New Jersey Real Estate Report

More inventory? Nah.

Posted on December 11, 2022 by grim

From Fox Business:

Housing turnover will drop to lowest rate since the 80s, economist projects

Home sale activity next year may reach the lowest point since the early 1980s as households buying or selling real estate retreat from the market, predicts Redfin deputy chief economist Taylor Marr.

Marr projected that only 32 out of 1,000 households will sell their home in 2023.

Affordability in the housing market is likely to “remain a pretty strong constraint” next year even if mortgage rates ease, Marr said.

“Mortgage interest rates have risen rapidly this year … raising the monthly payment by about 50%,” Marr said. “We do expect some moderation in rates to go into next year. But even after accounting for that and the elevated prices overall, affordability is likely to remain a pretty strong constraint.”
…
People who either thought about or were selling their homes “decided they’re going to wait a couple of years until rates are much lower and economic environment is better,” he said.

Why not assumable loans?

Posted on December 9, 2022 by grim

From MarketWatch:

How people bought homes in the 1980s when mortgage rates were 18%

For all the similarities between the 1980s and today, there are key differences. One of them involves “assumable mortgages,” which were plentiful then and are in short supply now.

Many mortgages were assumable at the dawn of the 1980s. With an assumable mortgage, the buyer not only gets ownership of the house but takes over the seller’s home loan, too. Picture yourself trying to buy a house when mortgage rates are in the double digits. You find a home seller who has an assumable loan with an interest rate in the single digits. That home may be affordable if you can take over the loan; it might not be affordable at a double-digit interest rate.

Posted in Economics, Mortgages, National Real Estate, Risky Lending | 166 Comments

Too damn high

Posted on December 8, 2022 by grim

From Bloomberg:

Manhattan renters face sticker shock with average rent at $5,200

Manhattan rents rose 2% in November, dashing hopes that prices would cool and forcing many renters to give up their leases or downsize, according to brokers.

The median rent for a Manhattan apartment in November hit $4,033, up from $3,964 in October, according to a report from Douglas Elliman and Miller Samuel. The average rent, which is often skewed by luxury sales, fell slightly for the month but is still up 19% over last year, hitting $5,249 in November.

The increases continue to defy predictions that New York’s sky high rents would fall after the summer and give renters some relief after rents hit all-time records. While rents are easing in many parts of the country, New York’s rents remain stubbornly high and the number of unrented or empty apartments remains low.

“Rents are not coming down as quickly as many would hope,” said Jonathan Miller, CEO of Miller Samuel.

The rise in New York rents also adds pressure to overall inflation, since rents are a large component of inflation indexes and New York is the nation’s largest rental market.

Manhattan rents are so high that many tenants have started to balk at the prices — either moving out of the city or finding smaller, less expensive rentals. The number of new leases signed in November plunged 39% over October, marking the biggest decline since the start of the pandemic in 2020, according to Miller.

Posted in New Jersey Real Estate, NYC | 22 Comments

The new inflation baseline

Posted on December 6, 2022 by grim

From the WSJ:

Must Inflation Be Brought Down All the Way to 2%?

“Why must inflation be around 2%?” is a question that obsessed central bankers back when inflation was stubbornly below their favorite target. It makes more sense to ask it now.

This past week, a string of data has suggested that inflation is finally on a downward trend. The U.S. personal-consumption expenditures price index excluding food and energy—the Federal Reserve’s preferred measure of inflation—recorded its second-smallest monthly increase for the year, even as consumer spending jumped and job growth continued. Meanwhile, eurozone inflation receded to 10% in November, suggesting that October’s 10.6% was the peak.

Stocks have rallied, especially after Fed Chairman Jerome Powell said Wednesday that interest rates will go up in smaller increments from now on. But he also indicated that the tightening is far from over. Indeed, central bankers don’t ultimately care if inflation stops rising: They want it to go down, back to the 2% number they are mandated to hit.

It underscores the misalignment between their interests and everybody else’s, which should worry investors.

Inflation in many rich countries has been decelerating since July, yet economists don’t expect it to return to 2% until a distant 2025, based on median forecasts. Derivatives markets price in that the Fed, the European Central Bank and the Bank of England will stop raising rates in 2023, cut them later in the year, and then sit on their laurels for two full years as inflation grinds down.

