Shore Uprising

Posted on March 12, 2019 by grim

From the NYT:

The Jersey Shore, a storied summer vacation spot, has become the newest national battleground over regulating and taxing the internet economy.

New Jersey is one of the first big states to adopt a surcharge on short-term rentals — a so-called Airbnb tax. It kicked in Oct. 1 and is causing vacationers to rethink their summer travels and stirring anxiety among the homeowners who rely on them.

The fallout over the 11.6 percent tax has inserted New Jersey into a broader debate as states and communities grapple with the explosive growth of the online home-sharing economy. A patchwork framework of local ordinances has failed to keep pace with the rapid rise of Airbnb, the largest home-sharing site, which was valued at $31 billion two years ago and has upended the rental market around the world.

Much like Uber’s dominance has caused a regulatory challenge for cities and Amazon’s ascent has prompted states to adopt internet sales taxes, the popularity of Airbnb has begun to push lawmakers to impose new rules even as they find ways to tap the enormous revenue it generates.

…

George Triebenbacher, 56, grew up on Long Beach Island in New Jersey and now owns seven properties there that he’s been renting out since 2010. His weekly rates vary — three homes rent for $1,650, three go for $5,500 and a larger home fetches $10,000.

In past years, by this point in March, all his homes had typically been reserved for the summer. But this year, about one-fourth of his rental weeks are still available, he said, and some people who had initially reserved are backing out.

“People are actually canceling and forgoing deposits to get away from the taxes,” he said. “There’s no question that there’s all kind of upheaval being created by this tax.’’

…

Passage of the short-term rental tax flew largely under the radar last summer, overshadowed by the battle between Mr. Murphy and Democratic legislative leaders over a different tax — on the wealthy — that nearly shut down the state’s government.

But now many along the shore say the rental tax places one of the state’s main summer economic engines in its crosshairs. The 11.6 percent tax applies to all rentals fewer than 14 days, including those made on home-sharing sites or directly between a renter and an owner. The only exceptions are rentals arranged through a realtor, which are not subject to the tax.

John Brennan owns a home on Long Beach Island that he is listing on Airbnb for $2,200 a week. By late winter he said he typically has 70 percent of the season booked. But so far, nothing has been rented. “They can’t just keep taxing us,” he said.

…

Maria Vitale, who has rented out her home in Lavallette for nearly 10 years, is charging the same weekly price, $2,400, as last year, but said many would-be renters had been turned off by the additional $280 in taxes.

“New Jersey people, we’ve been taxed enough,” she said.

The tax is taking hold at a time when the coast is still not fully recovered from Hurricane Sandy, Ms. Vitale noted. Still, there are signs of optimism: Her kitchen is being used less, she said, as renters seek out restaurants that have begun to reopen after the devastating 2012 storm.

“Knowing what the Jersey Shore went through six-plus years ago,” she said, “I don’t think this is the opportune time to tax them even more.”

Posted in Demographics, Economics, Politics, Shore Real Estate | 78 Comments

Our own little Disney

Posted on March 11, 2019 by grim

From the Star Ledger:

Inside the N.J. town where retail spending beats Hollywood and tourism rivals Disney

Name any brand, and it probably has at least one location in Paramus — some have two or three.

At a time when retail all over the world is struggling to survive, it seems that nothing — not even local laws that prohibit stores from actually being open seven days a week — can stop Paramus. The former farming community already sees more retail sales than any other zip code in the country (yup, it even beats Beverly Hills’ luxurious Rodeo Drive) and it’s continuing to add more shopping complexes.

Paramus is home to four major malls and a slew of other retailers that line the bustling highway routes 4 and 17 that bisect the town. And, no site sits stagnant for long. An office building was razed and a shopping center, called Paramus Crossroads, is being built near the intersection of Route 17 and the Garden State Parkway, between PC Richards and a PGA Superstore.

“Paramus is one of the most dynamic and desirable retail markets in the country, and has been for many years,” said Jared Minatelli, director of asset management for Advance Realty, which along with Invesco Real Estate developed Paramus Crossroads.

More than $6 billion in retail sales happen in Paramus each year.

