New Jersey Real Estate Report

From NJ Spotlight:

Jersey Shore Towns Begin to Open Up — Cautiously: How Ready Are They?

New Jersey’s beach towns prepare for a summer season like no other.

For the bulk of the 41 municipalities stitched up and down the Atlantic coast, from Sea Bright to Cape May Point, the 15 weeks between Memorial Day and Labor Day are crucial to the survival of their economies. And not just for the towns themselves — nearly half of the state’s $46.4 billion in tourism spending is generated by the four counties that encompass the Jersey Shore.

Statewide, travel spending for the first four months of 2020 has dropped by 87%, compared to last year, according to the U.S. Travel Association and Tourism Economics. In a report released Thursday, the state projects that 2020 will see tourism spending decline by about a third from 2019. With an economic window as narrow as that of the Jersey Shore’s, many town mayors have reached the critical moment in which they must figure how to begin reopening in order to salvage the livelihoods of seasonal businesses without risking the lives of residents and visitors.

On Tuesday afternoon, after weeks of regular discussions with the governor’s office, the Cape May County-Wide Recovery Initiative, a coalition of freeholders, mayors and business leaders, submitted a formal reopening plan to Gov. Phil Murphy — a first among the Shore counties.

The 35-page document proposes a “progressive reopening” over the next several weeks, with full access to boardwalks and beaches, as well as reduced-capacity opening for indoor and outdoor restaurants and nonessential retail beginning on June 1. According to the report, Cape May County is uniquely vulnerable to a collapse in the tourism economy — in 2018, the industry created 26,572 jobs, and over 23% of the population is directly employed in retail or food service and accommodation.

In a joint statement, the mayors of Avalon and Stone Harbor, located on the county’s 7 Mile Beach island, said that they would open their beaches for “walking, running, fishing and surfing, from dawn until dusk” on Friday, May 8, but that “stationary activity” would remain unallowed. “The beaches will be patrolled to make sure that social distancing practices are followed and there are no large groups of people gathered,” the statement went on, adding that if the rules are not followed, “we will again close our beaches.”

Asked whether they are prepared for an increase in COVID-19 cases should the county’s beach towns reopen, Brian Cahill, spokesman for Shore Medical Center, said, “We have been preparing for an influx of COVID-19 patients since the beginning, and our staff has done an incredible job. We currently have seventy isolation rooms and we can add more if necessary.” With regard to the county’s recovery initiative, Cahill said the hospital is “continuing to follow the guidelines set forth by the CDC and New Jersey Department of Health.”

From the NJ DOL:

NJ Unemployment Payouts Approach $2B

The New Jersey Department of Labor has distributed $1.9 billion in income-supplementing benefits since the COVID-19 pandemic began in mid-March, and this week saw new unemployment claims for the period surpass 1 million, an all-time high. 

In the seven weeks since COVID-19 hit New Jersey in mid-March, 1,018,785 unemployment claims have been filed, by far the most ever recorded for a similar period.

With more than 642,000 now receiving unemployment in the Garden State — and an additional 72,000 federal Pandemic Unemployment Assistance (PUA) claims processed last week — the Department has created online guides to walk people through the weekly certification process. Certifying for benefits each week is required by federal law. But the certification questions have been an obstacle for tens of thousands of claimants who have answered a question incorrectly and had their payments delayed. 

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“As we pass the milestone of 1 million claims filed – a number so staggering, we never thought we would come close to reaching it in such a compressed period of time – I’m incredibly proud of the tireless work of our staff to get nearly $2 billion into the bank accounts of so many New Jersey workers, to support their families,” said Labor Commissioner Robert Asaro-Angelo.

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NJ’s First “reopening” weekend – the last three data points on the chart are Friday, Saturday (peak), and Sunday. Saturday was clearly the most mobile day since mid-March. Will be interesting to see this develop over the next few weeks.

Quarantine Fatigue in NJ

From NJBIZ:

NJ sees steep drop in new jobless claims, labor data shows

Despite record-high nationwide unemployment, New Jersey saw a steep drop in the number of people seeking jobless claims last week as the COVID-19 pandemic slams the breaks on nationwide commerce, according to federal labor data released Thursday.

For the week ending April 25, a total of 71,017 New Jerseyans filed for unemployment, compared to 140,139 state residents who applied for jobless benefits the week ending April 18, according to the U.S. Department of Labor.

