The End Of Real Estate As We Know It?

From the New York Times:

The Last Stand of the 6-Percenters?

Redfin and other innovators, including ZipRealty and BuySideInc.com, are using technology to reduce costs and to save time for their brokers. Agents don’t find and recommend homes — customers do that on their own, using Internet listings — and that enables agents to charge less for the services they do provide, chiefly handling the paperwork and negotiations.

The Internet has radically changed the way consumers buy books and airline tickets, trade stock and learn news. But the real estate industry has resisted change — and protected its commission structure — by controlling the information on its Multiple Listing Service database of properties for sale.

“You can find out more on the Internet about an eBay Beanie Baby than you can about a $1 million house,” said Glenn Kelman, chief executive of Redfin, a licensed broker in Washington State and California.
...
Traditional agents still firmly control the M.L.S., which allows all participating brokers, including Redfin, to view almost every home for sale in a particular area, even those being offered through competitors’ agencies. But the typical 6 percent commission, paid out of the seller’s proceeds and split between the seller’s and buyer’s agents, is under attack because, as economists note, it does not serve consumers well.
...
In many cities, real estate agents have tried to restrict access to M.L.S. information or to limit its use on the database. Some have asked state legislatures to pass laws forcing brokers to offer certain levels of service, a move that Mr. Kelman sees as intended to squeeze out discount brokers. “It’s a thousand tiny shackles on innovation,” he said.
...
The Justice Department and the Federal Trade Commission have fought these tactics in Texas, Kentucky, Tennessee and Oklahoma, among other states, and the department is suing the National Association of Realtors, the powerful trade group of agents and brokers, over what it calls anticompetitive rules.

“Where it comes to our attention that significantly anticompetitive state laws or regulations are under consideration, we approach state officials to advocate that they take into account the benefits to consumers of a more competitive approach,” said J. Bruce McDonald, deputy assistant attorney general for the antitrust division of the Justice Department.
...
Buyers also enter details of their offers — the price they want to pay, the size of the deposit they are willing to put up and, for example, whether they will pay for the termite inspection. Then they click on “Submit.” A Redfin agent checks everything with the customer before passing along the offer to the seller.

“It took eight minutes,” said Perry Webster of Des Moines, a suburb of Seattle, who bought a new four-bedroom house through Redfin. “But it didn’t really matter that it was online. We just liked the business model.” He asked, “Is it really worth $10,000 to ride in a real estate agent’s Lexus?”

Deferred Property Taxes For Seniors

From Newsday:

Florida property tax deferrals catch Jersey's attention

Lou Albright has had enough.

Retired after working for Verizon for 35 years, the Gloucester Township man has seen property taxes on his two-bedroom home increase 12 percent in recent years, to $7,400 annually.

Albright, 64, wonders how senior citizens in other states can stay in their homes. Faced with the nation's highest property taxes, many New Jerseyans are struggling to afford retirement, he said.

"New Jersey has become a work-only state," Albright said.

Albright is intrigued by an idea that will soon receive attention in New Jersey _ a Florida program that allows senior citizen homeowners to defer annual property taxes.
...
The Florida law was recently amended. As of Jan. 1, it will allow homeowners at least 65 who meet income qualifications to defer property taxes until the home is sold or ownership is transferred, said Kathy Henley, a Florida state property tax administrator. Under the law, deferred taxes can accrue as much as 7 percent interest.

Robert F. Williams, a Rutgers University-Camden constitutional professor, told New Jersey lawmakers a law like Florida's might allow them to bring property tax reform to the Garden State without complicated constitutional revisions that need voter approval.

"You might be able to solve part of the problem without any huge structural changes," Williams said.

But not everyone is convinced it's right for New Jersey.

Albright likes the idea, but is worried it could make selling a home more difficult in a sluggish housing market.

Cy Thannikary, chairman of a citizens property tax reform group and an Upper Freehold resident, said deferring property taxes wouldn't solve the state's heavy reliance on property taxes to pay for local government and schools.

"It simply postpones the misery of ever-increasing property taxes to a future date or to the next generation," Thannikary said.

Labor Day 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. Also a good place to post suggestions, requests for information, criticism, and praise.

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.

Lowball! 8/22 - 9/2 (Bergen and Passaic)

Welcome to another edition of Lowball!

Lowball! takes a look at home sales from a 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 from the past month and pick out the sales that have the highest percentage difference between list 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.

Here are the lowball sales for Bergen and Passaic Counties from 8/22 through 9/2:

Bergen:

MLS #	Town	Original List	List Price	Sale Price	% Off OLP	% Off LP
2266747	Mahwah Twp.	$674,900	$355,900	$350,000	48.1%	1.7%
2236935	Franklin Lakes	$749,000	$499,900	$465,000	37.9%	7.0%
2260657	Franklin Lakes	$1,299,900	$999,999	$989,000	23.9%	1.1%
2256662	River Vale	$549,000	$449,000	$425,000	22.6%	5.3%
2276699	Franklin Lakes	$1,799,000	$1,600,000	$1,400,000	22.2%	12.5%
2257805	Upper Saddle River	$1,117,000	$895,000	$890,000	20.3%	0.6%
2250025	Lyndhurst	$489,999	$469,999	$407,000	16.9%	13.4%
2278352	Englewood Cliffs	$1,895,000	$1,750,000	$1,600,000	15.6%	8.6%
2262230	Waldwick	$579,000	$499,900	$490,000	15.4%	2.0%
2231246	Ridgewood	$2,149,000	$1,949,000	$1,825,000	15.1%	6.4%
2272332	Ridgewood	$1,345,000	$1,150,000	$1,150,000	14.5%	0.0%
2260752	Mahwah	$499,000	$469,900	$430,000	13.8%	8.5%
2270902	Englewood	$439,400	$399,900	$382,000	13.1%	4.5%
2245678	Allendale	$989,900	$899,900	$865,000	12.6%	3.9%
2248617	Ridgewood	$1,250,000	$1,245,000	$1,100,000	12.0%	11.6%
2256390	Fair Lawn	$659,000	$614,900	$580,000	12.0%	5.7%
2262348	Franklin Lakes	$1,869,000	$1,699,000	$1,655,000	11.4%	2.6%
2284576	Allendale	$579,000	$579,000	$515,000	11.1%	11.1%
2276196	River Edge	$860,000	$799,900	$765,000	11.0%	4.4%
2275731	Wyckoff	$869,000	$789,000	$775,000	10.8%	1.8%
2248671	Fair Lawn	$536,900	$479,000	$479,000	10.8%	0.0%
2234294	Glen Rock	$589,000	$589,000	$530,000	10.0%	10.0%
2259397	Elmwood Park	$399,900	$399,900	$360,000	10.0%	10.0%

Passaic:

