Lowball! 4/14 - 4/21

Lowball! takes a look at home sales over the past week from a very different perspective. For those new to Lowball!, a lowball offer is when a buyer offers a significantly lower bid than asking in hopes that the seller accepts the offer. We take a list of home sales over the past week and pick out the sales that have the highest percentage difference between asking price and selling price.

The purpose of Lowball! is to show buyers that the market has changed and buyers now have considerably more leverage than sellers. Just a short time ago, Lowball! offers would have been laughed at and discarded, however, not any more. The fact that so many under-asking offers are being accepted is clear proof that the market is changing.The list does not contain all sales, I hand-pick the most interesting sales from the list. These listings might be the highest dollar drops, biggest percentage reductions, or sales in towns that are thought to still be 'hot'. Please note, even with double digit percentage reductions, these homes are still incredibly overpriced.

On to the list!

MLS# 2099475 - Oxford, NJ
Original List Price $219,000
List Price $199,000
Slaes Price $135,000 (32.2% Lowball!, 38.4% off Original List)

MLS# 2226956 - Mahwah, NJ
List Price $410,000
Sales Price $286,500 (30.1% Lowball!)

MLS# 2259114 - Newark, NJ
List Price $298,198
Sales Price $225,000 (24.5% Lowball!)

MLS# 2252876 - Orange, NJ
List Price $275,000
Sales Price $210,000 (23.6% Lowball!)

MLS# 2225488 - Vernon, NJ
List Price $185,900
Sales Price $150,000 (19.4% Lowball!)

MLS# 2112198 - Hanover, NJ
List Price $1,299,000
Sales Price $1,075,000 (17.2% Lowball!)

MLS# 2112198 - Millburn, NJ
List Price $1,300,000
Sales Price $1,100,000 (15.4% Lowball!)

MLS# 2230762 - Millburn, NJ
List Price $2,295,000
Sales Price $1,960,000 (14.6% Lowball!)

MLS# 2097806 - Mendham, NJ
Original List Price $2,499,000
List Price $2,399,000
Sales Price $2,074,000 (13.5% Lowball!, 17% off Original List)

MLS# 2248517 - Wayne, NJ
List Price $329,000
Sales Price $290,000 (11.9% Lowball!)

MLS# 2200311 - Washington Twp, NJ
Original List Price $689,000
List Price $650,000
Sales Price $580,000 (10.8% Lowball!, 15.8% off Original List)

MLS# 2248710 - West Milford, NJ
List Price $239,900
Sales Price $215,000 (10.4% Lowball!)

MLS# 2103828 - Haledon, NJ
Original List Price $519,000
List Price $499,000
Sales Price $447,500 (10.3% Lowball!, 13.8% off Original List)

MLS# 2222324 - Mountainside, NJ
Original List Price $698,000
List Price $679,000
Sales Price $610,000 (10.2% Lowball!, 12.6% off Original List)

MLS# 2225852 - Millburn, NJ
Original List Price $1,300,000
List Price $1,195,800
Sales Price $1,075,000 (10.1% Lowball)

Just an anecdote, seems like sales were a bit on the slow side this week.

Caveat Emptor!
Grim

Development Briefs

From the Star Ledger:
Windy Acres agreement reached

After months of talks under the watchful eye of the state Council on Affordable Housing, Clinton Township and developer Pulte Homes say they have a new deal for the Windy Acres site.
...
Number one looks like last year's tentative agreement, roughly halving the size of the proposed 911-unit development. Pulte could build 365 age-restricted homes and 90 affordable units on the old farm just east of Lebanon Borough. It would provide land for 60 more affordable homes.
...
If that effort fails, the second option gives the Michigan-based developer the choice of building 58 high-end "McMansions" on 1.5-acre lots with individual septic systems.

If Pulte decides against that project, Clinton Township would be required to buy the 292-acre property, with a formula based on the current value of the 58 building lots. That figure is subject to appraisals, but Councilman Kevin Cimei, who helped negotiate the deal, estimated it would be about $18 million.

From the Record:
N. Arlington OKs development

Over the jeers of residents, the Borough Council voted 4-2 Wednesday night to sign an agreement with a developer to build 1,625 residences along Porete Avenue.

Cherokee EnCap will build the homes and 50,000 square feet of retail along the road, which is in the shadow of a landfill and is home to warehouses and light industrial businesses.

But many of the business owners don't want to leave and have vowed a court battle if the town condemns their properties for the Arlington Valley project.

From the Jersey Journal:
Lofts proposed for E. Newark

A developer is proposing constructing between 700 and 800 loft apartments, as well as commercial space, at the First Republic industrial complex on Passaic Avenue.

The mammoth site, which is currently leased to a number of commercial tenants, houses several four-story brick structures that date to the mid-1800s.

Mayor Joseph R. Smith said preliminary plans call for commercial space to occupy the first two floors. The $100 million project would roll out over a span of three to five years, he added.

Several other developers have also expressed interest in the site and have presented plans for projects including two-family houses, a hotel and a big-box home improvement store.

From the Jersey Journal:
Developer's $22.7M to fill Bayonne budget shortfall

For the second year in a row, Bayonne will look to a developer to help bail it out of a budget crunch.
...
BLRA Executive Director Nancy Kist said the authority expects to get the $22.7 million from the developer of Bayonne Bay at the Peninsula at Bayonne Harbor, formerly known as the Military Ocean Terminal. The city would use that money to further develop infrastructure at the Peninsula.

