A Manufacturing Comeback?

Posted on October 24, 2018 by grim

From NJBiz:

CBRE: 2018 strong year for NJ manufacturing real estate

Boosted by the sale of a Jersey City manufacturing property, the real estate services and investment firm CBRE is forecasting 2018 to be one of the strongest years for New Jersey’s manufacturing real estate market.

Based on third-quarter data, New Jersey is expected to close a total of 49 manufacturing-related real estate transactions by the end of 2018, according to the commercial real estate firm.

That marks a 63 percent leap from four years ago. New Jersey saw 30 such transactions in 2015, 43 in 2016 and 46 in 2017, the report said.

CBRE’s Robert L’Abbate and Thomas Monahan recently closed the $17 million sale of a 93,000-square-foot manufacturing facility in Jersey City on behalf of the property’s seller, Elementis Specialties Inc.

“It’s encouraging to see a steady rise in manufacturing transactions over the course of the last several years in New Jersey, with 2018 predicted to follow that same trajectory,” L’Abbate said in a prepared statement. “The Jersey City transaction is the perfect example of how developers can unlock the value of underutilized manufacturing facilities in the tristate area.”

Posted in Economics, Employment, New Jersey Real Estate | 80 Comments

Kaboom! Err, a new boom.

Posted on October 21, 2018 by grim

From HousingWire:

TransUnion: Home equity lending is going to soar

Home equity levels continue to rise, and all signs point to a market ripe for home equity lending, according to a recent report from consumer credit reporting agency TransUnion.

Home equity levels have risen every year and are now nearing $15 trillion, surpassing its 2006 peak by more than $1 trillion. TransUnion said this fact and several other dynamics will converge to create significant growth in home equity origination.

“There are ample signs that the home equity lending market is poised for growth. Home prices have surpassed 2005 boom levels and household home equity has grown even faster,” said Joe Mellman, TransUnion’s senior vice president and mortgage business leader. “Increasing consumer debt makes debt consolidation an appealing option and home equity can be the most economically attractive path to do just that.”

Interest rates also play a role, according to Mellman.

“With rising interest rates and increases in home prices outpacing wage growth, homeowners are more likely to stay in their current homes, rather than ‘move up,’” Mellman continued. “This leads to a higher likelihood of improving their existing home and home equity can be great tool for that.”

TransUnion said its study revealed that last year, HELOCs comprised the greatest number of home equity originations with 1.2 million loans closed, a 2.3% increase from the previous year.

Posted in Economics, Housing Bubble, Mortgages, National Real Estate | 42 Comments

Buy! No, rent! No, buy!

Posted on October 18, 2018 by grim

From the Real Deal:

More than 75% of Americans choose renting a home over buying: report

Fewer Americans are in the home-buying mood. Rising interest rates and housing prices prices, coupled with slowing rent growth are making homeownership less attractive.

New data from Freddie Mac found 78 percent of Americans now consider renting to be more affordable than buying a home, up sharply from 67 percent six months ago, according to the Wall Street Journal. And the long-term outlook shows 58 percent of renters say they have no plans to buy a home, up from 54 percent over the same period.

That means demand for homes on the market could remain soft in the coming months. Home sales across the U.S. are slowing because of low inventory and high prices, according to recent reports.

Posted in Demographics, Economics, Mortgages, National Real Estate | 94 Comments

Room to run or end of the road?

Posted on October 16, 2018 by grim

From Bloomberg:

Housing Market Is Raising Serious Red Flags

Despite a robust U.S. economy, at least as measured by gross domestic product, real home price growth is locked in a cyclical downturn. If that’s not bad enough, it will likely get worse based on the same approach and factors that correctly flagged the housing bust – in real time – in early 2006.

Home prices are highly cyclical and, as everyone discovered from the last recession, their movements can have material consequences for the broader economy. Yet, according to the minutes of the Federal Reserve’s Aug. 1 monetary policy meeting, policy makers are only starting to recognize the “possibility” of a significant weakening in the housing sector as a “downside risk.” Our research suggests that real home price growth has already entered a cyclical downturn that is likely to intensify. Data this week is forecast to show a drop in housing starts and existing home sales.

