New Jersey Real Estate Report

From NJ.com:

Why Murphy’s borrowing plan scares me to death

When this pandemic crushed New Jersey’s economy, it seemed obvious that the state would need to borrow money to survive it, and reasonable to spread the pain across at least the next few years as we pay it back. If I lost my job, I might do the same.

So, it struck me as nuts, at first, when Republicans filed suit to block Gov. Phil Murphy’s plan to borrow up to $10 billion. They don’t have a better plan, so I dismissed it as a spitball from the cheap seats in the run-up to next year’s election.

But now I’m scared. Because the state Supreme Court just ripped the mask off this thing, asking a series of shrewd questions at a hearing on Wednesday that revealed the beast underneath.

This is not just about coping with the pandemic. Murphy is using the pandemic to claim new authority to spend borrowed money on anything he wants, leaving the bill to his successors. The design of this thing is badly flawed, and our best hope now is that the Court rides to the rescue by putting up some boundaries.

My moment of clarity came 1 hour and 58 minutes into the hearing when Chief Justice Stuart Rabner pressed Murphy’s attorney to describe what type of spending might be justified, on an emergency basis, with the borrowed funds. 

“Could the money be used to subsidize a sports arena to the tune of $1 billion?” Rabner asked.

“Yes, your honor,” said the state’s lawyer, Jane Reilly. “If the Legislature, who has a wider view than I do of the economic needs of the state and the best means to remediate that, if they were able to come up with an explanation of why the sports arena was necessary to meet the fiscal emergency the pandemic caused, then yes, that would be acceptable.”

More than a million more Americans lost their jobs last week, and we’re celebrating these numbers as good news? Because initial claims fell? The US is still losing jobs at an alarming pace, NJ still losing jobs at an alarming rate. Even worse, these new applicants aren’t going to be eligible for any additional stimulus payments.

From NJ.com:

New unemployment claims in N.J. reach lowest levels of pandemic

New claims for unemployment benefits last week reached their lowest levels since the coronavirus and efforts to fight its spread began putting New Jerseyans out of work en masse in March.

Another 16,573 New Jersey workers filed for unemployment benefits last week, according to the state Department of Labor and Workforce Development. That’s down from more than 28,000 the week prior and well below March and April, when more than 200,000 workers were filing new claims weekly.

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Nearly 1.5 million workers in the Garden State have filed unemployment claims since March 15. Of those, 1.3 million have been deemed eligible for benefits and 96% of eligible workers have received some payment, the Labor Department said in its weekly claims report.

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New Jersey’s unemployment rate, 16.2 percent, is at the highest level since record keeping began in 1976.

From NBC News:

N.J. sees spike in COVID-19 cases as residents slack off on masks and social distancing

Alarm bells went off in New Jersey on Monday as a state that appeared to have successfully flattened the coronavirus curve saw the number of new cases spike by 175 percent in the last two weeks, an NBC News analysis of the latest figures showed.

As of Monday morning, New Jersey had reported 185,537 confirmed cases and 15,836 deaths, according to the latest numbers. The state’s rate of transmission had climbed back up to 1.48, equal to the levels in April when the pandemic was at its worst in the state.

From July 20 through Aug. 2, New Jersey logged 5,070 new cases and 134 deaths, the NBC News figures showed.

Gov. Phil Murphy responded Monday by tightening restrictions on the number of people who can gather at indoor venues or parties from 100 to 25.

“Limiting indoor gatherings to 25 people is a pretty meaningful step,” Murphy, a Democrat, said. “We knew as we reopened we’d take on more risk.” 

The governor on Friday conceded that the state was “standing in a very dangerous place” and he placed the blame squarely on the “knuckleheads” who fail to follow the rules.

“Everyone who walks around refusing to wear a mask or who hosts a house party is directly contributing to these increases,” Murphy said. “This has to stop, and it has to stop now.”

From NJB Magazine:

NJ Unemployment Claims Rise 8.8% Amid Broader Implications

Unemployment continues to mount in the Garden State, with 28,063 new claims filed for the week ending July 25, marking an 8.8% increase when compared to the week prior to that, according to the New Jersey Department of Labor and Workforce Development (LWD).