BLRA commissioners voted earlier this month to conditionally designate the D.R. Horton/Trammel Crow Residential partnership to build 1,769 units of "age-restricted" and "age-targeted" housing on 32.7 acres at the Peninsula's southern border.

The deal is still being negotiated but Kist said she was "fairly certain we'll be able to close on the sale of the property and deliver the money to the city" by June 30.

Corzine to sign Fort Monmouth development plan

From the Hub:
Corzine will sign fort reuse bill in area

Gov. Jon S. Corzine is scheduled to come to the area Wednesday to sign the bill creating a state-sanctioned authority to direct the future of Eatontown's Fort Monmouth facilities.
...
Corzine's signature is all that is needed to make the bill, a joint effort crafted by both the state Senate and the Assembly this winter, an official document.

The Assembly bill, known as A-2692, was co-sponsored by Assemblyman Michael Panter (D-12) and Assemblywoman Jennifer Beck (R-12) along with Assemblymen Steve Corodemus (R-11) John Burzicelli (R-3), Sean Kean (R-11) and Samuel Thompson (R-13).

The Senate bill, known as S-1472, was co-sponsored by state Sens. Joseph M. Kyrillos (R-13) and Ellen Karcher (D-12).

The new authority will operate in a fashion similar to the state's Meadowlands and Pinelands authorities, Panter has said.

After Corzine affixes his signature, the wheels can be put in motion to form the 10-member authority, which will become the official entity charged with overseeing future uses of Fort Monmouth's land and infrastructure after its scheduled closing by the Pentagon in September 2011.

Senate Bill S-1471 can be found in full here:

Fort Monmouth Economic Revitalization Authority Act(PDF)

Caveat Emptor!
Grim

Will high priced housing be the demise of the Northeast?

From CNN:

Housing prices put Americans on the move

The movement of Americans from north to south is trending as strong as ever, according to the latest report on net domestic migration released today from the Census Bureau.

And, it seems, housing prices are driving the trend. The net out-migration of residents is from high-priced northeastern and West Coast cities to more affordable housing markets in the Sun Belt.

"Many are surmising that housing values are so different around the country that it's impacting migration," says Marc Perry, a demographer with the Census Bureau. "Some people are cashing out housing and moving to cheaper areas. Others who don't own homes are moving so they can afford to buy one."

That makes losers out of metro areas like New York, Los Angeles and Chicago, and makes Dallas, Atlanta and Phoenix, where housing has been much more affordable, into big net gainers.

Of the 25 largest metro areas, the New York region lost the most people, with an average annual net outflow of 211,014 residents from 2000 through 2004. That calculates to an average loss of 11.4 people per thousand per year. The median house price in the New York area last year was $427,600, about twice the national median.

An Open Letter To Warren Boroson and the Daily Record Readers

It seems I've struck a chord with Mr. Warren Boroson..

It's important to defend against liars

The 11th Commandment, so far as I am concerned, is: Thou shalt not suffer thyself to be Swift Boated.

If you permit yourself to be lied about without vigorously defending yourself, you are encouraging the perpetrator to lie about other innocent people, too.
...
Example: Someone named Grim has a blog that focuses on the supposed alleged bubble in New Jersey real estate, and he regularly lies about me. He has accused me of urging people to buy houses while I quietly unloaded my own.

It was a lie that I have in recent years urged people to buy houses.

In my column, where I can express my opinions, I have suggested that sellers sell and suggested that buyers not buy unless they are prepared to live in their new house for many years.

In news or feature stories, in which I may not express my opinion, I have quoted people worried about New Jersey residential real estate, such as A. Gary Shilling, as well as people who are not worried.

So, I defended myself against Grim's accusation that I sold my house while urging others to buy.

Apparently he was startled. He referred to my vehemence and to my "insults." (I had called him a liar and a creep.)

He quickly erased my comments, though. I guess he doesn't think it's insulting to accuse a journalist of double-dealing.

Warren says that I deleted his comments, which is absolutely untrue, they can be found here:

http://nnjbubble.blogspot.com/2006/01/warren-boroson-profile-of-real-estate.html

Anonymous said...
From Warren Boroson
I sold my house because I didn't need 4 bedrooms, and I think older people like me should live in an apartment, for safety. I STILL OWN ANOTHER HOUSE. Since selling that house, it has appreciated $100,000.I have repeatedly written about selling my house. Ain't no secret. In Kiplinger's, in my own column.I have conveyed various people's views in my column -- the view that house prices are poised to plummet, the view that house prices will level off. My own view, which I have written about many times, is: Sell sooner rather than later.By the way, if I'm a shill for the industry, how come I wrote a book called, How to Sell Your House Yourself?You guys are a bunch of ignorant creeps. And terrible writers! But you are hilarious. And I love the publiciity!

and here is another one:

Anonymous said...
LIAR, LIAR!
from Warren Boroson
By the way, GRIM says that I have urged people to buy houses now -- while selling one of my houses. That is a lie. I have told everyone what Jim Hughes of Rutgers has said: If you buy now, be prepared to hold on for 10 years.What a creepy guy this GRIM is!