That brings the total number of jobless claims in New Jersey to almost 930,000 since the pandemic hit New Jersey nearly six weeks ago, and Gov. Phil Murphy enacted a virtual statewide lock down and sweeping restrictions to contain the spread of the virus.

Nationwide, more than 30 million Americans filed for unemployment since the onset of the pandemic. But 3.8 million Americans sought jobless claims last week, still 603,000 lower than the 4.4 million applications filed the week ending April 18.

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Labor officials ensured that since Murphy’s March 16 stay-at-home order, the state paid out $1.4 billion in benefits to unemployed and furloughed workers. That includes $727 million from the state’s own pool of money, and $690 million from the additional $600 per week checks that started going out earlier in April.

Between April 20 and 24, the state paid out $211.1 million of jobless benefits, compared to $179.7 million the week before that, and $140.7 million between April 6 and 10.

Freelancers, independent contractors, and self-employed residents will see their long-awaited unemployment payments on May 5.

From News 4:

At Least One-Third of New York, New Jersey Residents Had Someone in Their Home Laid Off: Polls

Two polls released Monday offer new perspective into the far reaching impact of the coronavirus pandemic in New York and New Jersey.

Since the beginning of the pandemic’s grip on the region, millions were forced into unemployment as the result of business closures or dramatic declines in revenue as people were encouraged to stay inside their homes. 

A Monmouth University poll found that 42 percent of New Jersey residents has had someone in their home lose their job. Broken down by income, the Monmouth researchers say 35 percent have a household income under $50,000, while an additional 34 percent earn between $50,000 and $100,000.

“Many New Jerseyans are just starting to feel the financial pinch, but these results suggest the economic impact will be much more widespread and particularly damaging to lower income families here than in other states,” said Patrick Murray, director of the independent Monmouth University Polling Institute.

From Barrons:

Home Buyers Are Looking for Price Cuts. Realtors Say Sellers Aren’t Budging.

The coronavirus pandemic has dampened the spring homebuying season by nearly every measure—but buyers still might not find the discounts they’re looking for. 

Of the nearly 3,000 agents surveyed by the National Association of Realtors (NAR) between April 19 and 20, 64% said buyers expect a decline in home prices, with the largest share of those predicting a drop between 5% and 10%.

The majority of home sellers aren’t budging, according to the realtors who work with them. According to the NAR survey, 74% of agents currently working with sellers said none have reduced the price to attract buyers. Of those agents whose clients have reduced their prices, the majority reported price reductions of less than 5%.

This dissonance between buyer and seller expectations is not necessarily surprising, says NAR chief economist Lawrence Yun. “Buyers—even in a normal market—they want to get a little discount,” Yun says. Sellers, meanwhile, “anticipate that once the economy reopens, given the housing shortage, that there is not a need to lower the prices.”

From the Record:

More than 850,000 NJ workers have filed for unemployment since COVID-19 crisis began

Close to 20% of New Jersey’s workforce has filed for unemployment benefits in the last five weeks to cover lost income, as businesses remain shuttered and social distancing measures to stop the coronavirus continue to be enforced. 

Between April 12 and 18, 140,139 new people submitted unemployment claims for the first time, compared with 10,737 claims that same week in 2019, according to data released Thursday by the state Department of Labor.

That brings a total of 858,000claims filed since mid-March, when these unprecedented spikes in applications began as Gov. Phil Murphy began ordering businesses closed in a piecemeal way.

These numbers don’t capture the many New Jerseyans who continue to experience technical issues when trying to trying to file, or can’t reach a claims agent to submit their applications. And while the federal stimulus CARES Act that expanded unemployment is mostly implemented in New Jersey, workers who previously used up their benefits are still awaiting guidance for how they can receive their extra 13 weeks of insurance. 

This historic flood of out-of-work individuals is reflected across the country: Nationwide, close to 4.4 millionpeople filed for unemployment last week. Over the last five weeks, close to 25 million people submitted claims across the country. 

From MarketWatch:

Existing-home sales slump 8.5% in March — but the worst is yet to come as the coronavirus hits the U.S. housing market

Sales of previously-owned homes slid 8.5% in March as the coronavirus pandemic began to exert pressure on the U.S. real estate market.

Existing-home sales occurred at a seasonally-adjusted annual pace of 5.27 million, the National Association of Realtors reported Tuesday. March represented a major reversal from the month prior, which featured the strongest sales figure for the month of February since 2007.