MLS #	Town	OLP	List Price	Sale Price	% Off OLP	% Off LP
2241538	Hawthorne	$369,000	$339,000	$235,000	36.3%	30.7%
2245542	Wayne	$1,265,000	$1,025,000	$950,000	24.9%	7.3%
2225890	Totowa	$1,299,000	$1,099,000	$999,000	23.1%	9.1%
2268226	Wanaque	$299,000	$299,000	$235,000	21.4%	21.4%
2255537	Wayne	$799,900	$679,900	$640,000	20.0%	5.9%
2252289	Totowa	$1,149,000	$1,090,000	$950,000	17.3%	12.8%
2280117	Wayne	$619,900	$545,000	$522,900	15.6%	4.1%
2244484	Ringwood	$529,900	$449,900	$449,900	15.1%	0.0%
2279148	Paterson	$349,000	$299,950	$298,000	14.6%	0.7%
2283785	Wayne	$689,900	$639,900	$600,000	13.0%	6.2%
2272567	Clifton	$379,000	$349,000	$330,000	12.9%	5.4%
2271987	Paterson	$379,000	$339,000	$330,000	12.9%	2.7%
2231647	Clifton	$479,900	$428,900	$419,000	12.7%	2.3%
2273026	Wayne	$485,900	$439,900	$425,000	12.5%	3.4%
2258026	West Milford	$624,900	$569,900	$550,000	12.0%	3.5%
2280359	Pompton Lakes	$459,900	$429,900	$408,000	11.3%	5.1%
2262178	North Haledon	$534,900	$524,900	$475,000	11.2%	9.5%
2247015	Pompton Lakes	$274,900	$249,900	$245,000	10.9%	2.0%
2292014	Paterson	$159,000	$159,000	$142,000	10.7%	10.7%
2235944	Bloomingdale	$379,900	$356,900	$340,000	10.5%	4.7%
2274716	Wayne	$528,900	$509,900	$475,000	10.2%	6.8%
2286340	North Haledon	$475,900	$459,900	$427,500	10.2%	7.0%
2257116	Clifton	$639,900	$589,900	$575,000	10.1%	2.5%
2284893	Wanaque	$399,900	$359,900	$360,000	10.0%	0.0%

Caveat Emptor!
Grim

Are Pensions The Problem?

From the Asbury Park Press:

Tax cuts difficult, but Corzine remains confident

A month into efforts to cut New Jersey's high property taxes, lawmakers are finding solutions hard to come by, but Gov. Corzine on Friday said he remains confident progress will be made.

Legislators have run into obstacles in the month since the governor jump-started the drive to cut the state's highest-in-the-nation property taxes:

They've been told they cannot cut pension benefits for most public government workers and that consolidating local governments wouldn't save much money.

A discussion about amending the state constitution incensed businesses worried they're going to be targeted for increased property taxes.
...
New Jersey's property taxes are twice the national average — at $6,000 per property owner — and have been increasing at a rate of 7 percent per year. Corzine wants to cut projected property tax growth by about 20 percent by 2010 and expects the panels that have been meeting this summer to devise recommendations by Nov. 15.

"I haven't seen one way or one recommendation to save money," said Sen. Ronald Rice, D-Essex, a member of a public worker benefits reform committee.

From the Randolph Reporter:

Pension costs hit Randolph

It’s time to pay the piper and municipalities, school districts and county governments are scrambling to make ends meet while also paying increasing state pension payments.

Local governments had been excused from paying pension costs for an eight year holiday as a way to help cut property taxes. But the holiday is over.

The primary problem facing officials is to meet pension obligations without raising taxes.
...
Lovell said the pension system has been used as a tool for tax relief for the last eight years now.

“Add to that the reality of Wall Street losses, and you can understand why we are facing the problems that are occurring today,” he said.

“The pension holiday was created specifically for tax relief,” said Lovell. “With that in mind, Randolph Township did not feel it should build surpluses in anticipation of future tax bills. So, when we were not required to pay into the pensions systems, we lowered, maintained, or controlled increases for local taxpayers.”

The “holiday” came when the state deferred local payments of annual pension contributions by public employers because the pension fund was financially sound.
...
Lovell said these costs, mandated by state law, are driving up local property taxes.

“Despite saying that, the township does carry a surplus and we do anticipate using some of those moneys to ease the increases in our operating costs,” said Lovell. “With the cost of providing services always increasing, it is nearly impossible to lower taxes without cutting services. Sometimes you have to cut services just to keep taxes the same. But I think it really hurts taxpayers if necessary increases are not kept to a bare minimum.”

July Pending Home Sales Fall 16% YOY

From Marketwatch:

Pending homes sales index falls 7% in July

An index of pending home sales fell 7% in July to lowest level since February 2003, the National Association of Realtors reported Friday.

The index is down 16% in the past 12 months. Every other housing indicator shows a similar decline in the past year.

"The index shows existing-home sales should continue to ease after a stronger-than-expected decline in July, but are likely to flatten in the months ahead," said David Lereah, chief economist for the realtors.

In July, the pending home sales index fell 9% in the Midwest, 7.7% in the Northeast, 6.4% in the South and 5.5% in the West.

In the past year, the pending home sales index is down 20.3% in the West, 20.1% in the Midwest, 15.5% in the Northeast and 11.3% in the South.

The index tracks signed contracts for sales of existing homes. The realtors report sales in a separate report at the closing.

"Psychological factors are causing some buyers to remain on the sidelines, waiting for prices to stabilize or for more favorable news about the market and the economy," Lereah said in a statement. "Contributing to this hesitancy is a lot of negative news stories, but in the end we believe that underlying market fundamentals will prevail."

From the National Association of Realtors:

Pending Home Sales Index Points To Easing Market

Home sales should be leveling out in the months ahead at a lower pace, according to an index based on pending home sales, a leading indicator for the housing market published by the National Association of Realtors®.

The Pending Home Sales Index,* based on contracts signed in July, is down 7.0 percent to a level of 105.6 from a downwardly revised reading of 113.5 in June, and is 16.0 percent lower than July 2005.
...
Lereah said psychological factors account for much of the decline in July home sales. “We’ve never seen a general decline in the housing market against a healthy economic backdrop where jobs are being created, the economy in growing and interest rates are favorable,” he said. “Psychological factors are causing some buyers to remain on the sidelines, waiting for prices to stabilize or for more favorable news about the market and the economy. Contributing to this hesitancy is a lot of negative news stories, but in the end we believe that underlying market fundamentals will prevail.”
...
Regionally, the PHSI in the West declined 5.5 percent in July to 103.1 and was 20.3 percent below July 2005. The index in the South dropped 6.4 percent to 122.3 in July and was 11.3 percent below a year ago. In the Northeast, the index fell 7.7 percent in July to 92.1 and was 15.5 percent below July 2005. The index in the Midwest dropped 9.0 percent to 93.3 in July and was 20.1 percent lower than a year ago.

The American Nightmare

Fantastic piece from BusinessWeek, the cover story of the September 11th edition:

Nightmare Mortgages

They promise the American Dream: A home of your own -- with ultra-low rates and payments anyone can afford. Now, the trap has sprung

For cash-strapped homeowners, it was a pitch they couldn't refuse: Refinance your mortgage at a bargain rate and cut your payments in half. New home buyers, stretching to afford something in a super-heated market, didn't even need to produce documentation, much less a downpayment.

Those who took the bait are in for a nasty surprise. While many Americans have started to worry about falling home prices, borrowers who jumped into so-called option ARM loans have another, more urgent problem: payments that are about to skyrocket.

The option adjustable rate mortgage (ARM) might be the riskiest and most complicated home loan product ever created. With its temptingly low minimum payments, the option ARM brought a whole new group of buyers into the housing market, extending the boom longer than it could have otherwise lasted, especially in the hottest markets. Suddenly, almost anyone could afford a home -- or so they thought. The option ARM's low payments are only temporary. And the less a borrower chooses to pay now, the more is tacked onto the balance.