As far as I can tell, these are the only two replies that Mr. Warren Boroson posted on this blog, to which I replied:

Nice to meet you Warren. We were wondering when you would stop by.
grim

You can read the rest yourselves. I don't mind being called names, god knows I have enough emails calling me names. What I don't like is that he said I deleted his comments. Absolutely untrue. I have only ever deleted 2 comments from this blog (spam aside, of course). One was due to the use of profanity, and the other was the posting of private information.

Mr. Boroson should have done some more research before stating that I deleted his messages. I did not. He was obviously mistaken, likely due to the fact that there have been a number of "Warren-Watch" threads posted on this blog. Everyone here knows this is an open forum. Anyone can post anything they'd like without fear of it being deleted or having their view oppressed.

Mr. Boroson, I expect an apology in print.

Caveat Emptor!
Grim

N.J. State Economy Outlook

From the Star Ledger:

Outlook for state's economy improves

New Jersey's employment picture brightened a bit in March.

Payroll employment for the month rose by 3,700 job and the state's unemployment rate declined to 4.5 percent from 4.7 percent, the state Department of Labor and Workforce Development reported yesterday.
...
But some experts worry most of the added jobs are low-paying positions. They said New Jersey is lagging in the creation of higher-paying jobs, such as those in finance and professional services, even as those jobs are growing quickly in the rest of the nation. Last month, the U.S. unemployment rate fell to 4.7 percent from 4.8 percent.

"When you look beneath the surface, it's not a pretty employment picture," said James Hughes, dean of the Edward Bloustein School of Planning and Public Policy at Rutgers University in New Brunswick.

For example, Hughes said nearly all of the jobs added last month were in "low-paying service jobs" such as restaurants, hotels and health services.

"This continues the undesirable pattern of a contraction in high-paying sectors of the state economy and growth concentrated in the low-pay sectors," Hughes said.
...
Restaurants and hotels added about 2,200 jobs in March, while the education and health services sector added 1,700 jobs. Employment in the trade, transportation and utilities sector increased by 1,100.

The area with the biggest decline was professional and business services, where employment fell by 1,000 jobs.

A national trade group reported yesterday that employment in high-technology industries in New Jersey fell by 5,500 jobs in 2004, the latest data available. The losses were largely in the telecommunications sector, according to AeA, a trade association representing high-tech industry.

Northeast Migration Outflow

From the NY Sun:

New York Is Losing People at Fastest Pace in America

New York State is losing more residents than any other state in the country, according to U.S. Census Bureau statistics released early today.

Based on surveys taken between 2000 and 2004, the figures show that New York replaced California as the net migration outflow leader, with an average of 182,886 people leaving a year, nearly double California's average for the same period. California led the nation between 1990 and 2000.

The findings track the state-to-state movement in America. They do not include international immigration numbers.

The New York City metropolitan region - which includes Long Island and parts of New Jersey and Pennsylvania - also leads the country in migration outflow, with an average of 211,014 leaving a year. The number is higher than the state figure because many of those leaving the metropolitan region resettle in other areas of New York.
...
"Our economic rate of growth is even less now than it was in the '90s, and that may suggest that the out-migration is likely to intensify," a senior fellow at the Manhattan Institute, Steven Malanga, said. "People can see very clearly how their lives are affected by slow economic growth or higher taxes."
...
"I think you miss the picture if you focus exclusively on people leaving," a professor of sociology at the City University of New York Graduate Center, Philip Kasinitz, said. "People have always left the city in large numbers. The question is, is that more than balanced by the people who are coming in?"
...
Overall, New York fits into the larger trend of residents moving away from the Northeast and toward the Sun Belt states and other warmer areas. In the past few years, the level of out-migration from the mid-Atlantic region declined slightly, but it remained the highest in the country. The South, meanwhile, continued to be the primary destination of any region, with Florida leading the way.

Northern New Jersey Residential Inventory Update

GSMLS
Single Family Homes, Condo, Coop
(Bergen, Essex, Hudson, Morris, Passaic, Somerset, Sussex, Union, Warren Counties)
4/12 - 14,812
4/19 - 15,126 (2.1% Weekly Increase)

NJMLS
Single Family Homes, Condo, Coop
(Bergen, Essex, Hudson, Passaic Counties)
4/12 - 7,259
4/19 - 7,429 (2.3% Weekly Increase)

MLSGuide
Single Family Homes, Condo, Coop
(Hudson County)
4/12 - 2,225
4/19 - 2,263 (1.7% Weekly Increase)

Mortgage Applications Fall Again

From Reuters:
Home loan demand down as rates hit new highs

Mortgage applications fell for a second consecutive week, led by a decline in demand for home purchase loans, as interest rates reached new multiyear highs, an industry trade group said on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity for the week ended April 14 decreased 1.7 percent to 569.6 from the previous week's 579.4.

Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.56 percent, up 0.06 percentage point from the previous week, its highest level since the week ended June 7, 2002 when it reached 6.65 percent.

The 30-year fixed-rate mortgage, the industry benchmark, is also above last year's high of 6.33 percent, reached in the week of November 11 after climbing on and off from a 2005 low of 5.47 percent in June.

The MBA's seasonally adjusted purchase mortgage index fell 2.7 percent to 407.4 from the previous week's 417.7.