But what if inflation stabilizes at a higher rate—say between 4% and 6%? In this plausible case, central banks may be compelled to start needlessly raising rates again, catching investors off guard. It would make a lot more sense to raise the inflation target instead, or define it as a wider range.

Posted in Economics, Employment, Mortgages, Politics | 135 Comments

Kaboom?

Posted on December 4, 2022 by grim

From the NY Post:

Here’s how much US home prices will plunge in current market bubble

US home prices will likely have to decline by as much as 20% over the course of a multi-year correction before the housing sector can get back on track with historical trends, a research firm warned this week.

The most recent correction cycles that occurred in the US housing market, such as a bubble in the 1990s and the sector’s implosion in the mid-2000s, took several years to conclude, DataTrek Research co-founder Nicholas Colas said.

In the current market, US home prices have only begun to fall in the last few months – suggesting the declines will continue for the foreseeable future.

“US home prices need to fall by about 15-20 percent over the coming years in order to return to their long run growth trend. That process is clearly starting but has a good way to go,” Colas said in a note to investors this week obtained by Insider.

Colas stated that peak home prices in June were 29% higher than their historical trend.

Posted in Economics, Housing Bubble, National Real Estate | 71 Comments

Jobs Day!

Posted on December 2, 2022 by grim

From CNN:

What to expect from Friday’s jobs report

Friday’s closely watched jobs report is expected to show a slowdown in November, with just 200,000 positions added, according to economists polled by Refinitiv.

But while the recent wave of layoffs hitting the tech sector has dominated news cycles and triggered concerns that a larger reckoning may be on the horizon, labor economists say those concerns are overblown.

“All these announcements that you hear: 10,000 [layoffs] here and 10,000 there, are basically a very, very small fraction of the total employment,” said Daniil Manaenkov, an economic forecaster at the University of Michigan.

Despite a slew of deep cutbacks — primarily at tech companies and other firms that scaled up during the pandemic — and fears that this is the calm before the storm, the broader labor market has barely flinched.

“We’ve just not seen those plans bear out to the degree that we expected,” said Julia Pollak, labor economist at employment marketplace ZipRecruiter. “Companies seem to be preparing an escape route, they’re working on their disaster response plans, but they’re preparing for a downturn that hasn’t happened.”

Posted in Economics, Employment | 88 Comments

Year over year home prices slow

Posted on November 30, 2022 by grim

From CNBC:

U.S. single-family home prices slow again in September

U.S. single-family home prices slowed further in September as higher mortgage rates eroded demand, closely watched surveys showed on Tuesday.

The S&P CoreLogic Case Shiller national home price index dropped 0.8% month-over-month in September. Monthly house prices fell in July for the first time since late 2018.

House prices rose 10.6% year-on-year in September, slowing from August’s increase of 12.9%.

The housing market has been hammered by aggressive Federal Reserve interest rate hikes that are aimed at curbing high inflation by dampening demand in the economy.

The 30-year fixed mortgage rate breached 7% in October for the first time since 2002, data from mortgage finance agency Freddie Mac showed. Though the rate retreated to an average of 6.58% last week, it remains well above the 3.10% average during the same period last year.

“As the Fed continues to move interest rates higher, mortgage financing continues to be more expensive and housing becomes less affordable,” Craig Lazzara, managing director at S&P DJI, said in a statement. “Given the continuing prospects for a challenging macroeconomic environment, home prices may well continue to weaken.”

Data this month showed sales of previously owned homes logged their ninth straight monthly decline in October, while single-family homebuilding and permits for future construction dropped to the lowest levels since May 2020.