The bill is coming due. Many of the option ARMs taken out in 2004 and 2005 are resetting at much higher payment schedules -- often to the astonishment of people who thought the low installments were fixed for at least five years. And because home prices have leveled off, borrowers can't count on rising equity to bail them out. What's more, steep penalties prevent them from refinancing. The most diligent home buyers asked enough questions to know that option ARMs can be fraught with risk. But others, caught up in real estate mania, ignored or failed to appreciate the risk.

Wake Up New Jersey

From the Record:

Census wakeup call

NEW JERSEYANS searching for silver linings in the grim U.S. census figures released this week will have to get out their umbrellas.

While we have the highest household median income in the nation, we are rapidly losing ground -- income was down by 2.8 percent last year alone. Although we have some of the wealthiest counties in the nation, we also have places like Camden, where a staggering 44 percent of the population lives in poverty.

Clearly, much of New Jersey's economy is either stuck in neutral or headed in reverse. The question raised by the census figures is: How does our state change course?

The short answer is by growing our economy after years of stagnation. What that entails is another matter entirely. Kick-starting that debate late next week will be the release of Governor Corzine's comprehensive plan for the state economy.

New Jersey is clearly at a crossroads. Although there'll be much debate in the coming weeks on what direction to take, one thing seems sure: To continue on the current economic course can only lead to a dead end.

According to the latest census figures:

New Jersey ranks first in median household income at $61,700, but:

Our income was down by 2.8 percent last year at a time when income nationally was flat.

Our poverty rate is up by almost one percentage point since 2000, from 7.8 to 8.7 percent.

The number of New Jerseyans without health care continues to climb, from 14.6 to 15.2 percent.

Property Tax Hikes Continue

From the Herald/Record:

Bergen County briefs

HASBROUCK HEIGHTS -- The Borough Council on Tuesday adopted a $15.8 million budget that comes with a 7.1 percent increase in the municipal tax levy.

The owner of a home assessed at the borough average of $436,800 will pay $2,603 in municipal taxes, an increase of 4.9 percent from 2005.

The council voted 3-3 on the measure, with Mayor Ron Jones breaking the tie. Republican council members Justin DiPisa, Ron Kistner and Tom Meli voted to approve the budget. Democrats Carol Skiba and Len Introna and Republican Maryetta Saccomano voted against approval.

Saccomano told residents at Tuesday's special meeting that she voted against it because $450 was too much for borough seniors to pay. But she was talking about the tax levy for the municipal, school and county budgets combined. Introna said he voted no because municipal departments should find ways to cut expenses.

The Next New Jersey Gold Coast?

From the Courier Post Online:

Camden doesn't have to be America's poorest city

The city has potential to draw in new residents and businesses and lift itself out of the bottom of some dubious rankings.

It's no coincidence that America's most dangerous city for two years running is now, according to U.S. Census data, also America's poorest city.

Camden's median household income is just $18,007 a year, according to new data from the U.S. Census Bureau.

Imagine raising a family on that annual income and it's easy to see why Camden is the poorest among all communities with at least 65,000 residents. It's also easy to understand why crime flourishes in Camden.
...
Camden doesn't have to be this way. It has things to offer such as its fantastic views of downtown Philadelphia, its Waterfront attractions, its higher education and cultural institutions, its rich history and its numerous transportation links.

Despite what some may say, it's not impossible for Camden to lift itself and its residents out of its current state. But to do so will take a concrete plan and, more importantly, government, school and community leaders focused singularly on implementing that plan. What Camden doesn't need is leaders who are more interested in keeping jobs and other benefits for themselves and their friends and political allies while allowing things to remain status quo.

Camden has potential. But it will take bold leaders and bold actions, not just talk, to lift Camden from being America's poorest and most dangerous city.

Looking Back: Redefining 'Affordability' for the 90's

From the New York Times:

Redefining 'Affordability' for the 90's
By THOMAS J. LUECK
Published: January 20, 1991

And for many homeowners, the gains in affordability are at best a mixed blessing. Millions who bought in the late 80's, believing their homes would prove to be lucrative investments, went further into debt for mortgage loans than has traditionally been considered prudent. Now, caught in a nationwide real estate slump and facing the propspect of selling for little more -- or even less -- than they paid, many are staying put, cutting back on other expenses and paying housing costs that are a heavy load.

For others, just staying put has become impossible. In New York, New Jersey and Connecticut, foreclosures on homeowners rose more than 30 percent in the first nine months of 1990. Evictions of renters are also on the rise; court records in New Jersey indicate they have risen by over 25 percent since 1986, to 163,994 last year.

"There is no question that people are feeling pinched and house poor," said Robert Engelstad, vice president for mortgage standards at the Federal National Mortgage Association, or Fannie Mae, the nation's largest buyer of real estate loans from thrifts, banks and mortgage companies.
...
"People in the 1980's expected to hold on to a home for two or three years and sell at a profit, so they thought it was O.K. to fall behind on their MasterCard bills in the meantime," said George Yankowich, a developer in Greenwich, Conn., one of the nation's wealthiest communities.
...
For home buyers, the rule had traditionally dictated that no more than 28 percent of their income be devoted to mortgage payments, real estate taxes and home insurance premiums. The 28 percent limit was intended to prevent people from going too far into debt. It also stipulated that the totality of a home buyer's debt obligations, including payments on the home loan, car loans, credit card purchases and other personal debts, should not claim more than 36 percent of income.

But for recent home buyers, particularly in the most expensive urban areas, the guidelines have been stretched widely. A 1990 survey of hundreds of home buyers in 18 large metropolitan areas, to be released later this month by the Chicago Title and Trust Company, found that most were paying more -- sometimes much more -- than 30 percent of their income for mortgage and real estate tax payments. Deepest in debt, the survey found, were 1990 buyers in the New York area, who are now paying an average of 40.6 percent of their incomes to mortgage lenders and tax collectors.

Fat Pensions Bleeding Jersey

From the Star Ledger:

The fattest pensions for public workers

For lawyer Damian Murray, the road to a comfortable, taxpayer-supported retirement runs through Lacey Township. And Dover Township. And Seaside Heights. And five other Ocean County communities.

Murray, a former county freeholder, serves as a municipal court judge in those towns, and they will pay him a combined $287,000 for his services this year, according to figures prepared for a legislative panel by the state Division of Pensions and Benefits.

Of more interest to reform-minded lawmakers and state officials, Murray's eight salaries would qualify him for an annual pension estimated at more than $135,000 even if he were to retire today, at age 57.

The Ocean County lawyer is among more than 5,000 public employees running up pension credits in more than one public job, a hot-button issue at a time when lawmakers are considering fundamental changes to the pension system to rein in expenses.
...
Murray doesn't hold the largest number of positions -- that distinction belongs to Gloucester County lawyer Jere Powell, a municipal judge in 11 South Jersey communities -- but Murray does earn the most from his multiple posts, the list shows.

Several others are not far behind.

Edward L. Kerwin, an assessor in Warren Township and seven other communities, will earn $255,956 in assorted salaries, while parking expert Leonard T. Bier will make a combined $204,000 in salary from posts with Middlesex County and four North Jersey parking authorities, according to the list.

