Monday, April 03, 2006

Lucent corporate HQ moves to France

From the Star Ledger:

Jerseyans likely to feel the pain on jobs, stock

New Jersey's economy took a one-two punch yesterday with the announcement that Lucent Technologies will be consumed by France's Alcatel and see the home office re-established in Paris.

Losing a big corporate headquarters means fewer high-paying jobs, reduced contracting opportunities for nearby small-business owners and an end to local decision-making about charitable contributions. Lucent employs more than 6,000 in New Jersey, while the yet-unnamed combined company plans to trim 8,800 jobs, or 10 percent of its global work force.
...
"You always hate to lose a corporate headquarters, but you have to wonder how long the New Jersey jobs would have lasted without this merger," said Joan Verplanck, chief executive of the state Chamber of Commerce. "Maybe they will keep what they have in New Jersey, and it will stabilize and grow. Lucent and Alcatel are both intelligent companies; they need highly trained, educated people, many of whom reside in New Jersey."

Rutgers University economist James Hughes called the Lucent-Alcatel deal "another step in the sustained erosion of New Jersey's high-technology sector that has been going on since 1990."

In a report last year for the state Commission on Science and Technology, Hughes and his Rutgers colleague Joseph Seneca found the state had 9,800 fewer high-tech jobs in 2004 than in 1990.
...
"When a corporate headquarters leaves, the major opportunities are no longer in New Jersey," she said. "The best and brightest will want to go to the corporate center."

Caveat Emptor!
Grim

41 Comments:

Anonymous UnRealtor said...

Between moves such as this, and "outsourcing" (exporting top US jobs to 3rd world countries), my concern for America's future grows every day.

4/03/2006 07:04:00 AM  
Anonymous Anonymous said...

I guess we should bid farwell to the comparatively low property tax rate in Berkeley Heights!

4/03/2006 08:46:00 AM  
Anonymous gary said...

I don't know what you guys are crying about, a guy at work keeps telling me that anyone who can't afford to live in North Jersey is just jealous and is a wannabee. He said if you can't afford to live here, you should move.

By the way, he bought his house in Glen Rock in the mid 90's for $240K.

4/03/2006 09:05:00 AM  
Anonymous Anonymous said...

Check out the USA Today feature article on ARM mortgages:

Some homeowners struggle to keep up with adjustable rates
Posted 4/3/2006 12:43 AM E-mail | Save | Print | Reprints | Subscribe to stories like this


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By Noelle Knox, USA TODAY
For 45 years, Robert and Lorraine Brown have lived in their ranch-style home in Florissant, Mo. One of their four children was even born there. But for the past eight months, the couple have been locked in a sleep-wrecking race to keep up with their rising mortgage bills. They've switched to cheaper phone service, cut back on groceries and sometimes put off ordering medicine.
When they refinanced their home two years ago to pay off some bills, Robert, now 78, was working as a deliveryman. But his employer went out of business last April. Now he and Lorraine, 72, a retired nurse, are both seeking work. The rate on their mortgage has jumped from 7% to 10.5%.

"We were having a hard time meeting bills at the time we refinanced. It seems once you get behind, you do desperate things to catch up, and you never do," says Lorraine, trying to hold back tears. "At the time of the loan, they tell you, 'Well, it may go up, but it's probably going to go down.' You want it to be so, so you believe it."

They feel alone, but they're not. America's five-year real estate boom was fueled partly by a tempting array of cut-rate mortgages that helped millions of Americans qualify for home or refinance loans. To afford soaring home prices, many turned to adjustable-rate and other, riskier loans with low initial payments. The homeownership rate hit a record 70%.

Now, the real estate market is cooling, interest rates are rising and tens of thousands more Americans are starting to have trouble paying their mortgages. Nearly 25% of mortgages — 10 million — carry adjustable interest rates. And most of them went to people with subpar credit ratings who accepted higher interest rates, according to the Mortgage Bankers Association.