…

The biggest of the Paramus malls (which is also the largest mall in New Jersey) is Westfield Garden State Plaza. It spans more than 2 million square feet and was named one of the most lucrative malls in America. It sits on 198 acres at the intersection of routes 4 and 17.

Garden State Plaza alone gets about 20 million visitors per year. Compare that to the number of visitors to the Eiffel Tower (7 million) or the number of annual guests at Disney World’s Magic Kingdom (20.5 million).

…

What makes Paramus’ retail powerhouse status even more impressive is almost all of its stores are only open six days a week. Retailers are forced by county — and town — Blue Laws not to sell pretty much anything but food on Sundays.

Posted in Economics, New Development, New Jersey Real Estate | 50 Comments

Fiscal … Death … Spiral

Posted on March 9, 2019 by grim

From the Star Ledger:

N.J. is in a ‘fiscal death spiral’ and Murphy call for new tax on millionaires isn’t the answer, top Democrat says 

New Jersey’s Democratic state Senate president, who is steadfastly opposed to the Democratic governor’s call to hike taxes on the wealthy, said Thursday that the Garden State is in a “fiscal death spiral” that can’t be repaired by raising taxes.

State Senate President Stephen Sweeney’s opposition to Gov. Phil Murphy’s plan to generate an estimated $447 million in new tax dollars through a millionaires tax complicates upcoming state budget negotiations, to say the least.

Murphy’s $38.6 billion proposed budget, which he unveiled Tuesday, proposes expanding the top marginal tax rate of 10.75 percent enacted last year to income over $1 million. During last year’s budget battle, Murphy sought the millionaires tax but agreed to a tax increase on income over $5 million.

“I’m not supporting it,” Sweeney, D-Gloucester, said of the millionaires tax during an interview with NJ Advance Media Thursday at the Statehouse in Trenton. “I’m not raising the income tax.”

Despite this conflict, Sweeney acknowledged the note of reconciliation Murphy struck Tuesday and said they’re already starting off on better terms than last year, when Murphy proposed raising more than $1.6 billion in taxes, including the gross income tax and the sales tax, and slashed $123 million for Democratic priorities.

Posted in Economics, New Jersey Real Estate, Politics | 17 Comments

Going up again?

Posted on March 7, 2019 by grim

From CNBC:

Home prices could be on the verge of heating up again, according to CoreLogic

Home prices in January rose at the slowest pace in nearly seven years, but buyers shouldn’t feel too confident just yet. Prices might be on the verge of picking up yet again.

Home values in January were 4.4 percent higher than a year earlier, smaller than the 4.7 percent annual gain in December, according to CoreLogic. Price gains have been shrinking since April, when they peaked at a 6.6 percent gain. January’s read was the smallest gain since August 2012.

“The spike in mortgage interest rates last fall chilled buyer activity and led to a slowdown in home sales and price growth,” said Frank Nothaft, chief economist for CoreLogic. “Fixed-rate mortgage rates have dropped 0.6 percentage points since November 2018 and today are lower than they were a year ago. With interest rates at this level, we expect a solid homebuying season this spring.”

The average rate on the 30-year fixed mortgage rose above 5 percent at the start of November but then began sliding. It now sits around 4.5 percent, right around where it was a year ago, when price gains were in the 6 percent range annually.

So that could mean the end of the current price chill, as more buyers this spring compete for a still-slim supply of listings for sale. Inventories have started to rise nationwide, but mostly on the higher end of the market, which is not where the bulk of current demand is. The supply of entry-level homes for sale is still very, very low, as builders continue to focus on more expensive homes, given today’s high costs for land and labor.

Posted in Demographics, Economics, Employment, Housing Recovery, National Real Estate | 175 Comments

Minimum wages up – Property taxes up

Posted on March 5, 2019 by grim

Oh, you’ll find a way. From NJTV:

How will NJ’s new $15 minimum wage affect local governments?

Middletown has a population of 66,000. The Monmouth County city has horse farms, the beach and Big Mike’s Little Red Store. Middletown Mayor Tony Perry says raising the state’s minimum wage to $15 an hour will have a massive impact.

“We have estimated that over the course of the 5-year phase-in period that the minimum wage is set to evolve over, it has a $750,000 impact on our budget. That’s 1.5 percent of our budget,” said Perry.