The cumulative total of unemployment claims filed in New Jersey since March 15 is now 1,441,936, out of an entire statewide nonfarm workforce of approximately 4.2 million.

At least some of these 1.44 million individuals have returned to work since initially filing for benefits. Meanwhile, the United States Bureau of Labor Statistics reported on July 17 that for the month of June, New Jersey had an unemployment rate of 16.6%.

Some experts are concerned that as unemployment continues to rise, demand for goods and services may decrease, potentially further imperiling the economy and potentially creating even more unemployment.

Food banks have additionally seen a spike in demand, with Gov. Phil Murphy this month directing $20 million in federal CARES Act funding towards these entities (in two phases) for the remainder of 2020.

Feeding America projects a 56% increase in New Jersey’s food insecurity rate in the coming months as a result of the coronavirus pandemic, and The Community Food Bank of New Jersey’s President and CEO Carlos M. Rodriguez said at a July 9 event that this translates into 432,000 state residents.

From NJ Spotlight:

Senate Moves to Let Towns Go Deeper in Debt to Weather Pandemic Crisis

New Jersey’s local governments could borrow money to help offset revenue losses during the coronavirus pandemic under a bill that’s progressing despite concerns among some lawmakers about oversight and the potential for abuse.

The Senate Budget and Appropriations Committee passed the local-borrowing measure Tuesday, putting it on course to win final approval from the Democratic-controlled Legislature on Thursday.

The bill’s advancement comes just weeks after lawmakers approved another borrowing measure that gives the state the preliminary authority to issue up to $9.9 billion in new debtto offset its own revenue losses.

But some lawmakers have raised concerns that the current draft of the local-borrowing billwould allow too much debt to be issued without direct state oversight. It’s also unclear right now whether Gov. Phil Murphy will sign it.

Still, local government officials and others who testified Tuesday said taking on more debt could help towns deal with severe revenue losses that some have experienced in recent months due to the pandemic.

“These revenues are not going to be recouped,” said Michael Cerra, executive director of the state League of Municipalities.

Five Months In!

From the Press of Atlantic City:

NJ unemployment claims fall, as $600 federal weekly supplement about to end

The number of new unemployment claims in New Jersey declined for the second straight week, the state said Thursday, as the $600 federal weekly supplement entered its final week.

The total number of claims filed in New Jersey now tops 1.4 million, the state Department of Labor and Workforce Development said.

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The $600 federal subsidy that has been added to unemployment payments ends with this week’s payments but will be made on eligible claims for the weeks ending April 4 through July 25 for those claims approved at a later date, according to the department.

There are proposals to extend the federal subsidy, but the two major parties differ on the best approach. Democrats would extend the $600 through January 2021. Republicans want to provide lower benefits because many workers make more on unemployment than they would if they returned to work.

The state has distributed more than $7 billion in $600 weekly federal Pandemic Unemployment Compensation to 1.1 million claimants since the program began the week of April 4, it reported.

From the Philly Inquirer:

Pa., N.J. workers set to lose the extra $600 in unemployment benefits this week

With no end in sight to the pandemic, Washington lawmakers are at odds over how to give more financial help to Americans. Democrats want to extend the full $600 enhanced unemployment benefit, while Republicans say that amount is too much, as some have earned more on unemployment than they did at work. Lawmakers are also weighing another round of direct stimulus payments, a payroll tax cut, and other measures to help the struggling economy.

Failure to pass something would deal a “body blow” to the economy, said Mark Zandi, chief economist at Moody’s Analytics. Companies continue to lay off workers at high levels and 17.3 million people nationwide were receiving unemployment benefits as of July 11. Cutting off financial help now would cause consumers to slash spending and force many to stop paying bills, plunging the economy back into a recession, he said. But scaled-back unemployment benefits along with other relief, such as a stimulus check, should be enough to keep things together, he added.

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As of July 11, 795,000 New Jersey workers were receiving the extra $600 in federal help, according to the state Department of Labor and Workforce Development.

The Pennsylvania Department of Labor & Industry said Tuesday that it could not provide an exact number of recipients. On Monday, Susan Dickinson, the department’s director of unemployment compensation benefits policy, said the state has about 3.3 million claims between regular and Pandemic Unemployment Assistance right now, and said most of those likely received at least one $600 payment.

