New Jersey Choking
From the Star Ledger:
N.J. economy is choking, say two experts
BY BETH FITZGERALD
Two Rutgers University economists plan to issue a report today stating New Jersey has entered an alarming economic decline whose severity is masked by the very affluence that is slowly slipping away.
"New Jersey now faces its most uncertain economic future since the Great Depression," James Hughes and Joseph Seneca write in their 20-page report.
...
With New Jersey's work force 4million strong and growing, and with unemployment relatively low, Hughes said he isn't predicting a recurrence of the Depression's bread-line nightmare. The threat, he said, lurks in the quality of the jobs that are keeping New Jerseyans busy, and the impact of those jobs on long-term prosperity for the state.
Between 2000 and 2005, New Jersey's economy created thousands of relatively low-paying service jobs and government jobs, while private-sector jobs declined. New Jersey also lost many high-paid technology, knowledge and manufacturing jobs during that period, while such jobs were growing in North Carolina, Virginia, Maryland and Florida.
This is disturbing, Hughes said, because New Jersey is an expensive place to live and work and needs high-paid workers to buy its expensive homes and pay the taxes that finance its rich diet of government services.
"It's not that we are entering another Depression -- the problem is that the future is just as uncertain as it was in the 1930s," Hughes said.
52 Comments:
For those who don't believe companies are leaving NJ..
From the Palm Beach Post:
Breath fresheners to kiss N.J. goodbye, relocate to Boynton
The company that has sold a billion bottles of breath drops is moving to Boynton Beach.
Health-Tech Inc., maker of the Sweet Breath brand, will brew up and package its breath drops, strips and mists here.
brings nine employees from its former headquarters in Totowa, N.J., and plans to hire 50 local workers at wages of $8 to $12 an hour, founder and owner Jeff Hirschman said Thursday.
The 30-year-old company, whose sales are $10 million a year, announced its move at a meeting of the Business Development Board of Palm Beach County.
...
He has leased nearly 30,000 square feet at Quantum Park in Boynton Beach and has found business costs here reasonable compared with those in his former home.
"Space is very expensive in New Jersey," he said.
...
As for soaring home prices, Hirschman said Palm Beach County still compares favorably with northern New Jersey.
The nine employees who followed the company here have been pleased by the choices they see in the housing market, said David Hirschman, vice president and son of the founder.
"They're thrilled with what they've been able to afford, especially compared to home prices up north," David Hirschman said.
Centex appears to have lost their collective minds with this marketing blunder..
http://www.askmadamezalora.com/?divisionID=1343
grim
Enterprise Florida kicks butt. They are the best econ developers in the country from what I have seen. They practically move you into your new place. NJ is severely lacking in this regard.
NJ is just not business friendly.
Has not been for years.
New Business has a very hard time
considering NJ. Rarely happens.
Taxes to high, quality of living.
Affordable housing,etc.
Isn't Centex a type of plastic explosive? Is that their deal, Grim, if the value of your home declines, they blow it up and you collect on the insurance?
Now THAT sounds like the NJ way.
Not to mention they spelled "Guarantee" wrong in the page title..
The Only Builder That Offers The Priceguard Garantee
This Mills deal is getting ready
to implode.
Xanadu is for sale. The gravedancers are around the project.
From Bloomberg:
Riskiest Mortgage Bonds May Underperform, Credit Suisse Says
The riskiest mortgage bonds may underperform the broader market as rising interest rates and a slowing economy make it harder for homeowners with the lowest credit scores to meet debt payments, Credit Suisse said.
Investors demanded 150 basis points more in yield than benchmark rates on average in June to own so-called subprime mortgage bonds, up 10 basis points from the month before, Credit Suisse analysts led by Rod Dubitsky said in a report last week. The spread may widen further as higher borrowing costs lead to more non-payments, the firm said.
Rates on adjustable mortgages are being reset higher because the Federal Reserve has increased its overnight lending rate between banks to a five-year high of 5.25 percent from 1 percent in June 2004. About 85 percent of all mortgages sold in the past two years are floating-rate loans with low introductory rates that reset after two years, according to Citigroup Inc.
``We see an environment of deteriorating credit because of payment shocks,'' said Dubitsky, the top-rated mortgage bond analyst in Institutional Investor magazine's 2005 poll, in an interview this week from his New York office.
The amount of bonds backed by subprime loans has more than doubled since 2001, to a record $476 billion, according to the Bond Market Association, a New York-based trade group of more than 200 securities firms.
