Monday, June 12, 2006

We Will See A Decline In Home Prices

Interesting piece from NJBiz, a somewhat in-depth discussion with Mr. Jeffrey Otteau:

Housing’s Summertime Chill
A stagnant market for homes could send prices downward
By Shankar P.

If anyone doubted that the state’s runaway housing market of recent years has turned into the Big Slowdown, the latest data from industry watcher Jeffrey Otteau should put such ideas to rest. His Otteau Appraisal Group reported last week that there were 71% more homes on the market in New Jersey at the end of April than at the same time last year. That left the state with a seven-month supply of unsold homes, more than twice the inventory on hand a year ago.

“Even I was surprised,” says Otteau, whose East Brunswick consulting firm has tracked the state’s housing market for 30 years and provides data to clients ranging from banks and Fortune 500 companies to local governments and relocation specialists. “The numbers do cause concern,” he says, “and if they continue, we will see a decline in home prices.”
...
According to Otteau, 62,000 homes were listed for sale in the state on April 30, compared with 36,000 a year ago. While his data show a 10% increase in median home prices since April 2005, all of it came in the second and third quarters of 2005. Since then, “Home prices have been flat for the past nine months,” Otteau says.

He says they could start to fall this summer if the inventory of unsold homes continues to swell. Price erosion is already setting in at the higher end of the market. “The more expensive homes will stay longer on the market and [when sold] will lose value over the next five to six years,” Otteau says.
...
Adding to high-end inventory is the fact that about 25% of all new home construction in the state is priced at $1 million and above, according to Otteau. However, he notes, the state has lost 119,000 high-paying jobs over the past five years. “Our economy is no longer creating those upwardly mobile, 35-year-olds with large salaries to buy these homes,” he says.
...
Markets with the largest inventories of unsold homes include Cumberland, Middlesex, Somerset and Cape May counties. Cumberland had a five-year supply of homes priced from $600,000 to $1 million. Bergen, Burlington and Atlantic counties comprised the next largest tier of areas with unsold up-scale homes.

Otteau says homes priced in the $600,000-to-$1 million range have an average of 10 months of inventory across the state, while those above $1 million have an inventory of 14 months. For homes priced below $600,000 the supply of unsold units averages about six months.
...
Otteau doesn’t foresee a repeat of the 1989 to 1991 housing bust when home prices fell an average of 15% statewide. If jobs and incomes grow, he says, home prices should stay unchanged over the next three years. But without such gains, he adds, prices could drop from 5% to 10% over the period.


Caveat Emptor!
Grim

51 Comments:

Anonymous MarMar said...

BBBBBBOOOOOOOOOOOYAH

6/12/2006 06:55:00 PM  
Anonymous Anonymous said...

I'm starting to feel blinded by science (yes, I'm an old MTV-aholic).

Otteau says we could see 5-10% over the next couple of years. O.K. based on?

But then I see this Corzen report showing which areas of NJ have ALREADY had a 10% price decline.

Is the Otteau discussing ignoring what has happened this year, and assuming ANOTHER 10% decline going foward, or just ignoring those stats totally?

I'm feeling like I need some splainin.

6/12/2006 06:58:00 PM  
Blogger InvestorDavid said...

I believe that during 89-91, Bergen County houses went down between 20%-30%.

He expects 5%-10%? I guess what he really meant was, 5%-10% PER year for the next 4-6 years.

Just my 2 Cents.

6/12/2006 07:19:00 PM  
Blogger grim said...

Otteau is an industry insider.

The fact that he has even admitted the possibility of a price decline is nothing short of extraordinary.

grim

6/12/2006 07:36:00 PM  
Anonymous Anonymous said...

The NY Times is posting this statement from a new Harvard University Joint Center for Housing Studies study:

"New household projections incorporating higher but more realistic immigrant assumptions suggest household growth will accelerate to 14.6 million over the next ten years from 12.6 million over the last ten. “Strong household growth, combined with record incomes and wealth, will lift housing investments to new highs next decade,” remarks Eric Belsky, executive director of the Joint Center."

