Locked in is the new priced out

Posted on April 19, 2023 by grim

From DS News:

Fannie Mae: ‘Lock-in Effect’ Amplifying Housing Shortages

While the annual rate of increase in home prices slowed dramatically as a result of inflated interest rates, single-family home prices increased at a non-seasonally adjusted annual rate of 4.7% from Q1 2022 to Q1 2023, down from the previous quarter’s revised annual growth rate of 8.6%, according to Fannie Mae’s latest Home Price Index (FNM-HPI) reading, a national, repeat-transaction home price index measuring the average, quarterly price change for all single-family properties in the United States — excluding condos.

On a quarterly basis, home prices rose a seasonally adjusted 1% in Q1 2023, above the 0.0% growth seen in the prior quarter. On a non-seasonally adjusted basis, home prices also increased by 1% in Q1 2023.

“As expected, the annual rate of increase in home prices has slowed dramatically in response to the rapid and significant increase in interest rates,” said Doug Duncan, Fannie Mae Senior VP and Chief Economist. “Still, the fact that prices rose slightly in the first quarter is evidence of significant pent-up mortgage demand, despite ongoing affordability constraints. Even though mortgage rates remain elevated compared to the previous few years, the acute lack of housing supply remains supportive of home prices. Of course, the shortage of homes for sale is currently being exacerbated by the so-called ‘lock-in effect,’ which continues to disincentivize huge numbers of households with low mortgage rates from listing their homes.”

Posted in Demographics, Mortgages, National Real Estate | 73 Comments

Let the borrowing begin!

Posted on April 18, 2023 by grim

From the Star Ledger:

N.J. credit rating gets two more upgrades from Wall Street as state coffers overflow 

New Jersey’s credit rating has won two more upgrades from Wall Street’s major rating agencies, bringing the number of upgrades to three in just the past week and six since March 2022.

Moody’s Investor Service lifted the state’s rating one notch on April 6, and that was followed by upgrades from Fitch on Tuesday and S&P Global a day later. In statements announcing the upgrades, the three agencies cited full pension payments over the past two years, as well as record surpluses and efforts to pay down debt and avoid new borrowing.

All three announcements closely followed Gov. Phil Murphy’s $53.1 billion state budget proposal for the fiscal year that begins July 1, which he unveiled on February 28 to kick off four months of budget hearings and negotiations in the state Legislature.

From Patch:

NJ Gets 3 More Credit Rating Upgrades From Fitch, Moody’s, S&P

New Jersey has received three credit rating upgrades in the past week, as ratings services note the state’s “resilient” fiscal position following years of downgrades which hampered the state’s borrowing power. 

The most recent upgrade was from S&P Global Ratings, who upgraded its rating on New Jersey’s general obligation bonds from “A-” to “A” on Wednesday. 

Fitch Ratings upgraded NJ’s Issuer Default Rating (IDR) to “A+” on Monday, and Moody’s Investor Services upgraded the state’s rating from “A2” to “A1” last week. These ratings measure the health of a state’s economy, as well as a state’s ability to pay its debts.

“The upgrades reflect better pension funding levels and improved structural balance, largely the result of an anticipated third consecutive year of full actuarial pension contributions in fiscal 2024,” said S&P Global Ratings credit analyst David Hitchcock in a news release.

The upgrades come as the state is preparing to issue more than $1 billion in bonds for school facilities construction projects, which Fitch assigned an “A” rating to. Also, this week, New Jersey state legislators began their review of Gov. Phil Murphy’s proposed $53.1 billion budget for the next fiscal year — which starts this July.

Posted in Economics, New Jersey Real Estate, Politics | 73 Comments

Fastest selling markets in NJ (Feb edition)

Posted on April 15, 2023 by grim

From Redfin:

New Jersey Towns Where Homes are Still Selling Fast

According to RedFin‘s February 2023 data, it takes 61 days to sell a home in New Jersey, which is an 11 day increase from 2022.