Sixty-day delinquencies on adjustable-rate loans issued to the riskiest borrowers in the first half of 2005 rose to 6.61 percent in May from 6.15 percent in April. The comparable figure for so-called subprime mortgages in 2004 was 2 percent, and the rate was 3.84 percent for 2003, Credit Suisse said.
...
About 18 percent of all mortgages issued in the first half of the year were to borrowers considered most likely to default, such as those with high credit-card balances, up from 2.4 percent in 1998, according to the most recent data from the Mortgage Bankers Association. The Washington-based trade group's 2,700 members represent 70 percent of the home-loan business.
Citigroup analysts said in a July 7 report that New York subprime adjustable-rate mortgage delinquencies are at their worst levels in eight years, highlighting the danger of lacking geographic diversity in the loans backing the bonds.
Four months after the end of their first year, 5.23 percent of the adjustable-rate subprime mortgages in New York are more than 60 days delinquent, up from 2.78 percent a year ago, said the analysts led by Rahul Parulekar in New York.
Grim,
What was the percentage of these
deals written in NJ?
Subprime has to be a large NJ
market.
Speaking of the veil of affluence, we had a tragedy in Bergen OCunty this week, an idiot killed his two sons, and then himself, in leafy Washington Twp.
That guy was in my Nutley High graduating class.
I read that he was in the payphone business. He HAD to have seen the writing on the wall years ago in that business.
I wonder if the new bankruptcy laws were a contributing factor. There's no earthly reason for killing your kids, though. Because of money? Jeez.
jw
i have a friend who just keeps on going on and on about how home prices will just continue to go up or at least flatten-out... she keeps on saying over and over again that NJ is growing in population and the local economy is good, people want to live here, etc.... i asked her if she realized how much a person could borrow if they made 100K... she had no idea... i said in the old days, the max would be 300K... she has an option-arm... she changed the subject real fast...
ignorant complacency
What about the lawsuit filed
Did anybody notice the towns
being sued?
Within the next year, once the real estate bubble pops once and for all, the entire economy, not just Jersey, is in for a quick fall and a hard landing.
Federal tax revenue is increasing rapidly because of the tax cuts (deficit is also falling) http://powerlineblog.com/archives/revenue%20growth.php
Many (business friendly) states are doing well. It is mainly NJ (and CA) that are in big trouble.
High taxes and activist judges kill the economy. It's that simple.
New Jersey could end up like
Las Vegas, where their are
about 20k homes for sale.
And nobody is buying.
All I can say is, working for Citigroup, I know they bought the Lucent campus and have a large base of employees in Warren now. But with the outsourcing trends in major firms, I don't see it lasting, and that goes for pretty much anywhere in the U.S.
Considering that even financial analysts now have to deal with counterparts in India, I don't know how long it can last.
As far as I can tell, sexual preference is irrelevant to the economic factors being discussed.
Don't waste a good response with irrelevant BS.
grim
One word: outsourcing.
Ignoring this phenomenon, or dismissing it as 'simply low-level call center jobs' is a grave mistake.
We're giving away the store and compromising our long term economic leadership to save a few pennies on the short term bottom line.
This will hurt more than NJ, it will hurt the whole US.
People will wake up when its too late...
Roof Collapses at Horton
By Nicholas Yulico
TheStreet.com Staff Reporter
7/14/2006 9:57 AM EDT
Click here for more stories by Nicholas Yulico
D.R. Horton (DHI - commentary - Cramer's Take) fell more than 9% Friday after it reported a drop in third-quarter new-home orders and slashed its full-year earnings forecast.
The largest U.S. homebuilder said that its orders for the quarter ended June 30 fell 4.4% to 14,316 homes from 14,980 a year earlier. The value of the homes sold dropped to $3.8 billion from $4.1 billion.
The company expects to post third-quarter earnings of 93 cents a share, well below analysts' average estimate of $1.30, as compiled by Thomson First Call. The company's forecast includes about 11 cents a share in write-offs related to land option contracts.
"The current home sales environment is characterized by an increase in both existing and new homes available for sale, higher than normal cancellation rates and an increase in the use of sales incentives in many of our markets," said Chairman Donald R. Horton in a statement.
For the full fiscal year, D.R. Horton sees earnings of at least $3.65 a share, compared with its earlier forecast of $5.25 to $5.35. Analysts target full-year earnings of $4.92 a share.
"We think the sharp deterioration in earnings throughout the end of fiscal 2006 likely reflects sharply lower closings and significantly lower margins," Bank of America analyst Daniel Oppenheim wrote in a research note.
He estimates the company's gross margins will fall to 16.2% in the fourth quarter of this year, down from 25.2% in the fourth quarter of 2005.
