N.J. Economy Losing Edge
From the Cherry Hill Courier:
Steps urged for state to keep economic edge
To retain its economic edge, New Jersey must offer more housing choices, encourage better land use and reduce "racial, class, and space disparities," an independent research and policy institute says in a new report.
Nationally, New Jersey ranks high in income level, educational attainment, homeownership and employment but "is beginning to lose its competitive edge," said Bruce Katz, vice president and director of The Metropolitan Policy Program, part of the Washington-based Brookings Institution.
New Jersey ranks low in wage growth and has been losing high-wage jobs and gaining low-wage ones, Katz said.
Tuesday, Katz presented his findings to a group of Garden State housing, transportation and policy experts gathered in a State House committee room. The day before, he gave the same PowerPoint presentation, entitled "Prosperity at Risk: Toward a Competitive New Jersey," to Gov. Jon S. Corzine's senior policy staff.
"The governor has already begun to address many of the critical issues raised in the report," said Brendan Gilfillan, Corzine's spokesman.
Steps urged for state to keep economic edge
To retain its economic edge, New Jersey must offer more housing choices, encourage better land use and reduce "racial, class, and space disparities," an independent research and policy institute says in a new report.
Nationally, New Jersey ranks high in income level, educational attainment, homeownership and employment but "is beginning to lose its competitive edge," said Bruce Katz, vice president and director of The Metropolitan Policy Program, part of the Washington-based Brookings Institution.
New Jersey ranks low in wage growth and has been losing high-wage jobs and gaining low-wage ones, Katz said.
Tuesday, Katz presented his findings to a group of Garden State housing, transportation and policy experts gathered in a State House committee room. The day before, he gave the same PowerPoint presentation, entitled "Prosperity at Risk: Toward a Competitive New Jersey," to Gov. Jon S. Corzine's senior policy staff.
"The governor has already begun to address many of the critical issues raised in the report," said Brendan Gilfillan, Corzine's spokesman.
10 Comments:
"To retain its economic edge, New Jersey must offer more housing choices, encourage better land use and reduce "racial, class, and space disparities," an independent research and policy institute says in a new report."
What are space disparities? My brother in law knows Bruce Katz, this guy often writes to other people in his field making the prose dense or just outrighht jargonistic.
I am glad to see the Guv on top of this, too bad he has the same crew in place under McSleezy.
A CNN article that says prices won't collapse if job creation does not slow down. But in NJ we have McJobs replacing high tech. Anyone want to guess where housing prices will go?
http://money.cnn.com/2006/05/02/news/economy/housing_jobs/?cnn=yes
Working on the housing boom
The sector is cooling, finally. Now, a debate is raging over whether the employment market will prevent a implosion.
By Chris Isidore, CNNMoney.com senior writer
May 2, 2006: 6:01 PM EDT
NEW YORK (CNNMoney.com) - Those looking to glimpse the future of the housing market may want to start watching help-wanted ads rather than the real estate section.
Experts who say the housing market is cooling, but won't implode, argue that solid job growth should be enough to prevent a collapse in home prices. But others who see a housing "bubble" ready to pop say a developing slowdown in home building itself could hurt job growth enough to put a big dent in housing.
"The economy was healthy when the stock market plunged in 2000," said Dean Baker, co-director of the Center for Economic and Policy Research in Washington and an outspoken advocate of the housing bubble theory, but stock prices "had gotten out of line with reality."
"We've been building too many homes in a market maintained by speculation. And job growth is not going sustain that."
Recent government figures show that about 1.5 million homes were vacant in the first quarter, most of those presumably up for sale, a 17 percent increase from a year earlier. The 2.1 percent vacancy rate was the highest on record since the government began tracking it in 1994. It was also the fourth straight quarterly increase.
"When you see it increasing quarter after quarter, there seems to be something going on here," Baker said. "We're building more homes than are being filled."
Among those most worried about the real estate market are home builders themselves. The National Association of Home Builders saw its index of builder confidence sink last month to the lowest level since 1995, save for two months right after Sept. 11.
Nearly three out of fourbuilders reported more homes on the market in their areas and about one in five reported a jump in new home orders being cancelled. About three-quarters also reported a drop in purchases by people buying homes as investments.
There's more. Late Monday, Hovnanian Enterprises (Research), a builder with big operations in California and Florida, cut its guidance and St. Joe's (Research), a smaller builder, reported surprisingly weak results Tuesday as the firms struggle with a faster-than-expected drop in the housing market. The stocks of both companies tumbled Tuesday.
But some economists say that while housing will cool as mortgages continue to rise, home sales and prices won't collapse, due mostly to strength in the job market. In fact, sales of both new homes and existing homes picked up in March, even as mortgage rates rose.
"What we had in the past couple of years was an unprecedented frenzy of activity," said Lawrence Yun, senior economist for the National Association of Realtors. "That's what we're seeing: A decline from a frenzied, unsustainable rate."
"Our experience says prices do not go down when there's job creation in the local economy," said Yun. "In local markets where they are flat on jobs, they could see prices decline. But we're projecting 2.3 million new jobs this year. The job market is providing a buffer. It's a counter force to rising rates."
So far job growth is cooperating. The economy created 590,000 new jobs in the first quarter, according to the Labor Department's payroll survey - an annual rate just under 2.4 million. And economists believe that job growth stayed on track in April, with an average forecast for payroll growth of 200,000, according to a survey by Briefing.com. The unemployment rate is seen holding steady at 4.7 percent.
