We're moving!

No, not out of state. Well, not yet anyway.

This blog and it's readership have grown tremendously over the past year. This tool is no longer adequate for managing such a large blog, and is becoming more frustrating with every day that passes. We've outgrown this site, so it's time to move to something bigger and better.

The transition is currently taking place and will likely continue until Wednesday. I was hopeful I could get all the data transitioned to the new site last night, but I gave up at 2 am, after 5 straight hours of "geeking". I'm hopeful that we can get the remainder of the data moved and site transitioned later tonite.

The new site is live, so take a look and make a note of the new URL. Unfortunately, I didn't have the foresight to register a domain name earlier on, so we're going to have to pay the price for that mistake now. However, I'm sure the benefits of the new site and blog will far outweigh the temporary hassle of the new URL. Many of you have already taken a peak, but for those who did not:

New Jersey Real Estate Report

Yes, we're no longer the "Northern New Jersey Real Estate Bubble Blog". I thought the name was great, at first, until I realized how incredibly long and cumbersome it was. It was almost as complicated as trying to tell someone the cryptic URL. We needed a new name and URL, and this is what I decided on (http://njrereport.com).

But wait, you say, the word "bubble" is missing from the name. Yes. Yes, it is. I feel that it detracts from the credibility of the site and its members, so the bubble reference is gone. However, the real estate bubble in New Jersey will continue to be the main topic of focus for the blog and forums.

With the new site will come new topics and features. Many of you have already started using the forums (http://njrereport.com/forum). With many topics hitting 100+ comments, it becomes very difficult to follow a conversation or branch off on separate threads. The forum will allow us to keep discussions on topic, as well as provide a forum for general discussion and questions.

I'm looking forward to hearing suggestions and feedback, so let's have it.

Caveat Emptor!
Grim

Can Fannie go bust?

From Marketwatch:

Fannie Mae could be hit hard by housing bust: Berg

The worst of Fannie Mae's regulatory troubles may be behind it, but one longtime skeptic of the mortgage giant thinks it could face bigger problems from trouble in the U.S. housing market.

Gilchrist Berg, founder of $2 billion Jacksonville, Fla.-based hedge-fund firm Water Street Capital, said in a recent letter to investors that Fannie Mae could lose $22 billion to $29 billion if, as he expects, the housing bubble bursts and foreclosures increase.
...
"We are not sure the folks running the show fully embrace the risk of declining house prices," Berg wrote in the letter, a copy of which was obtained by MarketWatch. If the housing market continues to decline "a major portion of Fannie Mae's value could be wiped out." He declined to comment for this story.

Fannie Mae spokesman Alfred King said the company protects itself from housing-market volatility in many ways, including maintaining a geographically diverse book of business and focusing on mortgages that have a high percentage of equity in them.
...
Fannie has traditionally specialized in higher-quality, fixed-rate mortgages, which are less vulnerable to interest-rate fluctuations and volatility in the housing market.

But the company has been investing more in subprime MBS in recent years. Subprime loans are sold to home buyers who fail to meet the strictest lending standards, so this area of the mortgage market is expected to be hit harder by any housing downturn.

Fannie and Freddie bought 25.2% of the record $272.81 billion in subprime MBS sold in the first half of 2006, according to Inside Mortgage Finance Publications, a Bethesda, Md.-based publisher that covers the home loan industry.

In 2005, Fannie and Freddie purchased 35.3% of all subprime MBS, the publication estimated. The year before, the two purchased almost 44% of all subprime MBS sold.
...
Given those recent moves, Berg said it's not implausible that 15% of Fannie's mortgage exposure is subprime.

If a housing slowdown causes subprime foreclosure loss rates to rise to between 6% and 8%, Fannie could lose $22 billion to $29 billion, Berg estimated in his letter.

That's more than half of the roughly $40 billion in capital that Fannie had at the end of March, according to Ofheo.

Disclaimer: Under no circumstances does this information represent a recommendation to buy or sell securities.

