Thursday, April 27, 2006

"Extreme Oversupply" Of Homes In New Jersey

From the Wall Street Journal (courtesy of the Post Gazette):

Housing strength shifts to new markets

A look at inventories of unsold homes, prices and employment trends points to generally positive signs in Houston, Dallas and Atlanta -- cities that have seen only modest home-price gains in recent years.

Metropolitan areas whose housing markets look less healthy, at least in the short term, include Boston, Los Angeles, Miami, Minneapolis, New York, Philadelphia and San Francisco. All of them have growing inventories of homes and relatively weak job growth. As a result, houses that a year or two ago might have sold in hours now are languishing on the market for months, and some sellers are cutting prices.

To produce a snapshot of residential real-estate prospects for 18 major metro areas, The Wall Street Journal examined inventories of homes for sale at the end of the first quarter from a variety of local sources; pricing trends based on surveys of real-estate agents by Daniel Oppenheim, an analyst at Banc of America Securities in New York; and projections of job creation by Moody's Economy.com, a research firm in West Chester, Pa. Inventory data provide a broad picture of the overall supply of housing, while job trends are the biggest driver of demand. The pricing data show how markets are adjusting to recent shifts in supply and demand.
...
In New Jersey, a market highly dependent on people who commute to other states, prices are likely to be flat to slightly higher this year, down from the double-digit pace of recent years, says Jeffrey G. Otteau, president of Otteau Appraisal Group in East Brunswick, N.J. Next year, he thinks prices could fall 5 percent or so in the state.

"We think that we're going to be in a flat holding pattern for the next several years," Mr. Otteau says, though at the top end of the market, there is "an extreme oversupply" of houses. In Spring Lake, N.J., known for expensive homes, there is a three-year supply of homes at the current rate of sales, and Upper Saddle River has a 21-month supply, Mr. Otteau estimates. He blames the state's loss of high-paying jobs in such industries as telecommunications and pharmaceuticals.

43 Comments:

Blogger grim said...

(crossposted)

Active Listings - GSMLS
(Bergen, Essex, Hudson, Morris, Passaic Somerset, Sussex, Union, Warren)

March 2006 - 19,207 (37% Increase)
March 2005 - 13,989

Caveat Emptor!
Grim

4/27/2006 05:33:00 AM  
Blogger bairen said...

I wonder if this is the start in the US of what's happened in the rest of the developed world. The "cool" metro and resort areas bubble up. They then flatline to slightly decline. Next the nonbubble zones increase at a much faster than historically normal pace. It's gone on in Australia and Western Europe. Is it the US's turn now?

4/27/2006 05:50:00 AM  
Anonymous Anonymous said...

Active listings in Bergen County from 04/01/05 to 04/27/05
1,042 condos/co ops

from 04/01/06 to 04/24/06
1,104

# of sold condos/co ops
from 04/01/05 to 04/27/05
344

from 04/01/06 to 04/27/06
284

4/27/2006 06:36:00 AM  
Blogger grim said...

I've tried looking at the data from a SFH versus Condo/Coop level, even trying to go down to the town level. Actually in one instance, I tried to compare an aggregate of towns on the midtown direct and main/bergen lines to those without train access. Even at a multi-town level the data was too ragged.

There simply are not enough transactions at these lower levels to get a good view. The variation is incredible, both on supply and sales, and the noise makes the data all but useless.

You really need to aggregate upwards to get a clear view. Once you start aggregating up to the county level, you begin to see smoothing of monthly changes and a clear seasonal pattern develop.

Is that data from GSMLS or NJMLS? I really hope it's from NJMLS, because I lost my NJMLS contact and I can't get detailed stats from NJMLS anymore.

4/27/2006 06:52:00 AM  
Anonymous Anonymous said...

The Best Blog around.

Tell all your friends and family.

Facts NOT spin!

4/27/2006 06:53:00 AM  
Anonymous Anonymous said...

Grim - Yes, it is data from NJMLS

4/27/2006 07:31:00 AM  
Anonymous opticnerve said...

