Billion Dollar Exodus

From the Wall Street Journal:

Jon Corzine Florio

Nearly every state in the nation is celebrating the new fiscal year that begins on Monday with record tax revenues. The big exception is New Jersey, which is headed instead for what could be a government shutdown.

The political showdown isn't between Republicans and Democrats, but is between Governor Jon Corzine and his fellow Democrats who control the state legislature. On Wednesday, Democrats cursed each other and, according to our eyewitness sources, came close to blows inside the capitol in Trenton. Mr. Corzine is now threatening a government shutdown if his own party doesn't bend to his proposal for a $1.5 billion tax increase.

Remarkably, all of this intra-party feuding isn't over whether to raise taxes, merely over how. Mr. Corzine wants to raise the state sales tax to 7% from an already high 6%. Many Democrats in the legislature believe this is political suicide, especially with the Governor low in the polls. But somehow they've convinced themselves that voters will happily swallow new levies on payroll, tobacco, computer services and car rentals instead. Meanwhile, the one promise that Democrats made to voters in last year's election campaign — lowering what are some of the highest property taxes in the country — remains conspicuously unfulfilled.

A new Quinnipiac poll finds that 47% of voters identify taxes as the biggest problem in the state — the highest number for any issue the polling firm has ever found in New Jersey. The Garden State has raised taxes nearly every year since 2000 and nearly twice as much per resident as the next highest tax state. Yet, no surprise, Trenton still has the biggest budget crisis outside of the states ruined by Hurricane Katrina. This taxing binge hasn't balanced the budget because state expenditures have ballooned by $8 billion, or about 45%, in six years. Mr. Corzine is nonetheless sticking to his story that state schools and services are underfunded.

The real New Jersey story is that a rising cost of living and taxes have spurred an exodus of businesses, high net worth individuals and working families. U.S. Census Bureau data indicate that, in 2004 alone, 60,000 more people left New Jersey than moved in. This outmigration led to a loss of $1 billion per year in the state's personal income, according to IRS statistics analyzed by the Manhattan Institute. Thus New Jersey finds itself in a spiral down: Taxes are raised, more taxpayers flee so the tax base shrinks, the politicians raise taxes again, and the cycle repeats itself.

Price Reduced 6/23 - 7/1

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.

This week's list really got my attention. There are more than a handful of jaw dropping price reductions this week. Multiple price reductions are starting to become commonplace at the top of the list. The list is straight off the top this week:

MLS# 2262563 - Plainfield, NJ
Previous Price $380,000
List Price $270,000 (Price Reduced 28.9%)

MLS# 2255200 - Delaware Twp, NJ
Original List Price $1,125,000
Previous Price $999,990
List Price $749,900 (Price Reduced 25%, 33.3% off OLP)

MLS# 2260657 - Franklin Lakes, NJ
Original List Price $1,299,000
Previous Price $1,249,000
List Price $999,999 (Price Reduced 19.9%, 23% off OLP)

MLS# 2294804 - New Providence, NJ
Previous Price $587,500
List Price $487,500 (Price Reduced 17%)

MLS# 2202222 - Mount Arlington, NJ
Previous Price $451,016
List Price $375,000 (Price Reduced 16.9%)

MLS# 2261570 - Verona, NJ
Previous Price $1,200,000
List Price $999,999 (Price Reduced 16.7%)

MLS# 2202280 - Weehawken, NJ
Original List Price $3,325,000
Previous Price $2,975,000
List Price $2,498,000 (Price Reduced 16%, 24.9% off OLP)

MLS# 2272959 - Bedminster, NJ
Previous Price $2,395,000
List Price $2,025,000 (Price Reduced 15.4%)

MLS# 2236099 - Bernardsville, NJ
Original List Price $3,250,000
Previous Price $2,950,000
List Price $2,495,000 (Price Reduced 15.4%, 23.2% off OLP)

MLS# 2293846 - Montclair, NJ
Previous Price $399,900
List Price $339,900 (Price Reduced 15%)

MLS# 2267223 - Plainfield, NJ
Original List Price $279,900
Previous Price $269,900
List Price $229,900 (Price Reduced 14.8% 17.9% off OLP)

MLS# 2268840 - Clifton, NJ
Previous Price $679,900
List Price $579,900 (Price Reduced 14.7%)

MLS# 2281213 - Washington Boro, NJ
Previous Price $349,900
List Price $299,500 (Price Reduced 14.4%)

MLS# 2229875 - Mahwah, NJ
Previous Price $559,000
List Price $479,000 (Price Reduced 14.3%)

MLS# 2285452 - Summit, NJ
Previous Price $1,750,000
List Price $1,500,000 (Price Reduced 14.3%)

MLS# 2286502 - Montague, NJ
Previous Price $250,000
List Price $214,900 (Price Reduced 14%)

MLS# 2106337 - Glen Rock, NJ
Previous Price $1,450,000
List Price $1,249,900 (Price Reduced 13.8%)

MLS# 2254357 - Watchung, NJ
Previous Price $899,000
List Price $775,000 (Price Reduced 13.8%)

MLS# 2255210 - Delaware Twp, NJ
Original List Price $1,999,000
Previous Price $1,873,000
List Price $1,623,000 (Price Reduced 13.3%, 18.8% off OLP)

MLS# 2285933 - Vernon, NJ
Previous Price $495,000
List Price $429,900 (Price Reduced 13.2%)

MLS# 2257275 - Belvidere, NJ
Original List Price $339,000
Previous Price $319,900
List Price $279,000 (Price Reduced 12.8%, 17.7% off OLP)

MLS# 2276516 - Hamburg, NJ
Previous Price $285,000
List Price $249,900 (Price Reduced 12.3%)

MLS# 2281454 - Bernardsville, NJ
Previous Price $10,700,000
List Price $9,395,000 (Price Reduced 12.2%)

MLS# 2268276 - Blairstown, NJ
Original List Price $359,000
Previous Price $339,000
List Price $299,000 (Price Reduced 11.8%, 16.7% off OLP)

MLS# 2246907 - Alexandria, NJ
Previous Price $1,125,000
List Price $995,000 (Price Reduced 11.6%)

MLS# 1629381 - Andover, NJ
Previous Price $649,900
List Price $574,900 (Price Reduced 11.5%)

MLS# 2283772 - South Orange, NJ
Previous Price $899,000
List Price $799,000 (Price Reduced 11.1%)

MLS# 2259912 - Lincoln Park, NJ
Original List Price $199,900
Previous Price $179,900
List Price $159,900 (Price Reduced 11.1%, 20% off OLP)

MLS# 2283698 - Union, NJ
Previous Price $449,900
List Price $399,900 (Price Reduced 11.1%)

MLS# 2254466 - North Caldwell, NJ
Original List Price $1,899,900
Previous Price $1,799,900
List Price $1,599,900 (Price Reduced 11.1%, 15.8% off OLP)

MLS# 2276405 - Millburn, NJ
Original List Price $990,000
Previous Price $900,000
List Price $800,000 (Price Reduced 11.1%, 19.2% off OLP)

Caveat Emptor!
Grim

Buying Back Flooded Homes

From the Associated Press:

Experts: Get residents away from flood plains

only natural that some low-lying areas near rivers and streams get flooded. That's why some environmentalists, academics and members of a New Jersey task force say the state should think twice about rebuilding areas hit repeatedly by floods.
After touring areas along the Delaware River that had been severely flooded for the third time in 21 months, Gov. Corzine said he would look to the flood task force to help figure out how to reduce the damage the next time the rivers rise.