"Within the last year, I would say 60% to 70% of calls to our hotlines are issues related to ARM (adjustable-rate mortgage) loans," says Chris Krehmeyer, executive director of Beyond Housing, a non-profit group that offers homeownership support services in St. Louis. "That's significantly higher than in years past, because the ARMs are coming home to roost."

Last week, the Federal Reserve raised interest rates for the 15th time since June 2004 and signaled that at least one more increase is likely. That trend is ominous for borrowers who were seduced by adjustable-rate loans that offered interest-only payment options or teaser rates below 2% or that let the borrower pay less than the interest owed. They will face bigger payment shock once their loans reset to higher rates.

The number of borrowers in trouble will rise this year and peak in 2007 and 2008 as the largest number of mortgages reset to higher rates, according to First American Real Estate Solutions, a real estate data provider.

Already, in West Virginia, Alabama, Michigan, Missouri and Tennessee, about one in five homeowners with a high-interest (subprime) ARM was at least 30 days late at the end of last year, according to the Mortgage Bankers Association. After 90 days, the foreclosure clock starts ticking.

Most of those foreclosures are related to job losses in auto and garment factories; higher mortgage payments were often the last straw.

What worries experts such as Christopher Cagan at First American Real Estate Solutions are the adjustable-rate loans made in 2004 and 2005, at the end of the housing boom. These loans were concentrated in the hottest markets, such as California, where about 60% of all loans last year were interest-only or payment-option ARMs. That's the highest such rate in the country.

Of the 7.7 million households who took out ARMs over the past two years to buy or refinance, up to 1 million could lose their homes through foreclosure over the next five years because they won't be able to afford their mortgage payments, and their homes will be worth less than they owe, according to Cagan's research.

The losses to the banking industry, he estimates, will exceed $100 billion. That's less than the damage from the savings-and-loan crisis in the 1990s, which cost the country $150 billion. "It will sting the economy, but it won't break it," he says.

'What can we do?'

In the Atlanta area, credit counselors for The Impact Group say 85% of their calls are now related to ARM or interest-only loans. The calls start "when the statement hits them with the new monthly payment," says Marina Peed, executive director for the non-profit group, which offers homeownership education, counseling and financial services. "They are calling and asking, 'What can we do?' "

The call volume jumped after January, as holiday credit card bills, higher gas bills and rising mortgage payments hit some borrowers at the same time.

When Paul and Sandra Wilson moved from California, where they couldn't afford to buy a home, to Georgia in May 2004, they bought a house with an interest-only loan. But Paul, 52, has had a tough time finding work, and they lost most of their savings in a business venture. They refinanced to an ARM with a lower rate but one that reset every six months and that charges a $20,000 penalty if they refinance within three years.

The loan broker "convinced us that it was in our best interest, and in most likelihood within six months our financial situation would turn around and we were going to look at selling," says Sandra, 53, a former law enforcement officer who is disabled.

In less than a year, their loan payment jumped from $2,275 to more than $2,800. The couple filed for bankruptcy and will lose their home next month. "This was our fourth home," Sandra says. "It's not as if we weren't aware, but we'd never had an adjustable-rate mortgage before."

Banking regulators are concerned about risky loans made to people with precarious finances or those who didn't understand the complex terms and the peril they could face if interest rates rose.

In December, regulators proposed new guidelines for mortgage lenders to crack down on loose lending practices. The rules would require better risk disclosure and a fuller analysis of the borrowers' ability to repay the loan through maturity — and at the highest rates allowed under the loan terms.

Bank trade groups complained that concerns were overblown. "We do not believe it is appropriate or possible for the lender to dictate the best mortgage products for individual consumers," America's Community Bankers responded.

No matter what the final guidelines say, they will be too late to help people such as Susan Cambero. She got into trouble after she took out an equity line of credit on her home in Lilburn, Ga., to pay off her car and other bills. As a single mother with total income of $38,000 a year, including child support, she never would have been able to qualify for the $57,000 line of credit from a conservative lender. That line of credit, when added to the balance on her fixed-rate mortgage, totaled $10,000 more than her home was worth.

