Saturday, February 25, 2006

Weekend Open Discussion

Open Discussion for this weekend

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

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

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

Caveat Emptor!

Friday, February 24, 2006

Price Reduced! 2/16 - 2/24

Welcome to another edition of Price Reduced!

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

On to the list!

MLS# 2209268 - Newark, NJ
Previous Price $249,000
Current Price $200,000 (Price Reduced 19.7%)

MLS# 2111702 - Phillipsburg, NJ
Previous Price $159,900 (Reduced from $179,000)
Current Price $128,900 (Price Reduced 19.4%, 28% off OLP)

MLS# 22047298 - Glen Ridge, NJ
Previous Price $925,000
Current Price $749,000 (Price Reduced 19%)

MLS# 2246559 - Montville, NJ
Previous Price $569,500
Current Price $469,500 (Price Reduced 17.6%)

MLS# 2224896 - Montclair, NJ
Previous PRice $1,200,000 (Reduced from $1,700,000)
Current Price $1,000,000 (Price Reduced 16.7%, 41.2% off OLP)

MLS# 2216676 - Randolph, NJ
Previous Price $514,900 (Reduced from $529,000)
Current Price $449,900 (Price Reduced 12.6%, 15% off OLP)

MLS# 2232910 - Montclair, NJ
Previous Price $1,395,000
Current Price $1,219,000 (Price Reduced 12.6%)

MLS# 2246959 - Morristown, NJ
Previous Price $339,000
Current Price $300,000 (Price Reduced 11.5%)

MLS# 2241651 - Jefferson, NJ
Previous Price $425,000
Current Price $379,000 (Price Reduced 10.8%)

MLS# 2222831 - Harmony, NJ
Previous Price $279,9000
Current Price $249,900 (Price Reduced 10.7%)

MLS# 2233481 - Roselle, NJ
Previous Price $289,900 (Reduced from $299,000)
Current Price $259,900 (Price Reduced 10.4%, 13% off OLP)

MLS# 2241723 - Madison, NJ
Previous Price $1,549,900
Current PRice $1,395,000 (Price Reduced 10%)

Something new this week is the "Short List"

Town/From Price/To Price/Reduction
South Orange Village/$1,525,000/$1,375,0009.84%
Essex Fells/$1,525,000/$1,399,900/8.20%
Scotch Plains/$1,250,000/$1,165,000/6.80%
Berkeley Heights/$460,000/$429,000/6.74%
Glen Ridge/$749,000/$699,000/6.68%
Upper Saddle River/$1,169,000/$1,095,000/6.33%

691 homes were Price Reduced! this week, the average reduction was 3.79%, and the total dollar amount of the reductions came in at a bit over $13,300,000.

Caveat Emptor!

North Jersey Real Estate News

Morristown Green development approved

The Morristown Planning Board gave the green light last night to a residential-retail development that will dramatically change the downtown streetscape facing the historic Green.

The unanimous vote on a proposal first announced in September 2003 paves the way for the demolition of the vacant Epstein's department store, which for 90 years has overlooked the Green on West Park Place.

With Epstein's and adjacent properties reduced to rubble, some 246 luxury condominium and apartment units will be built along with 72,000 square feet of retail space split up among ground-floor shops in three new buildings.

Transit village eyed for J&J tract

The Johnson & Johnson property on Route 1 is full of empty warehouses and barren parking lots, but what North Brunswick officials see is potential commerical growth.
Last night, in the first of many planned public meetings, the property's buyer tried to convince officials and residents that housing should be built on the sprawling 220-acre tract. Municipal officials, however, seemed unreceptive.
Even a real-estate agent at the meeting seemed against new housing.

"We're all scared to death of housing from that concept," Realtor and township resident Pete Maimone said. "There's absolutely no need for it. We have sufficient housing already."

Kearny resident feels New Jersey's 'affordability crisis'

Since moving to New Jersey from her native Puerto Rico two decades ago, Delia Andaluz has lived in some rough spots. She started in Newark's housing projects, then worked her way through a series of run-down apartments in the city's North Ward. Last summer, the 36-year-old single mother of two decided it was time to buy a house.

Easier said than done.

Andaluz eventually managed to purchase a three-family house in Kearny, but her inexperience in the daunting world of real estate left her with a $4,000 monthly mortgage. Despite rent checks from tenants and help from her fiancé, she is struggling to make ends meet on her $38,000 salary as a counselor at a local nonprofit organization.