Posted in Economics, National Real Estate | 179 Comments

NJ & PA economies looking strong

Posted on November 29, 2022 by grim

From the Philly Fed:

State Coincident Indexes – October 2022

The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for October 2022. Over the past three months, the indexes increased in 36 states, decreased in 11 states, and remained stable in three, for a three-month diffusion index of 50. Additionally, in the past month, the indexes increased in 20 states, decreased in 22 states, and remained stable in eight, for a one-month diffusion index of -4. For comparison purposes, the Philadelphia Fed has also developed a similar coincident index for the entire United States. The Philadelphia Fed’s U.S. index increased 0.7 percent over the past three months and 0.1 percent in October.
…

Pennsylvania

In the three months to October, the coincident index for Pennsylvania rose 1.4 percent. The level of payroll employment increased over the past three months but remained slightly lower than that of February 2020. The unemployment rate fell significantly during the three-month period. However, average hours worked in manufacturing fell. Overall, Pennsylvania’s economic activity as measured by the coincident index has risen 6.9 percent over the past 12 months.

New Jersey

In the three months to October, the coincident index for New Jersey rose 1.2 percent. The level of payroll employment increased over the past three months. The unemployment rate fell during the three-month period. In addition, average hours worked in manufacturing remained stable. Overall, New Jersey’s economic activity as measured by the coincident index has risen 6.2 percent over the past 12 months.

Posted in Economics, Employment | 76 Comments

Jersey City loses their minds

Posted on November 28, 2022 by grim

From the Jersey Journal:

Jersey City considers barring property owners from selling homes until they replace lead water lines

As the Jersey City Municipality Utility Authority works on removing all lead pipes by 2031, the city council could bar property owners from selling their homes unless their lead water lines have been replaced.

The council will introduce an amended ordinance Monday that would require property owners to have proof that their lead service lines have been replaced to get a certificate of occupancy, certificate of code compliance, and smoke and carbon monoxide detector certificates — all of which are required to for any transfer of ownership of property.

However, JCMUA spokesman Phil Swibinski said the agency responsible for managing the city’s water and sewage systems will work closely with property owners throughout the year-long pipe removal process.

“As areas in the cities are prioritized, there is ample communication and opportunity for special cases, such as upcoming home sales, to be dealt with appropriately,” Swibinski said.

Owners who violate the ordinance could face fines ranging from $100 to $1,000, imprisonment or community service for up to 90 days.

Posted in Gold Coast, New Jersey Real Estate | 62 Comments

Recession 2023

Posted on November 25, 2022 by grim

From Reuters:

Factbox: World’s biggest banks see global economy slowing more in 2023, with likely U.S. recession

Posted in Economics | 47 Comments

Kids these days…

Posted on November 23, 2022 by grim

From Business Insider:

Gen Z’s finances are already tanking, and we’re not even in a recession yet

Young Americans are still spending as the holiday shopping season ramps up, but they’re running out of money. With a recessionpotentially looming next year, it arguably couldn’t come at a worse time.

After falling in the last few years as borrowers paid down their balances, US credit card debt rose $38 billion between July and September of this year, per the New York Fed. The 15% year-over-year increase was the largest in over 20 years.

For now, credit card debt remain below pre-pandemic levels, and to some degree, an uptick was to be expected as consumers emerged from lockdowns and contended with higher prices.

The “real test,” however, New York Fed researchers wrote in a November blog post, is “whether these borrowers will be able to continue to make the payments on their credit cards.” Signs point to Gen Z, in particular, is starting to feel the squeeze.

While overall delinquencies remain below pre-pandemic levels, the percent of credit card payments 90 days or more past due rose to 3.7% in the third quarter, up from 3.2% the year prior.

While all age groups saw upticks in missed payments, the biggest increase came from 18 to 29-year-olds, whose 90-plus day delinquency rate rose to over 6%, though still below the roughly 9% rate before the pandemic took hold.

It’s not just credit card debt that young borrowers are struggling to make payments on either. Rising balances for auto loans also coincided with a spike in the auto delinquency rate.

“Is this simply a reversion to earlier levels,” the researchers wrote of the overall rise in missed payments, “with forbearances ending and stimulus savings drying up, or is this a sign of trouble ahead?”

Posted in Demographics, Economics | 80 Comments

October housing market hit a wall

Posted on November 22, 2022 by grim

From Mansion Global:

October Was a Spooky Month for the U.S. Housing Market

Would-be buyers are turning their backs on the turbulent U.S. housing market in droves, according to new data released from Redfin on Monday.

The number of pending sales, the amount of deals being scrapped and the proportion of homes seeing their asking price slashed all reached foreboding milestones in an October chill that could rival winter’s.