The index -- widely considered a timely gauge of U.S. home sales -- was also below its year-ago level of 466.7.

The group's seasonally adjusted index of refinancing applications decreased 0.4 percent to 1,526.1 compared to 1,532.4 the previous week. A year earlier the index stood at 1,870.0.

Consumer Prices Climb

From the AP:
Consumer Prices Climb 0.4 Percent in March

Consumer prices shot up by a bigger-than-expected amount in March, reflecting higher costs for gasoline, clothing and hotel rooms.

The Labor Department reported that its closely watched Consumer Price Index rose by 0.4 percent, far higher than the modest 0.1 percent gain in February. The inflation surge was led by higher gasoline prices, which jumped by 3.6 percent.

With oil prices climbing to record levels above $70 per barrel this week, analysts said motorists should be braced for more pain at the pump in coming months.

Core inflation, which excludes food and energy, posted a 0.3 percent rise in March. It was the biggest gain in core inflation in a year and could be a worrisome signal that higher energy prices are starting to spill over into more widespread inflation pressures.

Through the first three months of this year, overall inflation has been rising at a 4.3 percent annual rate, far above the 3.4 percent price increase for all of 2005. The price acceleration reflected rising energy prices, which are up 21.8 percent at an annual rate through March, compared to a 17.1 percent rise for all of 2005.

From Bloomberg:
U.S. March Consumer Prices Rise 0.4%; Core Index Rises 0.3%

Prices paid by American consumers rose 0.4 percent in March as the cost of gasoline jumped, a government report showed. Excluding food and energy, prices rose the most in a year.

The rise in the consumer price index followed a 0.1 percent increase in February, the Labor Department said today in Washington. Not counting food and energy, so-called core prices rose 0.3 percent, more than expected and the biggest jump since March 2005, after a 0.1 percent February gain.

The Morning News

From the WSJ:
We Must Undo Kelo Decision's Damage

Edward D. Herlihy is right to condemn eminent domain abuse of the type that took place in both Kelo v. New London and in the unnecessary taking of a wealthy, private golf course by the Village of North Hills, N.Y. What distinguishes the golf course case, however, is its rarity. Very seldom are the wealthy the victims of eminent domain abuse. Rather, cities and developers typically work together to take the property of poorer or middle-income folks to give to wealthier parties in the hope that the new owners will create more tax revenue and jobs. Much more common is a recent use of eminent domain a little south of North Hills in Long Branch, N.J., where the government seeks to condemn modest beachfront bungalows to give to a developer to put up million-dollar-plus condominiums.

From the Star Ledger:
Booker criticizes city sale of properties

Standing outside of a grassy, va cant lot in Newark yesterday, mayoral candidate Cory Booker called on the city council and the mayor to stop selling city-owned property at "bargain basement rates."

Booker assailed the city council, saying it has given away large chunks of valuable city land to politically connected developers who have profited handsomely at the expense of Newark residents.

"The city is selling off land at rock-bottom prices with no real conditions and no real vision for the overall development of the city," Booker said. "Newark's land has real value, and it can be used to bring investment, jobs, good housing and more to the city of Newark."

From the N.J. Herald:
Ross's Corner plan in final stretch

After being the subject of heated debate for more than two years, the future of the county's main intersection could come more into focus Thursday.

The meeting begins at 6 p.m. at the Farm Fun Building at the Sussex County Fairgrounds.

A town center plan, including space for homes, businesses, offices and recreation, will be discussed and possibly finalized at a joint meeting that night between Frankford's Township Committee and Land Use Board. If adopted, the plan would help to guide zoning for land near the intersection of routes 15, 206, 565.

The board is scheduled to hear a final presentation from Sussex Commons LLC, a Secaucus-based developer hoping to build a 90-store outlet mall on the land. Citizens for Responsible Development at Ross's Corner, a group formed to oppose the mall plan, is also scheduled to begin its presentation before the board.

The property, known as Ross's Corner, is considered by some to be the most developable piece of land in the county. Two regional attractions sit nearby — a minor-league ballpark and the Sussex County Fairgrounds. Traffic from neighboring Morris County and Pike County, Pa., comes through the intersection.

From the Jersey Journal:
Xanadu proving to be Xanadu-lite

To paraphrase Oliver Hardy, here's another fine mess our state officials have gotten themselves into. The issue at hand is Xanadu - a $1.3 billion, overhyped, mega-mall project that is being built in the Meadowlands sports complex. It is fast becoming something other than what was promised.

In October 2004, the New Jersey Sports and Exposition Authority signed a 15-year lease with the Xanadu developers Mills Corp. of Virginia and Mack-Cali Realty of Cranford. In a very public signing, there were many promises of a 50-50 entertainment and shopping experience on the border of Bergen and Hudson counties with such venues as indoor skiing, cinemas, rooftop roller coaster, a mini auto race track, a House of Blues, ice palace, music hall of fame, underwater world, skate park, indoor surfing pool, basketball center, a Meadowlands YMCA facility, wildlife museum and Food Network cooking school.

Now the public would be lucky to see the indoor ski run, movie complex, and a children's center. A minor league baseball stadium is the subject of a lawsuit. What is left is a big mall.
...
Today, the Mills Corp., lead developer of Xanadu, is fighting major financial woes. The federal Securities Exchange Commission launched an investigation into the firm's bookkeeping. The Mills Corp. also claimed that some of its bankers agreed not to declare it in default on construction loans and the firm raised needed funds by refinancing several of its other mall properties and slashing its dividend.