Perry says that’s not just for wages but for added Social Security taxes and pension contributions. But how will Middletown pay for it?

“The taxpayers of Middletown can be assured that we’re doing everything that we can, budget meetings every single day about how to confront this mandate from Trenton and decide how we’re going to face it. And I can assure you services are not going to be cut, but we’re going to find a way, the best ways, to address this $15 minimum wage,” he said.

…

Already one senator, Kristin Corrado, has introduced a bill to restore the exemption, saying, “The new minimum wage law is forcing local leaders to make impossible choices.”

The New Jersey League of Municipalities says it’s unlikely towns and townships and boroughs across the state will raise property taxes because of the 2 percent cap to make up for having to pay higher wages.

“And this is all going to fit underneath that cap. I think what it will do, is it will certainly for some services that have a great deal of interface with the public, such as recreation programs, youth programs, beach badges, it’ll likely increase registration fees. It might result in a decrease in hires or a streamlining of the services,” Cerra said.

Posted in Economics, Employment, New Jersey Real Estate, Politics, Property Taxes | 70 Comments

Single women second largest group of homebuyers

Posted on March 4, 2019 by grim

From the Press of Atlantic City:

In New Jersey, more single women are buying homes. Here’s why

Angela Cottrill likes having control over the place where she lives.

The single hairstylist wanted the investment of owning a condo, so she put in extras hours at her job and saved money to buy her own home after living with roommates in apartments and in a small house in Linwood.

“After a couple of years renting, it sort of became a little silly to throw money out or spend time fixing up the place when I know when my lease is up or when I left, I would essentially be left with nothing,” said Cottrill, 28, who bought her Somers Point condo in September.

After married couples, the next largest demographic group of homebuyers is single women, according to the National Association of Realtors and New Jersey Realtors.

…

“Unmarried couples, single females and single males, they all seem to be a growing share, especially among younger, first-time buyers,” said Jessica Lautz, vice president of demographic and behavior insight for the Realtors group.

More single women are purchasing homes each year due to their increased job stability, said Angela Desch, broker manager, residential and commercial, Coldwell Banker Argus Real Estate in Ventnor, and vice president of the Atlantic City and County Board of Realtors.

“For example, some professions, like nursing, where there is a shortage and wages seem to be quite competitive, those in that industry are able to finally afford a home on one income. First-time homebuying grants are also helping,” Desch said.

Posted in Demographics, Economics, New Jersey Real Estate | 38 Comments

Millennials don’t understand the concept of repair.

Posted on March 1, 2019 by grim

You have an entire generation that grew up in a culture of disposable everything. Why would anyone think houses should be different? You don’t fix things, you get the new version. From CNBC:

Most millennial homeowners have buyer’s remorse, a new survey shows

Millennial homeowners have a bad case of buyer’s remorse, according to a new survey.

Nearly two-thirds, or 63 percent, of millennial homeowners surveyed by Bankrate.com said they had regrets about buying. That is more than any other age group, defined in the survey as people aged 23 to 38, and nearly double the regret rate of baby boomers. Overall, about 44 percent of U.S. homeowners say they have regrets about their purchase.

Millennials have been slow to enter the ranks of homeowners, thanks to the last recession and the housing crash that caused it. Now, as they age into marriage and parenthood, they are buying at a faster pace. Many, however, are regretting it.

What seems to irk millennials most is maintenance. They didn’t factor in the high costs of fixing what breaks. Young buyers may have been renters previously, and not even considered maintenance since it was never a factor financially.

“Repairs and maintenance costs are something all homeowners face,” said Bankrate analyst Deborah Kearns. “Consumers should expect to set aside 1 percent of their home’s purchase price each year to keep in a savings account to cover these expenses. Budgeting early on can prevent dipping into emergency savings or going into debt to handle these added expenses.”

Other regrets include the type and location of the home purchased. About 12 percent of those surveyed said the house they bought was too small, while 5 percent said it was too large. Despite the old real estate adage, “location, location, location,” 8 percent said they bought in the wrong location.

Posted in Demographics, National Real Estate, Unrest | 112 Comments

Still rising?