Pending sales dropped 32.1% annually to 414,492 last month, the largest decline since at least 2013, when Redfin’s records began.

At the same time, almost 60,000 home-purchase agreements fell through, equating to 17.9% of the homes that went under contract last month, a record high, the data showed. In addition, almost one-quarter, or 23.9%, of homes for sale in October experienced a price drop, double the rate of a year earlier, the online property portal said.

“The Fed’s actions to curb inflation are causing the housing market to slow at a pace not seen since the financial crisis,” Chen Zhao, Redfin’s economics research lead, said in the report.

“There are already early but promising signs that inflation is cooling, which caused mortgage rates to drop last week,” she added. “If that progress continues, buyers who recently backed out of deals may return to the market and sellers may be less inclined to slash their prices.”

Posted in Demographics, Economics, Mortgages, National Real Estate | 66 Comments

Bezos says stop buying crap from Amazon

Posted on November 21, 2022 by grim

From Motley Fool:

Former Amazon CEO Jeff Bezos Has This Advice for Getting Through a Recession

The more money you have in savings leading up to a potential recession, the better equipped you’ll be to get through a period of upheaval. So it’s best to do what you can to conserve cash. Doing so, says Bezos, will allow you to “take some risk off the table.”

One good way to shore up your savings, says Bezos, is to put off large purchases for the time being. This means that if you were thinking of upgrading to a new car in the next few months, hold off, provided your existing vehicle still runs. And rather than buy new furniture or appliances for your home, stick with the ones you already have and put the money you would’ve spent into your savings.

Incidentally, this advice from Bezos doesn’t just apply to everyday consumers. It also applies to small business owners. Specifically, it’s wise for small businesses to avoid large capital expenditures during this current period of uncertainty.

Posted in Economics | 44 Comments

October sucked, ignore the price changes

Posted on November 20, 2022 by grim

From CNN:

US home sales fall for 9th month in a row in October

Home sales in the United States declined for the ninth month in a row in October as surging mortgage rates and high prices pushed buyers out of the market.

Sales of existing homes — which include single-family homes, townhomes, condominiums and co-ops — were down 28.4% in October from a year ago and down 5.9% from September, according to a National Association of Realtors report released Friday. All regions of the United States saw month-over-month and year-over-year declines.

That continues a slowing trend that began in February and marks the longest streak of declining sales on record, going back to 1999.

Sales in October were at their weakest level since May 2020, when the real estate market was at a standstill during the pandemic lockdowns. Beyond that, sales last month were the weakest they have been since December 2011.

Still, home prices continued to climb last month. The median home price was $379,100 in October, up 6.6% from one year ago, according to the report. But 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.

Posted in Economics, Housing Bubble, National Real Estate | 28 Comments

Blip or recession?

Posted on November 18, 2022 by grim

From NJ1015:

Record streak for New Jersey job growth snapped in October

New Jersey’s economy lost jobs in October for the first time in nearly two years, snapping the state’s longest streak of job growth since at least the 1980s.

Preliminary estimates from the U.S. Bureau of Labor Statistics announced Thursday by the state labor department show that private-sector jobs grew for the 30th consecutive month – but that 6,700 increase was eclipsed by a loss of 8,000 public-sector jobs.

Combined that leads to a drop of 1,300 jobs in October, the first decline since November 2020.

Eight out of nine private-industry sectors recorded job growth – all except financial activities. The biggest gains were in trade, transportation, and utilities, up 2,400; professional and business services, up 1,900; and education and health services, up 1,700.

Most of the public sector job losses were in local government, accounting for 7,800 fewer jobs. That reversed an unusually large increase in September.

The overall job loss was small, and it’s possible the revisions next month could show there was actually a gain. September’s employment report initially showed an increase of 3,800 jobs, but that has been revised upward by 9,100 to show a gain of 12,900.

The unemployment rate rose by 0.2 percentage points to 3.5% in October due to people re-entering the labor force seeking a job. The labor force was 23,900 larger than one month earlier, when the total fell by an unusual amount, and it is now at its largest size since June 2021.

Posted in Demographics, Economics, Employment, New Jersey Real Estate | 89 Comments