1 In Every 893 New Jersey Households Is In Foreclosure

From RealtyTrac:

Foreclosures Up 63 Percent From March 2005

Realtytrac, leading online marketplace for foreclosure properties, today released its March 2006 U.S. Foreclosure Market Report, which shows 101,597 properties nationwide entered some stage of foreclosure in March, a 13 percent decrease from the previous month but a 63 percent increase from March 2005. The report shows a March national foreclosure rate of one new foreclosure for every 1,138 U.S. households.

"After rising more than 20 percent during each of the first two months of the year, foreclosure numbers experienced a fairly sharp correction in March," said James J. Saccacio, chief executive officer of RealtyTrac. "We saw a similar drop in March of '05, followed by four consecutive months of increases. Many buyers and investors typically start looking for properties in the spring, and that could have provided distressed homeowners a better chance of selling their properties to avoid default or foreclosure."

New Jersey March Foreclosure Statistics
Notice of Default 3,009
Notice to Sell 467
REO 232

Caveat Emptor!
Grim

Pace Slowing on Long Island

From Newsday (Hat tip to Ben at the Housing Bubble Blog):

Housing market pace is slowing

Say one last farewell to the housing boom.

In the clearest evidence to date of a housing market shift, the latest Long Island data showed Nassau County's median home price rose only 4.4 percent from March 2005 to March 2006 - the smallest annual price gain since May 1998.

Nassau's median home price stood at $470,000, the same level it was in June 2005, according to the Long Island Multiple Listing Service. Suffolk County reported a 6.2 percent yearly jump, to $396,800. Queens is still far stronger, with a median price of $475,000, a 13.1 percent gain from March 2005.

While that's nowhere near a housing market collapse, it's certainly a sign of significant change that could impact the regional economy. Adding to the pile of evidence, the number of homes for sale is still 74 percent above last year's levels for the three counties, while closed sales in the region are down 6.7 percent.

Indeed, the supply of homes is far higher than last year. Based on the current selling pace, it would take more than eight months to sell the total supply of Nassau homes for sale, and nine months to sell Suffolk's inventory, the highest since 1998.

The numbers aren't a surprise and some are expecting more to come. Ed Gitlin, a broker for Century 21 Benjamin, with offices throughout Long Island and Queens, said he foresees 10 percent annual price declines on Long Island - perhaps as soon as June.

March FOMC Meeting Minutes

Hot off the Fed Presses:

Minutes of the Federal Open Market Committee

Housing activity had moderated somewhat from the robust pace of the past summer. Although the level of single-family housing starts was unusually high in January and February, much of this strength was likely the result of mild winter weather; new permit issuance extended the downward trajectory that began in October. After an unusual spike in January, multifamily housing starts dropped back in February to a rate well within their historical range. Sales of new homes fell in the first two months of the year, while sales of existing homes turned up in February for the first time since last August; both measures were well below their peaks of mid-2005. The stock of homes for sale was elevated compared with its range of the last several years. Mortgage applications continued to decline in February, and survey measures of homebuying attitudes also maintained their recent downward trend. Housing demand was likely damped by rising mortgage rates, which moved up further in late 2005 and early 2006. House price appreciation appeared to have slowed from the rapid pace of the summer, but price increases for both new and existing homes remained well within the elevated range that has prevailed in recent years.
...
Regarding the major sectors of the economy, meeting participants noted that consumer spending appeared to be growing at a solid pace, notwithstanding earlier rises in energy prices. Contacts in the retail sector reported strong demand, and lending to households seemed to be robust. However, some automobile dealers reported subdued demand for domestic name-plate products. In coming quarters, consumer outlays were expected to be supported by continued employment gains, household income growth, and relatively low long-term interest rates, even if gains in housing wealth abated.
...
Meeting participants saw both upside and downside risks to their outlook for expansion around the rate of growth of the economy's potential. In the housing market, for instance, some downshift from the rapid price increases and strong activity of recent years seemed to be underway, but the magnitude of the adjustment and its effects on household spending were hard to predict. Some participants cited stronger growth abroad and robust nonresidential investment spending as potentially contributing more to activity than expected. It was also noted that an abrupt rise in long-term interest rates, reflecting, for example, a reversion of currently low term premiums to more typical levels, could weigh on both household and business spending.
...
In the Committee's discussion of monetary policy for the intermeeting period, all members favored raising the target federal funds rate 25 basis points to 4¾ percent at this meeting. The economy seemed to be on track to grow near a sustainable pace with core inflation remaining close to recent readings against a backdrop of financial conditions embodying an expectation of some tightening. Since the available indicators showed that the economy could well be producing in the neighborhood of its sustainable potential and that aggregate demand remained strong, keeping rates unchanged would run an unacceptable risk of rising inflation. Most members thought that the end of the tightening process was likely to be near, and some expressed concerns about the dangers of tightening too much, given the lags in the effects of policy. However, members also recognized that in current circumstances, checking upside risks to inflation was important to sustaining good economic performance. The need for further policy firming would be determined by the implications of incoming information for future activity and inflation.