County purchases 14 acres of open space in Clark

The Union County Board of Chosen Freeholders announced last week that the county has preserved 14 acres of open space in Clark. County officials say the move will prevent the land from being developed into a residential subdivision site of 30 single-family houses.

The freeholder board voted Feb. 16 to authorize the county's purchase of the property from the Hazelwood Cemetery for $6.25 million through the Open Space, Recreation and Historic Preservation Trust Fund.

Mortgage brokerage pulls vanishing act

They drove brand new luxury cars and were rarely seen without their staple accessories: cigarettes and cellphone earpieces.

But the men behind AMG Mortgage suddenly vanished one weekend in early November, just two months after moving into a Palisades Park office building. They left behind furniture, paintings, even half-empty coffee cups.
The FBI has said AMG helped Korean-Americans in North Jersey secure as much as $100 million in fraudulent loans. With AMG's assistance, a homeowner would collect multiple loans on a single property, fooling each bank into thinking it was the only home equity lender, the FBI said.

At the corner of Grinn and Barret

Paul Eisenstein barely made it home for Thanksgiving last year. On his way from Pleasant Ridge, Mich., to his mom’s place in New York City, a street sign made him laugh so hard he nearly veered off the highway: Fangboner Road.
Eisenstein’s personal contest favorite is New Jersey’s Shades of Death Road, which runs through Allamuchy in Warren County. Although there are several theories on the name’s origin, the contestants submitted their own belief — that the Lenni-Lenape people who once occupied the area suffered from malaria and tuberculosis, and were slaughtered at the hands of an Iroquois tribe.

Welcome to Unaffordability, NJ!

The National Association of Homebuilders (NAHB) & Wells Fargo released their year end 2005 affordability study.

Indianapolis Recaptures Title Of Most-Affordable Major Housing Market At Year-End 2005

At the bottom of the affordability scale was Los Angeles-Long Beach-Glendale, Calif., where just 2.3 percent of homes sold in the fourth quarter were affordable to families earning the area’s median household income of $54,500. The median price of all homes sold in that area was an even $500,000. And as usual, the bottom of the affordability scale was dominated by large California cities, including Santa Ana-Anaheim-Irvine, San Diego-Carlsbad-San Marcos, and Stockton. New York-White Plains-Wayne, N.Y.-N.J. rounded out the list of the five least-affordable major housing markets.

The complete list by affordability rank (in Excel format) can be found here.

Caveat Emptor!

Thursday, February 23, 2006

New Jersey - Growth or Stagnation?

More Hughes and Seneca today in the Ledger:

Jersey faces stagnation if it can't handle growth

New Jersey, with 1,173 people per square mile, is the mostly densely populated state. Thus future population growth, without adequate infrastructure, portends increased crowding, costs and congestion. Or perhaps not.

There is a distinct possibility that population growth will not be of the magnitude forecast. In fact, there are signs that it won't.

Annual population growth in the state recently has slowed significantly. In fact, it has fallen steadily year by year from 71,000 people in 2002 to 33,000 in 2005. Net immigration from abroad into New Jersey has been declining, while net migration from New Jersey to the rest of the country has been increasing. In 2002, nearly 24,000 more people moved out of the state to the rest of the country than moved into the state from the rest of the country.

By 2005, almost 57,000 more people left New Jersey for the rest of the country than moved here, more than double the out migration of three years earlier. If this trend continues, future population growth will be more on the scale of the 1970s, when the state grew by 194,000 people, and the 1980s, when the state's population rose by 365,000.

This shifting demographic pattern is paralleled, and perhaps caused, by conditions in New Jersey's economy, which is now beset by below-national growth rates, tepid gains in high-paying job sectors, the erosion of our core science and technology assets and the high costs of housing. So we may not have such a congested future after all.

Demographic and economic growth appears to be slowing in reaction to our reduced capacity to accommodate growth. In turn, this creates its own set of problems, such as diminished economic opportunity, stagnant markets and decreasing ability to afford New Jersey's extraordinarily high costs of living.

Never before has New Jersey faced a period of such limited infrastructure capacity additions. It is now time for a sustained public policy discussion about the crucial issues of infrastructure needs, population growth and our economic future.

Caveat Emptor!