What say you, Grim?

6/12/2006 08:37:00 PM  
Blogger grim said...

The actual report is embargoed until tomorrow, I'll let you know what I think after I read it.

http://www.jchs.harvard.edu/publications/markets/son2006/

Unfortunately, a quick glance at the first few pages of the SON2005 report don't leave me feeling too warm and fuzzy.

Additional suuport was provided by:

America's Community Bankers
Fannie Mae Foundation
Federal Home Loan Banks
Freddie Mac
Housing Assistance Council
Mortgage Bankers Association
National Association of Affordable Housing Lenders
National Association of Home Builders
...
National Association of Realtors


Looks like this report is sponsored by some very heavy hitters in the housing industry. Wink.. Wink..

grim

6/12/2006 08:55:00 PM  
Anonymous UnRealtor said...

"Strong household growth, combined with record incomes and wealth, will lift housing investments to new highs next decade"


Great, will housing prices double to 20X median income in Northern NJ, and everyone have moved down South?

Current Northern NJ inventory at 16 months, good luck "investors."

6/12/2006 08:55:00 PM  
Anonymous Anonymous said...

While we are on th esubject of homes that will never sell, here is one in Florham Park:

MLS ID#: 2264881

This house was a FSBO for 2.95 million two years ago and did not sell on the pretigious (read BUSY) Brooklake Road. In late 2004, they called a realtor who told them to list it at 3.95 million so they would have room to negotiate down. No one came close and almost no one looked. The listing expired after 6 months and they listed with a new broker for the same $3.95 mil and that guy actually got them to cut their price to $3.85 mill, a whole $100K. Needless to say the house still didnt sell. Now we come to 2006 and they have a 3rd broker on the house and a new asking price of $3.75 mil.

The house is worth $2 million, thats it folks, I live in the town and its not worth the crazy numbers the owner had put in his head.

Another chaser of the market. By the way Grim, I enjoy the reading but first time poster.

J.S.R.

6/12/2006 09:19:00 PM  
Anonymous Anonymous said...

Harvard Joint Center for Housing 2006 study is available now, here:
http://www.jchs.harvard.edu/publications/markets/son2006/index2.html

6/12/2006 09:34:00 PM  
Blogger pesche22 said...

the report is double talk from the industry pimps.

its a joke.

grim just run the numbers

6/13/2006 07:01:00 AM  
Blogger delford said...

Prices In Bergen County dropped 30 to 40% or more, depending on the town. Co-Ops and Condos dropped even more, it was a very ugly time.

And yes it was a recession too, but keep in mind this was a time when there was no where near the amount of recklessness in the market as now, you actually had to qualify for a mrotgage. And the Fed by the way was dropping rates but tat did not stop prices from falling.

I do not think it is going tot take 3 years or posssibly more for the correction, like some posters on this board believe, and the so called "experts" in the media believe.

Prices went up 20 to 25% a year there was nothing that stopped prices form incrasing that much, and I believe that they can fall just as quickly. All it takes is one seller,and that becomes the new comp. An lets not forget the huge amount of people whoa re now homeowners (sub-prime) who never should have been able to purcahse in the first place;this factor too was absent from the last downturn.

Yes there will be those who hold on etc, and will not lower their prioces, they will simply delist the house. But we have job trnasfers, divorce lots of seniors inheriting of houses.


It was not an orderly increase in prices, and it will nto be an orderly decrease in prices, it will be swift and painful.

6/13/2006 08:32:00 AM  
Anonymous Anonymous said...

Watch the Greedy money grubbing sellers and Starving realtors Feuding over prices.

BOOOOOOOOOOYcott Houses!

No Bids NO MAAS to High Ripoff home prices.

WHY SHOULD YOU SPEND 40-50% OF INCOME TOWARD HOUSING?
DON'T DO IT! A LIFE OF SDLAVERY AWAITS YOU.