We’ve compiled a list of 42 cities and towns in New Jersey where homes are selling fast, with Woodbury, NJ, Moorestown-Lenola, NJ, and Lavalette, NJ taking the number one spot at just 12 days to sell a house.
…
New Jersey Towns Where Homes are Selling Fast (Feb 2023 data)

1. Lavallette, NJ

Median Days on Market: 12

Median Sale Price: $875K

Homes Sold: 5

2. Moorestown-Lenola, NJ

Median Days on Market: 12

Median Sale Price: $650K

Homes Sold: 9

3. Woodbury, NJ

Median Days on Market: 12

Median Sale Price: $238K

Homes Sold: 11

4. Sprindale, NJ

Median Days on Market: 13

Median Sale Price: $485K

Homes Sold: 7

5. Collingswood, NJ

Median Days on Market: 13

Median Sale Price: $325K

Homes Sold: 9

6. Preakness, NJ

Median Days on Market: 14

Median Sale Price: $445K

Homes Sold: 5

7. Bradley Gardens, NJ

Median Days on Market: 15

Median Sale Price: $380K

Homes Sold: 7

8. Bound Brook, NJ

Median Days on Market: 16

Median Sale Price: $430K

Homes Sold: 6

9. Gloucester City, NJ

Median Days on Market: 17

Median Sale Price: $195K

Homes Sold: 7

10. Haddon Heights, NJ

Median Days on Market: 17

Median Sale Price: $365K

Homes Sold: 8

11. Berlin, NJ

Median Days on Market: 18

Median Sale Price: $319K

Homes Sold: 9

12. Westmont, NJ

Median Days on Market: 19

Median Sale Price: $470K

Homes Sold: 5

13. Wanaque, NJ

Median Days on Market: 19

Median Sale Price: $415K

Homes Sold: 9

14. South Plainfield, NJ

Median Days on Market: 19

Median Sale Price: $443K

Homes Sold: 14

15. Lincoln Park, NJ

Median Days on Market: 19

Median Sale Price: $368K

Homes Sold: 17

16. Somerset, NJ

Median Days on Market: 19

Median Sale Price: $430K

Homes Sold: 21

17. Bridgewater, NJ

Median Days on Market: 20

Median Sale Price: $455K

Homes Sold: 15

18. Upper Montclair, NJ

Median Days on Market: 21

Median Sale Price: $705K

Homes Sold: 7

19. Rossmoor, NJ

Median Days on Market: 21

Median Sale Price: $202K

Homes Sold: 10

20. Cherry Hill, NJ

Median Days on Market: 21

Median Sale Price: $370K

Homes Sold: 36

Posted in Demographics, Economics, Housing Bubble, New Jersey Real Estate | 53 Comments

Back in the pool!

Posted on April 12, 2023 by grim

From CNBC:

Homebuyer mortgage demand jumps after interest rates drop to two-month low

Today’s housing market is so pricey that homebuyers are highly sensitive to any distinct moves in mortgage rates. And that’s what happened last week. Rates dropped, and buyers dove in.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) decreased to 6.30% from 6.40%, with points decreasing to 0.55 from 0.59, including the origination fee, for loans with a 20% down payment, according to the Mortgage Bankers Association. That was a weekly average decline, but a sharper, one-day drop smack in the middle of the week was likely the impetus for demand.

“Incoming data last week showed that the job market is beginning to slow, which led to the 30-year fixed rate decreasing to 6.30% — the lowest level in two months,” said Mike Fratantoni, MBA’s SVP and chief economist.

Mortgage applications to purchase a home rose 8% last week, compared with the previous week. They were, however, 31% lower than the same week one year ago, when interest rates were significantly lower. Buyers have been up against not only higher rates and higher home prices, but very limited supply.

Applications to refinance a home loan were less reactive, basically flat week to week and 57% lower than the same week a year ago. At today’s interest rates, there are very few borrowers who can benefit from a refinance. For those looking to tap their home equity, they are largely opting for second loans rather than cash-out refinances.

Posted in Demographics, Economics, Housing Bubble, Mortgages | 122 Comments

Who can afford all this?

Posted on April 11, 2023 by grim

From Stacker:

The 50 cities in New Jersey where home prices are rising the fastest

Posted in Demographics, Economics, Housing Bubble, New Jersey Real Estate | 19 Comments

Welcome to the party

Posted on April 10, 2023 by grim

From Axios:

Millennial homeowners outnumber renters for the first time

Millennial homeowners outnumbered millennial renters for the first time last year, despite creeping interest rates and a tight real estate market.

Driving the news: Nearly 52% of the first generation to grow up in the Internet age ​​— people born from 1981 to 1996 — were homeowners in 2022, making the largest ownership gains of any generation in the last five years, according to a new RentCafe report.

By the numbers: The number of millennial homeowners increased by 7.1 million between 2017 and 2022 to 18.2 million, a 64% increase.