The monthly payments for the equity line have more than doubled in four years, to about $400. (She also has a $700-a-month mortgage and hefty credit card bills.) "I can pay it, but I have nothing left over to eat," says Cambero, a contract analyst for a computer company. "I'm going to lose my house."

Some success stories

There are few resources to help homeowners in dire financial straits, but there are some. The Homeownership Preservation Foundation offers free credit counseling and referrals, 24 hours a day, seven days a week (888-995-HOPE, or 888-995-4673). And NeighborWorks America, a national non-profit that supports homeownership and financial literacy, has member groups in every state.

One of its members, Neighborhood Housing Services of Chicago, has been receiving about five calls a day since January from borrowers who are falling behind on ARMs.

Marilyn Maxwell is one of their success stories. She refinanced her loan in 2002. Maxwell, 58, is a former U.S. postal worker who's living on disability payments from the government. She agreed to an ARM that reset every six months.

She kept up with her payments on her house on the southeast side of Chicago until last April, after her daughter, who was helping Maxwell pay the mortgage, lost her job. Last week, Maxwell refinanced her home with the help of Neighborhood Housing Services. She got a 6.8%, fixed-rate loan, plus grants to help make long-neglected repairs.

"I'm getting a new roof as we speak," she said.

The Browns in Missouri also have had a happy ending. The lender, Saxon Mortgage Services in Texas, declined to discuss the Browns' case with USA TODAY last week. But within 24 hours of a call from a reporter, Saxon agreed to give the couple a fixed-rate loan at 7%.

"I'm so elated," Lorraine said.

Contributing: Barbara Hansen

4/03/2006 09:16:00 AM  
Anonymous Anonymous said...

"By the way, he bought his house in Glen Rock in the mid 90's for $240K."

Tell him that within 2-3 years, he may have reason to regret paying that much for his house. LOL

4/03/2006 09:17:00 AM  
Anonymous Anonymous said...

Tech, Telecom Pharmaceuticals soon Real estate related financing , services and construction.

There is NO WAY house prices will not drop a nice amount (20-40%) from here. Incomes are under pressure while cost of daily living sky rocketing.
This will not end. Lots of newly minted mba's phd's and MA's are produced yearly in India and China.

4/03/2006 10:25:00 AM  
Anonymous Anonymous said...

It will be nice to see greedy arrogant homeowners take it up the --- soon while their so called paper housing wealth goes up in smoke.

RT

4/03/2006 10:32:00 AM  
Blogger Richard said...

i have noticed the arrogant existing homeowners in nice parts of NJ usually bought their houses when they were 1/3 what they are today. many if not all of them couldn't buy their house today if it was on the market so why have such a 'tude?

there's only one thing that keeps NNJ afloat and that's NYC jobs, plain and simple.

4/03/2006 10:42:00 AM  
Anonymous Anonymous said...

NYC jobs didn;t help in 1991-1994 housing correction.

Real estate was not moving well back then and buyers had the upper hand in bidding by a long shot.

You didn't hear pricks like that back then.
Come on lower prices.

4/03/2006 10:48:00 AM  
Anonymous Anonymous said...

I'm probably wrong here, but weren't there significant NY job losses during the last bursting real estate bubble (and a corresponding collapse in NY real estate?) I think Lucent moving is just part of a larger trend of NJ growing more and more dependent on NY.

4/03/2006 11:29:00 AM  
Anonymous trroll said...

Loosing job at Lucent? Here is good article about job creating states (guess what NJ-NY area does not look too good).

http://msn.careerbuilder.com/custom/msn/careeradvice/viewarticle.aspx?articleid=719&SiteId=cbmsnhm4719&sc_extcmp=JS_719_hotmail1>1=7951&cbRecursionCnt=1&cbsid=ff558deff58948a7a1bdfcc6e53018e2-197382172-WP-2

America's Job Hotspots

"Looking for a new job? Think about heading to the Sunshine State. For the second year in a row, Florida metropolitan areas dominate the Milken Institute Best Performing Cities Index, a measurement of where jobs are being created in America..."