Wednesday, February 22, 2006

Say No to New Jersey Senator Rice

Thanks to the Jersey Shore Real Estate Bubble Blog for tipping me off on this one:

Make tax cards available to all

Sen. Ronald Rice, D-Essex, a real estate broker, is pushing a bill that would exempt property record cards, maintained by local tax assessors, from the definition of a government record. That means the public would no longer be able to access the cards through an Open Public Records Act request. Yet Rice's bill would give real estate professionals, such as himself, open access.

It's a self-serving piece of legislation that would benefit Rice and those in his profession, but be detrimental to everyone else. And the damage it would do to OPRA should prompt other legislators to demand that the bill be stopped in its tracks. Any effort to restrict public access to government records should be vigorously opposed.

Rice's bill would let homeowners access their own cards, which contain information such as assessed value, ownership, lot size and number of rooms. But homeowners who wanted to review the cards of other homes in their neighborhoods, which is commonly done to support tax appeals, would be blocked from doing so.

I urge everyone to pick up the phone immediately and call Senator Ronald Rice to express your utter disgust for this self-serving legislation. He can be reached at: (973) 371-5665.

If you want to make a difference, pick up the phone, start making calls, do whatever you need to do to make your feelings known, but don't let this pass.

Caveat Emptor!

Northern NJ Weekly Residential Inventory Update

Single Family, Condo, Coop
(Bergen, Essex, Hudson, Morris, Passaic, Somerset, Sussex, Union, Warren Counties)
2/15 - 12,376
2/22 - 12,597 (1.8% Increase, ~14% since January 1st)

Single Family, Condo, Coop
(Bergen, Essex, Hudson, Passaic Counties)
2/15 - 5,960
2/22 - 6,078 (2% Increase, ~13% since January 1st)

Single Family, Condo, Coop
(Hudson County)
2/15 - 2,054
2/22 - 2,078 (1.2% Increase ~20% since January 1st)

Inventory stats will be posted every week, prior to noon on Wednesday. The numbers will include all 3 of the Northern NJ MLS systems, GSMLS, NJMLS, and the Hudson MLS. If someone would like to provide me with numbers from the FSBO systems, I'll gladly include them as well. These numbers do not include multifamily homes, only SFH, Condos and Coops. Realize that this does make an impact in certain areas of North Jersey with high densities of multifamily (Hudson, Passaic, etc).

Warren Watch - Home prices set to fall

Regular readers know that I keep tabs on a number of local journalists that I've tagged as being industry cheerleaders. These journalists routinely write puff-pieces praising real estate and urging people to buy without regard to caution. One of these cheerleaders is journalist Warren Boroson.

Here is his most current piece:

Author: Home prices set to fall

There I was, bopping through the aisles at a Barnes & Noble, when what do I see?

A book called "SELL NOW! The End of the Housing Bubble."

The publisher is a respected name, St. Martin's Press. Copyright 2006.

So I bought it. And read it.

A strange book.


The author predicts that house prices will fall off the table, returning to their 1997 levels. All over the developed world.

Houses in New York and northern New Jersey will lose 44.6 percent of their value, falling from an average of $454,522 (in 2005) to $252,028 during the next five to seven years.


Anyway, my response is that people pay a lot of money for houses because houses are nice. You become the king of your castle; by paying down your mortgage, you own more and more of that castle -- instead of making your landlord richer.

Yes, it's clear that house prices in some areas are softening now. And maybe some people would be better off selling. But what a hassle!


And he may turn out to be totally correct, although I doubt it.

But if he's right, he will have made a self-fulfilling prophecy. If everyone who reads his book does what he advocates, the real-estate market will indeed be in serious trouble.


Now, after you've read the article (or the highlights I've posted here). Take a look at this piece:

Is it time to cash in on your home?

Who else might want to seize the opportunity to take profits? Anyone with more house than they really need. Warren and Rebecca Boroson bought their Glen Rock, N.J., home 29 years ago for $69,900 and raised their two sons there. But now, says Warren, "our children are grown and out of the house. We had four bedrooms, which is three more to mess up than we needed." Last year the Borosons sold for $579,000 and moved to a high-rise apartment in Hackensack, N.J., with a doorman and a swimming pool. [a rental]

"We sold mainly to lock in the profit," Warren says. "It was a little faster than we’d planned. But if you’re planning to sell in a few years, you might as well do it now while you’re sure the market is still good."