Powell, the Gloucester County lawyer with 11 posts, will earn $186,404 this year, enough to qualify her for a pension estimated at $74,000 a year when she turns 60.
...
The top 25 pension earners on the list will collect more in salary this year than state Chief Justice Deborah Poritz or the $175,000 salary authorized for the governor, the draft shows.

NY State Home Sales Slide 11.3% In July

Some housing news from New York from Inman News:

Buyer's market emerges in New York

Sales of existing single-family homes in New York fell by double digits between July 2005 and July 2006, while home-price growth slowed to a more normal pace, according to preliminary single-family sales data accumulated by the New York State Association of Realtors.

There were 9,392 sales recorded statewide in July, a decrease of 11.3 percent from the 10,681 homes sold in July 2005, according to the preliminary data. Last month's sales total was down 7.6 percent from June's level of 10,166 sales.

Year to date, 54,932 existing single-family homes have sold, down 2.8 percent compared to the 2005 record-setting market total of 56,495 for the same period.

The statewide median selling price rose 3.7 percent in July to $269,700, compared with the $260,000 median recorded in July 2005. The July 2006 median price, however, was down by 3.3 percent compared to the previous month, which recorded a median sales price of $279,000.

Personal Savings Rate Falls To -0.9%

From Bloomberg:

U.S. July Personal Spending Rises 0.8%; Core Prices Up 0.1%

Consumer spending in the U.S. rose 0.8 percent last month, the most since January, and a measure of inflation posted the smallest gain of the year.

The rise in spending followed a 0.4 percent June increase, the Commerce Department said today in Washington. The Federal Reserve's preferred inflation gauge rose a smaller-than-expected 0.1 percent last month.
...
The report's price gauge tied to spending patterns and excluding food and energy costs increased 2.4 percent from July 2005, a year-over-year gain last exceeded in April 1995.

Fed Chairman Ben S. Bernanke is among policy makers who have said they would be more comfortable with a 1 percent to 2 percent increase in the measure over a 12-month period.
...
Because the increase in spending was larger than the gain in incomes, the savings rate fell to minus 0.9 percent, from minus 0.7 percent in June. The rate has been negative for 16 straight months, indicating consumers are dipping into savings to maintain spending.
...
``The long-awaited housing-market correction is upon us and indications are that it is not going to be quite as orderly as many, including the Fed, are predicting,'' said economists Sheryl King and Claudia Lokody in an Aug. 25 report to clients. The slump in housing ``has the potential to pull consumer spending to the brink in early 2007.''

A drop in home prices would prevent consumers from tapping into home equity as a source of extra spending money, King and Lokody said. The slump in construction will also ripple through other areas of the economy, dragging down employment, they said.

Million Doesn't Go Far In Jersey

From the Star Ledger:

What $1 million will buy in N.J.
By Sam Ali

Walking past the vacant house at 10 Nottingham Road in affluent Short Hills is like stepping onto the set of that animated horror movie "Monster House"; except the neighbors here insist this place does not devour stray kites, basketballs or people.

The droopy slate roof is brittle and cracked. When two underground oil tanks were removed earlier in the year, the temperature inside the house plummeted and the pipes froze and burst, real estate agents said. And then, of course, there's that nagging problem of mold in the basement.

So much for lifestyles of the rich and famous.

While the phrase "million-dollar home" can conjure images of stately Georgians or grand, rambling Victorians, the definition is rapidly changing in New Jersey.

In a state where home prices have climbed 87 percent between 2000 and 2005, seven-figure homes including the one at 10 Nottingham Road are becoming more common with a heavy emphasis on the word "common."
...
Just how much "house" a million bucks will get you these days might surprise you.

You can get anything from a stately colonial in Chester on four acres with oodles of charm overlooking a pond to a shopworn, one-bedroom cracker box in Sea Bright that looks like a garage. In a number of towns, like Montgomery, East Brunswick and Montville, $1 million will get you a brand new 6,000-square-foot house with a three-car garage.

"The reality is that most of these million-dollar homes are very ordinary," said Arthur Tassaro, a sales agent with Friedberg Properties & Associates in Cresskill, which specializes in selling luxury homes in Bergen County. "A million dollars really doesn't get you a lot."
...
Jeffrey G. Otteau, who runs an appraisal firm in East Brunswick, believes a number of shifts are under way that will lead to a glut of luxury houses in the $1 million to $2.5 million range in the coming years, particularly as Baby Boomers start trading in their trophy houses for smaller condominiums or age-restricted housing.

In addition, the lack of growth in the highest-paying job sectors in New Jersey, as well as the scarcity of buildable land and its high cost, does not bode well for this segment of the luxury housing market, Otteau said.

In the 18 New Jersey counties his firm covers, the inventory of million-dollar homes is already much higher than homes in the lower price ranges. There is a 13-month supply of houses priced at $600,000 to $1 million, and an 18-month supply of dwellings listed between $1 million and $2.5 million.

"This weakness in the luxury market has been developing slowly for several years now and will likely continue for the foreseeable future," Otteau said.

Welcoming Back Short Sales

From Bloomberg:

Housing `Short Sales' Are Latest Sign of Stress

Housing headlines are dominating the news these days in the same way the Nasdaq did in the late 1990s.

And no wonder. Successive years of sizzling sales and spectacular price appreciation have given way to falling sales and starts, record inventories of unsold homes (new and existing), a plunge in housing affordability and a flattening out of prices on a nationwide basis. The residential real estate market may never match the Nasdaq's vertiginous 78 percent decline from the 2000 top to the 2002 bottom, but it is captivating potential sellers, late-to-the-party speculative buyers and analysts looking to assess the impact on the overall economy.

The big debate is whether housing will a) stabilize at a lower level; b) slide for an extended period; or c) sink fast and take the economy down with it. Each option carries its own flow chart of possibilities.
...
Greenspan never believed in the intangible aspect of the wealth effect: the idea that a homeowner could feel richer, and spend more from earned income or borrow to finance spending, because the price of an asset had appreciated on paper. For him, it was the actual dollars in consumers' pockets that mattered. (Maybe that's why he never grasped the stock market bubble in real time.)

Well MEW and HEE may soon become HEE HAW, for ``Home Equity Extraction or House As Wager.'' When prices stop rising, as they have in many previously hot areas of the country, the game is up for all but the savviest speculators who know the real estate market in a particular area and can spot undervalued properties.

That endgame is contributing to the practice of ``short sales,'' according to an Aug. 21 story in the Sacramento (California) Bee. Homeowners who owe the bank more than the house is currently worth try to convince the lender to accept less than the loan value to avoid the costs of foreclosing on the property.

Two die in illegal basement apartment

From the New York Times:

Fire in Subdivided Basement Kills Two in a New Jersey Home

ENGLEWOOD, N.J., Aug. 30 — A four-alarm fire tore through a three-story wood house on James Street here on Wednesday, killing two residents who, the authorities said, were living in illegal basement apartments. A tenant in a third basement apartment was critically injured.

The fire started around 3:40 a.m., said Chief Robert Moran of the Englewood Fire Department, and the flames quickly spread to the first and second floors of the house. In all, 14 people were in the house at the time of the fire, and most were members of the family that owns the property, Chief Moran said.
...
Chief Moran said that the basement had been divided into individual units, but that the city’s planning office had no record of permits being issued to the owner, Oscar Cortes, for the work. Deputy Chief Arthur O’Keefe of the Englewood Police Department said charges were likely to be filed against Mr. Cortes for illegal units. Arson investigators said the fire was accidental, but they had not determined how it started.
...
A shortage of low-cost housing has become a growing problem in Bergen County, and illegal conversions are becoming more common, Bergen County officials said. Mayor Michael Wildes of Englewood said that in recent years the growing number of illegal immigrants moving into the city had led landlords to capitalize on the situation.