Posted on February 28, 2019 by grim

From CNBC:

Home prices in December rose at the slowest pace since August 2015: S&P Case-Shiller index

Homebuyers have a limit to what they can afford, and sellers are slowly having to adjust to that new reality.

Home prices increased 4.7 percent annually in December, down from 5.1 percent in November, according to the S&P CoreLogic Case-Shiller U.S. National Home Price Index. That is the slowest pace since August 2015.

The 10-city composite annual increase came in at 3.8 percent, down from 4.2 percent the previous month. The 20-city composite rose 4.2 percent year over year, down from 4.6 in the previous month.

“Even at the reduced pace of 4.7 percent per year, home prices continue to outpace wage gains of 3.5 percent to 4 percent and inflation of about 2 percent,” said David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices. “A decline in interest rates in the fourth quarter was not enough to offset the impact of rising prices on home sales.”

The average rate on the 30-year fixed jumped to just over 5 percent at the start of November but then began falling in December. It has been hovering at just below 4.5 percent for the past two weeks, according to Mortgage News Daily. Lower rates not only help potential buyers afford a new home, they also help more buyers qualify for a mortgage.

Posted in Demographics, Economics, National Real Estate | 70 Comments

Millennials take the market

Posted on February 25, 2019 by grim

From HousingWire:

Millennials have officially entered the housing market

It’s long been projected that Millennials are destined to dominate the housing market in upcoming years. Now, new data from Realtor.com reveals that it’s finally happening. Millennials are buying houses. Lots of them.

According to Realtor.com, in January 2017, Millennials surpassed Generation X as the group that was responsible for the most new mortgages. Since then, Millennials’ share of the mortgage market has continued to rise. By the end of 2018, Millennials represented 45% of all new mortgages, compared to 36% for Generation X, and 17% for Baby Boomers.

What’s new is that Millennials also finally surpassed older generations in the total dollar amount of those mortgages. According to the data, Millennials now represent the largest dollar volume by age group as well.

“In November 2018, Millennials finally overtook Generation X as having the largest share of new loans by dollar volume, with a share of 42% in December, compared to a share of 40% for Generation X and 17% for Baby Boomers. This indicates Millennials are willing to take on larger mortgages than any other generation to fulfill their dreams of homeownership,” the company writes.

Realtor.com’s Director of Economic Research Javier Vivas said Millennials are getting older, with better jobs and deeper pockets, allowing them to expand their collective purchase power, and hence, their footprint in the market.

“The stereotype that Millennials primarily choose to buy homes and live in large metro areas isn’t the reality,” Vivas said. “Results show Millennials’ expansion is more heavily conditioned by affordability than in prior years, so their eyes are set on less traditional secondary markets where homes and jobs are now available and plentiful.”

Posted in Demographics, Economics, Employment, National Real Estate | 156 Comments

Did we elect the wrong guy?

Posted on February 24, 2019 by grim

From the Star Ledger:

Steve Sweeney’s winning the war with Governor Murphy over taxes

Last June we had a fight on taxes in the state budget.

On one side was Gov. Phil Murphy. He wanted to raise the income tax to go after rich people.

On the other side was Senate President Steve Sweeney. He wanted to raise the corporate tax on businesses.

They compromised. Each got a somewhat smaller version of the type of tax hike he demanded.

Last month we found out who won that fight:

Sweeney – and by a knockout.

The decision came when the Treasury Department released revenue figures for the final quarter of the 2018 calendar year, which had to be paid by Jan. 15, 2019.

The report said corporate tax revenues were up 74.5 percent compared to the prior year after Sweeney’s 2 percent surcharge went into effect. So that was good news.

Meanwhile on the income tax side, Murphy got some bad news about the hike to 10.75 percent in the top rate of the so-called “millionaire’s tax.”

How much did income-tax receipts go up? 

Zero. In fact, revenue dropped 6 percent compared to the prior year – despite the booming economy and the tax hike.

When I asked Sweeney about this last week, he said there was nothing surprising about that result. It was entirely predictable after the Trump tax reform ended federal deductions for state and local taxes – “SALT” for short.

…

“Tax the rich, tax the rich, tax the rich – and then the rich leave,” Cuomo said on one of the many talk shows he’s been appearing on lately.