Home Builder Confidence Hits 15 Year Low

From the NAHB:

Builder Confidence Slides In August

Reacting to what they perceive as increasing consumer uncertainty regarding the market for new single-family homes, builders tempered their views on current and expected sales activity in the Wells Fargo/National Association of Home Builders Housing Market Index (HMI) for August, released today. The HMI declined seven points to 32, its lowest level since February of 1991. This was the seventh consecutive month in which builder confidence, as measured by the index, has fallen.

“Two big factors are coloring builders’ perceptions of the market right now – rising sales cancellations and substantial growth in inventories of both new and existing homes,” said NAHB Chief Economist David Seiders. “These factors are largely the result of an increasing number of potential buyers adopting a ‘wait-and-see’ attitude because of uncertainty about where the housing market is headed, and record-high energy costs also appear to be weighing on housing demand. We’re also seeing an anticipated withdrawal of investors/speculators from the market, following a major influx in 2004-2005.”
...
All three component indexes declined in August. The component gauging current single-family home sales fell seven points to 36, while the component gauging sales expectations in the next six months and the component gauging traffic of prospective buyers both fell six points, to 40 and 21, respectively.

Regionally, the HMI recorded a three-point decline to 34 in the Northeast, a five-point decline to 15 in the Midwest, a nine-point decline to 41 in the South and a 10-point decline to 42 in the West.

From Marketwatch:

Home builders' confidence falls again in September

The confidence of U.S. home builders fell for the eighth straight month in September, dropping to the lowest level since February 1991, the National Association of Home Builders said Monday. The NAHB/Wells Fargo housing market index dropped by three points in September to 30 from a revised 33 in August, indicating that most builders think the housing market is poor. Economists expected the index to fall to 31. A year ago, the index was at 65. A reading of 50 would indicate builder sentiment was balanced between good and poor. (This is an update to correct how many months in a row the index has fallen.)

Nontraditional Mortgages Increasing

From the Wall Street Journal:

Use of Nontraditional Mortgages Is Edging Higher, Poll Indicates

Use of several types of nontraditional mortgages has increased among home buyers, according to a Wall Street Journal Online/Harris Interactive personal-finance poll.

The survey found increased usage of three of four types of nontraditional mortgages, which can be riskier for consumers than standard fixed-rate or adjustable-rate mortgages. The survey examined the mortgages used by people who had bought a home within the past three years.

The online poll of 2,790 adults found that 9% of recent home buyers obtained a payment option mortgage, compared with 4% in a survey conducted last year. These loans, also known as option ARMs, give borrowers as many as four payment choices each month, including a minimum payment set once a year, an interest-only payment, and what would be the standard payment on a 15-year or 30-year mortgage.

So-called piggyback mortgages, which combine a standard first mortgage with a home-equity loan or line of credit, were used by 12% of home buyers in the latest survey, up from 10% last year. And the share of home buyers using miss-a-payment mortgages edged up one percentage point to 3%. These loans let borrowers skip as many as two mortgage payments a year and 10 payments over the life of the loan with no impact on credit rating.

The overall use of interest-only mortgages fell to 14% in the latest poll from 17% last year. For homebuyers ages 18-34, though, the percentage rose to 23% this year from 16%, the poll showed.

At the same time, 15% of those who own homes said they had obtained a home-equity loan recently. Just over half of those said the purpose of the loan was to make home improvements, while 38% said it was to pay off credit-card debt and 11% said it was to help finance the purchase of a second home.

Of the 7% of Americans who said they currently own a second home, 40% said they bought it for use on weekends and vacations, according to the poll. Eighteen percent said they use their second home for rental income, while 17% said the second home was an investment and 15% said they would use the home in retirement.

"It's getting scary"

From Bloomberg:

Housing Slump in U.S. May Lead to First Drop Since Depression

Nancy and Brian Christopherson are asking $389,900 for their eight-room Colonial Revival home in Westford, Massachusetts, featuring a new kitchen with maple cabinets. Even at that price, they'll lose $14,100.

Monthly price reductions since they listed it in May for $429,900 have lured no offers for the house, bought for $369,000 in 2004. ``It's getting scary,'' says Nancy Christopherson.