“It is a tremendous challenge in our nation and in our city where people with economic challenges are forced into these situations,” Mr. Wildes said.

He said that he did not know how many illegal units Englewood had but that the city had been increasing inspections in recent months.

“Any landlord that profits or benefits from situations like this should be prosecuted,” he said.

Looking Back: Decline Seen In Home Prices In New Jersey

From the New York Times:

Decline Seen In Home Prices In New Jersey
By ANTHONY DEPALMA, SPECIAL TO THE NEW YORK TIMES
December 14th, 1989

The days of steeply climbing house prices are over, and the 1990's could begin with prices dropping by as much as 12 percent, according to a report released today by Rutgers University based on three million house sales in New Jersey.

''This really is the end of a housing and economic era in New Jersey and the Northeast region,'' said Dr. James W. Hughes, a professor of urban planning who wrote the report with Dr. George Sternlieb.

The study, ''New Jersey Home Prices,'' confirms what anyone who has bought or sold a house or apartment this decade already knows: prices have gone out of sight. But the sheer mass of the data gives new insight into how the increases have profoundly changed the market in nearly every one of the 567 municipalities in the state.

The authors said that although their data were drawn just from New Jersey the trends and general conclusions can be applied to the entire New York metropolitan region. Cooling in Mid-1988

Using computers, the authors examined all house and apartment sales in the state from 1965 to mid-1988, a total of three million transactions. They show that although house prices here remained at or below national levels through the beginning of this decade, they soared starting in 1985.

From 1980 to mid-1988, the median sales price rose to $141,900 from $57,500, with many communities, among them Alpine and Saddle River in Bergen County and Mantoloking in Ocean County, exceeding that by hundreds of thousands of dollars.

Since then, however, prices have cooled considerably, with no increases seen. In some cases, there have been declines, a trend that could continue, depending on the economy.
...
The housing bubble burst after Wall Street started laying off stockbrokers in 1987. Companies started to cut back, the high prices made many corporations move employees elsewhere and the demand for housing eased. Houses that had sold in three months were sitting on the market for nine months or longer, and sellers began lowering their expectations.

Professor Sternlieb said house prices had already declined in spots and could drop 4 to 12 percent next year, depending on economic conditions will determine whether prices remain depressed. Adjustment in Attitudes

The realignment could change the way that people think about housing, Professor Hughes said. Instead of stretching to buy as much house as possible and banking on appreciation, buyers may be content with less housing and put more money into savings accounts.

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)

8/23 - 18,720
8/30 - 18,743 (0.1% Increase)


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

8/23 - 9,165
8/30 - 9,170 (0.1% Increase)


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

8/23 - 2,676
8/30 - 2,661 (0.6% Decrease)

Growing Class Gap in New Jersey

From the Star Ledger:

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

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

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

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

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

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

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

An Upscale Wildwood?

From the Bucks County Courier Times:

Will regular guy bail as Wildwood upscales?

They want to upscale Wildwood, which is like a fast-food joint putting out linen and hiring a wine steward.

For nearly a century Wildwood has been the place on the Jersey shore where a working guy could take his family on a week's summer vacation and not go bust. Now the place has gone condo crazy.

Many of the small, affordable (and dated) motels that lined the seaside are gone. About 30 have been knocked down in three years.

Rising throughout North Wildwood and Wildwood Crest (two of the five municipalities that make up “The Wildwoods”) are beige, vinyl-clad condo rentals that sleep eight, 10 or more for $2,000 a week — and that's a deal.

A recently demolished site in North Wildwood has a sign that even more condos are “Coming Soon.” These will have “Hardwood floors” and “Granite counter tops” — the dcor opiates of the upper middle class masses.
...
Wildwood Mayor Ernest Troi-ano Jr. said growth has been as-tonishing. As real estate prices in nearby Stone Harbor and Cape May soared, investors flooded into the Wildwoods, sending prices skyward like a gull on an updraft.

“Three or four years ago you could pick up a house in Wildwood for 30 or 40 thousand dollars. Today, that same house is selling for 300 or 400 thousand,” he said.
...
One showed me a project for the “new” boardwalk which he said will have — egad — a Star-bucks, a high-end ice-cream shop and wi-fi cafes for laptop geeks.

“We want the guy who makes $100,000 to $150,000 to come here. It's beachfront property, it's premium, and the last I checked, God ain't makin' any more of it,” one agent told me.

Trading Sleep For Housing?

From the Star Ledger:

Trading sleep to beat housing costs and traffic

Years ago, taking a pre-dawn drive through the Lincoln Tunnel was a breeze.

There were empty seats on NJ Transit buses and trains at that hour, and highway construction crews could keep working until 6 a.m. without jamming traffic.

Not anymore.

New Jersey's rush hour keeps creeping earlier and earlier into the morning.

The number of people who leave for work between 5 and 6 a.m. jumped by more than 20 percent from 2000 to 2005, according to the U.S. Census Bureau's American Community Survey, released yesterday.

Meanwhile, the increase in the number of people starting their commute between 6 a.m. and 7:30 a.m. was more modest -- just 3.3 percent -- while the census showed a 7.5 percent decline in those who begin their commute between 7:30 a.m. and 8:30 a.m.
...
First, they say, people who have moved farther away from their jobs in order to afford housing have had to leave for work earlier in the morning to get there on time.

"They decided that providing a good home and security for their families were more important than having a short commute," said Tom Dallessio, New Jersey director of the Regional Plan Association, a non-profit planning organization.

Incomes rose, or did they?

From the NY Times:

Census Reports Slight Increase in ’05 Incomes

The nation’s median household income rose slightly faster than inflation last year for the first time in six years, the Census Bureau reported yesterday.

The rise, however, had little to do with bigger paychecks — in fact, both men and women earned less in 2005 than 2004. Rather, census officials said, more family members were taking jobs to make ends meet, and some people made more money from investments and other sources beyond wages.
...
While the economy has been strong by most statistical measures for the past several years, its benefits have not translated into improvements in the standard of living for many people. In New York, the proportion of city residents living below the poverty level has not changed in the last five years.
...
The 5.9 percent drop in median household income since 1999 was not shared equally around the country. In Michigan, median household income fell 11.9 percent between 1999 and 2005. In North Carolina, it was 11.2 percent, in Utah 10.4 percent and in Indiana 9.5 percent.

But in some states, the impact was not nearly so great: a drop of 2.5 percent in New York, 2.4 percent in South Dakota and 1.9 percent in New Hampshire. In the District of Columbia and six states — Hawaii, Maine, Maryland, Montana, North Dakota and Virginia — the change was so small that it fell within the survey’s margin of error.

Sustaining the no-lose perception

From The Motley Fool:

No Housing Bust Here!