Posted in Economics, New Jersey Real Estate, Politics | 21 Comments

In the old days, we’d have had a rebellion

Posted on February 23, 2019 by grim

No worries people, Murphy is on the job. He’s mad and he’s making phone calls. From the Star Ledger:

‘This is a big deal’: Murphy joins growing effort to restore your property tax deduction

They’ve gone to court. They’ve spoken out. They’ve even developed new ways to get around the rules.

Now a group of Democratic governors, including New Jersey Gov. Phil Murphy, announced plans to lobby for passage of legislation restoring the full federal deduction for state and local taxes.

The Governors Coalition for Tax Fairness plans to work with their representatives in Washington and try to convince other lawmakers to end the Republican tax law’s $10,000 cap on the deduction.

“I’ll call anybody,” Murphy said. “This is a big deal.”

Murphy joined the governors of New York, Connecticut, Illinois and Oregon on the first day of the National Governors Association’s legislative conference here to speak out against the tax bill signed into law by Republican President Donald Trump that targeted high-tax states. Except for Oregon, all of the states send billions of dollars more to Washington than they receive in services.

“This is politics masquerading as tax policy,” Murphy said. “It’s appropriate we are having this discussion in the middle of tax season because it is gutting our middle class. It is just plain wrong.”

U.S. Sens. Robert Menendez, D-N.J., and Rep. Bill Pascrell Jr., D-9th Dist., members of the congressional tax-writing committees, have introduced bipartisan legislation to restore the full deduction and pay for most of the costs by re-imposing a 39.6 percent tax rate on the richest Americans.

Posted in Economics, Politics, Property Taxes | 12 Comments

Will housing lead or follow?

Posted on February 21, 2019 by grim

From the NYT:

The United States has had 11 recessions since the end of World War II. All but two were preceded by a big decline in the housing market.

Inside that bit of trivia lie some fundamental insights into housing’s outsize role in the business cycle, along with clues to suggest that the economy is on firmer footing than the increasingly pessimistic forecasts make it seem. The gist is this: The United States may or may not enter a recession this year, but if it does, housing is unlikely to be the cause, because it never really recovered in the first place.

“Housing is not in a position to lead this thing down,” said Edward Leamer, an economics professor at the University of California, Los Angeles.

How much it can help prolong the overall recovery is another matter. Home sales and prices have been sluggish in the face of rising interest rates. Still, the pace of construction, combined with pent-up demand from young adults, suggests that the sector should at least remain stable in the face of uncertainty elsewhere.

…

Even though housing does not account for all that much of the economy, its role in recessions is huge, because it is highly cyclical and sensitive to interest rates. Think of expansions and recessions as the cycle of things that go up and down a lot. Housing is a big determinant of where that cycle is headed because, unlike many other sectors, it has wide swings.

…

Sometimes downturns have other causes, but they only underscore housing’s role in economic cycles. The 1953 recession followed a decline in government spending after the Korean War, and the 2001 recession was driven by a decline in business spending after the dot-com bubble popped. Both were relatively brief and shallow — the 2001 recession was the least severe since World War II — in part because housing investment remained stable.

The most recent recession, from 2007 to 2009, offered one of the more exaggerated examples of housing’s guiding role in downturns. A recent report from the Federal Reserve Bank of St. Louis found that the construction sector accounted for a little over a third of the decline in output in the past recession, and about half of the job losses (a figure that includes laid-off construction workers and job losses in connected industries).

How does housing look now? Mixed, but mixed in such a way that the things most important to economic growth are the most stable.

…

In other words: Housing is in recession already. It might not get better soon, but it probably won’t get worse.

Posted in General | 138 Comments

Thank Trump for fixing NJ’s property tax issue

Posted on February 19, 2019 by grim

From CNBC:

One surprising way to beat the SALT deduction cap: Move to a nearby town

A few years ago Dawn Donaghy and her husband, Raymond, made a decision that many residents in high-tax states make. They wanted to move.

The couple, then residents of Old Tappan, New Jersey, a town less than 30 miles outside of New York City, loved where they lived.

But Raymond’s three children were now adults, and no longer needed the school system. And the taxes that came with that high-quality public school education were high.