Warren writes a financial column for the Morris County, N.J., Daily Record that is syndicated nationwide. With an eye on retirement (he’s 69),
he invested his cashed-out home equity in a laddered portfolio of bonds.


I have a bit of concern with one small piece of the article, I'm not sure if it's just the way I'm reading it, but it comes off as a slam against the book's author, John Talbot.

By the way, the author is someone named John R. Talbott. He is identified on the book's back cover as a best-selling author (he wrote another book, called "The Coming Crash in the Housing Market"), was a visiting scholar at UCLA's School of Management and was an investment banker at Goldman Sachs.

Whether he has any real-estate experience, whether he graduated from college and whether he has any advanced degrees is not disclosed.

This really seems like a below-the-belt slam against Mr. Talbot. A quick search on the web finds the following bios:

John R. Talbott is an economic consultant who has authored academic papers on economic growth and development and made presentations on the subject to the governments of Russia, Jordan, and Qatar. A visiting scholar at the Anderson School at UCLA, Talbott is also a former vice president in the investment banking division of Goldman, Sachs, and Company.

Here are two of John Talbot's academic papers:

The End of Class Warfare: An Examiniation of Income Disparity
Political and Economic Freedoms and Prosperity

Not sure why a journalist would make such a rash assumption about someone's education and background and not just do a little leg work to find the real facts. I suppose that if you can't argue the facts, resorting to insult is the next best thing...

Caveat Emptor!

Where O' Where Has David's Credibility Gone?

This one was posted up at Bubblemeter:

Take a good look at that, and no, it's not a joke. That's NAR Chief Economist David Lereah's new book. Well, I don't believe it's entirely new, I believe it's a retitle, recover, and update of "Are You Missing the Real Estate Boom? : The Boom Will Not Bust and Why Property Values Will Continue to Climb Through the End of the Decade - And How to Profit From Them", released last year.

The new book, "Why the Real Estate Boom Will Not Bust - And How You Can Profit from It : How to Build Wealth in Today's Expanding Real Estate Market" is scheduled to be released this month, it can be found here.

Take a good look at the reviews section, there are some real gems there:

"For me, this was more comic relief than any scholarly analysis. The author has a vest[ed] interest in the bubble not bursting, and he's selling his soul with this book to prove it. "

"The key to making money in real estate - and keeping it - is to get aboard a rising real estate trend early, not late. While it is true that real estate is a good long-term investment, what Lereah ignores is the cycle nature of real estate. In other words, if you buy an overvalued house late in the market cycle - and you are over leveraged and illiquid like most Americans are today - you may not be around for the long-term." - Robert Campbell Author of Timing the Real Estate Market

" Huckster Drums Up Business"

"And where was this book say 10 years ago BEFORE real estate became the darling investment it is today? Seems Mr. Lereah is a tad late in the game. It's easy to say everything will continue to be wonderful when everything has been so wonderful for so long. The biggest mistake people make is automatically assuming, like the Realtor in Florida below, that just because things have been a certain way in the recent past that they will continue to be that way indefinitely into the future. "

Caveat Emptor!

Tuesday, February 21, 2006

January FOMC Minutes

The minutes from the January Fed meeting were released at 2:00pm this afternoon. The full text can be found here:

Minutes of the Federal Open Market Committee


"Although the stance of policy seemed close to where it needed to be given the current outlook, some further policy firming might be needed to keep inflation pressures contained and the risks to price stability and sustainable economic growth roughly in balance. In the view of some members, the possibility of additional policy moves was reinforced by readings on core inflation and inflation expectations that were somewhat higher than was desirable over the long run. However, all members agreed that the future path for the funds rate would depend increasingly on economic developments and could no longer be prejudged with the previous degree of confidence. "

"Real personal consumption expenditures appeared to have increased only modestly in the fourth quarter, as spending on motor vehicles was restrained following a surge in the summer in response to manufacturers' price incentives. Outside of motor vehicles, consumption was brisk, supported by job growth, increases in personal income, and the decline in energy prices. Consumption was also likely supported by further gains in home values and equity prices that raised the ratio of household wealth to disposable income relative to that seen earlier in 2005. Consumer sentiment measured by surveys moved up in December and, judging by the preliminary reading of the Michigan Survey, edged up further in January.