Housing Starts and Permits Fall

From Bloomberg:

U.S. Housing Starts Fall 7.8% in March to 1.96 Million Rate

April 18 (Bloomberg) -- Builders started work last month on the smallest number of new houses in a year, as rising mortgage rates and record inventories of unsold homes discouraged new projects.

Housing starts declined 7.8 percent in March to an annual rate of 1.96 million, from 2.126 million in February, the Commerce Department said today in Washington. Building permits, a sign of future construction, fell 5.5 percent to an annual rate of 2.059 million from 2.179 million.

Builders are breaking ground on fewer projects after new home sales declined in three of the last four months, falling in February by the most in nine years. Construction companies such as KB Home report fewer orders as increased borrowing costs and higher prices put new homes out of the reach of more Americans.

``It's clear that the housing market is cooling,'' Joel Naroff, president of Naroff Economic Advisors, in Holland, Pennsylvania, said before the report. ``There are areas of the country where we are going to see pretty sharp declines in construction and in housing prices.''

Some Corruption To Start Your Day

Some interesting pieces on corruption and building this morning..

From the Asbury Park Press:

The senator's new house

When it comes to potential conflicts of interest, state Sen. Wayne R. Bryant, D-Camden, is the master of denial. In his latest failure to see the ethical ramifications of a business deal, Bryant is building a fancy house in his hometown of Lawnside on a lot he bought from a developer who happens to be bidding to build housing in town.
...
Among the many possible conflicts: Bryant is borough attorney, his brother is mayor and his son sits on the Planning Board. All are in a position to affect the plans to build 300 apartments and condominiums in a neighborhood that would force 17 residents to sell their homes or face eviction. There may be nothing illegal, but the dealings don't pass the smell test.
...
As usual, Bryant isn't talking about any possible conflict. But like it or not, he is in the middle of this Lawnside redevelopment project because of his new residence, which is still under construction. Critics say Bryant paid $106,154 for the lot in a sweetheart deal that yielded developer Ernest Edwards a smaller profit than he could have gained, something Edwards denied. Bryant's and his family's role in the approval process will cast a cloud over the redevelopment until Edwards does the right thing and drops out of the bidding.

From the Bergen Record:

N.J. overpaid for school site

The state paid the family of a reputed mob associate far more than its estimated cost for the site of a troubled school project in Passaic, records show.

Several months before the state Schools Construction Corp. paid the wife of accused Genovese crime family associate Richard Doren $4.3 million for his property in downtown Passaic, officials anticipated getting that land and seven additional parcels for $2.5 million.

The agency closed on the property last year even as it was going prematurely bankrupt. The Passaic project has since become mired in controversy over the safety of the site, particularly because of the notorious pornographic movie theater and cut-rate hotel on the next block.

From the L.A. Times:

This land is whose land?

Like hundreds of lawmakers across the country, New Jersey state Sen. Diane Allen crafted a bill to protect owners of homes and small businesses.

The Republican lawmaker proposed a two-year moratorium on the use of eminent domain — the practice that allows governments to seize private property for public use.

Her plan followed a flurry of proposals — at least 25 major projects in her state — to raze modest homes in fine condition for grander housing and retail ventures that came on Kelo's coattails.

Allen said Kelo opened the door for towns and developers to rob the character of communities such as Lawnside, a middle-class black enclave that took root as a stop on the Underground Railroad. Four proposals to build expensive homes and shops are under consideration in Lawnside, imperiling as many as 20 well-kept homes.

"I'm not against redevelopment, and I'm not against building lovely townhouses," Allen said. "The question is: Where is it going to happen, and who is going to suffer because of it?"

Builder Sentiment Falls, Lowest Since 2001

From Reuters:

U.S. home builder sentiment lowest since Nov 2001

An index of U.S. home builder sentiment fell for a fourth consecutive month in April to its lowest since November 2001, the National Association of Home Builders said on Wednesday.

The drop was in response to rising mortgage rates, continued affordability problems and subsiding demand from investors and speculators, the NAHB said.

The NAHB/Wells Fargo Housing Market index slid to 50 in April, seasonally adjusted, from March's downwardly revised 54. It was the lowest reading since November 2001, when it stood at 48.

"Home builders definitely view this as something of a transition period, where demand from speculators is easing off and the market is heading to a more sustainable level of activity following the record-breaking performance of 2005," said NAHB President David Pressly, a home builder in Statesville, North Carolina, in a press release.

The confidence level indicates the majority of builders see conditions as neither positive nor negative in their markets, the NAHB said. Readings above 50 indicate more builders view their market conditions as favorable, rather than poor.

The index was also below its year-ago level of 67.
...
The NAHB said its index for current sales of new homes fell to 54 in April from a downwardly revised 59 in March.

The index measuring builder sentiment over the next six months slipped to 58 from 62 in March, while the potential buyer traffic index fell to 39 from an upwardly revised 40.

Short to Mid-Term Investment and Savings Strategies

Said it before and I'll say it again. Cash will be king in the next few years.

So what are your short to mid-term investment strategies? Risky or safe? CD's? Funds? Stocks? Bonds? Commodities? Are you planning to stay liquid or going long-term? Laddering CD's? Best rate? Let's hear them!

What about savings tips? What are you doing to save the most money you possibly can over the next year? Let's have your best money saving ideas!

