Sunday, August 27, 2006

Running out of land?

From the Record:

Squeezing the suburbs
North Jersey is on the cusp of a condominium and town-house building boom that some feel will slowly change the suburban character of the area into an even denser collection of bedroom communities.
...
Developments totaling at least 14,000 units of high-density housing have either been proposed, are before local boards, or have recently been approved in Bergen, Passaic, Morris and Hudson counties, according to a review of building data by The Record.

Construction is slated across the region, from massive developments such as the 2,580-unit EnCap Meadowlands Golf Village in Rutherford and Lyndhurst to smaller projects like a 68-unit apartment complex in Butler.
...
"There is a lot of competition to live here," said John Knifton, a senior vice president of Somerset Development, which is building the 737-unit Wesmont Station in Wood-Ridge. "There are high barriers. ... It's not made for just anyone," he said of homeownership in the region.

But will there be enough demand by the time these developments are built?

"It's a legitimate fear," said James Hughes, dean of the Bloustein School of Planning and Public Policy at Rutgers University. "These were conceived during boom years, but by the time they get around to building, it's a whole new economic situation."
...
Residential development is on course to outpace Bergen County's population growth in the next 10 years, according to a recent study by the county's Office of Planning and Economic Development.

At its current pace, housing in Bergen will climb toward 400,000 units from today's 350,000 by 2015 while the population slowly increases to the low 900,000s from 891,000. It would create the largest housing surplus the county has seen and its first since the late 1980s and early 1990s when the real estate market collapsed, said Farouk Ahmad, director of the county planning office.
...
Home construction in Bergen County this decade has already surpassed all residential building in the 1990s, 12,805 units through 2005 to 11,304 for all of the '90s. Passaic County may soon eclipse last decade's total: 4,016 so far to 4,820 in the 1990s.

Hudson County has already surpassed its 1990s total and Morris County is keeping pace with its 1990s building boom.
...
For instance, Edgewater has been the site for more new high-density housing since the early 1990s than any other community in North Jersey. From 1999 to 2005, there have been 1,091 multifamily units developed in the 0.85-square-mile borough, according to building permit data.

24 Comments:

Blogger grim said...

Fed helped fuel own inflation headache: Hubbard

The Federal Reserve must act to head off high inflation that is "a present danger" to the U.S. economy, the White House's former top economic adviser said on Saturday, as he blamed the central bank for failing to act aggressively enough so far.

Glenn Hubbard, now dean of Columbia University's Graduate School of Business, said the threat of high inflation partly reflects the central bank's leisurely two-year string of "measured" rate increases.

"I do believe policy had been too accommodative for too long. And now the question is, How do we deal with the current situation?" Hubbard told Reuters on the sidelines of the Kansas City Fed's annual Jackson Hole retreat.
...

8/27/2006 09:48:00 AM  
Anonymous Anonymous said...

They're putting up a fancy new condominium building in Montclair called The Sienna, and the units are outrageously priced. Remains to be seen if they can fill the building.

8/27/2006 09:50:00 AM  
Anonymous Anonymous said...

{{{ They're putting up a fancy new condominium building in Montclair called The Sienna, and the units are outrageously priced. Remains to be seen if they can fill the building.}}}

Montclair is a suburban version of the Upper West Side. Snooty, stuck up, & rude (like all of Manhattan).

Their customer is the six figure white transplanted NY'er who is willing to pay $700,000 or more for a one bedroom condo. Since 95% of the population in Montclair are transplanted NY'ers, they probably will institute some rigid board approval process similar to that in Manhattan in order to keep the 'wrong element' (which is why they moved to Jersey in the first place) out.

8/27/2006 10:16:00 AM  
Anonymous Anonymous said...

And now the fed is planning on cutting interest rates starting in 2007 according to inside sources.

It seems like the fed really wants to cut interest rates & go back to 1% but need adqequate justification to do so.

The economy may be 'slowing' to a horribly slow 3% annualized GDP, and inflation is picking up to 'scary' 4%. Sure this is really scary even as rents in the NYC metro have risen between 5% - 20% across the board since last year, and inflation here in this region is at a 16 year high.

But since 'Everyone Wants to live here', they will pay whatever it costs in terms of rent & cost of living to do so. Those who can't or who make less than $150,000 a year will be pushed out of the region.

Other than housing, the rest of the economy is doing great.