Part of the reason for the worsening outlook in home prices is the plunge in housing affordability, which is generally a function of the ability of a family with median earnings to buy a home at the median price. This metric – the National Association of Realtor’s Housing Affordability Index – recently dropped to a 10-year low, partly as a consequence of rising mortgage rates. But it’s not just about higher borrowing costs. Affordability has also been undercut by the steady rise in the ratio of median existing home prices to the median earnings of full-time wage and salary workers. This ratio recently reached a 10-year high, with the median cost of purchasing a home equaling almost six years of a worker’s earnings before easing slightly, according to our research.
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With the Fed determined to keep hiking rates and broader housing affordability remaining tough, it’s difficult for home prices to gain much traction. And it’s hardly reassuring that the level of real home prices appears to have peaked for the first time since the housing bust.

Posted in Housing Bubble, National Real Estate | 96 Comments

Rockland and Westchester slow

Posted on October 15, 2018 by grim

From LoHud:

After a robust year, there are signs the housing market is in correction mode

The residential market in the Lower Hudson Valley shows signs of a slowdown.

The number of sales in the third quarter slipped from a year ago while inventory increased slightly, according to a recent market report.

The report, issued by the Hudson Gateway Multiple Listing Services, a subsidiary of the Hudson Gateway Association of Realtors (HGAR), signals a departure from the trend in recent quarters when the lack of inventory was blamed for a sales slowdown in the heated market.

In Westchester, the number of overall sales from July to September was 3,022, the lowest in the past four years, or a decrease of 5.2 percent from a year ago when the figure was 3,189.

Meanwhile, the end-of-quarter inventory slightly increased to 4,175 from a year ago when the figure was 4,135, reversing a downward trend since 2014.

In Rockland, the number of overall sales in the third quarter was 811, down 1.2 percent from a year ago when the figure was 821.

Rockland’s end-of-quarter inventory was 1,289, up 3.6 percent compared to a year ago when the figure was 1,244, reversing the downward trend since 2013.

Jennifer Mallory, regional vice president of HGAR and associate broker with Keller Williams in Rockland, said the market, which has been heating up in the past few years, is in correction mode.

“The market runs in cycle, and you can’t have the entire time upward. At a certain point it goes down,” she said, “It’s part of the natural cycle.”

She added that the inventory has increased because homeowners decided to put their houses on the market as mortgage rates start rising.

Mortgage rates recently hit 5 percent for the first time since February 2011.

“Savvy homeowners would know that the best time to put their homes on the market is when the purchasing power of buyers is still strong,” she said.

The slowdown has yet to be translated into pricing.

Posted in Economics, Housing Bubble, North Jersey Real Estate, NYC | 65 Comments

Oh baby, now we’re talking

Posted on October 13, 2018 by grim

From CNBC:

Thousands line up for zero-down-payment, subprime mortgages

Magdalene Altidor lost her home to foreclosure during the subprime mortgage crisis, but this week she was first in line at a four-day event in Miami where borrowers with poor credit were offered no-down payment, low interest rate loans.

“I left home, it was about 4 a.m.,” she laughed. “I’m ready to purchase a home.”

The event is one of several being held in cities across America this year, run by the nonprofit, Boston-based brokerage Neighborhood Assistance Corporation of America, or NACA.

“It’s a national disgrace about the low amount of homeownership, mortgages for low- and moderate-income people and for minority homebuyers,” said Bruce Marks, CEO of NACA. “In the loans that we’ve originated in the past 6 years, zero foreclosures.”

Marks and NACA were front and center during the subprime mortgage crisis, holding mass mortgage modification events across the country with banks and servicers. Bank of America was there then and the bank is with NACA now, backing the program with $10 billion in mortgage commitments.