The couple considered moving as far as Connecticut, so they were surprised at what they found in their own backyard.

In June 2017, the Donaghys moved to a neighboring town, Saddle River, just about eight miles away.

“We started looking and we could not believe some of the homes that we saw and the tax bracket,” Dawn said. “We just looked at each other in amazement. We’re going to have more property, a larger home and one of them was half the taxes.”

While the couple did not end up choosing that house, they still were able to bring down their tax bill substantially — by about $10,000.

The property taxes they were paying in Old Tappan were around $37,000 at their highest, according to Dawn. Today, they’re paying around $27,000.

More residents of high-tax states are reportedly looking to move in light of changes ushered in by the Tax Cuts and Jobs Act. Notably, that includes a lower cap — $10,000 — for deductions for state and local taxes.

Posted in New Jersey Real Estate, Politics, Property Taxes | 112 Comments

Stop making sense

Posted on February 18, 2019 by grim

From the APP:

Making NJ competitive will do more than $15 minimum wage

New Jersey routinely places at or near the bottom in almost every economic analysis of states in America. It’s one of the worst places in the country to do business; it has among the highest business and personal taxes; it’s overregulated; it’s electric utility rates are high and it has one the highest debt loads in the country. And its high property taxes make home ownership unaffordable for the middle-class.

Instead of addressing crucial structural issues with the state’s economy — like lowering corporate and property taxes, the leadership in this state has determined that it’s more important to boost the minimum wage to $15, raise taxes on job-producing people, legalize marijuana and lay down a welcome mat for illegal immigrants — at taxpayers’ expense.

The Murphy administration tried to lure Amazon to Newark with an outrageous $7 billion incentive. Amazon thumbed its nose at New Jersey’s enticement and decided to spend its money in two other places — which combined offered billions less than New Jersey.  That says a lot about the state’s economic reputation.

…

While the governor pursues his progressive “fairness economy” his tax policies are destroying the opportunity to unlock New Jersey’s potential to attract investments that create jobs that support middle-class families.

According to a recent report, the average salary in New Jersey ($57,000) is not enough to afford the average rent of $2,062. A $15 minimum wage will not help. State property taxes now average $8,700 a year; New Jersey has the sixth-highest personal income tax rate in the nation (8.97 percent) and the third-highest per capita tax ($6,709) and the sixth-highest debt.  Consequently, young people and retirees are fleeing the state — and business owners are taking note that the state is failing to address affordability issues.

If the governor is seeking a “fairness economy,” shouldn’t he be focusing on creating an environment that attracts good-paying jobs for millennials and older adults?  Technology and manufacturing jobs that lift people out of poverty are going to less expensive states. Companies like Mercedes Benz and Honeywell are taking their high-paying jobs to Georgia and North Carolina and it’s not hard to figure out why.

Posted in Demographics, Economics, New Jersey Real Estate, Politics | 21 Comments

Uh oh.

Posted on February 15, 2019 by grim

From the Star Ledger:

N.J. revenues continue to slump, and Trump tax reforms are blamed

New Jersey’s state budget is really feeling the effects of the federal tax reform hangover now.

Last month, Gov. Phil Murphy’s administration warned tax revenues were falling behind because taxpayers were altering their behavior in response to federal tax changes. An updated report released Thursday shows the state’s growing risk of running a shortfall that could force mid-year cutbacks.

In total, the state’s major tax revenues were forecasted to increase by 7.5 percent over the last fiscal year, but growth has slowed to just 3 percent.

Thursday’s report would look worse if it weren’t for a tax amnesty program that brought in $282 million in delinquent tax payments. That winter amnesty program well exceeded its $200 million goal as taxpayers settled up with the state in exchange for waived penalties and reduced interest.

Without the amnesty bump, growth would have clocked in at just 1.3 percent.

The gross income tax — New Jersey’s largest source of tax revenue — is a big source of the trouble. Income tax collections for the first seven months of the fiscal year are down about $500 million compared to this same period last year. That’s a 6 percent decrease year-over-year, when the budget forecasts gross income tax collections are supposed to increase by 5.4 percent.

Posted in Economics, Employment, New Jersey Real Estate, Politics, Property Taxes | 105 Comments