Caveat Emptor!
Grim

Squeezing out the middle and lower class

From the Bergen Record:

The big squeeze

IT'S time New Jersey got serious about affordable housing. The state is one big boomtown for developers and owners of high-priced homes. Property values seem to rise every day. But residents on low or moderate incomes struggle to buy or even rent basic shelter.

Three decades after the state Supreme Court land use rulings were meant to deal with the problem, New Jersey has a persistent, structural shortfall of moderate-priced housing.

Under the so-called Mount Laurel rulings, communities could voluntarily agree to accept a "fair" number of affordable homes within their borders. The number is determined by the state Council on Affordable Housing. In return, participating local governments could stop a builder from using the courts to force an unwanted development on the community.

Yet many communities that opted to participate in the voluntary program have still to fulfill their Mount Laurel requirement; the state is well short of its goal of creating 118,000 units for people of moderate means.
...
Affordable housing has been built statewide at little or no detriment to communities, and it has helped make them more diverse. That's vital, considering that New Jersey is still one of the most segregated states in the nation.

Builders and communities need to get creative. They need to accept their responsibility to provide affordable housing, and work together – with affordable housing advocates - to ensure enough is built. They also need to ensure that the affordable units go to the needy, and not to those with political connections.

Gold Coast Residential

From the Jersey Journal:

Residential projects dominate landscape

Jersey City's office market boom has hit a wall, making way for a surging housing market that will change the face of the city's Downtown for decades to come, city officials and experts say.

While the 1980s and 1990s saw financial companies such as Goldman Sachs, Merrill Lynch and JP Morgan Chase transform Jersey City's shores into the Gold Coast, today's market is dominated by housing giants like Toll Brothers, K. Hovnanian and Donald Trump.

More than 15,000 residential units are expected to flood the Downtown area over the next several years, putting pressure on municipal services, according to the city's Division of Planning. Though more than seven million square feet of office space was developed from 2000 to 2005, planning officials say the current office market is very sluggish and will remain so for the foreseeable future.

"There are currently no office projects under construction, and none planned," says a planning report authored by Planning Director Robert Cotter earlier this year. Those two opposite trends have prompted at least one expert to declare that "the job growth era is over in Jersey City."
From 1992 to 2000, the state created 243,000 high-paying office jobs, driven by Jersey City's growth on the waterfront, says James Hughes, dean of Rutgers University's Edward J. Bloustein School of Planning and Public Policy.

But since 2000, there has been a net loss across the state, thanks to increases in the state income tax and other business taxes, said Hughes. "New Jersey has become an unfriendly place to do business," Hughes said.

The most recent sign of this trend is 77 Hudson St., where Hartz Mountain Industries just scrapped plans to build a 32-story office tower because the company believed that Jersey City cannot absorb the new space.

The company sold the land for $65 million to K. Hovnanian, which now plans to build two 48-story towers, with more than 1,300 condo and rental units combined.

Weekend Open Discussion!

Judging from the site traffic this afternoon, it seems many of you have started your weekend early. It's only appropriate that I start this discussion early as well. Have a great weekend!

Observations about your local areas, comments on news stories or the New Jersey housing bubble, Open House reports, etc. If you have any questions you wanted to ask earlier in the week but never posted them up, let's have them.

For readers that have never commented, there is a small link on the bottom of each new message that reads "# Comments". Go ahead and give that a click, you might be missing out on a world of information you didn't know about. While you are there, introduce yourselves to everyone.

For new readers that have only read the messages displayed on the main page, take a look through the archives, a substantial amount of information has been put online in the past 6 months. The archives can be found at the bottom of the right hand menu and are categorized by month.

As always, anything goes!

State Spending Cuts Spawn Property Tax Hikes

From the Asbury Park Press:

Schools asking for more from local taxpayers

Almost a month after Gov. Corzine announced a state budget plan including $1.5 billion in new taxes, school boards across the state this week will ask voters to approve property tax levies that would rise an average of 7.6 percent.

Proposed local tax levies for the 549 school districts that have elections Tuesday total $10.5 billion — up $745 million from current levels. And that doesn't include debt service, the 53 tax-levying districts in which the public doesn't get a vote, or more than $33 million in added taxes that 57 districts seek through extra questions for things such as courtesy busing, renovations and specific teaching staff or programs.

Because of years of little or no increases in state aid, school districts are relying more on local taxpayers to fund public education.

"We're at the point in time where if the system's not broken, we're in dire straits," said Jerry Cantrell of Randolph, a former school board president who formed a tax reform group.
...
"It seems to be yet another year where the state aid has been stagnant, and it puts the pressure on property taxes," Yaple said. "Home and business owners end up paying more."

Price Reduced! 4/10 - 4/17

Welcome to another edition of Price Reduced!

For all the newcomers to this blog, Price Reduced! takes a look at a handful of significant price reductions across Northern NJ. The purpose of this exercise is to serve as proof that the Northern New Jersey real estate market has long since been overvalued and has started the long hard decline back to the mean. These listings are in no way an endorsement by myself, nor do I believe they are a bargain or a value. Even reduced, I still believe these homes are still grossly overpriced.

I'm going to break this down into two lists this week. I'd like to keep the $1m and higher properties separate due to the fact that they are beginning to dominate the price reduction lists.