Oppenheim cut his 2006 EPS target on Horton to $3.65, down from $4.85, and slashed his 2007 target to $1.85, from $2.55, due to faster-than-expected margin declines.
Horton's sentiment echoes warnings from across the industry as builders ratchet down their fiscal 2006 estimates. Several major homebuilders, including Toll Brothers (TOL - commentary - Cramer's Take), KB Home (KBH - commentary - Cramer's Take) and Pulte (PHM - commentary - Cramer's Take), have cut their fiscal-year guidance in the past two months.
Shares of Horton fell 9.1% to $20.77 early Friday.
In other builder news Friday, Raymond James released a report that said contracts for housing sales fell 42% year-over-year in June in the greater Washington area, according to an area realtors groups. Closings declined 38% and the inventory on the market now represents 7.1 months of supply, compared with 1.6 months in June 2005, and 5.9 months in May.
"We continue to believe the Washington, D.C., market is headed lower as excessive speculation and overbuilding will weigh on the market for the foreseeable future," Raymond James analyst Rick Murray wrote.
Public homebuilders that have a major presence in the market include NVR (NVR - commentary - Cramer's Take), Toll Brothers and Hovnanian (HOV - commentary - Cramer's Take).
I can say this about outsourcing. My husband lost his job at BCBS due to outsourcing .. He was a lead developer for there internet website. Its a 90K a year job. About a year later BCBS was calling him to come back along with most of his co-workers because of the time lag and poor communication along with delivery issues. Inda would say yes yes and then the deadline would come and they would need extensions because of the language barrier and the thinking is just different. My cousins wife works for a Financail Company she was for 3 years living on an off in Inda trying to americanize them so they are more familiar with our business practices. Needless to say last year they stopped sending her and have killed the project because now its costing them more money then if they had just used US laborers. This might not always be the case. But I thought I would share.
Crude up to $79.
I think it will hit 80 within next 24 hrs.
http://money.cnn.com/data/commodities/index.html
$100 by Labor Day. That means, $10/gallon at the pumps.
You don't think that will slow things down. What then will the Fed do? They may pause, but I am leaning towards them not. They need to keep the dollar healthy. The Fed doesn't give a rats ass about you and your SUV, just along as the dollar is still strong or getting stronger.
Ahh yes.....say goodbye to real estate.
Hey wait, doesn't RE only go up? lol,,,,,
Man there is one born every minute.
SAS
While Outsourcing is still the trend, two new buzzwords more accurately describe the current direction: Nearshoring and Rightshoring.
The drive behind both of these concepts is radically different, rightshoring is driven by cultural compatibility, and nearshoring is being driven by security and geopolical concerns.
Outsourcing business processes to nearshore markets (Canada and Mexico) is becoming very common. In addition, BPOs are finding that nearshore markets are more culturally compatible with the American mindset.
While "Farshoring" is still common, the far shore market isn't isolated to India anymore. Southeast Asia is becoming a hot area, as is Ireland and Eastern Europe.
As far as software development goes, India used to be seen as a silver bullet. Cheap and plentiful developers were seen as the answer to any large-scale software development problem. Unfortunately, companies are realizing that while development costs have fallen dramatically, management costs have skyrocketted to compensate.
grim
Outsourcing is a new concept, there will be hiccups. Look 10 to 20 years out. This is a silver bullet alright, right into the US, and we're the ones pulling the trigger.
This is a HUGE problem, and it's not going away, or getting smaller, but just the opposite.
Investordavid...
Don't forget about health care being exported, as US and other "rich" patients fly to various Asian countries for surgery not covered by insurance.
For example, a hip replacement considered elective here, could cost $25k, but may only be $8k there. My family could get a nice vacation for a little more than our deductible.
http://www.globalhealthnet.com/Page10.html
http://www.tajmedicalgroup.com/
Pat
Don't forget about health care being exported, as US and other "rich" patients fly to various Asian countries for surgery not covered by insurance.
I was in the emergency room with my mom a few months back. They ran a few tests on her, then had to wait for the results to be read in Australia and transmitted back via computer.
> CA has a surplus.
Are you seriously saying that CA is in decent economical shape? It is on the verge of collapse (Bush tax cuts and economic boom has made things tolerable but the cost of illegal immigration and the unions cannot continue). Some day CA must pay back all those bonds.
Taxpayers and businesses are leaving CA in droves and are replaced by illegals. Arnold has improved things slightly but still - like in NJ - judges and unions are in charge.