BOOOOOOOOOYAAAAAAAAAA

Bob

6/13/2006 09:41:00 AM  
Anonymous Anonymous said...

Most of these greedy money grubbing sellers paid 30% of income toward their houses and also 3-4 times salaries.

Don't let these grubbers retire in comfort while you sign up for monthly slave payments.

NO MAAS to RIPOFF HOME PRICES!

NO WAY NO MAAS NADA!

BOOOOOOOOYcott Houses.

Bob

6/13/2006 09:43:00 AM  
Anonymous Anonymous said...

"New household projections incorporating higher but more realistic immigrant assumptions suggest household growth will accelerate to 14.6 million over the next ten years"

Yeah and look in the driveways. 5-6 cars. so take 8 bodies in a home divided 14,600,000 total over 10 years = 1,825,000 homes over 10 years. Builders have been building that many homes each year for the last 4 years.

6/13/2006 09:49:00 AM  
Anonymous Anonymous said...

an Ad ARTICLE AT
Asbury Park Press
Sunday May 28, 2006
p.G3 !!!

"Kara Homes advises active adults to purchase homes now" !!!

Why buy homes when you knew that New Jersey home prices is way overpriced according to the latest report and Housing prices is now cooling if not CRASHING !!!!

6/13/2006 09:58:00 AM  
Anonymous Anonymous said...

well we got delford over here,,
he sounds like an expert. Listen
carefully.

6/13/2006 10:36:00 AM  
Blogger delford said...

anon: I am no expert, you do not have to be an expert, all it takes is common sense, thats all.

There is no mystery, there is no underlying philosophy, there is no fundamental change to the economic land scape. We have not reached an economic plateau, there is no such thing as a soft landing, nobody can point to one.


Clear away all the nonsense and it is simply this:

Because of the the stock market crash and 9/11, the Fed dramatically lowered rates to prevent a serious recession. They cut rates all the way down to 1%
(kept them too low for too long)

As they carried out this program people flockedto real esate because rates were the lowest they had been in 45 years. (end the stock market bubble, start the real estate bubble)

Now throw in you moronic first time buyers, and your specultor flippers, and the market starts to get out of hand. meanshwil the existing homeowners are high on equity, and are sucking it ou like ther is no tomorrow, (the old I "feel wealthy") Dont you remember when owning aMercedes was impressive, no everybody has one.

Finally around the summer of 2003, things start to slow down (cant have that), now come the lenders with lossened lending standards and toxic financing, the bubble gets reinflated, and the madness continues. (you can breathe, you can get a mortgage)


The Fed does not step in until a year later, and then startd with 25bp increases, the market became complacent, because they knew what the Fed would do, before hand, and so the Fed lost credibility. Prices zoomed with the onslaught of ARMS, and all the rest.

Now the short term rate hikes are finnaly kicking in after two years, and there goes your so called affordabilyuloans, the Bulls will tell you that fixed rate loans are still low, but who cares, nobody can afford the homes with a fixed rate loan. (looks like perhpas Bernanke is going to try and restore Fed credibility)

And so it is simply this prices are too high, which is the fault of the Fed, the real estate establishment, the lenders, and ultimately the buyers.

Prices have becoem completely disconnected from the economic fundamentals, and when that happens prices will drop significantly, It's that simple.

6/13/2006 11:03:00 AM  
Anonymous Anonymous said...

No, things are hardly as dire as you see in the media.

First, Jobs AND Income are growing rapidly in the NYC metro area. The average person makes between $70,000 - $150,000 a year.

Job & income growth are the best since 1999-2000 for the region as a whole.

Next the NNJ area, the 'other 4 boros', Long Island, Westchester & Rockland are seeing huge demand from people who can pay $4,000 a month for housing but want more than a shoebox sized apartment in Manhattan.

Good Luck with seeing anything more than $20,000 or so cut from a $600,000 house.

Someone making $75,000 - $100,000 a year can't qualify for anything in this area unless they look in central PA.