"Repeat problems demand some kind of action be taken, judgments made," Corzine said Thursday.

That task force earlier this year released a draft set of recommendations that called for redrawing maps to show bigger flood plains, imposing tighter restrictions on development in those areas and using government money to buy some homes that are in especially flood-prone areas.

The recommendations were not getting much attention until this week's Delaware River flooding, which forced about 6,000 New Jersey residents to flee their homes, and which Corzine compared to the $30 million in damages suffered by the state during floods in 2005.

Do you think the state should buy back flood prone homes?

Jersey Shutdown Looms

From the Star Ledger:

Historic shutdown looms as Trenton budget fight builds
BY JEFF WHELAN AND JOE DONOHUE

Gov. Jon Corzine prepared to shut down state government starting today, as New Jersey's budget crisis turned into political warfare between the governor and lawmakers in his own party opposed to his plan to increase the sales tax.

Assembly Speaker Joe Roberts denounced Corzine for trying to "strong arm a tax increase upon the citizens of this state," while the governor's top aide accused Roberts of "grandstanding."

Corzine planned to sign an executive order at 9:30 a.m. to begin a phased shutdown of nonessential state operations, including the Lottery, road construction projects and motor vehicle offices, because no spending plan is in place for the budget year that begins today.

It would be the first state government shutdown in New Jersey history.
...
Corzine chief of staff Tom Shea responded by saying any shutdown would be the result of "the failure of the Legislature to pass a balanced budget."

Consumer Spending Up 0.4%, Savings Rate Down 1.7%

From Bloomberg:

U.S. May Personal Spending Rises 0.4%; Core Prices Up 0.2%

Consumer spending in the U.S. rose 0.4 percent, the smallest increase in three months, and inflation held above the Federal Reserve's preferred range.

The rise in spending follows a 0.7 percent April gain, the Commerce Department said in Washington. Over the last three months, the increase in the department's measure of inflation that's favored by the Fed matched the biggest in a decade.
...
The report also showed incomes rose 0.4 percent, more than expected, after a 0.7 percent increase that was larger than the government reported last month. The May rise reflected a jump in proprietors' income, while wages were unchanged from a month earlier.

The report's price gauge tied to spending patterns and excluding food and energy costs, the Fed's preferred measure, rose 0.2 percent in May and was up 2.1 percent from the same month last year.
...
The core rate was up at an annual rate of 2.9 percent over the last three months, matching the year-over-year rise in April 2004 as the biggest in a decade. Bernanke is among policy makers who have said a rate of 1 percent to 2 percent is acceptable.
...
The savings rate fell to minus 1.7 percent, from minus 1.6 percent in April. A negative rate suggests consumers are dipping into savings to maintain spending.

From the BEA:

PERSONAL INCOME AND OUTLAYS: MAY 2006 (PDF)

Personal income increased $38.3 billion, or 0.4 percent, and disposable personal income (DPI) increased $31.6 billion, or 0.3 percent, in May, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $40.3 billion, or 0.4 percent. In April, personal income increased $76.2 billion, or 0.7 percent, DPI increased $52.4 billion, or 0.6 percent, and PCE increased $65.3 billion, or 0.7 percent, based on revised estimates.
...
Personal saving -- DPI less personal outlays -- was a negative $162.9 billion in May, compared with a negative $153.5 billion in April. Personal saving as a percentage of disposable personal income was a negative 1.7 percent in May, compared with a negative 1.6 percent in April. Negative personal saving reflects personal outlays that exceed disposable personal income. Saving from current income may be near zero or negative when outlays are financed by borrowing (including borrowing financed through credit cards or home equity loans), by selling investments or other assets, or by using savings from previous periods. For more information, see the FAQs on “Personal Saving” on BEA’s Web site.

Bagging A Xanadu

Some Friday Humor, from the Star Ledger:

On the hunt for Giant Xanadu

Before I knew the Jersey Meadowlands, I had never heard of the Giant Xanadu. I met but few hunting men who claimed to have bagged one. Nor did I harbor the fondest wish of any big game hunter in my native state -- to track down this amazing beast and put it between the crosshairs of my trusted shotgun.

Roughly described, the Giant Xanadu is the 2 million-square-foot offspring of the Great Mall and the Great Adventure. These parental units were apparently successfully coited at Mills, Mack-Cali, the development company that claims creation of the Xanadu.

When fully grown, the whole thing may cover most of the ancient Mafia burial grounds between the Jersey Turnpike and Union City. But despite its gargantuan size and hideous appetite for the uplands and downlands, the Xanadu remains elusive. And fickle. Sometimes it takes on the shape of an innocent entertainment complex, with a snow dome for those many North Jerseyans who enjoy the sport of skiing over a frozen Slurpee and a minor league ball park, employing thousands, though at baby's first wages.
...
The Giant Xanadu may be killed in just one fashion: You must bait the meadows with subsidies, incentives and lucrative subcontracts, then wait patiently for the Giant Xanadu to fall down by the weight of its own stupidity and arrogance. This can take years.

And so on a recent sweltering morning, I plunged into the Meadows, letting Daddy Codey be my guide and guru.
...
For hours we trekked, sweating bullets but admiring the natural beauty of the Meadowlands. The delightful ooze of smog surrounded the Turnpike and rose like a sweet perfume from the Route 3 corridor. The muck beneath our boots shimmered and shone in a pallet of petro-purples and heavy metal silvers and grays.
...
What I saw next chilled my spine like a swizzle stick in a margarita. From the heavy scales of the Giant Xanadu hung Bergen County Democrats and North Jersey power brokers, heavy construction contractors, Sports and Exposition Authority execs and a few hundred lawyers. There was even a guy from New Jersey Transit in short pants.

They were holding on for dear life, while the great beast shook and shivered.

"Ohmigod," I muttered. "I'll never get a clear shot now."

Highlands Funding

From the Daily Record:

Highlands funding takes dive this year

The roller coaster ride that is federal funding for Highlands preservation continued downhill Thursday as a U.S. Senate committee endorsed only $1 million to be split among four states this year.

Although the Highlands Conservation Act of 2004 provides for $10 million in funds for land preservation every year, the Senate Appropriations Committee approved only one-tenth of that amount for the coming year.

That runs counter to the Senate's 2007 budget resolution, passed earlier this year, that endorsed fully funding the law. But it matches the House Appropriations Committee's action last month, setting aside just $1 million for the Highlands.