I'm sure others have noticed, as I have, the increasingly desperate pleas from the housing-bubble cheerleaders, especially National Association of Realtors Chief Economist David Lereah. A longtime bubble denier -- who, I think, is more interested in protecting his constituency of six-percenters than in offering realistic housing-market commentary -- Lereah began asking the Fed to protect his bubble a couple months back. At the same time, he and his associates have tried to spin the situation with the news media, who, hungry for soundbites, are usually all too happy to parrot headlines such as "Existing-Home Sales Down With Softening Prices."

That's the title of the latest "no reason for fear" release, which you can find here. You can see, especially in the remarks toward the bottom, the NAR's devotion to trying to convince Americans that housing is a no-lose "investment."

That doesn't quite square with the soundbite available via a Bloomberg story on the numbers. There, Lereah reportedly said, "It's very important that the Fed understand the fragile state of the housing market. It's very important that the Fed maintain the status quo, keep rates where they are."

Translation: "Pleeeez Gawwwd don't take away their free money! Do that and we're all sunk!"

If it's disconcerting that the most prominent housing bulls are, when we're not looking, begging for economic policies aimed at shoring up their crumbling story, then this might be much worse.

How about if the last shred of the housing bull story turned out to be -- how do you say? Untrue?

"20% decline in median single-family house prices nationwide"

From Forbes:

End Of The Bubble Bailouts
By A. Gary Shilling

For a quarter-century, Americans’ spending binge has been fueled by a declining savings rate and increased borrowing. The savings rate of American consumers has fallen from 12% in the early 1980s to -1.7% today (see chart below). This means that, on average, consumer spending has risen about a half percentage point more than disposable, or after-tax, income per year for a quarter-century.

The fact that Americans are saving less and less of their after-tax income is only half the profligate consumer story. If someone borrows to buy a car, his savings rate declines because his outlays go up but his disposable income doesn’t. So the downward march in the personal savings rate is closely linked to the upward march in total consumer debt (mortgage, credit card, auto, etc.) in relation to disposable income (see chart below).

Robust consumer spending was fueled first by the soaring stock market of the 1990s and, more recently, by the housing bubble, as house prices departed from their normal close link to the Consumer Price Index (see chart below) and subsequently racked up huge appreciation for homeowners, who continued to save less and spend more. Thanks to accommodative lenders eager to provide refinancings and home equity loans, Americans extracted $719 billion in cash from their houses last year after a $633 billion withdrawal in 2004, according to the Federal Reserve.

But the housing bubble is deflating rapidly. I expect at least a 20% decline in median single-family house prices nationwide, and that number may be way understated. A bursting of the bubble would force many homeowners to curb their outlays in order to close the gaps between their income and spending growth. That would surely precipitate a major recession that would become global, given the dependence of most foreign countries on U.S. consumers to buy the excess goods and services for which they have no other markets.

Here Come The Auctions

From NJBiz:

NJ Affordable Homes Portfolio Going Up for Bankruptcy Auction

Properties owned and controlled by bankrupt residential builder NJ Affordable Homes Corp. (NJAH) in Woodbridge will be put up for auction. Chicago real estate auction company Sheldon Good & Company Auctions NorthEast and real estate firm DJM Realty in Melville, N.Y., will handle the sale of the 340 properties from September 29 through October 1 at the Meadowlands Convention Center in Secaucus.

The Securities and Exchange Commission went to court last September to freeze the assets of NJAH and its president Wayne Puff. The SEC alleged Puff and the company sold at least $40 million notes in unregistered offerings in a Ponzi scheme to more than 490 investors across the country. NJAH was liquidated under Chapter 7 of the bankruptcy code. The U.S. Bankruptcy Court District of New Jersey in Newark granted the trustee a motion to sell all 340 properties held by the company.

From PR Newswire:

Good & Company Auctions NorthEast and DJM Realty in Joint Venture to Conduct Largest Residential Real Estate Auction in New Jersey

Sheldon Good & Company Auctions NorthEast, (http://www.sheldongood.com) the nation's premiere auction and brokerage company, in a joint venture with DJM Realty, a national real estate disposition firm based in Melville, New York, has been retained by Charles M. Forman, the chapter 7 trustee appointed for NJ Affordable Homes Corp. (NJAH) to sell at auction 340 properties owned and controlled by NJAH

The auction venue is being announced for September 29th, 30th and October 1st at the Meadowlands Convention Center in Secaucus, NJ.

Mr. Forman, of the law firm of Forman, Holt & Eliades, LLC, said: "The auction sale of the NJAH portfolio is the most efficient and cost-effective method of generating a substantial pool of funds from which those who were hurt by this massive fraud can be compensated."

Mr. Forman added: "Private investors, conventional lenders, other parties and the community as a whole have been victimized by the scheme. We believe that the auction method devised by this real estate team will result in the expeditious sale of these properties thereby ultimately benefiting all concerned, including the investors, lenders, tenants and their neighborhoods."

Jeffrey Hubbard, Executive Managing Director for Sheldon Good & Company Auctions NorthEast, LLC, said: "This will be the largest residential auction thus far to be conducted in New Jersey, and most likely, in the United States. This auction will have something for everyone: the builder, homeowner, developer and investor. The portfolio of properties includes 80 single-family homes, 78 two-family homes, 96 three-family homes, 19 four-family homes, 2 six-family residences, 57 parcels of land, and 8 commercial properties. This extensive portfolio includes property in every county in New Jersey except two. 195 properties are located in the Essex
County area."

Mr. Hubbard said that all properties would be sold absolute regardless of price, free and clear of liens, subject to the approval of the United States Bankruptcy Court District of New Jersey presiding over NJAH's bankruptcy case.

Rainy Day Economics

Two big pieces of data out today, Consumer Confidence and the FOMC minutes. Consumer confidence came in under consensus estimates earlier this morning, FOMC minutes to be released at two:

Consumer Confidence Plunges in August

Worries about the job market caused consumers' confidence in the U.S. economy to tumble more than expected in August to its lowest level in nine months
.
The Conference Board, a New York-based research group, said Tuesday its confidence index fell to a reading of 99.6, down from 107.0 in July. The index was lower than analysts' expectation of 102.5.

The last time the index fell below 100 was in November, which saw a reading of 98.3.

Lynn Franco, director of the Conference Board's consumer research center, said this month's drop -- the largest one-month decline since Hurricane Katrina ravaged the Gulf Coast a year ago -- means expectations of slower growth in the coming months.

"You've got a deterioration in business conditions coupled with lackluster job growth," Franco said.

Americans' sentiment about the labor market worsened in August, with consumers saying jobs are "plentiful" decreasing to 24.4 percent in August from 28.6 percent in July, and those saying jobs are "hard to get" increasing to 21.1 percent from 19.6 percent.

For those interested in reading the FOMC minutes released this afternoon:

Minutes of the Federal Open Market Committee

From Bloomberg:

Fed Members Saw Pause as `Close Call'; Unsure of Further Moves

Federal Reserve officials saw their decision to suspend a two-year run of interest-rate increases as a ``close call'' and were unsure whether they would further raise borrowing costs, records of their last meeting showed.

``Many members thought that the decision to keep policy unchanged at this meeting was a close call and noted that additional firming could well be needed,'' the Fed said in minutes of the Aug. 8 meeting, released in Washington today. ``Members generally saw limited risk in deferring further policy tightening that might prove necessary.''

The records detail how central bankers wrestled with a dilemma: raise rates because of higher inflation fueled by an increase in energy costs, or hold back because of a housing slump that's weakening the economy's expansion. Most voting Fed members felt that the current rate stance may prove ``consistent with satisfactory economic performance.''