The sharpest slowdown in U.S. home-price growth in three decades is trapping owners with mortgages they can't afford, pushing unsold homes to a record 4.42 million and gutting profits for builders such as Lennar Corp. and Toll Brothers Inc. The U.S. median home price next year may fall for the first time since the Great Depression, says Gabriel Stein, chief international economist with Lombard Street Research in London.

Economists such as Nobel laureate Joseph Stiglitz warn that the reduced sales may push the world's largest economy into recession, and concern is mounting over economic growth in Europe and Canada. The Federal Reserve will reduce its U.S. benchmark lending rate, says Jan Hatzius, chief U.S. economist with Goldman Sachs Group Inc. Last month, the central bank ended a two-year streak of 17 increases that pushed the rate to 5.25 percent, citing cooling home sales.

``The housing slowdown will be a large drag on economic activity,'' Hatzius says. ``The Fed will cut rates to 4 percent next year as the housing downturn starts to push up the unemployment rate.''
...
``For the next couple of months, we're probably looking at between zero to a five percent drop in prices,'' Lereah says. ``The only way for home sales to come back, and for inventories to start to diminish, is for sellers to start to bring prices down.''

Not all homeowners are willing to accept less. Roxy Allen, 54, listed her four-bedroom house in Littleton, Colorado, for sale in May. She dropped the price once to $339,900 from $352,000 and has refused to go lower. She hasn't received a single offer.

``The Realtor wants you to just make a deal with somebody and sell it for cheap,'' Allen says. ``Why would I sell my house for less and buy one for more?''
...
Some sellers across the U.S. must reduce their expectations, even those who don't move. Edward Brown, 47, a Florida real estate investor, says he's financially overextended and needs to sell a three-bedroom house in Cape Coral, Florida. He's asking $579,000 -- $20,000 less than he paid for the property a year ago.

``No one expected the market to drop so quickly,'' he says. ``There are a lot of people like me who are caught in a pickle.''

A Fallback Plan?

From the New York Times:

Who Bears the Risk?

The housing boom would never have lasted as long as it did if mortgage lenders had to worry about being paid back in full. But instead of relying on borrowers to repay, most lenders quickly sell the loans, generating cash to make more mortgages.

For the past few years, the most voracious loan buyers have been private investment banks, followed by government-sponsored housing agencies, like Fannie Mae. The buyers carve up the loans into mortgage-backed securities — complex i.o.u.’s with various terms, yields and levels of risk. They then sell the securities to investors the world over, at breathtaking profit. The investors earn relatively high returns as homeowners repay their mortgages.

The process has encouraged homeownership and created wealth. But there is a downside, too, which demands attention.

As the boom thundered on, the pool of available credit grew larger than the pool of creditworthy borrowers, resulting in an explosion of risky mortgages with features like no money down, interest-only payments and super-low teaser rates. Investors — including mutual funds, pension funds, hedge funds, insurance companies and foreign central banks, to name a few — currently hold $2 trillion in mortgage-backed securities from investment banks, triple the amount from three years ago. Investors also own $4 trillion in mortgage-backed securities from government-sponsored agencies.

In a market so vast and dynamic, everyone knows that if mortgage defaults should rise, damage could reverberate throughout the financial system. So far, defaults have inched up. But many homeowners are at a dangerous juncture. Interest rates on adjustable mortgages are rising as home values are weakening, precluding for many the chance to refinance. Economists calculate that $750 billion of outstanding mortgage debt is now at measurable risk of default — about 7 percent of the total.

Exodus from Real Estate

From Reuters:

Jump ship or pink slip for some realtors

They are jumping ship or receiving the pink slip. America's real estate agents and mortgage lenders, that is.

Now that the glory days of the most recent U.S. housing market are over, its deterioration is taking a toll on employees who profited from its record-breaking five-year run.

With home sales slumping and loan demand diminishing, layoff announcements and resignations have become increasingly common, evidence that the sector's slump is broad.

Carmen Cook, a veteran real estate broker, saw the writing on the wall and decided to retire earlier this year.