The Sub 1m List:

MLS# 2251858 - Hampton, NJ
Previous Price $289,900
Current List Price $249,900 (Price Reduced 13.8%)

MLS# 2262035 - Bloomfield, NJ
Previous Price $575,000
Current List Price $499,900 (Price Reduced 13.1%)

MLS# 2257002 - Rahway, NJ
Previous Price $299,900
Current List Price $265,000 (Price Reduced 11.6%)

MLS# 2258259 - Washinton Boro, NJ
Original List Price $275,900
Previous Price $264,900
Current List Price $234,999 (Price Reduced 11.3%, 14.5% off Original List)

MLS# 2241722 - Florham Park, NJ
Previous Price $675,000
Current List Price $599,900 (Price Reduced 11.1%)

MLS# 2242359 - Sparta, NJ
Previous Price $895,000
Current List Price $799,900 (Price Reduced 10.9%)

MLS# 2253255 - Belleville, NJ
Previous Price $399,900
Current List Price $359,900 (Price Reduced 10%)

MLS# 2247607 - Elizabeth, NJ
Previous Price $449,900
Current List Price $405,000 (Price Reduced 10%)

MLS# 2210453 - Cedar Grove, NJ
Original List Price $1,150,000
Previous Price $1,099,000
Current List Price $999,000 (Price Reduced 9.1.%, 13.1% off Original List)

MLS# 2256483 - Woodbridge, NJ
Previous Price $339,900
Current List Price $309,000 (Price Reduced 9.1%)

MLS# 2247901 - Rockaway, NJ
Previous price $769,900
Current List Price $699,999 (Price Reduced 9.1%)

MLS# 2212294 - Roselle Park, NJ
Previous Price $454,900
Current List Price $415,000 (Price Reduced 8.8%)

The $1m+ List:

MLS# 2243656 - Chester, NJ
Original List Price $1,350,000
Previous Price $1,199,999
Current List Price $999,999 (Price Reduced 16.7%, 25.9% off Original List)

MLS# 2255980 - Montville, NJ
Original List Price $2,400,000
Previous Price $1,900,000
Current List Price $1,600,000 (Price Reduced 15.8%, 33.3% off Original List)

MLS# 2258312 - Ridgewood, NJ
Previous Price $1,595,000
Current List Price $1,399,000 (Price Reduced 12.3%)

MLS# 2228485 - Montville, NJ
Previous Price $1,695,000
Current List Price $1,495,000 (Price Reduced 11.8%)

MLS# 2104615 - Franklin Lakes, NJ
Previous Price $1,699,000
Current List Price $1,499,000 (Price Reduced 11.8%)

MLS# 2232910 - Montclair, NJ
Original List Price $1,395,000
Previous Price $1,219,000
Current List Price $1,079,000 (Price Reduced 11.5%, 22.7% off Original List)

MLS# 2238993 - Chatham, NJ
Previous Price $1,150,000
Current List Price $1,025,000 (Price Reduced 10.9%)

MLS# 2250020 - Harding, NJ
Previous Price $3,999,000
Current List Price $3,599,000 (Price Reduced 10%)

MLS# 2241648 - Scotch Plains, NJ
Original List Price $1,695,000
Previous Price $1,550,000
Current List Price $1,399,000 (Price Reduced 9.7%, 17.5% off Original List)

For those wondering why it seems that mid-range properties aren't being represented here, let me explain why. Many midrange properties are seeing lower percentage reductions at a shot, typically on the order of $10-20k each reduction. I never make it deep enough into the list to pull out the $400-$500 properties that have been reduced multiple times. The week's list contained over 700 properties, going through every one of them to check it's history. The higher range sellers seem perfectly content to make huge reductions in one shot, the mid-range looks to prefer making multiple smaller reductions.

Again, this list is just an illustration of what is going on in the market, I trust that no-one is actually scouring this list for prospective purchases. I'm still urging sellers to be patient and wait to see how the next few months unfold.

Caveat Emptor!
Grim

Bonner On Housing

Just a quick snippet from the Daily Reckoning:

Bonner on housing

We are still here...still keeping a close watch on housing, reading the news, chuckling to ourselves, and wondering how it will all turn out.

“American borrowers’ rush into debt has been accelerating,” writes colleague James Ferguson in this week’s MoneyWeek. “It took more than 30 years to raise the debt-to-income ration 30 percentage points, from 40% to 70%. It then took only 15 years to raise it the next 30 percentage points to 100%. But is has taken just five years since the end of 2000 to jump the most recent 30 percentage points, to a new all-time high of 129%. This has surely been one of the most remarkable debt-financed spending sprees in the world, ever.”

This debt, says Ferguson, is largely concentrated on a single sector - and a single consumer asset: housing. It is debt that has made house prices rise - not new families or higher incomes. But, debt cannot rise forever. Ferguson thinks he sees the end of it:

“Now there are signs of a concerted, possibly even coordinated, monetary tightening by the world’s central banks...” whose consequences are already apparent.

“The data of new family houses in the U.S. in February was shocking. U.S. new homes sales fell 3.4%. In the economically vital Western U.S., new home sales in February plummeted 29% compared with the same period last year.

“According to David Rosenberg...in the last 309 years there have been eight such double-digit drops in new home sales. Six times, these drops signaled recession the next year and one drop led to GDP growth halving from 4% to 2%.”