Does anyone have good recent stats by county? I'm trying to figure out what's going on in Essex county, esp Montclair & environs. Seems like bad homes are sitting for a long time, but decent places still get busy open houses and offers. Might suggest the flattening rather than dip scenario, but it's all anecdotal.

4/27/2006 07:41:00 AM  
Blogger grim said...

Can you provide the inventory and sales numbers for SFH, Condos, and Coops in Bergen for March 2005 versus March 2006?

grim

4/27/2006 07:43:00 AM  
Blogger skep-tic said...

you'd have to be crazy to buy a condo or co-op right now. association fees alone are like 1/3 of what it would cost to rent. more "luxury" condos coming on the market all the time

4/27/2006 07:43:00 AM  
Anonymous Anonymous said...

Grim,

03/2005 active 2646
03/2005 sold 661
03/2006 active 3231
03/2006 sold 633

4/27/2006 07:51:00 AM  
Anonymous Anonymous said...

Flippers & speculators are Dead meat!

4/27/2006 07:53:00 AM  
Blogger Metroplexual said...

bairen said...
I wonder if this is the start in the US of what's happened in the rest of the developed world. The "cool" metro and resort areas bubble up. They then flatline to slightly decline. Next the nonbubble zones increase at a much faster than historically normal pace. It's gone on in Australia and Western Europe. Is it the US's turn now?"

I think that would happen under a low interest rate (cheap money scenario). What are interest rates up to in those other places. IMO the money is moving from one asset class to another.

Stocks till 2000
Houses till 2006
Gold silver ?

4/27/2006 07:53:00 AM  
Blogger grim said...

Optic,

The best data on a town level is from Otteau. The problem is it's released quarterly, and usually a bit on the late side.

Otteau Data

The most recent data is Q4. We're already in Q2. It's lagging by months. But hey, we'll take anything we can get.

The market didn't start to shift until Q4 of last year. The Otteau quarterly data begin to show that. I don't think we'll see the Q1 NJAR or Otteau data until mid-May.

I'd be careful about drawing too much of a conclusion based on current activity. While I have my own opinion, one I'm very vocal about. The truth is we are in uncharted waters. If the 90's in the Northeast or Japan are any indicator of how housing might play out, I don't think anywhere is going to be "immune" or "flat".

Remember, saying prices will stay flat is still a prediction.

grim

4/27/2006 07:54:00 AM  
Blogger grim said...

Thanks Anon @ 8:51.

grim

4/27/2006 08:04:00 AM  
Blogger Metroplexual said...

Grim,

The article speak about Dallas being hot now. I was down there in November and saw a ton of stuff on the market. I also will note that Dallas is going through a period of high foreclosures. Is it possible that that is what is getting picked up in the sales data?

4/27/2006 08:04:00 AM  
Anonymous Anonymous said...

Is today Boroson column day?

m reynolds

4/27/2006 08:06:00 AM  
Blogger skep-tic said...

Jonathan Miller's analysis of seasonal price trends on Curbed:

http://www.curbed.com/

**************

"For this week's chart I took three 5-year windows of the Manhattan co-op and condo market—1991-1995; 1996-2000; 2001-2005—and overlaid them to see if there were seasonal trends.

"Generally there was a upswing in prices in the second quarter of each year presented.

"No matter what 5-year period was presented, the trends were largely in sync"

**********

it's important to recognize that there were 2d quarter upswings in house prices even during overall downtrending periods (e.g., mid 1990s).

thus, even if median prices are slightly above where they were 4th quarter 05 and 1st quarter 06, it does not refute the idea that we are in an overall downward trend

4/27/2006 08:12:00 AM  
Blogger bairen said...

Metroplexual good point on the interest rates. Does anyone know what mtg rates in Europe and Australia have been doing over the last few years? I believe most mtgs in those countries are like our short term arms, some are even variable and can change on a monthly basis.

4/27/2006 08:33:00 AM  
Anonymous Anonymous said...