Just a nice little fast fact... 70% of the 2000-2001 fed budget surplus was tax revenue from companies that no longer exist...
Annomyous, where did you get this data?
New York Jazeera, July 9:
"Surprising Jump in Tax Revenues Is Curbing Deficit"
Bloomberg News:
" July 11 (Bloomberg) -- The Bush administration cut its estimate of this year's budget deficit by 30 percent to $296 billion amid a surge in tax collections from corporations and wealthy individuals."
If tax revenues have actually increased, why in the last 6 years have we gone from budget surpluses to the largest deficit in our history?
Ever heard of 9/11, dotcom market crash, War on Terror, dramatic increase on domestic programs, Katrina?
Canada has much higher taxes than we do, and their economy is doing much better than ours
Canada (like Norway, Bahrain etc) have some unique natural advantages.
But "activist judges" have absolutely nothing to do with the economy. Economic policy comes from the executive and legislative branches.
Yes maybe according to the constitution but they have been dictating things like X.Y billion must be spent on this school district etc. NY and CA have the same problem though. I certainly agree that activist judges should not be making this kind of ruling.
stock options and IPOs generated a lot of tax revenue in those days (this is happening now as well).
While outsourcing and offshoring are related, they are not synonymous. Many of you seem to be using the terms interchangably, so just be aware.
Using ADP to cut my paychecks is outsourcing. Sending my cat scans to India is both outsourcing and offshoring.
I'm part of the camp that believes outsourcing is almost always a great idea. An outsourcer can focus on a single aspect of a business while leveraging economies of scale and efficiency to do that aspect faster and more economically.
Offshoring is a mixed bag, and a much more complicated discussion..
grim
Delford said:"activist judicial branch makes all legislation any how."
Might I add socialist-activist.
InvestorDavid said...
Not only software development being oursourced to India, many companies are hiring Indian consultants from Indian company at half the rate of consultants from US based companies.
In addition, doctors/hospitals are sending X-ray and Cat scans to Indian radiologists as well as many financial firms are sending accounting jobs to India.
This country is killing itself by outsourcing everything.
7/14/2006 11:53:20 AM
You're absolutely right. I came to the US from India for my MBA. I am an IT consultant in Manhattan for one of the big finance guys. But we also have our company's vendors (US companies) getting IT consultants directly from India at half the billing rate. These FOBs (fresh-off-boat) from India are happy on a subsistence salary since 6-8 guys share a 2 bedroom in Jersey City, and live a great life being very frugal and debt-free.
To put things is perspective, my undergrad degree in India (from a Top 5 university in Accounting) cost me $2 a month in tuition. Now how many BS Accounting undergrad in the US coming out of an Ivy League debt-free?
US workers are getting squeezed in all directions. Either jobs go to India, or they come here and work for less since they are accustomed to a lower standard of living.
The game only works until the playing field becomes level.
grim
"we need to focus on what higher value added services we can provide that they can't. ... i have no problem going toe-to-toe with foreign labor. heck we're still the US of A and became great because of our ability to adapt and prosper."
Very naive.
Other countries don't view US imports as part of a 'level playing field' but tax them heavily. Japan did so with cars for example.
The US is willingly giving away its strategic advantage. We're sending our top jobs (which includes know-how) to other countries.
The only outcome to this game is a lower US standard of living.
Canada also doesn't have a military, and relies on the US taxpayer for security.
The entire Canadian army could not even staff America's carrier fleet.
"Using ADP to cut my paychecks is outsourcing. Sending my cat scans to India is both outsourcing and offshoring."
Unless ADP starts processing your checks in India. :)
My beef is sending US jobs to other countries, regardless of what label is applied.
PHLX residential housing sector index (HGX)
Fell below its 200 day moving average and continues to drop.
This is a warning that home prices declines are about to accelerate.
Watch out below . And down goes
Fraizer.
Owning a home in NJ that needs to
be sold,, could be like being
handcuffed to a corspe.
Space Ghost said...
dreamtheaterr, lets see if I understnand this -- you're not squeezing the American workers when you work here, its those other Indians who live in JC who do. Quite unintentionally funny.
I think you are missing the bigger picture. I said "US workers are getting squeezed in all directions. Either jobs go to India, or they come here and work for less"
Maybe I am squeezing a US worker; maybe I am not. That's an open debate.
But I earn what any MBA from a b-school earns. As an international student, I paid full tuition (that goes into the US economy, and subsidized a citizen's tuition tab), I pay full FICA taxes like anyone else, even though I will never collect it. A little off-topic but .....I can't get free treatment in the ER!