The 9-1 decision, which left the benchmark lending rate at 5.25 percent, was the first of Chairman Ben S. Bernanke's tenure to feature an opposing vote.

The dissenter, Richmond Fed President Jeffrey Lacker, wanted an 18th quarter-point increase because economic growth was not likely to slow enough to reduce inflation. In his view, ``further tightening was needed to bring inflation down more rapidly than would be the case if the policy rate were kept unchanged,'' the minutes said.

Caveat Emptor!
Grim

Realtor Response to Relisting Piece

Interesting response to this Star Ledger piece on relisting:

Practice hides the real deal on homes for sale in Jersey

Came across the response early this morning:

The wrong location

-- Jeffrey Consentino, Hillsborough Nothing to hide As a full-time professional Realtor with a premier New Jersey residential brokerage company, I take exception to your Aug. 20 article on the sleight of hand prac ticed by a few agents in the state. This slanted report relies on four other states for a comparison. New Jersey probably has the nation's most comprehensive rules and guidelines encompassing laws and ethics designed to protect the consumer in the purchase of a home. If the time was taken to research and interview the vast majority of Realtors like myself or brokerages like the one where my license hangs, people would learn that this practice is not tolerated because it is a deception. We have a responsibility, and we believe that all parties are to be treated equally.

To quote a Realtor in Cape Cod about a wrong practice by a few in New Jersey and make it front-page news is a disservice to one of the state's most valuable businesses. If the public perceives it, then it is real, but in this case it isn't the truth. Buyers and sellers should speak to their Realtors. The right choice has nothing to hide.

July Otteau Report

From the Otteau Group:

SUMMER MARKET REMAINS COOL
July was another cool month for the housing market as declining buyer-confidence continued to take its toll on home sales. In July, contract-sales activity declined 11% from the June level and was 25% below the year earlier pace in July 2005. That this slowdown comes in the midst of the prime March-to-August selling season when home sales should still be running hot provides compelling evidence of a market transition wherein home buyers have greater control over final selling prices than at any time since 1991, a 15-year span.

From an inventory perspective, the number of homes being offered for sale now stands 67% higher than a year ago. This equates to a 9-month supply as compared to only 4-months last year at this time. It is however encouraging to note that Unsold Inventory increased by only 1.5% in July following a 47% increase over the 1st 6 months of the year, which works out to nearly 8% per month over that period. This moderation, coupled with recent declines in mortgage rates present home buyers with an opportunity window that will likely close once mortgage rates continue their upward climb.

From a price perspective, market conditions continue to exhibit the greatest weakness for luxury priced homes. As shown in the table at right, Unsold Inventory below $600,000 stands at an 8 month supply as compared to 27-months above $2.5 million. This weakness in the luxury market has been developing slowly for several years now and will likely continue for the foreseeable future. As a result, expect the market for more affordably priced homes to be the first to recover.

"We can help you keep your home."

From the Herald News:

Rug pulled out from under them

They left her with a flier for Property Solutions of New Jersey. At the bottom, they wrote, "We can help you keep your home."

A year later, Alford faces homelessness. She and her family will be evicted from her home of more than 38 years on Tuesday, and Property Solutions will get the property. If experience is an indicator, the company will sell the house within months and make hundreds of thousands of dollars.

"They are taking the house from out underneath me," said Alford, 40, choking back tears.
...
But in the process, some homeowners like the Alfords lose ownership of their properties. Offering foreclosure rescue services is not illegal. But lawyers representing the thousands of homeowners who have entered the deals say some companies use fraud and deception to lure people into giving up their property.

"This is a way to steal homes from people," said Jeremiah Battle, a lawyer with Northeast New Jersey Legal Services in Jersey City. "They are set up for failure."
...
Typically, foreclosure specialists offer to pay off an existing mortgage and sell the house back to the owner when they can afford it. The resident remains in the house and pays a monthly fee, believing that the company will help them find new financing.

But the new financing rarely materializes. And only later -- often when they receive an eviction notice -- do residents realize that they actually signed over their home's deed to the foreclosure specialists, as documented in cases cited by the Consumer Law Center report. The company can then flip the house for significant profit and evict the tenants.
...
What the Alfords say they didn't realize was that on July 12, 2005, with a few pen strokes, they had lost ownership of their home.

Copies of the paperwork reveal that on that day the Alfords signed over their home's deed and title to Property Solutions in exchange for $96,000 to buy the property out of foreclosure.
...
State records show that Property Solutions has sold at least six of its properties in the state. A property on Van Dyke Avenue in Haledon was purchased in February 2006 for $302,653. It was sold just three months later for $368,000, a more than $65,000 increase. A Passaic property was sold for an $86,000 gain. A Paterson house was sold for $51,000 more than its purchase price. All had been in foreclosure and all were redeemed with money paid by Property Solutions, according to Bill Maer, spokesman for the Passaic County Sheriff's Department, which handles foreclosure sales.

Price Reduced! Morris 8/18 - 8/28

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 me, nor do I believe they are a bargain or a value. Even reduced, I still believe these homes are still grossly overpriced.

On to the list!

Morris
MLS	Town	Original List	List Price	Reduced
2203111	Kinnelon	$2,150,000	$1,449,000	32.60%
2264950	Jefferson	$435,000	$350,000	19.50%
2271789	Mount Olive	$725,000	$599,900	17.30%
2258594	Jefferson	$319,900	$265,000	17.20%
2276485	Roxbury	$419,000	$349,000	16.70%
2299709	Rockaway	$1,199,000	$999,999	16.60%
2265540	Morris	$1,250,000	$1,050,000	16.00%
2268485	Denville	$639,000	$539,000	15.60%
2302086	Morristown Town	$649,000	$549,000	15.40%
2231744	Roxbury	$389,900	$329,900	15.40%
2289264	Morris	$618,000	$525,000	15.00%
2258958	Rockaway	$529,000	$450,000	14.90%
2268683	Chatham	$935,000	$799,000	14.50%
2222380	Rockaway	$595,000	$509,900	14.30%
2275247	Harding	$699,900	$599,900	14.30%
2293241	Rockaway	$359,900	$309,900	13.90%
2285691	Mount Olive	$649,000	$559,000	13.90%
2290975	Mount Olive	$439,900	$379,900	13.60%
2280895	Parsippany-Troy Hills	$379,900	$329,000	13.40%
2276232	Rockaway	$219,000	$189,900	13.30%
2272288	Morris	$389,000	$339,000	12.90%
2264066	Washington	$1,090,000	$950,000	12.80%
2272566	Montville	$859,000	$749,000	12.80%
2263866	Washington	$865,568	$755,557	12.70%
2257922	Pequannock	$538,190	$469,900	12.70%
2278711	Rockaway	$429,000	$374,900	12.60%
2266600	Kinnelon	$1,599,000	$1,399,000	12.50%
2284929	Kinnelon Boro	$795,000	$699,900	12.00%
2285277	Kinnelon	$765,000	$675,000	11.80%
2270644	Boonton Town	$679,000	$599,900	11.60%
2277719	Randolph	$1,690,000	$1,495,000	11.50%
2268559	Chatham	$949,000	$839,900	11.50%
2258904	Rockaway	$484,900	$429,900	11.30%
2107582	Dover Town	$409,900	$365,000	11.00%
2303396	Montville	$750,000	$669,000	10.80%
2288314	Madison	$1,849,000	$1,650,000	10.80%
2272505	Roxbury	$829,000	$739,900	10.70%
2253323	Jefferson	$425,000	$379,900	10.60%
2291554	Montville	$1,228,000	$1,099,000	10.50%
2269360	Parsippany-Troy Hills	$229,000	$205,000	10.50%
2261436	Mount Olive	$429,900	$384,900	10.50%
2302454	Washington	$669,000	$599,000	10.50%
2271851	Parsippany-Troy Hills	$574,900	$514,900	10.40%
2268333	Rockaway	$479,900	$429,900	10.40%
2277298	Mountain Lakes	$999,000	$895,000	10.40%
2273975	Randolph	$319,500	$286,500	10.30%
2294469	Rockaway	$499,900	$449,900	10.00%
2301653	Roxbury	$217,000	$195,300	10.00%