Last year, the federal government spent no money on the Highlands.
...
There was more bad news for New Jersey: The Senate committee chose not to include $1 million to preserve another portion of the Great Swamp National Wildlife Refuge in Long Hill, which Rep. Rodney P. Frelinghuysen, R-Harding, had gotten the House Appropriations Committee to endorse.

State and local officials have been hoping for federal funds to help preserve thousands of acres of land in the Highlands, particularly in that half of the region where development has been curtailed severely, as state land preservation funding programs are running out of money.

Otteau Report - June 2006

From The Otteau Group (http://www.otteau.com)

MAY SALES TREND HIGHER, BUT STILL LAG LAST YEAR

Following a disappointing April, residential contract-sales activity in New Jersey trended higher in May providing some balance to the housing market. However, while buying activity in May increased 7% from April, it still ran 18% below May 2005 providing further evidence of a structural market change. Some encouragement can be taken in the slowing rise of unsold-inventory which held steady in May at a 7-month-supply of available homes. When segregated by home price, the market is now holding a 6 month supply below $600,000, 10-months between $600,000-$1 million, and 13-months above $1 million.

While there are very real reasons for the current deceleration in the residential market, the extent of that change goes beyond what can be explained by underlying fundamentals alone. Certainly the record high home prices achieved in 2005 when coupled with lagging salary increases, rising interest rates and slower population growth are solid reasons for a market slowdown. More positive indicators are also in play however such as a state economy at virtual full-employment, new home building activity at constrained levels, and mortgage rates which remain low by historical standards. Clearly, the sweeping change that has enveloped the residential market over the past 10 months extends beyond market metrics and is at least partly attributable to fears of a housing price collapse. Apparently the chorus of voices predicting this collapse and the attention they received from the media, have played a role in bringing the market to it’s current state……as always perception becomes reality!

As we look forward to what’s ahead, expect the current situation of fewer sales and higher inventory to continue for the next several years. As a result, some of the increases in home prices which occurred over the past several years will likely be reversed as motivated Sellers trade-off lower prices for quicker sales. Ironically, this is not necessarily good news for home buyers as rising mortgage rates will likely offset any savings derived from lower home prices. In fact, some home buyers will actually lose purchasing power despite a downward drift in home prices. Thus, buyers should consider whether the current combination of affordable mortgage rates, higher inventory levels and negotiable-sellers are reason to buy now rather than wait.

Just a quick word on the "underlying fundamentals". The recent changes can not be attributed to the degredation of underlying fundamentals for one simple reason. Fundamentals were not behind the movement of the market. Unless, of course, by fundamentals you mean easy money, speculators, and the NAR cheerleading squad. Lagging population growth and stagnant wages were the norm throughout the bubble years.

Don't be too scared off by the warning at the end. Do the math for yourself. If you are not sure, ask and someone here will gladly do it for you. Unfortunately, that warning will become the mantra of every New Jersey real estate agent tomorrow morning, mark my words.

Caveat Emptor!
Grim

FOMC Hikes, Vote Unanimous

From the Federal Reserve:

FOMC Statement

The Federal Open Market Committee decided today to raise its target for the federal funds rate by 25 basis points to 5-1/4 percent.

Recent indicators suggest that economic growth is moderating from its quite strong pace earlier this year, partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices.

Readings on core inflation have been elevated in recent months. Ongoing productivity gains have held down the rise in unit labor costs, and inflation expectations remain contained. However, the high levels of resource utilization and of the prices of energy and other commodities have the potential to sustain inflation pressures.

Although the moderation in the growth of aggregate demand should help to limit inflation pressures over time, the Committee judges that some inflation risks remain. The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information. In any event, the Committee will respond to changes in economic prospects as needed to support the attainment of its objectives.

More to come

Q1 GDP Expands At 5.6% Rate

From Bloomberg:

U.S. First-Quarter Gross Domestic Product Grew at a 5.6% Rate

The U.S. economy expanded at an annual rate of 5.6 percent in the first quarter, propelled by a surge in consumer spending that has since faded as gasoline prices soared.

The gain in gross domestic product, the value of all goods and services produced, is the biggest in more than two years and follows a 1.7 percent pace in the last three months of 2005, the Commerce Department said in Washington. The reading is stronger than the 5.3 percent pace the government reported last month as the trade deficit widened less than previously estimated.
...
Business investment, which rose at the fastest pace in almost six years, and government spending also contributed to the improved reading in the first quarter.
...
Consumer spending rose 5.1 percent at an annual rate last quarter, the most since the third quarter of 2003.
...
A measure of inflation tied to the GDP report rose at an annual rate of 3.1 percent, less than the 3.3 percent that the government estimated last month.

The increase in prices tied to consumer spending and excluding food and energy costs, the measure preferred by Fed policy makers, rose at a 2 percent annual rate, putting it at the top of the 1 percent-to-2 percent range Chairman Ben S. Bernanke and other policy makers have said is acceptable.

OER Distorting the CPI?

Deja-vu, from the Star Ledger:

Debating how inflation is measured
BY SAM ALI

Talk about inflation and economists are quick to complain that the Consumer Price Index, the Federal Reserve's chosen measure of inflation, made inflation look artificially tame these past few years when home prices were soaring.

But now, economists are once again faulting the CPI, saying the index is making inflation look worse than it actually is now that home prices have started to simmer down.
...
The CPI number, which is calculated and published once a month, is designed to track the price of a hypothetical basket of goods people buy. And since housing is the biggest expense for most Americans, housing costs are a huge part of the Consumer Price Index; nearly 40 percent of this hypothetical basket of goods revolves around "home sweet home."

But since 1983, the government has measured everyone's housing costs -- renters and homeowners alike -- by looking at rents, not at the actual cost of owning a home.

To determine what the government calls the "owner's equivalent rent" component of the CPI, the BLS tries to answer this question: "If someone were to rent your home today, how much do you think it would rent for monthly, unfurnished and without utilities?"

The problem with this methodology, say economists, is simple: In the last eight years, as home prices have risen by almost 50 percent in real terms, creating more than $5 trillion in real estate wealth, rental rates have stayed mostly flat or even fallen -- one reason the housing boom hardly nudged the CPI all these years, said Dean Baker, co-director of the Center for Economic and Policy Research in Washington.

The problem is the housing bubble, not the OER calculation. Housing prices and rental prices will typically move together, except of course, when you've just gone through the largest asset bubble in history.

Caveat Emptor!
Grim

Countdown to Shutdown

From the Star Ledger:

Tensions mount as state budget battle gets ugly
BY JEFF WHELAN AND JOE DONOHUE

New Jersey's budget battle turned bizarre yesterday as Assembly Democrats staged what amounted to a six-hour Statehouse sit-in, lawmakers openly cursed each other and the budget committee chairman tried to haul the treasurer before the panel to explain why Gov. Jon Corzine doesn't like their alternative spending plan.