The reality is that real wages in the US will not increase as long as capitalism allows it. US corporations can keep a lid on wages by offshoring/outsourcing. This will decrease the existing standard of living for people in jobs easily outsourced.
My perspective is we have three layers of people fighting for the same job:
1. Sumeone who drew up and studied in the US, and has huge student loans and used to a higher standard of living
2. Someone who came from abroad to the US to study and work here (minimal student loans) to have a higher standard of living
3. Someone direcly from abroad to work here for a lower salary because they can easily afford to (used to lower standard of living and no debt whatsoever).
Space Ghost said...
dreamtheaterr, lets see if I understnand this -- you're not squeezing the American workers when you work here, its those other Indians who live in JC who do. Quite unintentionally funny.
I think you are missing the bigger picture. I said "US workers are getting squeezed in all directions. Either jobs go to India, or they come here and work for less"
Maybe I am squeezing a US worker; maybe I am not. That's an open debate.
But I earn what any MBA from a b-school earns. As an international student, I paid full tuition (that goes into the US economy, and subsidized a citizen's tuition tab), I pay full FICA taxes like anyone else, even though I will never collect it. A little off-topic but .....I can't get free treatment in the ER!
The reality is that real wages in the US will not increase as long as capitalism allows it. US corporations can keep a lid on wages by offshoring/outsourcing. This will decrease the existing standard of living for people in jobs easily outsourced.
My perspective is we have three layers of people fighting for the same job:
1. Sumeone who drew up and studied in the US, and has huge student loans and used to a higher standard of living
2. Someone who came from abroad to the US to study and work here (minimal student loans) to have a higher standard of living
3. Someone direcly from abroad to work here for a lower salary because they can easily afford to (used to lower standard of living and no debt whatsoever).
My apologies for the double post.....
O.K. make nice on Friday, you guys. New Jersey is choking, can we agree on that, at least?
I really am curious, and nobody is answering my Q from another thread:
http://www.zillowblog.com/
"This is just the beginning – we'll add more financing info as we grow."
For 10 points, and a chance to move on to the lightning round, which companies offering 5 minute mortgages will be the first linked at ZillowFinancing?
Pat
LP: $719,900
SP: $709,900
OLP: $719,900
LD: 03/16/2006
CD: 06/15/2006
STYLE: Colonial DOM: 12
MLS#: 2257153
SP: $684,000
OLP: $729,900
LD: 04/13/2006
CD: 06/22/2006
STYLE: Colonial DOM: 20
MLS#: 2266776
LP: $799,900
SP: $800,000
OLP: $844,900
LD: 01/12/2006
CD: 06/26/2006
STYLE: Colonial,Custom Home
DOM: 71
MLS#: 2233846
LP: $899,900
SP: $855,000
OLP: $939,900
LD: 03/03/2006
CD: 06/15/2006
STYLE: Colonial
DOM: 90
MLS#: 2253190
LP: $1,295,000
SP: $1,250,000
OLP: $1,295,000
LD: 03/07/2006
CD: 06/29/2006
STYLE: Colonial,Custom Home
DOM: 35
MLS#: 2254342
A TON of price drops today. The heat is on for sellers as we move half-way through July.
Boooya!
Heard today that a home in Montville
listed at 1.9 lowered to 1,7
is finally selling in the 1.1 range.
New construction was sitting
for over 6 months finished.
owner just wanted to bail.
Their are many many open commerical
offices available in nnnj.
Grim
My Real Estate agent keeps sending me 20-25 listings about once a month for the last 18 months. Last listing caught my attention for the lack of DOM (Days on Market) figures. I compared the last listings to the other listings I have received last month which showed the DOM. Some properties overlapped between the two so I was able to figure out the DOM (some were 100 or more).
Is this a new thing in this profession ? is there a new policy to conceal this information from prospective buyers ? Also, I know some sellers drop their price but I can’t find them on the detailed listing anymore.
Please comment.
Cliffy
Cliffy, it might be time to get another agent, or ask the current agent why the DOM are not shown.
There are several report types they can cend you, ask for the full report.
As for price history, you'll have to track that yourself.
Space Ghost asked "where all this commercial office space, vacant for years, exists."
First hand knowledge...Englewood and Englewood Cliffs.
Aren't some of those high paying jobs held by those greedy realtors and brokers. I know a few who are sitting pretty, having screwed over family and friends to get that commission.
jt
Corizines new budget will add a new 1% buyers tax for purchases of homes over 1MM. That adds $10K to the cost for a buyer.
The seller also has to pay a 1% Jim McGreedy sellers tax, which of course is passed on to the buyer.
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