Retail sales have not slipped or slowed at all. Third quarter consumer spending will likely be the highest so far this year and holiday season looks like a blowout in terms of retail sales.

8/27/2006 10:21:00 AM  
Blogger grim said...

And now the fed is planning on cutting interest rates starting in 2007 according to inside sources.

Anyone else having a hard time swallowing this part?

grim

8/27/2006 10:24:00 AM  
Anonymous Anonymous said...

{{{North Jersey is on the cusp of a condominium and town-house building boom that some feel will slowly change the suburban character of the area into an even denser collection of bedroom communities.}}}

Really they are trying to make northern NJ into the Six & Seventh boros of NYC (if not already) with dense multi family housing, overcrowding, spiraling rents & housing costs.

Figure out the actual total monthly costs of these condominiums and determine who their ideal customer will be.

Hint: It won't be anyone earning less than $200,000 a year or anyone from NJ's large cities especially if they are minority.

8/27/2006 10:26:00 AM  
Anonymous Anonymous said...

{{And now the fed is planning on cutting interest rates starting in 2007 according to inside sources.

Anyone else having a hard time swallowing this part?}}

Fed futures imply at least 2 cuts by mid 2007 according to marketwatch.com

2.5% or 3.0% economic growth is not recessionary and healthier than 4% economic growth given by consumer debt..

8/27/2006 10:27:00 AM  
Blogger Richard said...

looks like $300 jean boy is back

8/27/2006 10:52:00 AM  
Anonymous Anonymous said...

Did anyone see this pathetic attempt to push RE online Reuter/Buisness article?

Real estate is still a real value By Linda Stern
Sat Aug 26, 10:12 AM ET

Real estate is expensive these days, but it's still a valuable commodity.
When you tuck a real estate trust or mutual fund in your investment portfolio, it will reward you with steadier and better returns than if you limited yourself to stocks and bonds.
Real estate goes up in spurts, like over the last five years, when the average annual increase was almost 21 percent, according to data from the National Association of Real Estate Investment Trusts and FTSE, a British index publishing company. And so far this year, real estate mutual funds have returned 16.57 percent to investors, reports Morningstar, putting them at the top of the fund research firm's list.
But even when real estate stocks and funds aren't racing up in price, they tend to pay you in solid dividends that are really rent payments collected by the companies you invested in. Even after the last rip-roaring five years, REITs are paying about 4 percent in dividends, according to their trade association........"

8/27/2006 11:24:00 AM  
Anonymous Anonymous said...

“‘You are not going to sell a property at market value. You are not going to sell it for its appraised value,’ said Paul Pastore of Re/Max in Chandler. ‘You are only going to sell it for what someone is willing to pay.

8/27/2006 12:50:00 PM  
Anonymous Anonymous said...

http://www.rgemonitor.com/
blog/roubini/143257

Eight Market Spins About Housing by Perma-Bull Spin-Doctors...And the Reality of the Coming Ugliest Housing Bust Ever….

8/27/2006 12:52:00 PM  
Anonymous Anonymous said...

No Commish checks this week. Oh well.

Lean times are here starving realtors. It will be fun watching the desperation and the urgency as your scheme to convince buiyers to buy is now reversed to convince Greedy Money grubbing "it's not 2005" sellers to substantially cut their bloated prices.

8/27/2006 12:54:00 PM  
Anonymous Anonymous said...

Click ---> Getting real about the real estate bubble

Fortune's Shawn Tully dispels four myths about the future of home prices.
By Shawn Tully, Fortune editor-at-large
August 27 2006: 11:31 AM EDT


NEW YORK (Fortune) -- For the past five years, the housing bulls have been trotting out one rational-sounding argument after another to explain why the boom made perfect economic sense.

Forget about a crash, they assured homeowners. Expect a "soft landing" where your three-bedroom colonial in Larchmont or Larkspur not only holds onto its huge price gains, but keeps appreciating at a "normal," "sustainable" rate of 6 percent or so into the sunset.

Americans wanted to believe, and they did. Now, the giant popping noise you're hearing is the sound of yesterday's myths exploding like balloons pumped up with too much hot air.

The newest sign that the myth-makers were spectacularly wrong is the data on existing home sales for July. Nationwide, median prices rose .9 percent.