Although the federal program expires July 31, this is the final claim week for the additional $600 payments. Both state agencies said workers who are owed unemployment benefits for previous weeks will still receive the extra $600 for those weeks, too, even if payment is issued after the program expires.

From Forbes:

COVID-19 Job Losses Have Been The Steepest In High-Tax States

The state jobs report for June was issued Friday morning with all states and the District of Columbia showing nonfarm payroll increases as the nation continues to recover from the steps taken to slow the spread of COVID-19. The U.S. Bureau of Labor Statistics reported that the national unemployment rate declined by 2.2% to 11.1%, 7.4% higher than in June 2019. 

But the economic effects of state and local government measures to “flatten the curve” to prevent the medical system from being overwhelmed varies widely from state-to-state. There are two main variables at work here—when the virus hit a state and how hard, and policymakers’ response to the pandemic. 

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As it turns out, a state’s general fiscal orientation is a strong indicator as to the extent of jobs losses since the virus hit. States with heavy tax burdens generally feature government policies that favor government intervention. States with lighter tax burdens lean towards smaller government with a relatively larger role for individuals, charities, and business. 

Looking at 2016 individual federal income tax returns from households that itemize deductions, there are 27 states where the average State and Local Tax (SALT) deduction was under $10,000—the cap under the tax cut signed into law by President Trump in December 2017. These states collectively lost 7.7% of their nonfarm private sector employment from February 2020 to June. In the 23 states with average SALT deductions greater than $10,000, the rate of job losses was 57% greater, 12%. 

From NJ.com:

N.J. can ‘go after’ travelers who violate coronavirus quarantine, Murphy says

New Jersey, unlike New York, isn’t threatening fines if travelers from states considered coronavirus hotspots don’t comply with a tri-state advisory to quarantine for 14 days.

So what’s to stop some “knucklehead” trekking to New York from flying into Newark Liberty International Airport to avoid getting whacked with a $2,000 penalty?

Gov. Phil Murphy was asked that question Tuesday afternoon during a radio interview. The governor insisted New Jersey’s health commissioner, Judith Persichilli, has the power to impose some sort of punishment — though he didn’t specify what.

“Something will happen to you,” Murphy said during the appearance on 1010 WINS in New York City. “If you’re a real knucklehead and you come in and you flagrantly violate this, the commissioner of health in New Jersey has the teeth to go after you. And she won’t hesitate to do that.”

From Marketwatch:

Home prices could fall in major cities as Americans sour on urban living, says Nobel Prize-winning economist Robert Shiller

The coronavirus pandemic has many Americans heading for the hills — or the suburbs, as it were. And home prices in cities could decline as a result, says Nobel Prize-winning economist Robert Shiller. 

In an interview with CNBC, Shiller outlined the broad risk to the economy posed by the spread of the novel coronavirus and the resulting impact on the global economy.

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Where housing is concerned though, the impact of a decline wouldn’t be felt equally across all markets. Rather, Shiller laid out a worst-case scenario for urban markets around the U.S.

“What’s nice about the city? It’s good restaurants, theaters, museums, art shows,” he said. “But if you’re afraid of people because you think you might catch something in the next epidemic then it may color your whole feeling about the city.”

In addition to that fear, many employers have embraced remote working amid the coronavirus pandemic. Facebook, has said it will ramp up hiring remote workers, while other firms have given workers the option to continue working from home indefinitely amid the pandemic. There’s even a “work-from-home” ETF that’s aiming to capitalize on the trend.

From Curbed:

No, Manhattan Home Prices Are Not Plummeting

For anyone shopping in Manhattan, the opportunity for a discount seemingly presented itself last week: A Douglas Elliman report revealed that the median price for Manhattan home sales in the second quarter of 2020 was down a shocking 17.7 percent year over year. Has the economic fallout from the pandemic caused Manhattan’s housing market, one of the most durable and expensive in the country, to collapse?

Despite headlines like “Manhattan Real-Estate Market Plummets As City Dwellers Seek Housing in Rural Communities” and “Real-Estate Prices Fall Sharply in New York,” the answer is, sadly, no for prospective buyers. The pandemic has disrupted the basic functioning of housing markets across the country, and particularly in New York City, where brokers weren’t even able to show homes to buyers for much of the second quarter.