“It’s total upside,” said AJ Barkley, senior vice president of consumer lending at BofA. “We have seen significant wins in this partnership. Just to be clear, when we get those loans with all the heavy lifting here, we’re over a 90 percent approval, meaning 90 percent of the people who go through this program that we actually underwrite the loans.”

Borrowers can have low credit scores, but have to go through an education session about the program and submit all necessary documents, from income statements to phone bills. Then they go through counseling to understand their monthly budget and ensure they can afford the mortgage payment. The loans are 15- or 30-year fixed with interest rates below market, about 4.5 percent.

“That’s what’s going to help people who’ve been locked out of homeownership to really become homeowners and to build wealth,” said Marks.

Posted in Housing Bubble, Mortgages, Risky Lending | 16 Comments

Big Spender

Posted on October 12, 2018 by grim

From the Star Ledger:

$170M Bayfront plan given final OK by Jersey City council

A $170 million plan that city officials say will give them more control over the redevelopment of a formerly contaminated swath of waterfront land cleared a major hurdle on Wednesday when the City Council gave the plan its approval.

The council voted 7-2 to authorize the city to borrow $170 million, enter into an agreement with the autonomous Jersey City Redevelopment Agency to partner on the project and approve of the city’s plan to purchase some of the land from Honeywell. The site is known as Bayfront.

The city’s plan is the latest for the property, a formerly contaminated 100-acre site that sits west of Route 440 and is owned by the city and Honeywell. The city intends to buy Honeywell’s portion, pay for infrastructure improvements and slowly sell portions of it to real-estate developers to pay off the debt.

The final vote was not a surprising one, with the six allies of Mayor Steve Fulop — Rolando Lavarro, Joyce Watterman, Daniel Rivera, Denise Ridley, Mira Prinz-Arey and Jermaine Robinson — joining James Solomon in favor. Council members Rich Boggiano and Michael Yun voted no.
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Boggiano cited fears that the city would botch the project, citing the 11 years it took the city to build a police station in the west district.

“Mark my words, I will be right. This will be a fiasco with the City of Jersey City running it,” he said.

Yun expressed concern about the amount of borrowing. This year’s budget shows the city has $574 million in outstanding bonds, up from $499 million in 2015. In that time, the city’s net debt per capita has decreased from $1,947 to $1,596.

The initial plan for Bayfront was for Honeywell to sell the property once it was remediated of chromium. That sale is expected to occur later this year.

In May, Fulop announced this new plan, which he said would allow the city to dramatically increase the share of affordable housing at Bayfront, which could have as many as 8,000 residential units. Fulop said by doling out the parcels in pieces and acting as a “master developer,” the city could push for a share of affordable housing as high as 35 percent. The old plan had the one-site share at 5 percent.

Posted in Gold Coast, New Development, New Jersey Real Estate, Politics | 33 Comments

Mortgage rates touch 5% again

Posted on October 10, 2018 by grim

From CNBC:

Mortgage rates jump past 5%, signaling more home price cuts ahead

Millennials are in their prime homebuying years, and they’re used to cheap credit. So they might be in for a rude awakening as mortgage rates jump.

The average rate on the 30-year fixed loan sat just below 4 percent a year ago, after dropping below 3.5 percent in 2016. It just crossed the 5 percent mark, according to Mortgage News Daily. That is the first time in eight years, and it is poised to move higher. Five percent may still be historically cheap, but higher rates, combined with other challenges facing today’s housing market could cause potential buyers to pull back.

“Five percent is definitely an emotional level inasmuch as it scares prospective buyers about how high rates may continue to go,” said Matthew Graham, chief operating officer of MND.
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Home sales have been sliding for much of this year, and total annual sales are expected to come in lower than last year. Affordability is the clear culprit. With rates now more than a full percentage point higher than a year ago, that adds at least $200 more to a monthly mortgage payment for a $300,000 loan. It also knocks some borrowers out of qualification because lenders are strict on how much debt a borrower can carry in relation to his or her income.