By day's end, New Jersey inched closer to a state government shutdown as the budget stalemate between Corzine and Assembly Democrats continued. Despite the Assembly Budget Committee chairman's prediction that his panel would approve a spending plan that does not include a sales tax increase, no action was taken.
...
Corzine said he was prepared to shut down state government operations if budget negotiations remained stalled and the Legislature failed to meet a midnight Friday deadline to deliver him a state budget. Corzine once again insisted a sales tax increase from 6 percent to 7 percent is necessary to balance the state budget. Assembly Democrats refused to back down in their opposition to the hike.

"We will end up phasing down the operations of the state until people come to their senses," Corzine said.

Age-Restricted For East Hanover Redevelopment Site

From the Star Ledger:

Varityper project moves forward in East Hanover
BY LAURA JOHNSTON

A plan calling for the construction of up to 200 homes and retail space on the former Varityper site will be presented to the East Hanover council, likely in August.

The Varityper Redevelopment Plan -- the first since a proposal for a supermarket and senior housing was voted down in 2004 -- calls for 200 residential units, rather than 350; a maximum of 100,000 square feet of retail space, rather than 165,000 and 300 feet of buffer between the multi-family homes and the homes on Timber Hill Drive, instead of 100.
...
The 37-acre redevelopment zone on Mount Pleasant Avenue, next to Hanover Park High School, would include an adult community of townhomes and multi-family homes, with an option for single-family detached homes.

It may still include a full-service grocery store and specialty retail stores.
...
Two years ago, the township council considered allowing a Wegmans supermarket and a gated age-restricted community on the land. But after the East Hanover Concerned Citizens Committee opposed the plan, and residents argued it would exacerbate traffic congestion at the Route 10-Mount Pleasant area, the council voted unanimously against it.

Still, residents aren't thrilled with the idea of commercial and multi-family development on the site, where Tuesday evening Canada geese munched on unkempt grass in front of empty windows. The building, once used to manufacture typing equipment, has been vacant for more than a dozen years.

Northern New Jersey Weekly Inventory Update

GSMLS - http://www.gsmls.com
(Garden State Multiple Listing Service)
Single Family Homes, Condo, Coop
(Bergen, Essex, Hudson, Morris, Passaic, Somerset, Sussex, Union, Warren Counties)

6/21 - 18,240
6/28 - 18,526 (1.6% Increase)


NJMLS - http://www.njmls.com
(New Jersey Multiple Listing Service)
Single Family Homes, Condo, Coop
(Bergen, Essex, Hudson, Passaic Counties)

6/21 - 9,034
6/28 - 9,165 (1.5% Increase)


MLSGuide - http://www.mlsguide.com
Single Family Homes, Condo, Coop
(Hudson County)

6/21 - 2,540
6/28 - 2,621 (3.2% Increase)

Tell Them How Much You Would Pay

I've received a number of emails lately, which all asked the same question. If people are boycotting open houses, and not placing bids, how are sellers supposed to know that their homes are overpriced? It's a good question. Unless the sign in sheets are blank, and their home has been on the market a long time, they probably don't. Very few people in New Jersey are keeping as close a watch on the market as we are, agents included.

So here is what we're going to do. I want you all to go out to realtor.com and find a listing or two that fits what you might be looking for. Once you find it, paste the link up as a reply, along with the price that you would seriously consider buying it for. You can post anonymously if you wish. This is a serious exercise, please don't post a link to a $4.5m home with a bid of $10.50.

Here is an example, chosen at random:


The property is in Essex Fells, NJ.

Essex Fells MLS ID#: 2236020

The current asking price is $819,900, a reduction from an OLP of $849,900. This home has been on the market approximately 6 months.



Barring any problems with the home inspection, I would purchase this property at $650,000.

I'll be posting my selections up later in the day, anonymously. However, if this home was in my price range, and what I was looking for, I would most certainly purchase the home at that price, barring any issues with the home inspection, of course.

Caveat Emptor!
Grim

NY Rent-Stabilized Rates To Increase 7.25%

There has been quite a bit of buzz lately about rent increases being passed through to the Core CPI through something called OER (Owners' Equivalent Rent). The CPI doesn't take into account housing prices directly, so the stagging increase over the past 5-6 years hasn't been captured as inflation. The CPI uses the equivalent rental price as the basis for judging changes in house price movements. In a normal environment, home prices and rental prices move in tandem. However in our bubble market, rents have been stagnant for the past few years, while home prices have shot up dramatically. Recently, rents have begun to rise. This jump in rents is starting to push the core CPI higher. You can think of the CPI as having understated housing inflation, simply due to the way housing inflation is measured. Should rents continue to increase, the Core CPI figure is going to remain elevated.

So what are the macroeconomic effects of the rental rates of 1,000,000 apartments increasing 7.25% in the next two years?

From the NY Times:

Despite Protests, Rent Board Sets 7.25% Increase

Rents for New York City's one million rent-stabilized apartments can increase by as much as 7.25 percent over the next two years, the city's Rent Guidelines Board voted last night in a raucous meeting that was disrupted for hours by jeering tenants protesting the state's control of the city's rent laws.

The board voted, 5 to 4, to allow increases of 7.25 percent on two-year leases and 4.25 percent on one-year leases. For tenants who pay for their own heat, the allowable increases are 6.75 percent and 3.75 percent. The increases, the highest since 2003, apply to leases renewed between Oct. 1, 2006, and Sept. 30, 2007.

Increases such as these may keep the Fed tightening, long after the housing bubble bursts.

Caveat Emptor!
Grim

Purchase Mortgages Fall 6.2%

From Reuters:

Home loan demand drops as rates hit 4-year high

U.S. mortgage applications fell last week as interest rates hit their highest in over four years, an industry trade group said on Wednesday.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity for the week ended June 23 decreased 6.7 percent to 529.6 from the previous week's 567.6.

Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.86 percent, up 0.13 percentage point from the previous week, its highest level since April 12, 2002 when it reached 6.92 percent.

The MBA's seasonally adjusted purchase mortgage index fell 6.2 percent to 389.0.

The purchase index, which is considered a timely gauge of U.S. home sales, was substantially below its year-ago level of 477.4.

The group's seasonally adjusted index of refinancing applications decreased 7.5 percent to 1,356.0. A year earlier the index stood at 2,529.2.

Rental Overcrowding

From the News Transcript:

Crowded conditions draw look in Freehold

Hitting landlords with higher fines and providing public education for landlords and tenants are ways the Freehold Borough Rental Property Advisory Committee hopes to address the issue of residential overcrowding.

