the highest level since mid-2008.

“After a brief pause in July, mortgage rates have increased more than a percentage point over the past six weeks,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting. “Ongoing uncertainty about the impact of the Fed’s reduction of its MBS and Treasury holdings is adding to the volatility in mortgage rates.”

Posted in Economics, Mortgages, National Real Estate | 78 Comments

Poof

Posted on September 28, 2022 by grim

From CNBC:

Home prices cooled in July at the fastest rate in the history of S&P Case-Shiller Index

U.S. home prices cooled in July at the fastest rate in the history of the S&P CoreLogic Case-Shiller Index, according to a report released Tuesday.

Home prices in July were still higher than they were a year ago, but cooled significantly from June gains. Prices nationally rose 15.8% over July 2021, well below the 18.1% increase in the previous month, according to the report.

The 10-City composite, which tracks prices in major metropolitan areas such as New York and Boston, climbed 14.9% year over year, down from 17.4% in June. The 20-City composite, which adds regions such as the Seattle metro area and greater Detroit, gained 16.1%, down from 18.7% in the previous month. July’s year-over-year gains were lower compared with June in each of the cities covered by the index.

“July’s report reflects a forceful deceleration,” wrote Craig J. Lazzara, managing director at S&P DJI in a release, noting the difference in the annual gains in June and July. The 2.3 percentage point “difference between those two monthly rates of gain is the largest deceleration in the history of the index.”

Tampa, Florida, Miami and Dallas saw the highest annual gains among the 20 cities in July, with increases of 31.8%, 31.7% and 24.7%, respectively. Washington, D.C., Minneapolis and San Francisco saw the smallest gains, but were still well above year-ago levels.

Posted in Demographics, Economics, Employment, Housing Bubble, National Real Estate | 69 Comments

“More remote work leads to higher house prices and rents”

Posted on September 27, 2022 by grim

From Bloomberg:

Remote Work Drove Over 60% of House-Price Surge, Fed Study Finds

The shift to working from home drove more than half of the increase in house and rent prices during the pandemic and will likely drive up costs and inflation going forward as the shift becomes permanent, according to research from the Federal Reserve Bank of San Francisco. 

“The transition to remote work because of the COVID-19 pandemic has been a key driver of the recent surge in housing prices,” economists Augustus Kmetz and John Mondragon, of the San Francisco Fed, and Johannes Wieland of the University of California, San Diego, wrote in a note published Monday.

House prices rose 24% in the two years ended November 2021, the authors wrote. More than 60% of that increase is attributable to the rise in work from home during the pandemic — a trend that has persisted, with 30% of work still being done from home as of last month.

“This suggests that the fundamentals of housing demand have changed, such that the persistence of remote work is likely to affect the future path of real estate prices and inflation,” the economists wrote. 

The authors, who adjusted housing data to account for the migration from expensive cities to more affordable areas that occurred during the pandemic, found that each 1 percentage point increase in remote work results in about a 0.9 percentage point increase in house prices. The impact on rent prices has been identical.

Posted in Demographics, Economics, Employment, Housing Bubble, National Real Estate | 86 Comments

The starter home may never exist again

Posted on September 26, 2022 by grim

From the NYT:

Whatever Happened to the Starter Home?

As recently as the 1990s, when Jason Nageli started off, the home-building industry was still constructing what real-estate ads would brightly call the “starter home.” In the Denver area, he sold newly built two-story houses with three bedrooms in 1,400 square feet or less.

The price: $99,000 to $125,000, or around $200,000 in today’s dollars.

That house would be in tremendous demand today. But few builders construct anything like it anymore. And you couldn’t buy those Denver area homes built 25 years ago at an entry-level price today, either. They go for half a million dollars.

The disappearance of such affordable homes is central to the American housing crisis. The nation has a deepening shortage of housing. But, more specifically, there isn’t enough of this housing: small, no-frills homes that would give a family new to the country or a young couple with student debt a foothold to build equity.

The affordable end of the market has been squeezed from every side. Land costs have risen steeply in booming parts of the country. Construction materials and government fees have become more expensive. And communities nationwide are far more prescriptive today than decades ago about what housing should look like and how big it must be. Some ban vinyl siding. Others require two-car garages. Nearly all make it difficult to build the kind of home that could sell for $200,000 today.

“It’s just become where you can’t get to that number anymore,” said Mr. Nageli, now the operations manager for the Utah builder Holmes Homes.

Nationwide, the small detached house has all but vanished from new construction. Only about 8 percent of new single-family homes today are 1,400 square feet or less. In the 1940s, according to CoreLogic, nearly 70 percent of new houses were that small.

Posted in Demographics, Economics, National Real Estate | 50 Comments

Foreclosures coming?