"The biggest movers from last year were Bremerton-Silverdale, Wash., which moved up 104 places (122nd to 18th), and Newark-Union, N.J.-Penn., which dropped 101 spots (39th to 140th)."

4/03/2006 11:33:00 AM  
Anonymous RW said...

RT

""It will be nice to see greedy arrogant homeowners take it up the --- soon while their so called paper housing wealth goes up in smoke.""


I am a huge bubble believer and IMO we will certainly see huge declines in the next couple of years. The CONSTANT generalizations that all home sellers are arrogant and greedy are simply wrong. Many homeowners also think this market is nuts and have true compassion for those young families struggling to afford a home.

Your desire to see houses drop by 40% so you can afford something while the ramifications of the decline destroy thousands of lives across the country isn't just the least bit selfish? So that you can then be the arrogant one that gets to brag that you saw it all coming?

If you were retiring, owned a home and were able to sell it at a 100% profit would you not? If someone is willing to pay the price and the "market demands" it. No matter how out of whack it is.

A lot of people getting out now are in agreement with us that this is the peak. I don't call it greedy, I call it smart!

This is business, it's not personal. Wait for your declines and buy at better prices , but don't criticize those that are getting out NOW!

If you were selling your car would you say to a prospective buyer, I know that I could sell it to someone else NOW for twice the price but I will hold it for you and let you pay half in another year? Dont think so.

4/03/2006 11:41:00 AM  
Blogger Richard said...

rw, not everyone can look purely at financial based decisions in this market. it's been 5 years and things have continued to go out of reach. many already have families living in cramped rentals or other circumstances who just want to 'get on with their lives' and not want to wait 2-3 years to do so. these people will make the decision to purchase even being convinced that prices will lower in the future, maybe even substantially. if it's the stock market it's a much easier decision but this is the very core of why we live. i know my family is in such a predicament (of which i constantly drone on about here ;)

4/03/2006 11:51:00 AM  
Anonymous trroll said...

richard,

I agree with you. Though I'm not in you situation I know people that are. They called me yesterday, they are my in-laws good friends, and asked how much $250K-$300K mortgage would be (they are not internet savvy - so I had to use the mortgage calc for them) to buy 2 family house for - $375K. The house is small (my one family is only 350sqf smaller) and needs some repairs. I told them not to buy now - wait 2-3 more years but they got to the point they do not care. THEY WANT IT NOW - they are sick and tire of renting. I feel sorry for them - because if they buy this house now they will be up-side-down on it in couple of year. But I can understand them – they are like my wife couple of years ago. No she sees how big mistake would it be if we bought the houses she liked back then – we would be in debt up to our eyeballs.

4/03/2006 12:03:00 PM  
Anonymous RW said...

Richard,

Prices are already coming down and you may find something that suits you in the next six months. I have seen the most dramatic price drops in Summit on homes that went on in the fall, less buyers and if something becomes "dead wood" in many of these towns it becomes next to impossible to sell!

Too bad we can't see one year in to the future. Darn, where is my crystal ball?

Instead of a crystal ball I am relying on the overwhelming evidence supporting the bust! Who needs magic? We have Grim!

4/03/2006 12:11:00 PM  
Anonymous Anonymous said...

Selfish?

Why doesn;t the homeowners be less selfish and offer their homes at a reasoanble price?

I am selfish becasue I do not want to ruin my financial future chasing these skyhigh out of sight home prices by using a gimmicky mtg loan?

Looks who is selfish here.

As I have read real estate in NJ took it in the chin in 1991-1995. It went down in some cases for condos 50% from my research. houses 25-30%. And the economy held up okay then. The economy has become much to reliant on housing related ATM spending. It needs to end now before it gets worse for everyone.

What's wrong with prices correcting in housing? Let the free markets work as they should. those that made stupid financial decisions should be punished and those that waited to make a rational fianncial decision should be rewarded. What's wrong with this?
RT

4/03/2006 12:20:00 PM  
Anonymous Anonymous said...

richard people are getting on with their lives.