"The market changed and my job became more difficult," she said. "I was working just as hard and the income wasn't coming in."
...
"All the brokers are hustling right now, but the income is not coming in the way they are accustomed to," she said.
...
The mortgage lending industry has not fared much better, with layoff announcements totaling 8,513 during the same period, a rise of over 70 percent year-over-year, according to data provided by the company.

Is tax reform even possible?

From the Daily Record:

Critics say talk bogs down progress; Democratic lawmakers urge patience

So what happens when you put a sacred cow, a third rail and an 800-pound gorilla all on a table?

So far, not much.

Nearly two months into lawmakers' efforts to curb property taxes by tackling some of New Jersey's most politically charged and expensive elements of government -- Gov. Jon S. Corzine lumped together those metaphors in a July speech to lawmakers --committee hearings have mostly resulted in dry, academic discussions that often outline what cannot be done rather than what money-saving options exist.

Some critics are frustrated at the pace of progress on the long-standing issue, but with another two months left until the Democrats' self-imposed deadline to propose their solutions, legislative leaders said last week that they are laying the foundation for reform by closely studying the complex issues involved and expect their plans to take shape over the next month -- even if the hearings might be putting people to sleep, said state Senate President Richard J. Codey, D-Essex.
...
William Dressel Jr., executive director of the New Jersey State League of Municipalities and one of the most vocal advocates for property tax reform, said lawmakers are learning firsthand how difficult the subject is, and he has doubts that they will have meaningful solutions in place by Nov. 15.

"There is no easy solution to dealing with a very complex problem," Dressel said. "I think they realize that there is not going to be a broad-based meaningful property tax relief served to them on a silver tray."

Lowball! Morris County 8/23 - 9/17

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 original 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 is Morris County for the range specified, I'll publish the rest of the counties as time permits.


(click to enlarge)


(click to enlarge)

Caveat Emptor!
Grim

Slowdown

From PhillyBurbs.com:

Market slowdown

If there's any doubt in your mind that the local real estate market has slowed, ask a seller.

“It seems like people are coming and looking, but nobody's making an offer,” said Terri Kiriakidi, who has been trying to sell her mother's Warminster house since June.

Or a real estate agent.

“I've never seen anything like this in my life,” said Herman Petrecca, a real estate agent with ReMax Associates in Warminster. “I've got a bunch of properties sitting on the market.”

Supporting these anecdotal assessments are cold, hard numbers, mined from the Multiple Listing Service used by real estate agents to track and record home sales and provided by Prudential, Fox & Roach Realtors.

Those numbers — all from the 43 municipalities of Central and Upper Bucks and Eastern Montgomery counties — show that it took 86 percent longer to sell a house in August than it did one year ago. They show that the number of homes sold in August, 521, was off 25 percent from a year ago. And they show that the local inventory of homes for sale hit an all-time high in August of 3,565, almost double December 2004's level of 1,814.

The numbers also show the area's median home-sales price hit an all-time high of $325,000 in August. But that median price was only 1.6 percent higher than the price in August 2005, one of the smallest year-over-year increases in recent memory and well below the year-over-year price increases homeowners enjoyed at the height of the boom. In May 2005, for instance, the area's median home price rose 17 percent from the previous May.

Many descriptive phrases are used to describe the area's current housing market. But all spell one word: slowdown.

Is the media shaping public perception of the bubble?

From the NY Times:

Someone’s Spoiling the Party, the Housing Market Says

TO hear some people in the real estate industry tell it, one of the biggest problems with the housing market is what is being said about it in the news media.

Agents and industry executives say reporters, editors and news anchors are making a cooling market sound worse than it is. While the number of sales may have dropped from 2005 (which was a record-setting year, the end of a five-year run) and more homes stay on the market longer, real estate professionals note that sale prices in much of the country are still higher than they were a year ago.

Richard A. Smith, vice chairman and president of the Realogy Corporation, the nation’s largest residential real estate broker, said there was a “constant flood of media that is so negative” that it was discouraging many potential buyers and sellers.

“Nobody wants to be foolish in this kind of market,” he said. “No one wants to sell too low or buy too high.”
...
Robert J. Shiller, the Yale economist and author of “Irrational Exuberance,” said the news media played an important role in molding public opinion as markets both rise and fall. But he said he generally approved of the skeptical tone of many news reports about both the real estate boom and subsequent downturn. “The media has been pretty on top of this story, that this might be a psychological event,” he said.