  • There are still 17.2 million millennial renters, which is still considered the dominant renter generation, RentCafe found.
  • The average millennial bought their first home at 34, slightly older than the average age of past generations, when boomers took the keys at 33 and Gen X at 32.

Yes, but: Older generations still own more homes than millennials.

  • Baby boomers, who were born 1946 to 1964, own about 32.1 million homes as of 2022, but lost 354,000 homeowners in the last five years.
  • Gen X, born from 1965 to 1980, own 24.4 million homes, an increase of 1.9 million.

Posted in Demographics, Economics, National Real Estate | 38 Comments

Don’t worry about commercial real estate…

Posted on April 9, 2023 by grim

From Insider:

Most of Wall Street is panicking about commercial real estate – but Goldman Sachs says there’s little chance it triggers a financial crisis

It seems like there are three words on the lips of every investor now that panic around the US’s regional banking sector is starting to die down: commercial real estate.

Big names ranging from Bill Ackman and Elon Musk to Bank of America and JPMorgan have predicted that the troubled sector will be where the next cracks appear in the US financial system – but Goldman Sachs bucked that trend this week.

“The risk of a vicious circle of large leveraged losses and undercapitalized balance sheets that would pose a threat to financial stability is still limited,” strategists Lotfi Karoui and Vinay Viswanathan said in a research note published Monday.

Goldman Sachs’ view clashes with analysts such as Bank of America’s Michael Hartnett, who said in a research note last week that commercial real estate would likely be the “next shoe to drop as lending standards… tighten further.”

Hartnett believes that a wave of upcoming refinancings of commercial real estate loans at much higher interest rates than in the past could spark a credit crunch in the sector, sending stocks spiraling and the economy into a recession.
…
While Karoui and Viswanathan are anticipating massive issues in the office sector – an area that other strategists have expressed concern about as well – they believe that apartments, manufacturing plants, warehouses, and other types of commercial real estate are better-capitalized and won’t suffer a huge crash.

“We expect office loan delinquencies to materially increase, but think this is unlikely to lead to systemic risk given healthier fundamentals in other commercial real estate subsectors,” the Goldman Sachs strategists said.

The turmoil will likely be contained to office loan delinquencies “given healthier fundamentals in other commercial real estate sub-sectors such as apartment and industrial properties, as well as in other parts of credit markets,” Karoui and Viswanathan added.

Posted in Economics, Mortgages, National Real Estate, Risky Lending | 24 Comments

Reinstate Pearson and Jones

Posted on April 8, 2023 by grim

From CSPAN:

Posted in Politics | 50 Comments

Heating up!

Posted on April 7, 2023 by grim

From CNN:

Mortgage rates fall for the fourth week in a row

Homebuyers benefited from another week of falling mortgage rates, with the average rate dropping for the fourth week in a row, according to data from Freddie Mac released Thursday.

The 30-year fixed-rate mortgage averaged 6.28% in the week ending April 6, down from 6.32% the week before. A year ago, the 30-year fixed-rate was 4.72%.

“Mortgage rates continue to trend down entering the traditional spring homebuying season,” said Sam Khater, Freddie Mac’s chief economist. “Unfortunately, those in the market to buy are facing a number of challenges, not the least of which is the low inventory of homes for sale, especially for aspiring first-time homebuyers.”

The average mortgage rate is based on mortgage applications that Freddie Mac receives from thousands of lenders across the country. The survey includes only borrowers who put 20% down and have excellent credit.

After hitting a 2022 high of 7.08% in November, rates started 2023 trending down. However, they climbed again in February, after robust economic data suggested the Federal Reserve was not done in its battle to cool the US economy and would likely continue hiking its benchmark lending rate.

The Fed raised interest rates by a quarter point at its most recent policymaking meeting, in an effort to continue to fight stubbornly high inflation while taking into account the risks to financial stability brought about by recent turmoil in the banking sector.

Posted in Economics, Mortgages, National Real Estate | 59 Comments

Jersey shore is underwater, but you still can’t get a good deal

Posted on April 6, 2023 by grim

From CNBC:

A hidden time bomb? A ‘Big Short’ investor sees financial disaster brewing in housing markets

More than a decade after a U.S. mortgage meltdown threatened to destroy the international financial system, a “Big Short” investor once again sees financial disaster brewing in the real estate market.

Dave Burt, CEO of investment research firm DeltaTerra Capital which aims to help clients manage climate risk, was one of the few skeptics who recognized the housing market was on the brink of collapse in 2007.