I know a number of people that have left this area already.

This is bad for future home prices.

It is the start of lower prices for the next decade all in my opinion.

4/03/2006 12:22:00 PM  
Anonymous Anonymous said...

richard people are getting on with their lives.

I know a number of people that have left this area already.

This is bad for future home prices.

It is the start of lower prices for the next decade all in my opinion.

4/03/2006 12:22:00 PM  
Anonymous Anonymous said...

richard people are getting on with their lives.

I know a number of people that have left this area already.

This is bad for future home prices.

It is the start of lower prices for the next decade all in my opinion.

4/03/2006 12:22:00 PM  
Anonymous RW said...

Richard,
Back to my point that I think you get more for your money this year than last. You should be thankful you didn't buy then, and just keep looking for those lowball oppotunities. You are already more in control as a buyer this year. You are doing your research and I have confidence you will get a deal. Good Luck!

4/03/2006 12:49:00 PM  
Anonymous Anonymous said...

i realize that the Hanover/Whippany area does have a good amount of industry there... but if they really do lose Lucent, that has to put a serious strain on their tax revenues.

4/03/2006 12:49:00 PM  
Anonymous RW said...

RT

Sellers will offer their homes at more resonable prices when they can no longer sell them at these levels. This is starting to happen.

You are not selfish for being financially wise or prudent, but calling sellers greedy and arrogant for asking current market prices for their homes seems misdirected.

I do not take pleasure in seeing the misfortune of others, whether I deem them "stupid" or not. Unfortunately lots of buyers have not been privy to information about the market imbalance. Many Americans have not even completed econ 101 let alone read Shiller.

Yes they will suffer horribly and I feel compassion not disdain for them.

4/03/2006 01:02:00 PM  
Anonymous Anonymous said...

rw,

I do not begrudge a home owner getting an increase in the value of their homes over time, but when prices go up about 100% in about 5 years due to imbeciles gambling with other people's money then I get angry. I have had to wait because of these jerks. It should be the other way around. they should be waiting until they save up and sacrifice for a down payment first!

4/03/2006 01:37:00 PM  
Anonymous Anonymous said...

anon 237 I agree. 2 things have historically put houses on the market on a regular basis; death and divorce while people are living longer, i do see the divorce rate going up in bubble markets like ours. when the arms reset and wife starts busting the husbands ba##s because he cant pay it, he will recall it was her nesting instinct that go him in the jam in the first place.

4/03/2006 02:45:00 PM  
Anonymous Anonymous said...

Please...Lucent is a "has been" company. It employs about 6000 people, and not all of them are being fired (why would Alcatel do that....their own people, the French, don't seem to like working and they can't even fire them over there..they have a more pliable workforce in the US). You people are talking as if the entire building in Berkeley Heights will just be shut down.


Outsourcing is highly overated.
I have a good friend who is the ceo of a tech company in NJ. There are hardly any cost savings with outsourcing (lots of middle men in between) The primary reason it is done is to access talent and to be able to develop 24/7. If you have skills, you are not likely to lose your job here for cost savings reasons.

And no, it's not NYC that keeps Northern NJ ticking (in fact, I believe the NYTimes did an article a couple of years ago stating just that- that NJ over the years has become far less dependent on NYC than it ever has been). Pharma is still strong, tech less so but its still there (not like NYC has much to offer with respect to either).

So ease up. Pessimism will get you nowhere.

4/03/2006 09:27:00 PM  
Blogger chicagofinance said...

Anon 10:27PM:

If you are under 40 with advanced degrees, NJ has very little to offer in terms of interesting jobs.

Most of the corporations are dead in the water. Further, there are not any highly regarded research universities other than Princeton, so there isn't even a great pipeline anyway. It's why Boston and CA are completely outclassing this area.

Financial services is what differentiates this area from other parts of the country. Twenty-five percent of the income earned in NYC is earned by about 5% of the workforce, and they are in financial services. Of the commuters who travel to NYC to work from outside its borders, 40% come from NJ.

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