“For buyers that are inclined to buy now, they’re doing the same things they’ve been doing: Looking at the appalling lack of available inventory, seeing if any of it meets their needs, and deciding whether or not they can afford the monthly payment. In that sense, 5 percent takes some buyers out of some markets, and it plays a supporting role in the leveling-off process that’s already well underway for home sales,” Graham said.

Posted in Mortgages, National Real Estate | 80 Comments

Can NJ buy it’s way into a startup economy?

Posted on October 8, 2018 by grim

From the Star Ledger:

Murphy’s risky plan to spark Jersey’s sagging economy

Is New Jersey’s government smart enough to invest $250 million in venture capital projects, and come out a winner? Should a government that is not competent to run the trains on time take that risk with taxpayer money?

The proposal comes from Gov. Phil Murphy, who described it as “the big idea” behind his new effort to revive New Jersey’s sputtering economy, which he unveiled Monday. It’s an aggressive use of government, which is no surprise coming from an audacious liberal like Murphy.

The surprise is that even conservative business groups like the Chamber of Commerce and the New Jersey Business and Industry Association welcomed the plan, pending a review of details.

“Maybe this is the time we can get something right,” says Michele Siekerka of the NJBIA. “Sometimes we have to try new things, go outside the box.”

The governor’s plan is sprawling, with initiatives in transportation, housing, and job training. But it’s the venture capital idea that crosses into new territory.
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Tim Sullivan, the EDA’s executive director, says that the program is designed to rely on the expertise of private venture capital firms, who will have their own skin in the game. The state would supply half the money, matching an equal investment from private firms, for a total investment of $500 million over five years. “They are putting up their own money alongside of us,” Sullivan said.

Still, there is room for error. Start-ups are inherently high risk, and the state will still have to choose among competing proposals from private firms.

A second question: Murphy noted that venture capital investments in New Jersey dropped by half during the last decade, while they increased in states like New York and Massachusetts.

But doesn’t that suggest the core problem is New Jersey’s rotten business climate, rather than a shortage of venture capital? Why else would venture capitalists choose other states first?

Posted in Demographics, Economics, Employment, New Jersey Real Estate | 141 Comments

Murphy taxes online sales

Posted on October 5, 2018 by grim

From InsiderNJ:

Now Law: Burzichelli & Moriarty Bill to Require Marketplace Facilitators & Certain Remote Sellers to Pay NJ Sales Tax

Legislation sponsored by Assemblymen John Burzichelli and Paul Moriarty to ensure a level playing field between brick-and-mortar businesses and online marketplace providers like Amazon, and bring in needed revenue to the state has been signed into law.

The new law (A-4496) will require certain remote sellers and online marketplace facilitators to collect and remit sales tax. It was signed today by Gov. Murphy.

“This will help provide parity among brick-and-mortar businesses and online marketplaces and provide the state with needed revenue,” said Burzichelli (D Cumberland/Gloucester/Salem). “Online marketplaces have made it easier for interstate and international commerce, allowing many businesses to circumvent state sales tax requirements. New Jersey based businesses have to abide by the sales and use tax law, and so should any company who does substantial business in the state.”

New Jersey could gain between $216 million and $351 million as a result of this legislation—about 2 to 4 percent of total 2016 state and local government general sales and gross receipts tax revenues— according to the United States Government Accountability Office (GAO) study in November 2017.

Forty-five states and the District of Columbia levy taxes on the sale of goods and certain services, including those sold remotely, such as over the Internet.

Under the law, if a seller does not have a physical presence in the state but has revenue from sales into the state in the calendar year, or prior year, in excess of $100,000, the seller must collect taxes. The same rule will apply to a seller with 200 or more separate transactions into the state in a calendar year or in the prior year.

Posted in Economics, New Jersey Real Estate, Politics | 134 Comments

Rent a shore house, pay a new tax, unless you use a realtor

Posted on October 4, 2018 by grim

One of the most disgusting pieces of protectionist legislation I’ve ever seen.