China 1 year rates 5.85%.

Competition for money going up. Interest rates up, Invenotry up and House prices down.

4/27/2006 08:37:00 AM  
Blogger grim said...

China's central bank unexpectedly raised one of their key interest rates this morning.

I believe the 10Y briefly hit 5.13% this morning, looks like it's around 5.12% right now, despite a larger than expected initial claims report.

I've heard quite a bit of chatter lately on the U.S. needing to increase rates in response to rate changes across the globe to keep the dollar strong. Each time the fed raises, the dollar rallies, each time a foreign central bank raises or talks about dollar reserves, the dollar falls.

Falling dollars equals inflation on imports, and god knows that if anyone can import, it's us.

So we seem to be potentially hitting a catch-22 situation. If the fed pauses, the dollar falls, and the potential to see inflation on the imports side rises. Thus requiring the fed to hike.

Even bigger problem is the Fed is forced to hike because of these import inflation numbers, and due to growth, productivity, and capacity.

grim

4/27/2006 08:40:00 AM  
Blogger grim said...

I need to start proofreading or writing slower. I'm a very fast typer, and can usually type faster than I can think. That last paragraph should read:

Even bigger problem is if the Fed is forced to hike because of inflation due to imports, and not due to growth, productivity, and capacity.

4/27/2006 08:42:00 AM  
Blogger Shailesh Gala said...

Grim - How about some Poll from the visitors of the blog? I am not sure if blogger provides such a feature. This could be a good question.

What is your prediction of NNJ Home price gain/loss for 2006?

-40%
-30%
-20%
-10%
0%
+10%
+20%

This may give idea of what we all collectively are thinking.

4/27/2006 09:01:00 AM  
Blogger Metroplexual said...

Shailesh Gala said...
Grim - How about some Poll from the visitors of the blog? I am not sure if blogger provides such a feature. This could be a good question.

This site is used by bubbleboy.

http://www.pollhost.com/

http://bighousingbubble.blogspot.com/

4/27/2006 09:07:00 AM  
Blogger Shailesh Gala said...

Grim - I tried out following site.

http://www.blogpoll.com

You create a Poll, at the end it give HTML code, that you can post it in Blogger. The Blogger displays poll, and once user select answers, it pops results in new window.

Looked pretty ok.

4/27/2006 09:10:00 AM  
Anonymous Anonymous said...

Ba ba ba ba ba ba ba BOYCOTT Houses!

Boooooyaaaaaa

Bob

4/27/2006 09:42:00 AM  
Anonymous Anonymous said...

Shaleish Gala:

By 2008-09 home prices will be 40% of what they are today. ie; "$1m" house today will be $400k.

4/27/2006 12:52:00 PM  
Anonymous Anonymous said...

37% YOY increase in inventory and Realtors have the nerve to say NO bubble.

19,207 listed homes March 2006

VS

13,989 listed homes march 2005

That's alot of panicky sellers out there. hehehee

4/27/2006 01:03:00 PM  
Anonymous Anonymous said...

And the NAR calls the market balanced or Normal.

HAHAHAHHA!

4/27/2006 01:04:00 PM  
Anonymous Anonymous said...

I'll bet we see 25,000 listed homes for sales by end of September as the panicky sellers try to rush out the closed door.

TOO LATE!.

4/27/2006 01:05:00 PM  
Anonymous Anonymous said...

I called the listing agent to place an offer. My offer was 10% less then the asking price but still it was little more then the last year's price. When he heard my offer, he started laughing and started telling me the market is still strong and he was so much confidant that he will be able to sale the home close to the asking price.

Time will tell….

4/27/2006 03:24:00 PM  
Blogger chicagofinance said...

The fact that you received that much of a reaction says a lot. Obviously, he wants you to increase the $$$, and is notably disappointed with what you said.

That doesn't mean that some else won't step in, but you should know that you are in the running.

A simple "thank you" would have been far less reassuring.

Good luck.