Posted on September 25, 2022 by grim

From Patch:

NJ Housing Market Troubles Loom As Foreclosures Surge: Reports

With inflation still high, foreclosures nearing pre-pandemic levels and a recession potentially looming, new analysis warns that New Jersey has some of the nation’s most vulnerable housing markets. Meanwhile, the Garden State has one of the highest foreclosure rates in the United States, according to new reports from ATTOM.

New Jersey had the nation’s fourth-highest rate of properties entering foreclosure filings in August — 1 out of 2,441 housing units, according to the real estate data curator. Only Illinois (1 in every 1,926), Delaware (1 of every 2,387) and South Carolina (1 in every 2,417) had higher rates.

Based on gaps in home affordability, underwater mortgages, foreclosures and unemployment, many of New Jersey’s housing markets show among the highest risks of decline in the nation, according to ATTOM.
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Many of New Jersey’s most vulnerable markets include suburbs of New York and Philadelphia. Bergen, Essex, Ocean, Passaic, Sussex, Union, Camden and Gloucester Counties are among the nation’s 50 most vulnerable housing markets based on data from the second quarter of 2022, according to ATTOM.

Out of the top 50 most vulnerable counties, three in New Jersey had among the highest rates of homes with a foreclosure action during the second quarter. Cumberland County (1 in 373 homes), Warren County (1 in 373) and Camden County (1 in 462). Only Cuyahoga County (Cleveland), Ohio, had a higher foreclosure rate (1 in 365 homes) on the list of vulnerable markets.

Posted in Economics, Foreclosures, Mortgages, New Jersey Real Estate | 18 Comments

UK brings out the big guns to fight recession

Posted on September 23, 2022 by grim

From CNBC:

UK government dishes out extensive tax cuts as country braces for recession

The measures include:

  • Cancellation of a planned rise in corporation tax to 25%, keeping it at 19%, the lowest rate in the G-20.
  • A reversal in the recent 1.25% rise in National Insurance contributions — a tax on income.
  • A reduction in the basic rate of income tax from 20 pence to 19 pence.
  • Scrapping of the 45% tax paid on incomes over £150,000 ($166,770), taking the top rate to 40%.
  • Significant cuts to stamp duty, a tax paid on home purchases.
  • A network of “investment zones” around the country where businesses will be offered tax cuts, liberalized planning rules and a reduction in regulatory obstacles.
  • A claim-back scheme for sales taxes paid by tourists.
  • Scrapping of an increase in tax rates on various alcohols.
  • Scrapping of a cap on bankers’ bonuses.
Posted in Economics, Politics | 99 Comments

Not going to get better any time soon

Posted on September 22, 2022 by grim

From CNN:

Home sales dropped 20% in August from a year ago

Home sales declined for the seventh month in a row in August as higher mortgage rates and stubbornly high prices pushed prospective buyers out of the market.

Sales of existing homes — which include single-family homes, townhomes, condominiums and co-ops — were down 19.9% from a year ago and down 0.4% from July, according to a report from the National Association of Realtors. 

Sales in August were at their weakest level since May 2020, which was an anomaly because that was in the early days of the pandemic lockdown. Setting that aside, sales last month were the weakest they have been since November 2015.

A year-over-year decline in sales was seen in all price categories, with steeper drops at the lower end, and in all regions, dropping the most in the West where affordability challenges are greatest.

Home prices continued to climb during the month, although it was the lowest year-over-year increase since June 2020. The median home price was $389,500 in August, up 7.7% from a year ago, according to the report. That’s down from the record high of $413,800 in June. The price increase marks more than a decade of year-over-year monthly gains.

“The housing sector is the most sensitive to and experiences the most immediate impacts from the Federal Reserve’s interest rate policy changes,” said Lawrence Yun, NAR’s chief economist. “The softness in home sales reflects this year’s escalating mortgage rates.”

Posted in Economics, Housing Bubble, National Real Estate | 96 Comments

Decision Day

Posted on September 21, 2022 by grim

From CNBC:

Fed expected to hike rates by three-quarters of a point again, but its forecast may matter most

It’s not what the Federal Reserve does, but what it says it could do in the future that will be most crucial when the central bank ends its two-day meeting Wednesday.

The Fed is expected to fire off another three-quarter point rate hike — its third in a row. It will also release quarterly forecasts for inflation, the economy, and the future path of interest rates Wednesday at 2 p.m. ET.

The Fed’s projections are always important, but this time they are even more so because investors have been trying to game how high it will raise interest ratesand how much officials expect their actions could affect the economy.

Fed Chair Jerome Powell speaks at 2:30 p.m. ET, and he is expected to emphasize the central bank will do what it takes to fight inflation and it is unlikely to reverse its rate hikes anytime soon.

Posted in Economics, Mortgages, National Real Estate | 122 Comments