But even that meager number masks the real story. Prices actually fell where housing is most vulnerable, in the bubble markets in the West and Northeast. In the Northeast, they dropped 2.1 percent from July of 2005, at the same time prices nationwide rose around 3 percent, meaning that houses lost over 5 percent of their value adjusted for inflation.

Homeowners just saw their wealth shrink, by a lot. The numbers will only get worse. It's time to examine the clichés that the "experts" - chiefly analysts and economists from realtors and mortgage associations - used to convince Americans that what they're seeing now could never happen. Here are the four great housing myths - and why they never made much sense in the first place.

Myth #1: As long as job growth is strong, prices can't go down

You can almost forgive the bulls for stumbling over this one. In past housing recessions, prices fell sharply in markets with severe job losses, like Texas in the mid-80s and Boston in the early 90s.

But the argument that prices can't fall in a good job market doesn't make economic sense: To be sure, a strong employment picture helps demand. But if far more houses are pouring onto the market than can be absorbed by households lured by the new jobs, and if the sellers are pressured to sell, prices will fall.

That's precisely what's happening now in good job markets such as San Diego and Northern Virginia. In this boom, prices soared to such extraordinary levels that builders kept churning out new homes, and owners of existing houses threw a record number of units on the market to cash out. The supply grew so fast that demand, even in strong job markets, simply couldn't keep up.

As usual, for the believers, it's always easier to fall back on a cliché than read the warning signs.

Myth #2: The builders learned their lesson in the last downturn. They won't swamp the market with new houses when the market turns

You might call this the OPEC theory of homebuilders. The idea was that the builders wouldn't take a chance by building lots of unsold, "spec" units that could clog the market in a downturn. They had supposedly absorbed hard-won discipline from their excessive building in past downturns.

Well, it hasn't turned out that way. Builders are still pouring out near-record numbers of new homes as sales decline, assuring a further fall in prices. "Buyers" are walking away from deposits on houses that were supposedly pre-sold, forcing developers to throw them back on the market at a discount.

The problem is that even now, margins on new homes are still pretty good, though well below the levels of a year ago. As a result, builders will just keep building until those big margins evaporate. High prices are sewing the seeds of their own demise. They always do.

Myth #3: Low interest rates will keep values rising, or at the very least, put a floor under prices

What really matters for all assets, whether it's houses, stocks or bonds, is real interest rates - in other words, nominal rates after subtracting inflation. And real rates fell sharply starting in 2001. That caused a legitimate, one-time increase in housing prices.

The rub is that prices rose far more than could ever be justified by declining mortgage rates. That's where the bubble kicked in. Today's relatively low rates are not, and never were, a reason why prices would keep rising. Once real rates drop and stabilize, the impetus goes away - again, the gain is a one-time, not a recurring, phenomenon.

Today, real 10-year rates are still extremely low. They have nowhere to go but up. When the one-time gain of 2001-2004 reverses, housing prices could take a further hit.

By the way, a decline in rates due to a fall in inflation isn't the boom to real estate it's advertised to be. Sure, rates go down, but workers also receive lower raises. So the fall in rates turns out to be a wash. As for what matters - real rates - what goes down later goes up, and housing prices go in the other direction, namely south.

Myth #4: restriction on development in the suburbs ensure low supply, and guarantee rising prices

This argument ignores that the tough zoning laws and anti-development fervor have been a feature of America's tony towns since the early 1970s. The "not in my town" phenomenon is nothing new.

Sure, it's still difficult to get new building permits in suburbs of New Jersey, New York, Washington, Seattle and San Francisco. But America's housing market is extremely fluid. People move farther from job centers, and commute longer hours, to get bargains where housing is plentiful. Then the jobs move to the areas with the cheap houses. People in their 50s and 60s cash out early in San Diego and buy a bigger house for half the money in Texas or South Carolina.

And the cities are just as enthusiastic about developing blighted areas with new, tax-paying high-rises as the suburbs are slamming the door. In the New York area, Brooklyn, Jersey City and Hoboken - and even Manhattan - are sprouting more new housing than in decades, despite a job market that's hardly robust.

A year ago, the reigning cliché was that real estate had entered a new world of "no supply." Now, a record 3.85 million homes are up for sale, and buyers are getting scarce.

No, the world hasn't changed. And the myths haven't changed either. Next time, don't believe them.


http://money.cnn.com/2006/08/27/real_estate/pluggedin_tully.fortune/index.htm

8/27/2006 02:31:00 PM  
Anonymous Anonymous said...

