Wednesday, August 30, 2006

Growing Class Gap in New Jersey

From the Star Ledger:

Flight of the white middle class creates a split between have-a-lots and have-nots

New Jersey remains the nation's wealthiest state, but its population is increasingly divided along lines of race and class as lower- and middle-income whites leave in growing numbers.

The findings come from a voluminous array of U.S. Census information released yesterday. The most comprehensive sampling in five years documents trends in income, immigration, commuting and race.
...
The income gap between races is partly explained by an exodus of white lower- and middle-class families, according to an analysis by The Star-Ledger.

That white migration included folks like Paul and Patricia Wiedemann, who faced a difficult decision when Patricia retired three years ago.
...
They preferred to stay in Clinton Township, where they lived near two grown children and five grandchildren, but they feared the high cost of living and taxation would someday erode all their savings.

The couple moved to Delaware, where they are paying about $800 a year in property taxes, compared with the $8,400 they were paying when they left. They soon learned that many of their neighbors in the senior development where they settled also were recent arrivals from New Jersey.

"There was no incentive to stay in New Jersey," Paul Wiedemann said. "If you've got money and you're working, you can swing it. If you retire, the only way to stay is if you're wealthy."
...
James Hughes, dean of Rutgers' Bloustein School for Planning and Public Policy, said some of the middle-income whites got raises that bumped them up to the next earning category. But many simply moved away.

"With the bursting of the telecommunications bubble and downsizing, we had a lot of people moving for economic reasons," Hughes said. "Some simply moved across state lines for lower taxes; still others were fleeing diversity. Then you had retirees cashing out of the housing boom."
...
"The real danger would be the hollowing out of middle New Jersey," he said. "That has potential implications for the economy, because corporations expand where there is the diverse labor force they want."
...
"The housing crisis is affecting everyone, from the professional who has a choice of jobs in New Jersey or a lower-cost state to the single mother struggling to make ends meet," agreed Arnold Cohen of the Housing and Community Development Network of New Jersey.

37 Comments:

Blogger grim said...

Purchase Mortgage Applications fell 1.6% in the last week to hit a 33 month low..

From Marketwatch:

Mortgage applications slip lower

The number of applications for mortgages dropped 0.9% last week as interest rates bounced off a five-month low, the Mortgage Bankers Association reported Wednesday.
The number of applications for home purchases fell 1.6% to the lowest number since November 2003.
Applications for refinancing an existing loan inched higher to a five-month high.
Applications are down 22.4% from a year earlier -- a reflection of the weaker real-estate market.
Loans to refinance existing mortgages accounted for 41.5% of total applications last week, up from 40.6% the week earlier. It's the highest share for refinancings since February.

8/30/2006 06:15:00 AM  
Blogger grim said...

Some viewpoint from our neighbors to the north.

Lighten up on stocks, National Bank advises

It's time to lighten up on stocks, buy more bonds and keep a good chunk of your assets in cash. That's the advice from National Bank Financial Inc.'s chief economist and strategist, Clément Gignac.

"In light of the deterioration in U.S. real estate, we have recently raised the odds of a U.S. recession from 25 per cent to 40 per cent and are predicting for 2007 the weakest consumer spending growth in 15 years," Mr. Gignac said in the September issue of the firm's monthly economic monitor.

He added that central banks have a "poor record of engineering soft landings when a housing bubble has burst" and said that, as a result, the firm has cut its 12-month target for the S&P 500 composite index to 1,225 from 1,325. It closed yesterday at 1,304.40.

8/30/2006 06:47:00 AM  
Blogger BergenBuyer said...

The middle class great white flight has definitely occurred already. NJ is and will increasingly be made up of rich suburbs, serviced by illegal immigrants landscaping and cleaning houses whom live in less desirable and weakening border towns and dirt poor cities. It's evident today and it doesn't seem to be changing.

8/30/2006 07:28:00 AM  
Anonymous Anonymous said...

“There is a lot of truth to the saying that Buyers determine the selling price of a home, not the Sellers. Sellers can set an asking price, but if no one is willing to pay it, then it is just a dream.”

Lots and lts of dream prices out there.

BLEED"EM DRY!

8/30/2006 07:46:00 AM  
Anonymous Anonymous said...

http://graphics8.nytimes.com/
images/2006/08/26/
weekinreview/27leon_graph2
.large.gif

Parabolic price increases. Expect a parabolic price decline starting at peak 2005 and accelerating in 2007 and into 2008.

If you pay anywhere near asking you will be a bagholding fool.

Slice 30% off of those dream prices and then maybe you will be underwater slightly at some point.

8/30/2006 08:06:00 AM  
Anonymous Anonymous said...