Yun's group is calling for prices of existing homes - which account for about three-quarters of all homes sold - to rise 6.4 percent this year while new home prices gain 2.3 percent - even as sales decline.
While that's far less than the 12 percent and 9 percent gains in median prices last year, it's still solid growth. And the Realtors forecast includes 30-year fixed rate mortgages hitting 7 percent by year-end, up about half a point from current levels.
But the experts who see a possible meltdown saystrong employment isn't enough to support an overinflated housing market.
"You have to look at how much more inventory has been put on the market and what impact that could have on pricing," said John Tomlinson, analyst with Majestic Research, an independent research firm. "To get sales going, people are going to have start pulling in their expectations."
Tomlinson sees new home prices flat or edging lower this year with existing home prices flat to slightly higher "at best." He points to reports showing big increases in the number of homes on the market.
Past housing downturns have seen builders slash their work forces by up to 40 percent, said Baker, the housing market bear, and with an estimated 3.5 million people working in residential construction, the loss of more than 1 million jobs would obviously cause problems for the labor market.
Add job losses at mortgage firms, building supply retailers and real estate agencies and the downturn in home building could itself further weaken one of the key supports for real estate.
One of those worried about just that is James McShirley, owner of Sulphur Lumber near Indianapolis. He's already laying off staff and not filling open positions due to a slowdown in orders from his builder clients.
"We're holding off as much as we can because qualified people are hard to find," he said. "But there will come a point where we have to face that (more layoffs) and it could be soon."
McShirley said when he sees his clients cutting staff, and a local mortgage broker with 100 employees go out of business, he grows more worried.
"Those people losing their jobs are the classic home owners. This could be a vicious circle," he said.
Stagnant/Flat incomes + exodus of people out of NJ + Job growth due to real estate related + Increasing out of control property taxes + Affordability at record lows + Health insurance cost up double digits every year last 7 + rising Mtg rates = DISASTER FOR NNJ HOME PRICES.
I'd would say that we are going to see about a 20-25% haircut on home pricing in NJ-Metro NYC, more in FL, NJ Shore, Vegas, etc. Now this will be off 2005 peak crazy prices but I would expect prices to fall back to 2002-2003 levels so if you purchased your home pre 2001 you are still sitting pretty.
People are not taking into account the current economy, national debt, war, budget shortfalls, rising interest rates, and an overall unhealthy economy. I think we are going to see the late 1980's repeat themselves.
This is what happens when you elect Ronald Regan part II "The Moron Edition". Look at the policies, the situation of the economy when Bush came in, look at the tax cuts. There will be a recession it is knocking at the door, and what triggers it or when it hits some people will hurt. The swings in the market are the result of usually a small market shift causing panic and fear in an unstable economy. Well guess what our economy is out of whack.
Right now we stand in 1987-88, real estate is over extended, builders have too much money out and are leveraged. In the late 80's a stock crash caused the problem but it was the collapse of the RE market that brought the recession. Today it just maybe the higher intrest rates coupled with inflation, higher oil prices, and lower real salaries that trigger the collapse.
But when real estate collapses the pain is felt, it provides many jobs. It is really the only production we have left. An RE collapse causes job loses in construction, banking, MBS I-Banks, etc.. So a little slowdown only causes a larger slowdown and nobody wants to get caught with their pants down so they are getting out and that is how the bubble will not pop but slowly deflate wait till 2008. Our next president will be the bag holder. For the reckless fiscal policies of this administration.
No we are not there yet, we have seen maybe 5% decrease in sales price on top properties, not crap. The good stuff is always the last to fall. With the prices what they are a 25% haircut would mean 400k 2bdr condo is 300k I just don't see that right now. We are at the turning point as inventory is mounting. Watch non premium properties that have lost their 20% stand to lode an other ~15%. From where I am sitting prices are not down much yet.
SG,
Here is a study by NJfuture with many of the same conclusions but I can't find the Katz piece. But NJfuture is mentioned in the same article so it might be the same piece.
http://www.mypinwheel.com/accounts/pw_05132002/links/4 ways.pdf
SG,
Much of the content is what I have been espousing hese past months here. It is mostly a smart growth approach to solving housing shortages and land consumption within the state.
The main problem with the paper is that it is heavy on platitudes as most planning documents are when they are top down recommendations.
In NJ we Have home rule which effectively negates regional planning. This especially happens between neighboring Munis that often put their ugliest ratables at the border. This creates dispersed landuses peppered through the state and often causes traffic related problems.
The paper also goes on to say that we are closing in on buildout in the state when essentilly the die will have been cast. Only redevelopment and infill projects will be in the future beyond buildout making it an urgent matter. This is part of the reason the Highlands bill was pushed, it makes the urgency that much more tangible now that developments will be forced west in the state.
On page 18 the report pretty much states what the situation is (and is likely to be) that status quo will go into the future unless schools are funded differently.
SG,
Thanks! It is just what I do for a living.
The constitutional convention to change taxation looks like it is being pushed back so it might take some time to address the problem.
BTW,
This bill, S-168, was signed today. It basically end runs local zoning and supplements ABC regs with a special provision for liquor licensing in a place that comprises 200 acres is a ski area and is next to preserved land.
Hmmm.....I wonder where this could possibly be. Nope no special favor here.
http://www.njleg.state.nj.us/2006/Bills/S0500/168_I1.PDF
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