Instances of residential overcrowding have increased over the last 10 years as the borough has seen an influx of immigrants, but not a corresponding increase in the housing stock.
...
According to Newman, between 90 and 95 percent of the landlords in the borough are people who do not live in the community.
...
Newman, an attorney, said residential overcrowding can lead to problems that include improper entrances and exits from attics and basements, overuse of kitchens, mold, leaks, electrical hazards, sanitation, risk of germs and fire. He said the code enforcement office receives between 10 and 20 calls per month related to residential overcrowding. He said about 50 percent of the calls end up with a summons being issued.
...
Newman said it might also be possible to report the names of landlords who violate tenancy limits to the IRS and to the state Division of Taxation; the theory being that if they are permitting illegal occupancy, they may also be underreporting their income.

He noted that Morristown officials have been forwarding the identity of owners of overcrowded properties to mortgage companies, since overcrowding is a violation of the mortgage.

D. R. Horton Bows Out On Bayonne

From the Jersey Journal:

$11M IN THE HOLE
By RONALD LEIR

One partner in a joint venture designated to build 1,700 apartments at the Peninsula at Bayonne Harbor has bolted, leaving the city with an $11 million deficit in the current fiscal year's budget.

But state officials are giving Bayonne officials an extra year to come up with the cash, taking the unusual step of allowing the city to operate with a deficit.

News of the setback came Monday night at a special meeting of the Bayonne Local Redevelopment Authority when the BLRA commissioners were due to announce terms of an agreement with D.R. Horton and Trammel Crow Residential to develop a 32.7-acre tract called Bayonne Bay.

Instead, BLRA Executive Director Nancy Kist said that last Thursday Horton e-mailed the BLRA that it was bowing out because of "many significant unresolved issues."

The BLRA commissioners accepted Kist's recommendation to approve a redevelopment agreement with Trammel Crow Residential to build 530 "luxury rental" apartments on 7.42 acres under which TCR will pay $18.4 million for the right to develop that property. TCR must give the BLRA an $11.3 million deposit upon signing the agreement and must provide the balance by June 2007, BLRA special counsel Joseph Baumann said.
...
Kist said the BLRA will negotiate with the other nine developers who submitted proposals in July 2005 to develop Bayonne Bay to replace Horton, possibly by Aug. 1. Kist said she expected the total purchase price for Bayonne Bay would "come in at well over $100 million."

Stagnating Real Estate Market

From CNN/Money:

Stuck! Homes sit longer on the market

The tell-tale sign of a stagnating real estate market? When homes for sale start lingering - and that's exactly what real estate brokers and other industry watchers say they're seeing now.

The National Association of Realtors does not maintain national time-on-market figures. But inventory - the number of homes for sale - spiked 37 percent for the 12 months through April 30, the most recent data available.

All that supply means homes are sitting around longer and that sellers are asking more than buyers are willing to pay -- an indication that prices may have to come down.

"Sellers are in denial, and there is a rising disconnect with the buyers," said Jonathan Miller, a real estate appraiser in New York. "Until sellers get the message, you'll see a drop in the number of transactions."
...
All this is evidence that the real estate boom may have run its course in many hot markets. At the very least, sellers will have to set their prices very carefully if they want to move their properties quickly and avoid long months of having their houses spending time-on-market.

If any of you would like to read more from Jonathan Miller, you can visit his site here: Matrix

Caveat Emptor!
Grim

PMI Risk Index Jumps

From Reuters:

U.S. house price risk jumped in past year

Homes in about 30 percent of the top 50 U.S. house markets are at risk of losing value, up from about a fifth a year ago, according to an index prepared by mortgage insurer PMI Group Inc.

The average score of PMI's U.S. Market Risk Index for the top 50 metropolitan statistical areas, or MSAs, leaped 70 points this quarter to 288 from the year-ago period, PMI said in a statement on Tuesday.

This suggests homeowners face a 28.8 percent chance that prices on their houses will drop within two years, PMI said.
...
On a quarter-over-quarter basis, the average risk score for the top 50 MSAs increased 1 point, with results increasing in 25 areas and declining in 20, PMI said. Newark, New Jersey, and Miami led increases in the index with 32 point jumps, to 459 and 359, respectively, PMI said.

From the PMI Group:

PMI U.S. Market Risk Index Shows Hot Markets Continue to Cool

The U.S. Market Risk Index shows 13 MSAs continue to have risk scores above 500, meaning they face a 50 percent or greater risk of home price declines in the next two years. The average score for the riskiest markets was 573.

The average score for the top 50 MSAs increased to 288, a 70-point increase from a year ago. The biggest gains this quarter were not among MSAs at the top of the list but those in the middle. Newark, NJ and Miami, FL lead the pack with increases of 32 points each, bringing their Risk Index scores to 459 and 359, respectively.

May Existing Home Sales Down 6.6% YOY

From the National Association of Realtors:

May Existing Home Sales (PDF)

Nationally, Existing home sales for May fell 1.2% from April, and 6.6% from last May. The Northeast saw a 4.2% monthly decline, and a 5% year over year decline in volume. April sales were revised downward to 6.75m from a 6.76m yearly rate.

Inventory of existing homes increased significantly in May, up 5.5% from April, and up 41% in the last 12 months. Months supply now stands at 6.5 months, up from 6.1 months in April, and up from 4.3 months last May.

From Bloomberg:

U.S. Existing Home Sales Fell 1.2% to 6.67 Mln Rate in May

Sales of previously owned homes in the U.S. fell in May to the lowest since January as higher mortgage rates sapped demand, a private report today showed.

Resales declined 1.2 percent to an annual rate of 6.67 million, from 6.75 million in April, the National Association of Realtors said today in Washington. Sales fell 6.6 percent compared with a year earlier.

Housing will be a drag on the economy this year as buyers are deterred by the highest mortgage rates since 2002, economists say. An unexpected increase in sales of new homes reported by the Commerce Department yesterday bears out Federal Reserve predictions that the cooling will be gradual.

``The general trend is toward weaker housing market activity,'' Anthony Chan, chief economist at JPMorgan Private Client Services in Columbus, Ohio, said before the report. ``More and more people are being priced out of the housing market, precisely at a time when rates are going up.''

Resales were expected to decline to an annual rate of 6.6 million from April's originally reported 6.76 million, according to the median estimate of 58 economists in a Bloomberg News survey. Forecasts ranged from 6.43 million to 6.88 million.
...
Before the May report, existing home sales fell in all but four months since May 2005, the Realtors' reports showed. Existing home sales account for about 85 percent of the housing market and are recorded when a contract is closed.

The supply of homes rose 5.5 percent to 3.6 million, bringing inventories up to 6.5 months' worth at the end of May.

The median price of an existing home rose 6 percent in May from a year earlier to $230,000, the Realtors group said.

Resales of single-family homes fell 1.5 percent to an annual rate of 5.82 million. Sales of condos and co-ops rose 1.9 percent to an 852,000 rate.

Purchases fell 4.2 percent in the Northeast to 1.13 million and fell 3.8 percent in the Midwest. They rose 0.4 percent in the South and rose 0.7 percent in the West.