Just do the math. Incomes were up between 15-18.7% from 2000-2005. House prices are up 80-100% over that time. This may be the biggest discrepancy between prices and fundamentals in the history of any market, certainly real estate. You talk about an arbitrage trade. Also, inflation was up 17% over this time peroid. (I feel it was much higher) You are talking about flat,real incomes and ridiculous price increases. How does this support these prices??? It's simple, it doesn't.

By the way, JP Morgan cut HOV from over-weight to neutral. This is why analysts are analysts and not traders. The stock is down almost 60% off its 9/05 highs and you cut your rating now??? Maybe we should call this analyst an anal-ist!!!!!

BC Bob

8/30/2006 08:39:00 AM  
Anonymous Anonymous said...

The cost of migration;

A friend of mine is moving to Raleigh, N.C.. The discrepancy in one way rates from U-Haul confirms what this site has been talking about regarding migration out of NJ.

One Way Rates for a 26 ft truck;
Jersey City to Wilm., Del.-$400
Wilm., Del. to Jersey City-$200

J.C. to Raleigh, N.C.-$1,498
Raleigh, N.C. to J.C.-$207.

You talk about leading indicators. The sellers and realtors may be in denial. U-Haul is taking our side of the trade.

BC Bob

8/30/2006 09:05:00 AM  
Blogger skep-tic said...

I've lived in a few diff't areas of the country and it's pretty obvious to me that the class divide is much more severe in the NYC-region than most other places (except maybe California).

Middle class people in the South and Midwest can afford nice homes in nice communities with good schools and with short commutes to work.

Maybe this area will never be as affordable as the Midwest and South, but it is scary to imagine it even more stratified. NYC of the 1970s and 80s was the result of middle class flight. the suburbs are not immune to crime

8/30/2006 09:17:00 AM  
Blogger grim said...

From The Record:

Rising pay buys less

ew Jersey families lost buying power last year in the face of rising prices for fuel, housing and health care.

The median household income in the Garden State remained the highest in the nation in 2005, according to Census Bureau data released Tuesday. But the income of $61,700 was down 2.8 percent from the inflation-adjusted 2004 number of $63,400. That decline was one of the biggest drops in the nation.

Even over the long term, the picture is discouraging: Adjusted for inflation, the state's residents had lower median incomes last year than they did in 1989.

"In the 1980s and 1990s, we were adding large numbers of knowledge-based, high-paying jobs," said James W. Hughes, a Rutgers economist. "Past 2000, that has stopped. We're starting to see the effect of that on incomes."

8/30/2006 09:37:00 AM  
Anonymous Anonymous said...

One more;

JC to Austin,Tx.-$5,913
Austin,Tx.to JC- $616

Is it possible that this is much bigger than we think????

BC Bob

8/30/2006 09:44:00 AM  
Anonymous Anonymous said...

That is the way it is in the 5 boros of NYC and especially out on Long Island (the consumer capital of America).

Huge classism here where everyone is defined by what they own & what they drive and more importantly what they wear (how designer & expensive it is).

For under $300,000 you can barely find a studio apartment let alone a home anywhere within 100 miles of Manhattan.

8/30/2006 09:49:00 AM  
Anonymous Anonymous said...

What can you qualify to rent or buy on a $63,000 income in Northern NJ or the 5 boros of NYC at todays market rents.

Answer not much unless you look in southern Queens near the Belt Parkway. Rents have skyrocketed especially in yuppified parts of NJ like Jersey City & Hoboken.

Hudson county is really an extention of Manhattan these days.

8/30/2006 09:51:00 AM  
Anonymous Anonymous said...

{{I've lived in a few diff't areas of the country and it's pretty obvious to me that the class divide is much more severe in the NYC-region than most other places (except maybe California). }}

Especially in the outer boros of Manhattan and Long Island. Manhattan is just wealthy transplants, but it really shows outside of Manhattan. Of course access to credit masks this.

Credit wasn't as available or used in the 1970's or 1980's.

8/30/2006 10:01:00 AM  
Blogger chicagofinance said...

likening mortgage securitization to "sliced sopressata"

go here and look for the post starting with "sopressata"
http://www.njrereport.com/forum/viewtopic.php?t=129

8/30/2006 10:06:00 AM  
Blogger RentinginNJ said...

A friend of mine is moving to Raleigh, N.C

I'm supposed to scope out Raleigh this weekend, but my flight is scheduled to land just about the time Ernesto passess over Raleigh. I guess we'll see what happens.

8/30/2006 10:12:00 AM  
Blogger chicagofinance said...

I underplayed the provocativeness of this article. If you appreciate my sleep-inducing econo-babble, spend a few minutes reading this or else pick up today's WSJ.

8/30/2006 10:13:00 AM  
Anonymous UnRealtor said...

Keep us posted RentingInNJ!

8/30/2006 10:18:00 AM  
Anonymous Anonymous said...