From the APP:

NJ Airbnb users now must pay tax, unless they use a real estate agent

Visitors to the Shore who want to avoid paying a new occupancy tax have a loophole: Find a place to stay through a real estate agent.

Otherwise, guests who book rooms directly from owners through online sites such as Airbnb and VRBO are scheduled to begin paying a 5 percent tax on Oct. 1.

“Since 50 percent of bookings are direct by owner, it’s going to affect a large part of the Jersey Shore,” said Duane Watlington, owner of VRLBI.com, which has more than 800 listings on Long Beach Island.

The law signed by Gov. Phil Murphy will force owners who put their homes, or rooms, up for the short term to collect the state’s 6.625 sales tax and 5 percent occupancy tax. Municipalities also can collect taxes of up to 3 percent.

It’s a bid by government agencies to adjust to the digital age that is disrupting long-standing businesses.
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“They’re acting like hotels, they should be paying the same tax,” said Marilou Halvorsen, president of the New Jersey Restaurant and Hospitality Association, a trade group that represents hotel and motel owners.
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The New Jersey Division of Taxation was still finalizing the rules late Friday to ensure the tax would be applied specifically to to online sites like Airbnb.

Still, the department said homeowners who rent their property directly to consumers by word of mouth still would have to collect the tax because federal rules prevent state and local governments from discriminating against electronic commerce.

Posted in New Jersey Real Estate, Shore Real Estate, Unrest | 38 Comments

Otteau: September Update

Posted on October 2, 2018 by grim

From the Otteau Group:

September MarketNews

Home purchase contracts in New Jersey declined in August by 2% compared to the same month last year. Almost half of the markets in NJ have seen a decline in the pace of home sales on a year-to-date basis. As a result, the number of year-to-date purchase contracts (January-August) in New Jersey is up marginally by 0.8%, or roughly 600 contracts. While this is partially attributable to an under-supply of housing inventory, a growing affordability gap due to rising prices and interest rates is a significant factor.

While the number of year-to-date home sales has increased by 0.8% overall, that is not the case for all price ranges. Contract activity for homes priced under $400,000 have declined due to supply shortages, with unsold inventory having dropped by 12% year-to-date. Sales have stagnated in the $1+mil-$2.5mil range. At the opposite end of the spectrum, contract activity for luxury priced homes over $2.5-Million has increased by an impressive 12% (243 in 2017 vs. 272 today).

Shifting to the supply side of the equation, inventory remains restricted, which is limiting choices for home buyers. The number of homes being offered for sale today in New Jersey continues to be at its lowest point since 2005, having declined by 760 (-2%) over the past year. This is also 42% (31,000) less than the amount of homes on the market compared to the cyclical high in 2011. Today’s unsold inventory equates to just 4.1 months of sales (non-seasonally adjusted), which is the same as this time last year.

Currently, all of New Jersey’s 21 counties have less than 8.0 months of supply, which is a balance point for home prices. Middlesex and Essex Counties have the strongest market conditions in the state with just 3.1 months of supply, followed by Union (3.4), Passaic (3.5), Monmouth (3.5) and Camden (3.8), which all have fewer than 4.0 months of supply. The counties with the largest amount of unsold inventory (6.5 months or greater) are concentrated in the southern portion of the state including Cumberland (6.7) and Salem (6.8).
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Demand for rental apartments remains strong in NJ with statewide occupancy rates being among the highest in the US, which has allowed for average asking rents to rise for 33 consecutive quarters. The Central NJ region has the lowest vacancy rate in the state at 2.7%, which is slightly higher from the prior quarter’s 2.5%.

In spite of these strong metrics, vacancy rates have been rising recently, except for NYC where vacancy declined from 5.6% to 5.3% in the Q2. The vacancy increases in New Jersey is attributable to the staggering pace of new construction deliveries. In 2008.Q2, there were 6,400 apartment units being constructed, which has increased to over 30,000 units presently, equating to an astounding 368% rise in apartment construction over the past decade. The pace of new construction deliveries in key markets like Hudson County is especially rapid with almost 15,000 apartment units currently in construction compared to just 4,300 in 2008, representing a 248% increase.