Caveat Emptor!
Grim

New Jersey - Tax Hell

From the Star Ledger:

Study calls Jersey a taxing place to call home

New Jersey's reputation as a tax hell just got worse.

The $1.9 billion worth of tax increases in the state's new budget represents a 5 percent increase over last year, far outpacing any other state, according to a study by the National Conference of State Legislators.

New Jersey now has the highest state sales tax, tied with three other states, at 7 percent. Its cigarette tax now leads in the nation. And, of course, this all comes on top of the nation's highest average property taxes.

It's no wonder people like Donley Kuendel are thinking of leaving.

"The quality of life is going down about as fast as taxes are going up," said Kuendel, 50, of Atlantic Highlands. He and his wife are looking at houses in Delaware, where there is no sales tax, no income tax and property taxes are relatively low.

He's not much impressed by the Legislature's current efforts to come up with tax-cutting plans.

"I just can't see how you are going to get relief in this state," he said.
...
Other data provided by the Americans for Tax Reform and National Governor's Association show no state has boosted taxes more than the $5.2 billion enacted by New Jersey in budget years 2002 through 2007 -- a per capita increase of $596. Our big next-door neighbor, New York, raised taxes $4.6 billion during that period, or $240 per person. Only Alaska, with its small population, had a higher per capita increase, $699.
...
"Businesses are fleeing New Jersey as well as residents, and it's very discouraging," he said.

Auctions an alternative as market slows

From the Chester Daily Local:

Home auctions on the rise

And now for yet another sign of the rapidly cooling housing market:

Prudential Fox & Roach is teaming up with Sheldon Good & Co. to offer auctions as a way to sell homes for owners, builders and real estate developers alike.

The largest real estate firm by far in the Philadelphia metropolitan market, Prudential Fox officials believe its combination with Good, the biggest U.S. auction house, is especially well-timed.
...
Usually, real estate auctions flourish as local housing markets cool. The last time auctions flowered was during the late 1980s and early 1990s, when home prices dropped precipitously in certain parts of the United States, southern California and Texas included.
...
Auctions can provide builders, investors and developers with the ability to buy and sell everything from single-family homes, townhouses and condos to raw and approved land, Ritti explained. Sales in once red-hot markets have tanked so quickly that sellers have little handle on how much their homes are really worth now -- or how to attract buyers to begin with.

Auctions also give homeowners another, often faster way to sell their abode in a market fast losing steam.
...
Prudential Fox first looked at the New Jersey shore real estate market because certain pockets there are languishing,Ritti said. Existing home listings in Ocean City, N.J., Wildwood, N.J., and Brigantine, N.J., for instance -- markets where people tend to buy homes more for investments than to occupy them --have doubled since a year ago.
...
First client for the new alliance is builder Tom Morello’s Sea Breeze Development, which will put 22 new vacation homes on the auction block in North Wildwood, N.J. come October.

From the Wall Street Journal:

As Rates, Inventories Rise, Developers Try Home Auctions

Brian Michaud just picked up a little something for 40% off -- a brand-new, two-bedroom condominium in Fish Creek, Wis., with a private elevator and harbor views. His method: He bought it at auction. Though the condo was new, its developer decided he wanted to sell quickly, so he put it on the block last month.

Mr. Michaud had been watching the condo since construction started, but figured last year's $1.25 million asking price was beyond his budget. But when it went on the block, Mr. Michaud and his brother snapped it up for $740,000 -- less, even, than comparable units without water views have sold for nearby. "It was a great deal," he says.

As the U.S. housing market slows, private homeowners have begun experimenting with various sales strategies, including putting the prized family home up for auction. But another group of sellers is also heading to the auction house: builders and developers trying to unload newly built homes. Unlike typical homeowners, whose emotional and financial stakes in their homes might keep them from slashing prices, developers tend to lack sentimental attachments and may have more room to negotiate financially. So in many cases, buyers can get a decent price on new properties at auction, with discounts of 20% and even more.
...
Unlike private homeowners, who may overvalue their homes and are often reluctant to reduce their asking price at auction, small builders and developers tend to be more sophisticated and motivated, auctioneers say, with a clear-eyed understanding of the value of their properties. And because builders make as much as 40% gross profit on the homes they sell, they also have more wiggle room when it comes to reducing the price. "A home seller is in a retail position," says Destin, Fla., auctioneer Ben Anderson. "A builder is in a wholesale position."
...
This isn't the first time that large numbers of new homes have gone under the gavel. In the late '80s and early '90s, builders large and small were buying land and building houses on speculation. When the market turned, many of these properties wound up in foreclosure, along with thousands of privately owned homes. As a result, banks created separate departments known as REOs, for "real estate owned," to handle the onslaught of sales.

All asset bubbles are alike

From Stephen Roach at Morgan Stanley:

Another Post-Bubble Shakeout

Five and a half years ago the equity bubble popped. Within six months, the US economy went into mild recession, and the global economy was quick to follow. Today, America’s housing bubble is finally bursting. Is the die cast for another bubble-induced downturn in the US and global economy?

All asset bubbles are alike. Sure, there are obvious differences between equities -- a financial asset -- and homes -- a tangible asset. But to me, the Shiller definition says it all: A bubble is an outgrowth of powerful amplification mechanisms -- both real and psychological -- which create an unsustainable condition whereby “… price increases beget further price increases” (see Robert Shiller’s Irrational Exuberance, second edition, Princeton University Press, 2005). The rise and fall of the US housing market fits the Shiller script to a tee. House price appreciation surged to a 27-year high in 2005, and as of the first quarter of 2006, prices were still rising by 20% or higher in 53 metropolitan areas across the United States. Both pricing and demand were feeding on each other through classic Shiller-like amplification mechanisms.

As always, the upside of a speculative bubble lasts for longer than you think. But when it finally goes, it invariably unwinds with greater force than widely expected. That seems to be the way the chips are now falling in the US housing market. Demand for homes is falling like a stone and inventories of unsold dwellings are ballooning -- up 40% for existing homes and 22% for new homes in the 12 months ending July. These are the classic quantity adjustments that set the stage for price destruction -- the endgame of any asset bubble. So far, home values just seem to be leveling off at still lofty price points. As the bid-offer gap widens in an excess inventory and rising interest rate climate, price declines will come as they always do. This bubble is not different.

Running out of land?

From the Record:

Squeezing the suburbs

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

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

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

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

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

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