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“The decline does not infer a COVID discount,” says Jonathan Miller, CEO of New York appraisal firm Miller Samuel and the author of the Douglas Elliman report. “The market was shut down by state mandate, so the activity was not transparent because there were no in-house showings allowed by the brokerage community. That’s just not enough time, so there’s been no price discovery.”

The 17.7 percent drop in sales prices suggests that a housing-market crash on the level of the 2008 financial crisis is under way. But taking one number from a report and viewing it in isolation, as many headlines from last week presented it, distorts the reality on the ground, which is that New York’s housing market still isn’t fully functioning and any aggregate price data from this market should be taken with a grain of salt.

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But if the market isn’t collapsing, why would the data show a huge drop in home-sale prices? There are a few factors at play. First, Miller’s report noted that home sales plunged in Manhattan by a whopping 54.1 percent year over year in the second quarter, so the median home price is based on a far smaller sample than usual.

Second, the data highlights two fiscal quarters that saw unusual activity in the luxury market. In the second quarter of 2019, homebuyers rushed to close on homes to avoid the city’s newly enacted “mansion tax,” a onetime fee on home purchases above $1 million. This led to an above-average number of luxury-home closings in Q2 of 2019, pushing up the median home-sale price for that quarter.

Conversely, the second quarter of 2020 saw fewer luxury closings because a lot of luxury market listings disappeared after the pandemic hit; wealthy homeowners are more likely to have the means to be able to wait to sell their homes, as opposed to someone at a median price point who has to move because they lost their job or got a new one. Luxury buyers are also more likely to hold off on making a huge investment during an uncertain period. This is a trend happening across the country, not just in New York.

From CBS News:

Hoboken Mayor Confirms Highest 2-Day Total Of New COVID-19 Cases Since Mid-May

While coronavirus numbers have been trending down in the tri-state area, there’s concern about a recent spike in some places, especially as crowds gather to celebrate July 4th.

Hoboken Mayor Ravi Bhalla announced Saturday the city recently saw its highest two-day total of new COVID-19 cases since mid-May.

The mayor said 13 cases of the coronavirus were confirmed on July 2 and 3.

“All 13 of the new cases that we’ve seen are ones that have traveled for work or for pleasure outside of the city of Hoboken,” Bhalla said. “Twelve of those 13 cases went to states on New Jersey’s quarantine list, including Florida, Texas, North Carolina and South Carolina.”

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Bhalla said the positive tests are all people under the age of 45, mostly between 20 and 35-years-old, and who attended indoor and outdoor events with groups of people. In some cases, he said, they showed no symptoms of the virus.

From Bloomberg:

Manhattan Home Sales Fall Most on Record in Locked-Down Quarter

Manhattan home sales plunged the most on record in the second quarter, while New York was shut down to prevent the spread of Covid-19.

Purchases of co-ops and condos in the borough tumbled 54% from a year earlier to 1,357, according to a report Thursday by appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. It was the biggest annual decline since the firms started keeping the data in 1990.

Most buyers in the quarter went into contract before mid-March’s shelter-in-place orders banned in-person showings. The median price of completed deals fell 18% from a year earlier, the biggest drop since the second quarter of 2009.

From CNBC:

Pending home sales spike a record 44.3% in May, as homebuyers rush back into the market

Pending home sales spiked a stunning 44.3% in May compared with April, according to the National Association of Realtors.

That is the largest one-month jump in the history of the survey, which dates to 2001. It beat expectations of a 15% gain. Sales were still 5.1% lower compared with May 2019, however.

Pending sales measure signed contracts on existing homes, so it shows that buyers were out shopping during the month of May. Sales had fallen 22% for the month in April, as the economy shut down to slow the spread of the coronavirus. 

“This has been a spectacular recovery for contract signings, and goes to show the resiliency of American consumers and their evergreen desire for homeownership,” said Lawrence Yun, NAR’s chief economist. “This bounce back also speaks to how the housing sector could lead the way for a broader economic recovery.”

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The supply of existing homes for sale at the end of May was nearly 19% lower annually, according to the NAR. Single-family housing starts in May were not as strong as expected, although building permits, a measure of future construction, did gain some steam.