Posted in Demographics, Economics, New Jersey Real Estate | 122 Comments

NYC transitions into a cooling market

Posted on October 1, 2018 by grim

From CNBC:

NYC has moved into a buyer’s market, and is experiencing a housing trend last seen in 2009

New York City’s pricey real estate has become a “buyers market,” new data suggests, characterized by lowball offers and a rise in the number of properties staying on the market for longer.

The latest figures from Warburg Realty show that among higher-priced homes, New York City is in the throes of a “major shift” that reflects a cooling market, the likes of which hasn’t been seen in almost a decade.

“Offers 20 percent and 25 percent below asking prices began to flow in, a phenomenon last seen in 2009,” wrote Warburg Realty founder and CEO Frederick W. Peters in the report, which surveys real estate conditions around the city.

Warburg’s report dovetails with separate data showing a definitive cooling in New York’s housing market. The number of homes for sale in the city recently hit a record, according to StreetEasy data, amid fewer sales transactions. Meanwhile, September’s report from real estate firm MNS showed Manhattan apartment rental prices — the most expensive in the city — on the decline.
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In today’s market, sellers should not expect multiple offers, he added. “The majority of deals result from a single offer,” Peters said — nor should they expect things to move quickly. “The days on market average has soared during 2018.”

Posted in Demographics, Economics, Housing Bubble, Lowball, NYC | 46 Comments

The middle class was an anomaly

Posted on September 28, 2018 by grim

Great read from Ritholtz at Bloomberg:

Why America Has a Two-Track Economy

Which of these two scenarios describes the U.S. economy?

No. 1. The economy is better than ever: The stock market is near a record high, wages are rising, there are more job openings than applicants, household wealth has hit a record, gross domestic product is growing briskly, house values have recovered from the bust, and consumer confidence is back — and so is America!

No. 2. Real Americans are suffering: Inflation-adjusted wages are stagnant or even declining, economic mobility is nonexistent, gasoline is getting expensive as oil prices rise, labor force participation rates are stuck at levels not seen since the late 1970s, health care is brutally expensive and getting more so, and rents have been rising. There is a looming retirement crisis coming, as households have too little savings, and pensions are underfunded — the average American is getting crushed!

In reality, this binary choice is a false construct and both of these scenarios are very true. But who you are, where you live, your job and educational background very much determines which of those two descriptions you relate to more. And while there has always been a divide between rich and poor, it has grown especially acute during the past decade.

Posted in Economics, Employment, Housing Recovery, National Real Estate | 127 Comments

Foreclosure problem, or borrowing problem?

Posted on September 27, 2018 by grim

From MarketWatch:

A decade after the housing crisis, foreclosures still haunt homeowners

Maria Landi, a 75-year-old retired insurance specialist, and her husband John, had been making payments on their East Brunswick, New Jersey home for 40 years when Wells Fargo foreclosed on it in 2010.

At the time, John Landi was forced into early retirement by the financial crisis from his job as a producer at ABC and 20/20. The couple could no longer afford to make the monthly payments on the home where they raised five children, and were forced out in 2013 after three years of trying and failing to apply for loan modifications from Wells Fargo.

“We had countless holidays, baptisms, communions, confirmations and birthdays in that home,” Maria Landi told MarketWatch. “We had graduations, engagements, weddings and, of course, end of life moments. Our blood, sweat and tears went into this structure. Renovations, additions and many accommodating improvements were put into this, what some may call just a building.”

The home was initially purchased for $49,000 and was later valued at $750,000 after the Landis renovated it and made additions to the home. But after the Landis got the foreclosure notice from Wells Fargo, it was appraised at just $450,000, far below what the Landis owed on their mortgage.

Posted in Economics, Foreclosures, New Jersey Real Estate | 99 Comments