JC to Austin,Tx.-$5,913
Austin,Tx.to JC- $616

Is it possible that this is much bigger than we think????


Your reasoning is flawed. It's always cheaper to return a u-Haul to a bigger metro area, where there is more demand for them for all kinds of moves, including intra-city.

But nice try.

8/30/2006 10:21:00 AM  
Blogger chicagofinance said...

Babe Ruth in the Bushwood Swimming Pool

3-Month 5.05
2-Year 4.83
10-Year 4.77

8/30/2006 10:24:00 AM  
Blogger annamelbourne said...

"NJ is and will increasingly be made up of rich suburbs, serviced by illegal immigrants landscaping and cleaning houses whom live in less desirable and weakening border towns and dirt poor cities."

Not just New Jersey. Increasingly, this is how it is the world over.

8/30/2006 10:56:00 AM  
Blogger Jpatrick said...

Those that can afford to retire in NJ tend to prefer not to. What else is new?

8/30/2006 12:28:00 PM  
Blogger RentinginNJ said...

Chicago,

Just read the WSJ article. One of the factors that is supposed to mitigate systemic risk from defaulting mortgages is the fact that mortgage debt is spread around to a greater extent than in past downturns through mortgage backed securities. The article, however, mentioned investment banks are returning mortgages for poor performance. Do you know to what extent can investment banks return non-performing mortgages? Would it be possible for investment banks to dump large amounts of mortgages back on the originators?

8/30/2006 12:55:00 PM  
Anonymous Anonymous said...

these loans are securitized and
in defaults, they have insurance,
as well as replacement of bad
loans.

depends on the structure of the deal.

just like auto loans.

8/30/2006 01:05:00 PM  
Anonymous Anonymous said...

Well is it finally
sinking in.

NJ is a welfare state.

the pols have finally
broke the bank.

8/30/2006 01:07:00 PM  
Anonymous Anonymous said...

I am scoping out Raleigh/Chapel Hill this weekend with the hopes of relocating next summer. I finally have my significant other convinced it is time to sell his over-priced condo and run with the profits. We have watched the prices decline 10% YOY in Bedminster and want to lock in the gains before it gets real ugly out there.

8/30/2006 01:15:00 PM  
Blogger chicagofinance said...

RentinginNJ said...
Chicago,
One of the factors that is supposed to mitigate systemic risk from defaulting mortgages is the fact that mortgage debt is spread around to a greater extent than in past downturns through mortgage backed securities. The article, however, mentioned investment banks are returning mortgages for poor performance. Do you know to what extent can investment banks return non-performing mortgages? Would it be possible for investment banks to dump large amounts of mortgages back on the originators?
8/30/2006 01:55:05 PM

I am not an expert at CCMOs or RCMOs, but I do have experience with securitizing credit card receivables through an origination program.

Ultimately there is the overriding indenture [i.e. rules of the game]and prospectus that puts forth the terms of the program.

However, in every tranche that is originated, it will have its own terms that could amend any of the provisions of the prospectus or indenture.

What may exist [and sounds as if it does based on the article] is that an investor in the CMO is given a "put" option [i.e. contractual right to return the security at a predetermined, or even relative, price]. Also, I've seen a collateral pool replacement feature, where all of the collateral that securizes the bonds must be of a certain profile. If the profile changes [defaulted mortgage], then the issuer of the bonds is obligated to replace the collateral with a suitable substitute.

Re-read the articles for details, but I also know that there are also grades within a single issuance, so you can choose a risk and return profile that suits your objectives.

There is a ton of detail that I am skimming past, but I cannot write a full explanation.

Understand 4 things:

1. Large investors [buy-side] own the Street; issuers are patsies [deaf, dumb, and blind] ; and bankers are whores [toll collectors whose mission is to transact]

2. In a pinch, bankers will sell-out the issuers to make sure investors are appeased

3. There is no free lunch in risk/return unless there is arbitrage, or illegal manipulation

4. There's nowhere to hide forever

chicago

8/30/2006 02:38:00 PM  
Blogger chicagofinance said...

the thread killer does it again

SORRY :(

8/30/2006 04:44:00 PM  
Blogger chicagofinance said...

chicagofinance said...
Babe Ruth in the Bushwood Swimming Pool
3-Month 5.05
2-Year 4.83
10-Year 4.77
8/30/2006 11:24:06 AM

someone whack me in the head
hard
preferably several times


U.S. Treasuries Advance on Five-Year Note Auction

By Darrell Hassler
Aug. 30 (Bloomberg) -- U.S. Treasuries rose after the government's sale of $14 billion in five-year notes met the highest demand in nine years, while stocks rose for a third day as the economy expanded in the second quarter.