Next, it seems like everyone is spending money. Retail sales are running at the fastest rate of growth since 1999.

Everyone is spending huge sums of money on designer clothes, cell phones, IPODS, expensive cars and such.

6/13/2006 12:35:00 PM  
Anonymous Anonymous said...

whats wrong with owning car,ipods,
designer rags. I do. and I'm
not ashamed.

I worked hard for my education
got a good job and can afford it.

Paid my student loans, I have many
credit cards, which I pay.

I suggest many of you here, get
a life, or job and stop the envy.

I really think Delford should seek
medical help or an adjustment of the meds.

I see people like you in the clubs
standing in the corners wishing
you were part of the gang, but
you can barely pay the cover to get in.

Moreover, you continue to wear that cheap polo shirt you got on
sale at Lord & Taylor with the coupon.

Have a nice Day.

6/13/2006 12:54:00 PM  
Blogger delford said...

anoym: Adjust my meds? I am not on meds, but perhaps you should be for depression, anxiety, and just a touch of rage.

You are the typical real estate bull, you offer no valid arguements as to why the market is not a bubble, you just repeat the mantra real estate never goes down.

I challenge you to point out to me where I am mistaken in may analysis or opinions.

Many of use here are well educated, whats your point, (scholarship for undergraduate, MBA at night.)

IPods cell phone blackberry and the like, I have them all and I love them, loveall gadgets nothing wrong here either.

Lord&Taylor; They have very high quality merchandise, I shop there and find it quite adequate. No need to pver pay for casual clothing. Quality suits Brooks Brothers or Paul Stuart, buy it once and forget about it.

Club scene, I am a little past that stage, but I have seen your type, party all weekend, big house, big toys,(no funriture), and then you struggle to meet you monthly nut, but hey there is lots you can do with peanut butter.

You got lots of credit cards, I am not surprised, yeah I know you use them for the miles etc You only really need about two one master card or visa,and perhaps a gas card, and you do need to pay more then just the minimum balance each month.


You are an anom poster that appears to have stumbled upon this board, and you are scared, becasue the market is starting to crash, and if only crazy bloggers like us would stop, then it would not happen.


Looks like you are part of a whole new generation that is going to be slapped back into reality. After it is done, you will learn two things, real estate prices do drop, and debt is not wealth.

So simpel so true, guess your education does not include common sense.

6/13/2006 01:43:00 PM  
Anonymous Anonymous said...

To anon @ 1:54

At the clubs? Ohmygod, as soon as I ready your post, I immediately pictured you as that character Will Ferrell played on SNL, the Roxbury Guys where they played the song, "Baby Don't Hurt Me"!

Sweetie-pie, you are the only one who cares what car you drive, what clubs you're going to, and what clothes you're wearing. You are obviously very young and extremely insecure, but sadly, a product of your generation. Someday you'll realize that in the end, all of the stuff you have, the designer rags, just don't matter and you can't take it with you!

And btw, I have all of those gadgets you mentioned and then some (as well as a beautiful family, which I doubt you have since you are at da clubs) ....the difference is that I paid for them in cash and I'm proud to say that I bargain shop! Who gives a &%^# where I bought something and how much I paid for it! Grow up, buddy.

6/13/2006 02:16:00 PM  
Anonymous Anonymous said...

All those club types usually live at home with mom on Long Island or in NJ.

Wasting money on the club scene?? No thank you. Enjoy paying $2,000 a month for clothing to be a trend whore.

Don't let looks fool you. Most of these 'too cool' 20 somethings work $15 retail jobs or are full time college students but act they have everything the world.

Of course 'work' is not part of the Sex in the City & MTV life.

6/13/2006 02:34:00 PM  
Anonymous Anonymous said...

I have a friend that lives like this club guy; always going out, bought trending clothes, drove a BMW. Then he got married to a woman who also liked these trendy things and he thought it was "cute" that she shopped so much and spent so much time at Bloomies.

Then they get married and immediately buy a super trendy condo in a spiffy building in North Jersey so everyone would think they had money. Then they immediately have a baby.