Despite the slowdown on a monthly basis, existing-home sales still occurred at a 0.8% faster pace than a year ago, representing the ninth consecutive month in which sales were higher year-over-year.

“Unfortunately, we knew home sales would wane in March due to the coronavirus outbreak,” said Lawrence Yun, the National Association of Realtors’ chief economist. “More temporary interruptions to home sales should be expected in the next couple of months, though home prices will still likely rise.”

From CNBC:

The New York retail real estate market is reeling because of coronavirus, as rents tumble

The coronavirus pandemic is pummeling the retail real estate market in New York City, with rents tumbling and not expected to turn around anytime soon, according to a new report from commercial real estate services firm CBRE.

Average retail asking rents in the city continued to fall during the first quarter, which started Jan. 1 and ended March 31, with the average of the New York City neighborhoods surveyed dropping 9% year over year to $714 per square foot, the report said. This marked the tenth consecutive quarter of declines. On a year-over-year basis, 13 of the 16 corridors tracked by CBRE, including the Upper East Side and Upper West Side, saw rent decreases.

Most notably, in Times Square, retail rents have dropped to levels not seen since 2011. Average rents dropped 15.7% from a year ago to $1,647 per square foot. Average rents are now below $1,800 per square foot for the first time since 2011, CBRE said.

A corridor in SoHo along Broadway saw the biggest drop in asking rents, of 30.1%, to $420 per square foot from $600 per square foot a year ago. CBRE said some of the most expensive listings in the area are being repriced down, hoping to lure buyers with a cheaper deal.

“It remains to be seen how quickly normal life will return to New York City after the crisis has passed and how long the Manhattan retail sector will take to recover from this dramatic economic decline,” the CBRE report said.

“The retail sector will remain under duress until social distancing mandates are lifted and foot traffic is restored,” it said.

From MarketWatch:

Fannie Mae: Home sales will decline by 15% in 2020 due to coronavirus, but what will happen to property prices?

At the end of last year, economists expected that 2020 would be a strong year for housing. But now thanks to the coronavirus pandemic, home sales are poised to nose dive in the months ahead.

A new report from Fannie Mae FNMA, +11.11% projects that home sales will fall by nearly 15% in 2020. Driving that decline will be a downturn in existing home sales, which Fannie Mae expects will drop to an annual rate of 4.54 million units, down from 5.34 million in 2019.

Issues with both supply and demand are expected to contribute to the decline in home-buying activity. On the demand side, the rapid rise in unemployment as a result of the coronavirus pandemic and its accompanying stay-at-home orders will curtail many Americans’ ability to afford a purchase as big as a home.

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Sellers don’t necessarily need to worry about lower prices if they do put their home on the market, according to Fannie Mae. Fannie Mae is still projecting the median price for an existing home to rise to $275,000 in 2020 from $272,000 last year, while the median price for a new home is expected to increase to $326,000 from $321,000.

While the downturn in sales is expected to lead to a slower pace of mortgage lending for loans used to purchase homes, refinancing is expected to remain strong throughout the year thanks to the low rate environment. Fannie Mae projects there will be $1.41 trillion in refinance loans originated in 2020, up from $1.01 trillion last year.

The good news for prospective home buyers and sellers alike is that the situation in the real-estate market is expected to improve next year, according to Fannie Mae. The mortgage giant currently expects the U.S. economy and home sales both to rebound in 2021. But that rebound is contingent on the pandemic’s trajectory.

From HousingWire:

It may be harder to get a mortgage after coronavirus crisis ends

From an economic standpoint, the main question surrounding the spread of the coronavirus is just how long the country will be shut down and just how much damage that shutdown will cause to the economy.

One thing that is clear, however, is that the mortgage lending landscape is vastly different in early April than it was in early March. Certain segments of the business – namely government, non-QM, and jumbo loans – have dried up substantially as lenders pull back from loans that are seen as riskier than GSE loans.

And according to Federal Housing Finance Agency Director Mark Calabria, some of those changes may be sticking around for a while.

“Anybody’s housing price forecast right now should be taken with a grain of salt. And that’s no slight on forecasters,” Calabria told HousingWire this week.

“To me, I don’t see that as a bug. I see it as a feature,” Calabria continued. “We’re really at a point where nobody, there’s a wide range of possible outcomes for the housing market over the next six months. Given that uncertainty, I certainly think it’s appropriate for people to re-examine their underwriting standards.”