"And now the fed is planning on cutting interest rates starting in 2007 according to inside sources.

Anyone else having a hard time swallowing this part?"

If the Fed starts cutting rates, this will be very worrisome. Personally, I would like to see the rate, hit 6% in about a year or less time. Yes, it would hurt. But like a drug addict wanting to clean himself up, we have to go through some pain, to clean ourselves up.

This country has become so high on cheap credit and the easy money policey of the fed, we have become credit addicts. This is most troublesome over the long haul and can ruin this country.

Think of it this way, people whom loan you money are always examining your credit worthyness, once you are deemed a credit risk, people will no longer loan you money. With this concept, apply it now globally. If the god damn foreigners start seeing us as a credit risk, and think we can no longer pay them back, there goes the gravey train in the form of the T-bills.

SAS

8/27/2006 02:40:00 PM  
Anonymous Anonymous said...

We are damned either way. First off all the fed is targeting inflation, at least they say they are. Their band is 1-2% ex. food and energy. If inflation is running outside of this band and the fed cuts, there will be serious implications. The market will see this and drive the long end up(the fed does not control the long end). Also, we are at the mercy of foreigners holding our bonds, the biggest being the Chinese and Japanese. If we cut, with inflation lurking, it will drive down our dollar. Holders of our debt will demand a higher rate on the long end to compensate for their loss with their currency conversion. That's the best possible scenario. What happens if they start pulling out?? I feel inflation and appeasing our bond-holders will be the priority of the fed, not the nar. It will be tough medicine to take. However, we will be much better in the long run if the proper policies are put in place now.

BC Bob

8/27/2006 03:34:00 PM  
Blogger grim said...

The hard to swallow part wasn't that the Fed could potentially drop rates, but that an anonymous poster on this blog was somehow privvy to "insider information" at the Fed.

Or maybe Bernanke has been hanging around with Maria again..

grim

8/27/2006 04:08:00 PM  
Anonymous Anonymous said...

Wait until he (Bernanke) sits down for lunch with Paul Volcker!!!!!!!

BC Bob

8/27/2006 04:18:00 PM  
Blogger Math, like gravity, is law. said...

Anon 12:24 posted from a article..."When you tuck a real estate trust or mutual fund in your investment portfolio, it will reward you with steadier and better returns than if you limited yourself to stocks and bonds."

WOW...GOLLY GEE WHIZ!!!
Maybe some money guy's can get us into those?
Okay know for some straight talk:
Anyone that replaces the word buy with tuck is a huckster.
Anyone who uses the word portfolio is a huckster.
Anyone who uses the term reward you is a huckster.

8/27/2006 04:21:00 PM  
Blogger Math, like gravity, is law. said...

pardon; now

8/27/2006 04:22:00 PM  
Blogger Math, like gravity, is law. said...

grim said...
The hard to swallow part wasn't that the Fed could potentially drop rates, but that an anonymous poster on this blog was somehow privvy to "insider information" at the Fed.


Yes Grim that bs jumped off the screen.

8/27/2006 04:32:00 PM  
Blogger Math, like gravity, is law. said...

A rant by yours truly:
Go to any newstand and pick up a magazine; New Yorker or whatever. Look at the magazines objectively, what you will find is FANTASY, people crave it, and the swift capitalize on it. This housing chicanery is a sympton of the irrational behavior of other human beings, I'm personally angry at myself for being frozen by the data and not taking more advantage of the stupidity...I will next time.

8/27/2006 04:37:00 PM  
Blogger Richie said...

No one is running out of land. It's much more profitable to a developer to throw 30 units on a acre rather then 1.

Duh.

8/27/2006 05:10:00 PM  
Blogger Metroplexual said...

Grim,

Do I need to reprint my Benny and the feds lyrics? Just kidding, love the money honey. Stab you in the back while smiling.

8/27/2006 05:31:00 PM  
Blogger chicagofinance said...

FYI - all the rates beyond a year look stimulative to me.

Who gives a whit that Fed Funds is at 5.25%. Any company that is not an airline or U.S. automaker has deep and liquid fixed income markets to access EN MASSE for CHEAP.

Look at all the leveraged buyouts that are happening. Why is that?

Maybe the INSIDERS know?

8/27/2006 09:15:00 PM  

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