Guess what happens next? Wifey-poo isn't working, home with the baby, but still needs her "club" clothes at Bloomies and is spending $2,000k a month on "stuff."

A year after they buy their condo, they are BROKE! They put the condo on the market last summer, a year after they buy it (they actually had a buyer last summer but their Realtor never told them about a little thing called capital gains and they had to cancel the contract).

They put it on the market for $220k MORE than they bought it because after all, prices have gone up sooooo much and their neighbors sold for that much; why can't they?

The condo has been on the market for a year now. They can't lower their 50% marked up price because, see, they had to take out home equity loans to keep up with their two car leases on their high-end cars, pay their credit cards, just so they wouldn't be seen using, gasp, coupons!

So, they are probably headed for divorce, will probably have to file bankruptcy, and will probably never be able to buy a real house.

Sadly, I don't think their story is all that uncommon in North Jersey.

6/13/2006 02:53:00 PM  
Anonymous Anonymous said...

got the mba in finance. would never
go into a l&T.

always fly first class , get double
miles,, and when in china, have the
driver and the car.

have lived in Paris,, and at the clubs always meet the New Jersey
crowd. Many have the accent, with
the thing around the neck, and of course many have never been further
than Lets say Seaside Heights.

And its really laughable when they
want to discuss things like housing.

Experts like you have never seen.

Then we get the housewifes who
want to tell their lifestory,
astonishing Delford, really astonishing that you would waste your time in a blog room like this.

wait till we post this crap

6/13/2006 03:02:00 PM  
Anonymous Anonymous said...

Anon. @ 4:02

Honestly, I think you are on drugs; seriously. Your posts are just ramblings and make no sense.

You'd never go to a Lord and Taylor, and you have a driver in China. Where are you going with this?

Are you trying to impress us? Because you're failing miserably. You really just look foolish, desperate, and well, like a whiney little baby...."wait till we post this crap"? Ha! C'mon....are you gonna tell daddy that people are being mean to you?

6/13/2006 03:20:00 PM  
Anonymous Anonymous said...

"So, they are probably headed for divorce, will probably have to file bankruptcy, and will probably never be able to buy a real house."

This is the future for many a 0-down IO/negam borrower.

6/13/2006 03:29:00 PM  
Anonymous Anonymous said...

"I see people like you in the clubs
standing in the corners wishing
you were part of the gang, but
you can barely pay the cover to get in."

This is funny - I recall people saying these same exact things in Silicon Valley in the late 90s. Ignorance is indeed bliss.....

6/13/2006 03:31:00 PM  
Anonymous Anonymous said...

Getting into a club is a status symbol???

What are you 17?? and live with your parents??

Grow up and act like an adult.

6/13/2006 04:22:00 PM  
Anonymous Anonymous said...

Housewife, huh? Well....at least I have a house and don't still live with mommy and daddy, you tiny little nitwit.

And I prefer "tropy wife."

6/13/2006 09:29:00 PM  
Anonymous Anonymous said...

That's "trophy wife"...I had a blonde moment. ;)

6/13/2006 09:31:00 PM  
Anonymous Anonymous said...

Hint #13 for . Three is A Crowd: Avoid having too many people present during a showing. Potential buyers need to feel at home, not like intruders being hurried through the house.

6/20/2006 03:21:00 PM  
Anonymous Anonymous said...

The party is over HOME SELLERS!

6/20/2006 06:34:00 PM  
Anonymous NJ resident said...

You know its over when selling a house becomes a game show on TV...

Oh yeah, like I'm really going to be persuaded and swindled by a homeseller's quick drive to Home Depot to buy 5 dollar flowers propped in the front yard, and a smear of cheap white hospital paint in a poor attempt to hide eyesoures of all sorts. Oh and I almost forgot about that phony homey baked cookie smell in the house. (The TV shows are really reaching)
OH HONEY I HEARD ON TV THAT WE CAN BAKE COOKIES TO GIVE IT THAT WARM TOUCHY FEELING. NOW WE CAN GET OUR ASKING PRICE WOOPIE!!!
Personally I have no intension of paying an extra 200,000 for a house someone bought 3 years ago because homeowners cheap gimmics and the obvious industry pimps pillow talk. The masses have been duped, and now some are finally realizing.