He helped two of the protagonists of Michael Lewis’ best-selling book “The Big Short” bet against the mortgage market in the lead-up to the 2008 global financial crash. As it turned out, they were right and made billions.

Now, Burt believes an overlooked climate risk could see history repeating itself.

“I’m always on the lookout for these big systemic issues and there’s a few of reasons for that,” Burt told CNBC via videoconference.

“Professionally, if something is mispriced, then as an investor, which has been my job for most of my career, your main opportunity to add value is to identify something that is either too cheap to purchase for your clients or something that it is too expensive to sell for your client,” he said.

“From a personal perspective, and this is partly based on that professional perspective, I’ve seen when that goes wrong, how impactful that can be on economies and society and our most vulnerable. And I’m really thinking through the post-global financial crisis period here in the U.S. from 2008 to 2012 where there was a huge amount of human suffering.”

Burt said DeltaTerra Capital’s research suggests that 20% of U.S. homes have “meaningful exposure” to a mispricing issue because of flood risk. If realized, he warned the fallout could resemble the extraordinary correction seen during the global financial crisis.

“We think of this repricing issue as maybe a quarter of the size and magnitude of the [global financial crisis] in aggregate, but of course very, very damaging within those exposed communities,” Burt said.

Posted in Crisis, National Real Estate, Risky Lending | 104 Comments

Vacancies and Zombies

Posted on April 4, 2023 by grim

From ATTOM Real Estate:

Top 10 U.S. Housing Markets with Zombie Properties in Q1 2023

From the Record:

North Jersey office vacancy hits 14-year high amid uncertain economy, report finds

The flight from offices triggered by the COVID-19 pandemic showed no signs of abating in this year’s first quarter, with north and central New Jersey’s office vacancy rate reaching its highest level since the Great Recession, according to a report Monday.

The vacancy rate was 25.8%, nearing the 26% recorded in 2009 in the wake of the global financial crisis, according to the quarterly analysis released by JLL, an East Rutherford-based real estate services firm.

“The first three months of 2023 were overshadowed by macroeconomic uncertainties, which provided headwinds to office demand,” the report said.

That continued the upward climb of the pandemic years. The vacancy rate was 24.5% at the end of 2022, JLL said. The firm cited “restrained demand” as well as consolidations of existing office space. About 1.8 million square feet of space came onto the market in this year’s first quarter, according to the report.

Hudson River waterfront properties saw the biggest declines. The largest deal signed in the quarter involved drugmaker Sanofi’s leasing of 260,000 square feet at the planned M Station West building in Morristown. The company will relocate its operations from Bridgewater in phases during late 2024 and early 2025, JLL said.

“Some companies are still looking to see what they want to do with their workspace going forward,” said Steven Jenco, director of New Jersey research at JLL. “Companies are still trying to feel out their return to office, how much space they’re going to need going forward.”  
…
Overall, New Jersey had 168 million square feet of office inventory in north and central new Jersey in the first quarter: 101 million in the north with a 26.8% vacancy rate, and 67 million in Central Jersey with a 24% vacancy rate, according to the JLL report.

Posted in Crisis, Demographics, Economics, New Jersey Real Estate | 97 Comments

Spring doesn’t matter this year?

Posted on April 3, 2023 by grim

From Money:

Why Seasonality Doesn’t Matter in the Housing Market This Spring

The housing market usually has seasonal ebbs and flows. Spring is historically a very strong season for the real estate market, and home sales tend to peak during the warmest months of summer.

But now, with interest rate hikes continuing to affect the terms mortgage lenders are offering to homebuyers, seasonality might not hold nearly the same influence on real estate. Rather, it looks like the market in 2023 could be all about mortgage rates.
…
Spring is normally the start of the busiest time of the year for home sales. However, there have been fewer closings than usual so far in 2023, even as the historically-active season kicks off. “We’re not seeing the typical spring seasonal increase in business,” Redfin agent Shauna Pendleton said in a news release.

The real estate market is morphing. The Federal Reserve’s interest rate hikes have had a depressing effect on the housing market. When the central bank hikes rates, it becomes more expensive to borrow money. This ripples across to variable-rate loans like credit cards and mortgages, pushing these rates up in turn. The rate hikes are indirectly causing the market to shirk its typical seasonal trends.