Activity in the housing market appeared to continue at high levels, although there were some indications of slowing. Single-family housing starts decreased markedly in December; however, this decline may have been due in part to unusually cold and wet weather in some areas of the country. Multifamily housing starts increased in December. Sales of new and existing homes remained at elevated levels but slowed somewhat toward the end of the year. Moreover, the stock of homes for sale increased to the upper end of ranges seen in recent years. Recent data on mortgage applications and survey measures of homebuying attitudes also pointed to some cooling in the housing market. "

Caveat Emptor!

Some Interesting Reading

A look at the personal savings rate from Contrary Investor:

'Neff Said?

Clearly there have been times over the last five plus decades where the three year moving average rate of change in household ownership of equities was well above what we now experience. Should we not have seen meaningful dips in the US savings rate as this true multiplicity of price peaks was seen again and again over time? Shouldn't we have at least seen savings rate dips when both household real estate and stock price peaks coincided, or roughly coincided throughout history? That's the logic that's being applied to the dismissal of meaning in today's savings rate calculation. So just why shouldn't that also have been true of the past? Clearly, implicit in Neff and many a pundits comments of today, whether they realize it or not, is that "it's apparently very, very different this time" when it comes to interpreting the message implicit in today's negative savings rate.

Statement given by Ron Paul to the U.S. House of Representatives:

The End of Dollar Hegemony

Once again Congress has bought into the war propaganda against Iran, just as it did against Iraq. Arguments are now made for attacking Iran economically, and militarily if necessary. These arguments are all based on the same false reasons given for the ill-fated and costly occupation of Iraq.

Our whole economic system depends on continuing the current monetary arrangement, which means recycling the dollar is crucial. Currently, we borrow over $700 billion every year from our gracious benefactors, who work hard and take our paper for their goods. Then we borrow all the money we need to secure the empire (DOD budget $450 billion) plus more. The military might we enjoy becomes the “backing” of our currency. There are no other countries that can challenge our military superiority, and therefore they have little choice but to accept the dollars we declare are today’s “gold.” This is why countries that challenge the system-- like Iraq, Iran and Venezuela-- become targets of our plans for regime change.

Ironically, dollar superiority depends on our strong military, and our strong military depends on the dollar. As long as foreign recipients take our dollars for real goods and are willing to finance our extravagant consumption and militarism, the status quo will continue regardless of how huge our foreign debt and current account deficit become.

From the Daily Reckoning:

Desperate Times Call For Desperate Measures

Stocks are holding at their 1997 levels. Houses are at least twice as high. But house prices seem on the verge of tumbling. In the 1990s, houses in the Los Angeles area fell nearly 30% when the aerospace industry went into a slump. People lost jobs; house prices fell. The downturn was cushioned by falling interest rates - especially after the bubble collapsed. We have full employment - albeit at low wages - but interest rates are not falling, they're rising. And now, on about the same incomes as 10 or 20 years ago, consumers are spending twice as much on housing. One out of every five homeowners in California spends more than half his income on housing. The typical mortgage in the Bay Area is $2,867 - more than twice the typical rent of $1,324.

What will happen when the cycle turns and the ATM machine stops working in the bedroom? Will they drop their houses like dot.coms? Will the marginal buyers go back to renting? Speculators could get hit hard; house prices might drop 30% or more...and stay down.

From the Star Ledger:

Demand driving Market

This piece looks more like a "Special Advertising Section" than journalism. Here are one readers comments on this piece:

You see the star ledger "special" this week? Outlook 2006 "Housing Industry living large"
This newspaper strongly needs a reality check or should be held to some sort of accountability for their press. They need to stop coupling solely with realtors and begin doing some true journalism (Sleuthing, gathering facts, etc) instead of collecting one-sided quotes. They put in 2010 "prediction/projections" for median price value, f*cking crazy - Predicting 60-140k increases in median prices across the state.

WTF? The article by Tracey Porpora starts off "Despite the lack of available land, developers are building homes across northern NJ to try to keep up with the strong demand for new residential real estate". The first few words are enough to know that the article is garbage. This comes from a writer of such fine articles as "The Three Flirting Moves That Never Fail" and "My grandfather holds the Guinness World Record for his 475 spoon rests". This author is a frequent writer for "Contemporary Bride" and has no business reporting on Real Estate.

The whole damn thing made me sick to my stomach. It sickens me to see that the RE industry is using the press to pressure the market into irrational exuberance.

Caveat Emptor!