Jersey Shore Real Estate Debacle

Hat Tip to the Jersey Shore Bubble Blog for the link:

From the Philidelphia Inquirer:

Forecast turns bit cloudier
By Alletta Emeno and Alan J. Heavens

Without a doubt, the Jersey Shore real estate market has had a fantastic run for the last eight years. Up and down the coastline, from the top of Ocean County to the tip of Cape May, construction boomed, sales exploded and prices skyrocketed.
...
An Inquirer analysis of 27,709 home sales last year in Atlantic, Cape May and Ocean Counties showed that about 1,000 houses sold for $1 million or more.

And five towns - Stone Harbor and Avalon in Cape May County and Bay Head, Harvey Cedars and Mantoloking in Ocean County - had median home prices of $1 million or more, the analysis showed. (The median is the middle value; half the houses sold for more, half sold for less. In any town, a drop in median price does not mean prices fell for all houses there.)

But this picture of sunny times is turning partly cloudy, observers of the Shore market say, as higher interest rates are beginning to dampen sales, and condo construction, mostly involving investors, adds to a growing surplus of properties.

"Whenever interest rates rise, the second-home market is the first one to take the hit," said Fred Glick, president of US Loans Mortgage L.L.C. in Philadelphia.
...
"It's the condo and lower end of the Shore market that's taking a hit," said Paul Leiser, a broker at Avalon Real Estate. "These are the buyers who depend on lower interest rates to balance two mortgages, and with rising interest rates, they can't do it.
...
Jay Lamont, the host of "All About Real Estate" on WPEN-AM (950), who has studied and owned real estate in Ocean City for about 40 years, said, "I have never seen anything even close to this debacle. Many legitimate and qualified buyers are waiting for fall, for the lender REO [real-estate-owned] listings and foreclosure sales on failed developer loans."

Weekly sales reported to the Ocean City MLS are 80 percent to 90 percent lower than they were in spring 2005, with seven or eight sales a week, he said.

New Urbanism?

From the Star Ledger:

'New urbanism' transforms Montclair
BY PHILIP READ

Just outside her office in the $1.7 million model home is an under-the-glass layout of the "new urbanism" style Montclair subdivi sion, where houses in various stages of construction are tucked shoulder-to-shoulder and a short "How do ya do" distance from the sidewalk.

Round pushpins are tacked into each lot in the subdivision's map. There's one yellow pin for the fully furnished model showcase. There are eight green ones. And there's the solitary red.
...
In the mature suburbs of Mont clair and environs, scores of new homes and condos -- from Christopher Court to Montclair Heights to The Siena and The Reserve at Glen Ridge -- are just now in the midst of drumming up their first sales.
...
Montclair Heights is rising on the site of the old Montclair Community Hospital, which had sat empty for six years and attracted a connoisseur of "abandoned and interesting places" who posted eerie online pictures of its abandoned nurses stations.

The Reserve is rising on the site of a 1950s-era building once used by Verizon for its famed Yellow Pages, and The Siena is replacing the old Hahne & Co. department store, whose 15-year stint as a va cant hull dead-center in the business district was a thorn in the side of politicians for years.

Christopher Court was cut through the site of the historic Marlboro Inn, a Tudor-style hostelry that once billed itself as "the European countryside, only closer," but fell to a wrecking ball after a 16-month struggle between a developer and preservationists who now bemoan the size of the estates rising there.

These developments can hardly be considered "New Urbanism". These are simply high density/high price developments that utilized existing structures. While I might be swayed into believing that Montclair Heights and the Reserve have something in common with New Urbanism, Christopher Court is anything but. I was very sad to see the Marlboro Inn torn down to make way for what is possibly the highest density McMansion development in Montclair.

Caveat Emptor!
Grim

East Orange Redevelopment

From the Star Ledger:

Big things ahead for E. Orange as $129.4M project gets the OK
BY KEVIN C. DILWORTH

Without comment, the East Orange City Council last night unanimously designated a real estate consortium to finance and create one of the biggest redevelopment projects in the city for decades.

The Evergreen-Halsted Associates limited liability company received approval for a $129.4 million major hotel/conference center, residential condominium high-rise, office tower, two levels of retail stores and a commuter parking facility near NJ Transit's Brick Church rail station.

The proposed complex, which will take up almost an entire city block off Route 280, will be bordered by Freeway Drive East on the north, Evergreen Place on the west, and Halsted Street on the east.

Negotiations are under way with prospective clients that include Hilton Hotel, Red Lobster, Old Navy, Commerce Bank, and a Starbucks-like coffee shop, to be the prime tenants, officials said.
...
If the property sale measure is approved, the city will then spend $1.1 million to demolish the exist ing buildings. That would allow Evergreen-Halsted Associates to spend the following two to three years constructing what will be a 140-room hotel, and a 91-unit condominium comprising 56 two-bedroom residences and 35 one-bedroom units.
...
The development plans also call for a 120,000-square-foot office tower on the Evergreen Place side of the property, near Halsted Place; two levels of retail space, each 75,000 square feet in size; and a two-to-five level parking deck for 1,100 vehicles used by condominium owners, retailers, shoppers, NJ Transit commuters, hotel customers and workers, and office tower workers.

The entire site is literally across the street -- via the Evergreen Place and the Halsted Street- Route 280 overpasses -- from the NJ Transit train station that offers Midtown Direct express rail service into Manhattan and Hoboken.

Some Builder Incentives May Violate RESPA

From RealtyTimes:

Home Builder "Incentives" to Buyers Under Federal Scrutiny
by Kenneth R. Harney

Have you ever wondered how home builders can offer such generous incentives -- thousands of dollars worth of upgrades, closing cost contributions and other financial goodies -- provided buyers agree to use the builder's affiliated or controlled mortgage company? Are these come-ons legit?

The federal government -- pressed by the National Association of Mortgage Brokers -- is concerned by these questions too. Though no details of investigations or regulatory actions are available at the moment, HUD's Real Estate Settlement Procedures Act (RESPA) investigative staff is interested in possible violations of federal rules in the builder-incentives field.

Brian D. Montgomery, federal housing commissioner, issued this statement on the issue: "Often consumers feel compelled to use a builder's hand-picked mortgage company because they feel they've been offered an incentive they can't refuse." But to comply with RESPA, he said, "these incentives (must) be legitimate and not built into the price of the house or the cost of the loan," and they must be voluntary to the consumer, not coerced.
...
Savitt says "mortgage brokers around the country see this sort of stuff every day. Builders are misleading consumers by waving imaginary savings and upgrades in front of them, and are either tacking the 'savings' onto the price of the house or into the cost of the mortgage."

The practices may also violate federal anti-trust and fair trade statutes, according to Savitt. Under those laws, mandatory tie-ins are illegal when they hinder competition, "which is what builders are doing when they are stealing (loan applicants) from brokers and lenders" using intentionally misleading claims of discounts.

May New Home Sales Down 5.9% YOY

From the U.S. Census Bureau:

NEW RESIDENTIAL SALES IN MAY 2006(PDF)

Sales of new one-family houses in May 2006 were at a seasonally adjusted annual rate of 1,234,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 4.6 percent (±13.1%)* above the revised April rate of 1,180,000, but is 5.9 percent (±10.8%)* below the May 2005 estimate of 1,311,000.