And that’s exactly what has already happened over the last few weeks.

The first domino that seemed to fall was non-QM lending. Late last month, many of the biggest lenders specializing in lending to borrowers outside the Qualified Mortgage lending box began pausing their activities due to uncertainty in the market.

Then, the Federal Housing Administration lending environment began to shift with many lenders raising their FHA requirements, thereby limiting the number of borrowers that were able to get an FHA mortgage.

More recently, many lenders have dialed back their jumbo lending as investor interest has dried up. Beyond that, a growing number of lenders are tightening lending standards as a record-breaking number of people are losing their jobs.

The reason for all these changes is the same; there’s far too much uncertainty in the market and lenders are uneasy about lending to borrowers whose credit profile isn’t “perfect.”

That’s much different from what the mortgage market experienced in recent years, with lending to borrowers who don’t fit tightly in the GSE credit box increasing substantially.

According to Calabria, that situation has played out numerous times before.

“This is the case every cycle, where you go a really long time and people convince themselves that, no, there is no more housing cycle and there’s no risk and we can all be highly leveraged,” Calabria said. “That happens every cycle. So, do I expect that kind of behavior to ever truly go away? Probably not.”

But Calabria said that the recent tightening in credit availability is a normal reaction to economic situations like this one.

From Bloomberg:

New Jersey Home Prices Head for 12% Drop on Bottom-Feeder Feast

The housing market in New Jersey is about to get crushed.

Home sales in the state, second only to New York in coronavirus cases, may fall as much as 45% this year from 2019, while prices will drop as much as 12%, according to Jeffrey Otteau, president of Otteau Valuation, a real estate consultant in Matawan, New Jersey.

“People will be taking homes off the market and in spite of that, this will be a buyer’s market, with low inventory,” Otteau said. “It’s unusual.”

Getting a sale will require a deep discount, maybe 20% below what the seller was planning to list for, he said.

“If you don’t need to sell now, take your house off the market and re-evaluate in the fall or next spring,” he said. “If you do go to the market now, there will be a price for that. The price will be that you’ll be at the mercy of bottom-feeders.”

From TechCrunch:

Commercial real estate could be in trouble — even after this is over

Commercial real estate owners, brokers, and landlords have collectively made many hundreds of billions of dollars a year in recent years as the economy zipped along.

Now, they’re getting clobbered by the pandemic-fueled economic crisis. Worse, their industry may be forever changed by it.

To state the obvious, extracting rent from nearly anyone right now is problematic. According to the National Multifamily Housing Council, just 69% of U.S. households had paid their rent by April 5 compared with the 81% who’d paid by March 5 and the 82% who paid by the same time last year.

That statistic will almost assuredly look worse by May 5, given the soaring numbers of both laid-off and furloughed employees.

On the commercial side, the problem is beginning to look as dire. In addition to the countless small retail and restaurant businesses that may be forced to permanently vacate their commercial spaces because they can no long afford them, a growing number of corporate chains is also beginning to prove unwilling or able to pay their rent.

WeWork, for example, has stopped paying rent at some U.S. locations while it tries to renegotiate leases, says the WSJ, this even as the co-working company continues to charge its own tenants.

Staples, Subway and Mattress Firm have also stopped paying rent as a way to strong-arm building owners into rent reductions, lease amendments and other courses of action designed to offset the losses they are incurring because of the coronavirus.

From MarketWatch:

This hard truth about the mortgage markets isn’t being told

Everyone wants to know what impact the coronavirus and the government response to it will have on housing markets. While it is too early to hazard a guess, some things are becoming increasingly clear.

Already, it looks as if the U.S. is moving towards a temporary moratorium on mortgage payments. Fannie Mae and Freddie Mac unveiled an emergency program which provides a two-month deferral of mortgage payments for any homeowner who claims to be facing a hardship because of the virus.  The payments will be tacked on at the end of the mortgage term.  

The coronavirus rescue law just enacted by Congress includes a provision which requires all firms that service federally-backed mortgages to grant a forbearance of up to 360 days for any borrowers who say they have been harmed by the coronavirus outbreak.

It is not much of a stretch to say that this virus has changed everything. Many of you may sense that the virus has undermined what you thought was still a fairly strong housing market around the country.

In truth, the so-called housing recovery since 2010 has been little more than a carefully constructed illusion. The belief in a strong housing recovery was carefully devised using a strategy of misleading information, withheld data and false impressions.