As the Fed softens ever so slightly on its most recent rate hike, mortgage rates seem like the new end all, be all for the housing market in 2023.

“There’s no seasonality,” Pendleton said. “Homebuyers and sellers are hyper-focused on mortgage rates.”

Posted in Mortgages, National Real Estate | 93 Comments

Lowball! Alpine Edition

Posted on April 1, 2023 by grim

From NJ1015:

New Jersey’s most expensive home finally sells — look inside

The Stone Mansion in Alpine — New Jersey’s most expensive home for sale — has finally sold years after it was listed.

The sale price, which started out at $68 million in 2010 before it was even finished, was dropped over the years and finally sold for $27.5 million. The home was completed in 2013 and has been on the market ever since.

So, what does that much money get you? First off, 30,000 square feet of living space; 12 bedrooms, 15 full bathrooms and four half-baths. From the Sotheby’s listing, you also get:

Reception rooms of grand scale proportions include a ballroom, martini parlor, his and her libraries, formal living room, formal dining room, north and south art galleries, and wine tasting room.

It has a 65-foot saltwater pool (the pool house has its own kitchen), a tennis court, an elevator to all levels, and a heated driveway.

Posted in Housing Bubble, Lowball, New Jersey Real Estate | 84 Comments

Why wouldn’t they?

Posted on March 31, 2023 by grim

From CNBC:

More home sellers are sitting out of the spring housing market

It might seem like a great time to list your home for sale. Buyers are flooding back into the market, mortgage rates have fallen off their recent highs, and there are still far too few homes for sale to meet demand. But potential sellers aren’t budging.

New listings continued to fall in March, according to Realtor.com, down 20% from the same month last year. That decline in new listings outpaced the 16% drop posted in February. New listings in March were nearly 30% below pre-pandemic levels.

The active inventory of homes for sale is, however, 60% higher than the start of last spring, but that is only because homes are taking longer to sell. Inventory is also half of what it was at the start of spring in 2019, before the Covid pandemic caused an unprecedented run on housing.

Homes are now sitting on the market an average of 54 days, up from an average of 36 days at the start of last spring. Time on market was longer in all of the top 50 metropolitan markets, but the greatest increases were in Raleigh, North Carolina (up 42 days), Kansas City, Missouri (up 37 days), and Austin, Texas (up 37 days). 

“Amid fewer new choices on the market and still rising home prices, home shoppers have shown that they are very rate sensitive, only jumping back in the market when rates dip, and so what happens with rates this spring will likely play a strong role in determining whether the housing market bumps along or picks up speed this year,” said Danielle Hale, chief economist at Realtor.com.

Posted in Housing Bubble, Mortgages, National Real Estate | 111 Comments

Big Discount?

Posted on March 30, 2023 by grim

From the Star Ledger:

More N.J. homes are selling below asking price

List price and what buyers actually paid for a home in New Jersey have been wildly different for the past few years.

Bidding wars that drove up sales prices were a hallmark of the pandemic market. And now that the market is cooling — largely due to higher interest rates on mortgages — buyers are gaining more control in the residential real estate market.

“People don’t have as much money to spend because interest rates are so much higher,” said Marybeth Mcgee of RE/MAX Bay Point Realtors. “What they could afford last year is now almost $100,000 less.”

Home prices have risen 36% since 2020, and interest rates have doubled since August 2021.

A person making $100,000 per year with a 10% down payment could’ve afforded a home for $383,355 in August 2021. By December 2022 their buying affordability dropped to $279,733, according to data from the Otteau Group.

And a person with an income of $200,000 could’ve afforded a home for $1,085,861 in August 2021. In December 2022 the affordable price tag dropped to $808,295.

Typically home prices increase only 4 to 5 percent per year, said Jeffrey Otteau, a real estate economist and president of the Otteau Group. Between 2013 and 2019, home prices increased an average of 3.5%.

Prices were bid up by people coming from New York City and adjusting them to their own income levels. “People working in New Jersey cannot afford house prices in New Jersey because of this dynamic,” Otteau said.

Percent of list price paid on closed sales in New Jersey dipped below 100% for the first time in December 2022, when it hit 99.8%. It slipped further in January, to 99.4%, and to 99.1% in February, according to data from New Jersey Realtors.

Percent of list price peaked in New Jersey in June 2022 at 105.1%. At that same time — two months after the interest hiked began — price reductions became more common across the state.

Posted in Demographics, Economics, Employment, New Jersey Real Estate | 82 Comments