The median sales price of new houses sold in May 2006 was $235,300; the average sales price was $294,300. The seasonally adjusted estimate of new houses for sale at the end of May was 556,000. This represents a supply of 5.5 months at the current sales rate.

May Year-Over-Year Sales
United States -5.9%
Northeast -36.3%
Midwest -20.8%
South 8.4%
West -12.7%

The May median sales price of $235,300 is down approximately 6% from the peak price of $250,800 set in February of this year and is down 4.3% from last month.

Caveat Emptor!
Grim

"Mortgage brokers, prepare your résumés"

From the Wall Street Journal:

A Housing Slowdown Can Put the Brakes on a Job Sector But Open Other Opportunities
By MARK WHITEHOUSE

Mortgage brokers, prepare your résumés. And while you are at it, highlight any experience you've had in health care.

The reason: Housing, the biggest generator of jobs in the current expansion, is running out of steam. As a result, tens of thousands of Americans, from bankers to hardware-store clerks, are likely to find themselves out of work over the next couple of years. For those who can transfer their skills to other industries that are still growing, such as health care, it won't be the end of the world.

"It's not going to be a big show-stopper, because there are other areas of the economy that are picking up," says Brian Bethune, U.S. economist at consulting firm Global Insight.

Few sectors can claim to have as much sway over the economy as housing. Housing-related employment has accounted for about 23% of the 4.9 million jobs created since the nation's job market began to grow in late 2003, according to Moody's Economy.com. That includes architects, contractors, real-estate agents, brokers and bankers, as well as the host of others who provide the industry with materials and services.

"There's never been a housing boom like this one in terms of the reach, in terms of the range of industries affected," says Ethan Harris, chief U.S. economist at Lehman Brothers in New York. "This is clearly unprecedented."

Now, the boom is coming to an end. Total single-family-home sales were running at an annualized rate of 7.1 million in April, down more than 6% from the June 2005 peak. Backlogs of unsold homes are rising, and price increases are slowing.

Economists expect the slowdown to affect more than just housing-related jobs: As stagnating house prices and higher interest rates limit Americans' ability to use their homes as a source of cash, they are likely to spend less money on consumer goods, meaning less work for all kinds of folks, from assembly-line workers to shop assistants.

Cliffside Park Exercises Eminent Domain

From the Record/Herald:

Cliffside taking 12 properties
By PETER J. SAMPSON

The borough has condemned a dozen properties in a downtown redevelopment area slated for new shops, restaurants and high-rise apartments and is gearing up to take a Fairview parcel for its new public works facility.

Exercising its power of eminent domain, the borough filed a "declaration of taking" to assume ownership of the properties that will be razed to make way for the $40 million redevelopment project, said Borough Attorney Christos Diktas.

Eleven of the properties are commercial buildings on Anderson and Grant avenues, some with tenants living above the stores. One is a single-family home on Glen Street.

Before a judge signed the condemnation order, the borough had to deposit $6 million with the Superior Court to compensate the owners. Despite vocal opposition in the past, none of the owners objected in court to the move, Diktas said.
...
The project is a joint venture of the borough, which owns about half the land in the redevelopment area, and Towne Centre C.P., LLC, a partnership headed by Fred Daibes and James Demetrakis.

The plans call for a 220-unit apartment tower above shops, sidewalk cafes and restaurants that would open up to an expansive public plaza. The site, along Lawton, Anderson and Grant avenues, would include underground parking.

Jersey Traffic to Worsen

From the Daily Record:

No easy solution for projected traffic crunch
BY KEN SERRANO

It's what most road commuters have learned to expect: more traffic and a longer drive to work and home. That's the prognosis for people traveling on Route 287 in the coming years
...
Traffic along a stretch of the interstate between Middlesex and Somerset counties, for example, is expected to rise by as much as 10 percent in four years. In less than 25 years, it will increase by 35 percent along the same stretch, according to one forecast.

North of Route 78, traffic is expected to grow by 2.5 percent in four years and 20 percent by 2030. Under those scenarios, the ride-home drive time could finally make the full transition from the rush hour to the rush evening.

"Obviously, if these projections come to pass, it's going to be a nightmare," said Jeffrey Zupan, senior fellow for transportation with the Regional Plan Association, an independent nonprofit group.

For Zupan, more traffic means more money, lots of it, in terms of the tax burden on towns along the stretch and the lost revenue of businesses having trouble with worker arrivals.
...
"I predict as far as volumes for commuting, it's not going to come close," said Steve Carrellas, who cites telecommuting as one reason for his optimism.

"Once you have the basic infrastructure, as far as the software goes, people don't have to go to the office," said Carrellas, state chapter coordinator for the National Motorists Association.

Carrellas, who has worked with the NJTPA, stressed that the forecasts do not take into account telecommuting, the high cost of gas and other future trends. Even if the worst predictions come true, he said higher volumes don't have to mean more tie-ups and slowdowns.

Where are they getting the money?

From the Star Ledger:

State, local government jobs jumped since 2000
In N.J., the private sector stayed flat, analysis shows
BY STEVE CHAMBERS AND ROBERT GEBELOFF

New Jersey added 59,400 state and local-government jobs in the first half of this decade, even as private-sector employment was flat, a Star-Ledger analysis has found.

The 11 percent increase in government jobs -- driven largely by ballooning education payrolls -- outpaced population growth and came at a time of rising anger over skyrocketing property taxes.

"It's an incredible number that leaves private businessmen and taxpayers scratching their heads and saying, 'How is this possible?'" said Philip Kirschner, president of the New Jersey Business and Industry Association. "The economy is the same for all of us, so where are the public entities getting the money? We all know the answer to that question."

It is a basic rule of economics that private-sector jobs pay the bills that government jobs produce, which explains why New Jersey is suffering from huge budget gaps and soaring property taxes, experts said. In 2005, there were almost 580,000 state and local-government jobs.

"It's probably the best indicator of why we have a property tax problem," said James Hughes, a Rutgers University dean who often writes about the regional economy. "It relates to the expenditure side of the equation."

The issue of taxation -- and voter anger -- will be center stage this week in Trenton, as lawmakers and Gov. Jon Corzine wrestle over the best way to balance the budget. It also will be the subject of a summer session targeting rising property taxes.
...
School districts statewide added 15,417 teachers, 860 administrators and 2,902 other certified personnel between 2000 and 2005. They also hired another 14,485 noncertified employees, a broad category that includes everything from custodians to teachers aides.

That means schools added 33,664 new jobs at a time when statewide enrollment grew by just 101,605 children -- one new employee for every three new students.

Weekend Open Discussion

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!

So What's My Monthly Payment?

From Yahoo Finance:

How the Monthly Mentality Messes Up Your Wealth
by Laura Rowley

Housing prices are coming down in my New Jersey town, with properties virtually flooding the market, compared to summers past. This tempts me to surf the local realtor Web sites, trolling for deals.