6/21/2006 05:05:00 AM  
Anonymous Anonymous said...

. Noise does not sell well. Let the Realtor� and buyer talk, free of disturbances. Background "soft playing" music is okay, but the wrong sounds will turn buyers off. Noisy children and animals are roadblocks to a contract � and traffic, trains, and planes must be dealt with honestly, if they are part of the deal. Go here for more ideas.

6/21/2006 07:17:00 AM  
Anonymous Anonymous said...

Pop goes the Housing Bubble? A Florida subdivision -- -- characterizes the area, the problem, and the answer.

6/21/2006 07:49:00 AM  
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6/22/2006 02:54:00 AM  
Anonymous Anonymous said...

Hint #3 for . Let The Sun Shine In: Open draperies and curtains and let the prospect see how cheerful your home can be. Dark rooms do not appeal. One trick which always seems to work is to replace 60-watt bulbs with 100-watt bulbs, and have your Realtor� turn them all on, even for a daytime showing (and off again after the showing).

6/22/2006 10:59:00 AM  
Anonymous Anonymous said...

. Noise does not sell well. Let the Realtor� and buyer talk, free of disturbances. Background "soft playing" music is okay, but the wrong sounds will turn buyers off. Noisy children and animals are roadblocks to a contract � and traffic, trains, and planes must be dealt with honestly, if they are part of the deal. Go here for more ideas.

6/23/2006 05:34:00 PM  
Anonymous Anonymous said...

Hint #5 for . Loose knobs, sticking and squeaking doors and windows, warped cabinet drawers, and other minor flaws detract from home value. Fix them. Most buyers assume there will be ten hidden problems for every one they see.

6/23/2006 06:53:00 PM  
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6/24/2006 03:12:00 AM  
Anonymous Anonymous said...

Even if you sell your home "as is, subject to inspection" � you can do a lot to . A top-notch Realtor� will probably hand you a list of at least a dozen things you can do to help improve your sale. If they don't, well, maybe you need to .

6/24/2006 06:53:00 PM  
Anonymous Anonymous said...

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6/25/2006 07:38:00 AM  
Anonymous Anonymous said...

Hint #13 for . Three is A Crowd: Avoid having too many people present during a showing. Potential buyers need to feel at home, not like intruders being hurried through the house.

6/29/2006 10:56:00 AM  
Anonymous Anonymous said...

The real estate market really . Overpriced homes. Underpricing buyers. Especially tough to sell in a market more interested in hurricanes than square feet under air. But maybe this is the way. Enjoyed your site. Thanks.

6/29/2006 12:05:00 PM  
Anonymous Anonymous said...

. Pets Underfoot? Keep them out of the way ... preferably out of the house. Many people are acutely uncomfortable around animals. Nothing can stop a sale faster than man's best friend, wagging its friendly tail at a prospect with an allergy.
Go here for more ideas.

6/29/2006 03:01:00 PM  
Anonymous Anonymous said...

You can do a lot to For example, curb appeal sells: do some landscaping. Plant some flowers. Remember that the front door greets buyers. Make sure it offers potential a bright, warm welcome.

6/30/2006 07:23:00 PM  
Anonymous Anonymous said...

Has the Housing Bubble popped? says "Yes!" A typical subdivision -- the Boca Country Club -- characterizes the area, and the problem.

7/01/2006 05:56:00 PM  
Anonymous Anonymous said...

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7/03/2006 07:39:00 AM  
Anonymous Anonymous said...

Hint #6 for . Clutter will clog a sale: Display the full value of your space by removing all unnecessary articles. Consider storing things you don't need all the time.

7/03/2006 07:46:00 AM  
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