“You have wrought my destruction, too.”

From the NY Times:

A Fable, Adapted From Aesop

THERE is an Aesop fable about a man — Greek, of course — who sees a swallow fluttering about on an unusually warm winter day. Leaping to the conclusion that summer has arrived, the man sells his only coat to buy himself a good time.
...
Some economists say you merely need to replace the Greek with an American, and the coat with a house or condominium to understand the force powering the American economy during the recent housing boom.

In this updated version of the fable, Americans were intoxicated by the leaps in the value of their real estate. Assuming the good times were here to stay, they were unable to resist temptation, impulsively calling the mortgage broker to get another loan to pay for the plasma TV set, the Caribbean vacation and the three-burner barbecue grill.
...
Between the third quarter of 2005 and the first quarter of this year, home equity withdrawals were running at an annual rate of more than $850 billion, according to the Federal Reserve, and amounted to about 9 percent of disposable personal income. The personal savings rate declined into negative territory last year for the first time since 1933. And the economy surged.

In Aesop’s world, winter set in again, the swallow died and the coatless man blamed the bird for his misfortune: “By appearing before the springtime you have not only killed yourself,” he moaned, “but you have wrought my destruction, too.”

Development Watch

From the Star Ledger:
New life for old factories in Orange

The boarded-up factories where John B. Stetson and his family built a thriving hat manufacturing business in Orange's Valley section may be transformed into lofts and retail space for artists.

That's the goal for the Stetson family's long-abandoned No Name Hat Factory complex, off Mitchell and South Jefferson streets. It is at the northern end of what used to be Orange's hat manufacturing district.

The Orange City Council recently made a deal with developers to breathe new residential and retail life into that site as well as into two adjacent properties: the one-time Monroe Calculating Co. and the Harvard Press building.
...
The initial redevelopment plan calls for the creation of 100 residential and retail spaces where artists will live and work, Morrissy said.

"There will be artist live-work lofts, artist retail spaces, artist studios, and art program spaces," Morrissy said. "The project will include a new pedestrian entrance to the Valley, along the east branch of the Rahway River, and another 350 condominium units, in either the old industrial buildings, or new buildings."

From the Star Ledger:
900 housing units plus retail proposed

Another 900 residential units are proposed for the township.

At its Wednesday meeting, the planning board will review an application calling for constructing the homes and a shopping center on 168 acres of farmland that borders School House and Randolph roads. The application, submitted by Summerfields at Franklin, includes plans to construct single-family dwellings, semiattached homes, a clubhouse and a retail center.

As proposed, except for 150 single-family homes, the balance of the community would be age-restricted. One out of every nine units built would be set aside for low to moderate-income housing.

Part of the township's Council on Affordable Housing obligation would be met through two proposed three-story buildings of 50 units each that would be reserved for low- to moderate-income housing.

The project is estimated to take 10 to 12 years to complete. The site is nearby the Canal Walk development and is slated to have more than 1,300 age-restricted units.

From the Jersey Journal:
19 condos on Bergen Ave. hailed as evidence of rebirth

A host of local officials yesterday kicked off the sales of 19 condos on the 600 block of Bergen Avenue in Jersey City, hailing it as a sign of increasing investments in areas of the city other than the Gold Coast.

The family team of Santomauro General Contracting turned two four-story row homes into 19 condominium units.

From the Record:
Condo plan angers neighbors

Proponents of a 196-unit condominium and town-house complex proposed off Palisade Avenue say it would bring tax revenue to the township and raise property values in the surrounding neighborhood.

The Park View development would be built on the site of an old soap factory adjoining Herrick Park. "There are no downsides" to the $92 million complex, said Frank DeVito, lawyer for the developer, Holuba Realty.

Residents in Teaneck and neighboring Bogota view the proposal through a decidedly different lens.

"This is a high-density development in a single-family neighborhood," said Mark Gold of Van Buren Avenue, just up the street from the proposed development. "It's completely inconsistent with the character of the neighborhood."