But I can't bring myself to trade up. The main problem, as I explained to my realtor pal Elizabeth is the taxes. New Jersey's property taxes are, in a word, ridiculous -- especially to someone who grew up in the Midwest.

For example, it's not uncommon to find a five bedroom, two-and-a-half bath residence in my area with $20,000 in annual property taxes. This is three to five times what my siblings in the Midwest pay. The thought of spending $200,000 over 10 years to get a bigger kitchen and an extra bed and bath makes me gag.

"Most people don't look at it the way you do," Elizabeth told me. "They just look at whether they can afford the monthly payment."

And therein lies the modern personal finance conundrum. From housing to autos to material goods, Americans are bombarded with the notion that if you can afford the monthly payment, you can afford the thing you're buying. What's never discussed is the princely opportunity cost of living on borrowed money -- and how devastating the monthly mentality can be to long-term wealth. But as a variety of recent reports demonstrate, it has become a way of life for millions of Americans.
...
The monthly mentality is also evident in the auto market. Some 29 percent of U.S. vehicle buyers were "upside-down" in their loans in May -- meaning they owe more than the trade-in value of their cars. That's the second-highest level in four years, according to Jesse Toprak, executive director of industry analysis for Edmunds.com. The average amount of negative equity was $3,789.

The reason? Borrowers who otherwise can't afford the cars they want are opting for mega-term loans: In January, 2002, the average loan term was 57.3 months. Now it's 63.6 months. Toprak says 72 months is becoming the norm.

"Unfortunately, we still often see people going to the dealer and saying, 'I want to pay $400 a month,' despite the fact that it's a really bad way to buy a car," Toprak explains. "Extended terms become the only way to get the car they want. They don't see the consequences two years down the road."

Toprak says he's seen a new trend in leasing among upside-down borrowers because it allows them to finance up to 115% of the vehicle's sticker price, whereas a traditional purchase only provides 100% financing. Thus, borrowers can trade in their vehicle and add their negative equity to the lease. It results in higher monthly payments, but at the end of the lease the negative equity is gone. Of course, they don't own anything at the end of the lease, either.

"Oh my god. I've got to sell this house"

From the Star Ledger:

Tax increase shocks some in Perth Amboy
BY AMISHA PADNANI

When Carol Bilas got her tax bill in the mail last week, she felt like a deer caught in headlights.

"I knew the taxes would increase, but I mean these numbers are just unbelievable," she said.

Bilas, who owns two properties in Perth Amboy, was looking at a 169 percent increase in her municipal taxes. She will now have to pay $3,716 for the second quarter for a property on High Street, up from $1,382, which she paid in the first quarter. The first-quarter payment was based on an estimated tax bill.

"My instantaneous reaction was, 'Oh my god. I've got to sell this house and get out of here.' But who in their right mind is going to buy it?"

So Bilas, like every other Perth Amboy resident, is expecting to pay her tax bill by the July 11 deadline.
...
The tax increase was needed to balance the municipal budget after the state ordered the city earlier this month to remove $8 million in revenue that it could not justify.

"I know they have a budget problem down there, but they created that problem," she said. "The people in the town are not being given an explanation by this type of increase and they owe that to us."
...
Now Bilas, a retired teacher, said she will have to take money out of her savings to pay for her properties. She said she feels fortunate to have the funding in her account, but it's still a major burden on her finances.

"I can't keep pulling money out of my life savings," she said. "What am I supposed to do, spend my life savings in a year or two to pay my taxes?"

In addition to the property tax hike, Perth Amboy residents may also be faced with a school tax increase because of a state freeze on overall funding to Abbott district schools, according to board of education officials.

Southwest Hoboken Redevelopment Zone Established

From the Hoboken Reporter:

Southwest redevelopment area established

The goals for the southwest corner of Hoboken are easy enough to express. It's a traffic-clogged, flood-prone, park-starved area that has century-old sewers. It could use traffic planning, new open space, and major infrastructure improvements.

Those needs are largely uncontested, but there is controversy over how to make them happen.

A packed council chamber More than 150 people looked on as the Hoboken City Council debated until 1 a.m. Wednesday night. They finally voted 5-4 to create a Southwest "Industrial Transition" District Redevelopment Area.
...
The properties in the Southwest "Industrial Transition" District Redevelopment Study Area that were identified as being "in need of redevelopment" include surface parking, stacked car storage, vacant lots, two residences, and a holding area for police horses and other animals. According to the redevelopment study, many of the buildings are poorly maintained or are in need of general maintenance.
...
So why is there so much opposition to the creation of a redevelopment area?

In one word - trust.

There is a large segment of the population that does not trust the mayor and the City Council to effectively manage a redevelopment area, especially considering that redevelopment law gives the City Council such sweeping authority.

They worry that the city will abuse its powers, which could lead to high-rise, high-density development, with nothing more than small strips of landscaped land that would pass as parks.

Long Branch Homeowners Lose In Court

From the Star Ledger:

Homeowners lose round in court
BY MARYANN SPOTO

On the one-year anniversary of the U.S. Supreme Court decision that gave wide latitude to municipalities to seize property for redevelopment, New Jersey opponents of the ruling took to the streets Friday night as they lamented their own setback in a court battle to save a Long Branch neighborhood.

Some 300 opponents of eminent domain -- the policy of taking private land for public projects -- held a rally in the Jersey Shore town to protest the U.S. Supreme Court's Kelo vs. New London decision last year that granted towns broad authority to take homes and land for private development.

The rally came one day after Superior Court Assignment Judge Lawrence M. Lawson in Freehold delivered a ruling that further stoked the outcry by eminent domain opponents around New Jersey.

"I don't know what I'm going to do," said Long Branch homeowner Frances DeLuca, who stands to lose her home through eminent domain along with 23 other property owners battling the city in court. "The judge did exactly what I thought he was going to do, because as far as I know, I've never seen him rule in favor of the homeowner."

Carrying signs proclaiming, "This land is my land," "Got greed?" and "Protect our property," those at the rally criticized the Kelo ruling and said the practice of taking people's homes and property for redevelopment must stop.
...
In a project launched a decade ago but under construction only four years, Long Branch is undergoing a $1 billion redevelopment along a mile of its oceanfront to include some retail and 1,200 residential units.
...
In his decision, Lawson chastised the homeowners for failing to file suit sooner. But they contend the city and the developer had no intention of taking their properties until they realized the great demand for the new condominiums and townhouses -- fetching sales prices of anywhere from $400,000 to $2 million -- being constructed just to the south of their neighborhood.
...
Ocean Terrace resident Lou Anzalone, 89, said he doesn't want to live anywhere other than the house he's been in for the past 46 years. He couldn't afford to buy anything like his house a block from the ocean with the $304,000 the city has offered him, he said.

"I don't want a condo," he said. "They look like tenement houses to me.