4/27/2006 03:31:00 PM  
Anonymous Anonymous said...

wHEN THEY CALL YOU BACK ASKING IF YOU ARE STILL INTERESTED TELL'EM NOW IT'S 15% BELOW THE ASKING DUE TO INTEREST RATES AND THE NNJBUBBLEBLOG FACTUAL INFORMATION.

4/27/2006 04:56:00 PM  
Anonymous Anonymous said...

I felt insulted when he laughed at me after I put an offer. I told him that your listing price is much higher then last year's price and this is my final offer. He said that he is very confident that he will able to sale it for close to the asking price. I told him "Good Luck".

4/27/2006 09:24:00 PM  
Blogger Roadtripboy said...

Anon 10:24,

I don't blame you for feeling insulted. You put in a good-faith offer to purchase a property and the agent laughs??? Apparently they feel entitled to offers of mega-$$$. They should feel thankful that someone is interested. But alas, we don't live in a perfect world.

I agree with the other anon: if they come back to you at a later time (say next week???) and ask if you are interested, definitely lower the offer. We buyers need to start taking the attitude that the sellers need us and not the other way around.

4/27/2006 10:42:00 PM  
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4/28/2006 05:07:00 PM  
Anonymous Anonymous said...

Atlanta Midtown condo market is cooling. Just opened Spire, a 28-story building with 388 condos has 104 units on the market.

The builder, Novare, sold out Spire quickly, after enjoying great success in 2002 with the 498-unit Metropolis across the street, but Spire's 96 resellers (flippers?) and 6 owners hoping to rent out their units are in deep trouble.

Prices range from $167k to $768k for 1 & 2bedroom units.
http://ianmarshall.mlsb.com/mls/results_fields.cfm?ClientID=2671&SearchType=Address&HOUSE_NUMB=860&STREET_NAM=peachtree&CITY_NAME=%276198%27

New stuff sells in Atlanta because Atlantans are willing to pay a premium for the latest & greatest--but as Metropolis resellers are finding out--that premium doesn't last long.

Atlanta's condo market is probably going to have a soft landing. New buildings are probably going to do well--just not as well as before. But existing condo owners inside the Perimeter can forget about making a fast buck. In fact, Fulton County property records show that many condo dwellers had to sell for 10 to 15 percent less than what they paid if they purchased at inflated prices during the 1999-2001 period.

The problem with many condo buyers is that their purchasing decision is based on what they can afford for a monthly payment instead of a realistic resale value 2 to 4 years later. Many find that prices declined two years later instead of rising.

Not to speak of the rest of ATL--just the Midtown area has no less than 1,200 units coming on line and 4,200 in the planning stages. Let’s name a few mega projects: Atlantic Station, Plaza Midtown, Centennial Park, Onyx, Aqua, 13th St conversion, and we’re not even considering all the new supply in Buckhead and elsewhere inside the Perimeter.

Single-family homes inside the perimeter are selling well, but the resell market for condos is really bad. It's going to be an expensive summer for condo resellers who hold out for 95% of asking price. If that magical offer comes, it will have been at a very high holding cost--but most resellers have this myopic view that its better to lose $10k in monthly payments than to lower their price by $5k to unload their property. This is not a luxury that many can afford thanks to option-ARMS and cash-strapped speculators.

Who’s hiring? Who’s relocating here? I suspect a lot of Atlanta’s recent job growth is explained by tourism and conventions coming here instead of New Orleans. That could explain some of the success of the new Georgia Aquarium. Moreover, Atlanta got several thousand evacuees, who are here to stay. Ticker counters can’t afford a Midtown condo.

Midtown white-collar condo-paying jobs are booming right? No. Atlanta has a great long-term future, but the short-term is dismal. Besides the announced closure of Ft. McPherson, there are mergers, layoffs, and shutdowns affecting GM, Ford, ATT/Bellsouth, Cingular, Hewlett Packard, Delta—just to name a few.

4/28/2006 06:05:00 PM  
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