Treasuries extended earlier gains after the notes sold at a lower yield than traders expected. Investors including foreign central banks bought the largest share of a five-year sale since January. U.S. government debt is headed for a second straight monthly gain amid growing speculation the Federal Reserve will refrain from lifting interest rates again this year.

``There is an awful lot of cash that needs to go to work,'' said Ted Ake, head of Treasury trading in New York at Mizuho Securities USA Inc.

3-Month 5.05
2-Year 4.81
10-Year 4.75

8/30/2006 05:02:00 PM  
Anonymous Anonymous said...

Thread killer: It's not you.

It's the reminder that I've kept putting off all the analysis of my own situation, together with any re-allocation.

The stuff is like the dreaded file that you keep on the top of your desk, because you know you have to do it, but you keep finding excuses to prioritize other things ahead of it. The upside is, that when you finally tackle it, you have it all figured out and it really only takes a couple of minutes...and the hard part is splainin to people why it took so long.

Thanks for the reminders.

Pat

8/30/2006 06:09:00 PM  
Blogger jayb said...

"I am scoping out Raleigh/Chapel Hill this weekend with the hopes of relocating next summer."

"A friend of mine is moving to Raleigh, N.C.."

"I'm supposed to scope out Raleigh this weekend,"

To the above people checking out NC, please do tell about it. Good friend of my sister is also moving to NC. Have yet to talk to him, but apparently there's something good about it.

8/30/2006 06:14:00 PM  
Anonymous Anonymous said...

Dunno about NC.

Maybe following the herd about four years too late?

Lots of construction related jobs there. How will the economy fair if you believe that there is a downside coming?

Pat

8/30/2006 07:00:00 PM  
Blogger Rich52 said...

Your reasoning is flawed. It's always cheaper to return a u-Haul to a bigger metro area, where there is more demand for them for all kinds of moves, including intra-city.

Isn't Austin a big city? I'm just asking, I really don't know, havn't been to TX.

8/30/2006 07:28:00 PM  
Blogger RentinginNJ said...

Maybe following the herd about four years too late?
Lots of construction related jobs there. How will the economy fair if you believe that there is a downside coming?


Sure. There’s an incredible amount of construction there, however the economy is more diverse than that, with lots of jobs in health care, environmental science and IT.

Pat, I look at it this way, I can get a new house that I couldn’t dream of in NJ, that doesn’t need work, in a nice neighborhood, with decent schools and low taxes, that I will never outgrow and can be happy in for many years, and with a mortgage payment that I can make on one income. Even if times got tough, we could still make the payment.

I’m convinced we will see lower prices in NJ, but it will still be expensive and taxes still aren’t under control. I also think a downturn will take several years to play out. I refuse to buy a depreciating asset, but I’m also getting tired of waiting.

It doesn’t matter, my wife will probably get cold feet anyway and we will just keep renting in NJ:)

8/30/2006 07:52:00 PM  
Anonymous Anonymous said...

rentinginNJ said...

"Chicago,

Just read the WSJ article. One of the factors that is supposed to mitigate systemic risk from defaulting mortgages is the fact that mortgage debt is spread around to a greater extent than in past downturns through mortgage backed securities. The article, however, mentioned investment banks are returning mortgages for poor performance. Do you know to what extent can investment banks return non-performing mortgages? Would it be possible for investment banks to dump large amounts of mortgages back on the originators?


Hope this sheds light...IB's essentially can send back purchased loans to the originators during the warehousing stage that occurs prior to securitization. There are many different reasons among them is the failure of the mortgagee to pay the first payment another would be aggressive credit terms and faulty paper work which tends to signal poor credits.

8/30/2006 08:37:00 PM  
Anonymous Anonymous said...

"For under $300,000 you can barely find a studio apartment let alone a home anywhere within 100 miles of Manhattan."

Just not true. Realtor dot com lists hundreds of one and two bedroom condos/coops in this part of jersey for under 100k.

Yes, you might have to swallow your pride and say "Fort Lee" when you want to say "Gramercy Park," but you said 100 miles...why, you could even afford Rutherford!

8/30/2006 09:59:00 PM  
Anonymous Anonymous said...

OK, so I slightly exaggerated. In the very low 100K range you can get in relatively comfortably. (In Rutherford, there are 1B condos for 92.5, studios elsewhere under 60K.)

My guess is that next year condo prices will be much better still.

As to pride of location, hey, wherever nice people go is a nice place.....you should have seen Brooklyn Heights in 1980.

8/30/2006 10:06:00 PM  
Anonymous Anonymous said...

It's always cheaper to return a u-Haul to a bigger metro area, where there is more demand for them for all kinds of moves, including intra-city.

According to Wikipedia, Austin has nearly 700k population while Jersey City has only 240k population.

YOU LOSE! GOOD DAY SIR!

8/31/2006 09:52:00 AM  

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