Saturday, March 18, 2006

Jersey and Taxes, Perfect Together

Ever wonder where your federal tax dollars go? And how much we get back for them?

Biggest Tax Donors

The state of Massachusetts gets 77 cents in federal spending for every dollar that it sends to Washington in tax revenue, according to a study by a tax policy think tank.

The nonprofit Tax Foundation released the results of an annual study which found that states that had more high-cost urban areas with higher median incomes chipped in more federal tax revenues than they got back in spending.
Scott Hodge, president of the Tax Foundation, said the disparity for states like Massachusetts has more to do with their citizens earning more money, and less to do with the congressional delegation not doing its job.

"The main culprit is not lazy congressmen who don't bring home enough pork, but rather the progressive income tax," Hodge said. The study identifies 18 donor states — those who contribute more to the federal tax pie than they get back — and 32 "beneficiary" states. New Jersey had the distinction of being the biggest donor, with that state only getting back 55 cents for every dollar in federal taxes paid by its residents and businesses.

Thanks to metroplexual for the link as well as the graphics. If you think this is interesting wait until you see the migration pattern charts!

Caveat Emptor!

Lowball! 3/11 - 3/17

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

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

I'm going to try to pick some different towns this week, I seem to keep gravitating towards the same places.

On to the list!

MLS# 2095322 - Fairfield, NJ
Original Price $479,900
Reduced Price $444,900
Sales Price $335,000 (24.7% Lowball, 30.2% off Original Price)

MLS# 2248762 - Belleville, NJ
List Price $240,000
Sales Price $195,000 (18.8% Lowball)

MLS# 2095090 - Washington Twp, NJ
Original Price $385,000
Reduced Price $375,000
Sales Price $306,000 (18.4% Lowball, 20.5% off Original Price)

MLS# 2042574 - Newark, NJ
Original Price $169,000
Reduced Price $154,000
Sales Price $129,000 (16.2% Lowball, 23.7% off Original Price)

MLS# 2202768 - Bernardsville, NJ
List Price $4,485,000
Sales Price $3,825,000 (14.7% Lowball)

MLS# 2200327 - Irvington, NJ
List Price $275,000
Sales Price $235,000 (14.5% Lowball)

MLS# 2100692 - Elizabeth, NJ
List Price $219,000
Sales Price $190,000 (13.6% Lowball)

MLS# 2105480 - Ridgewood, NJ
List Price $2,495,000
Sales Price $2,175,000 (12.8% Lowball)

MLS# 2091793 - Cranford, NJ
Original Price $649,900
Reduced Price $624,900
Sales Price $545,000 (12.8% Lowball, 16.1% off Original Price)

MLS# 2238683 - Plainfield, NJ
List Price $399,900
Sales Price $350,000 (12.5% Lowball)

MLS# 2235423 - Florham Park, NJ
Original Price $620,000
Reduced Price $569,900
Sales Price $500,000 (12.4% Lowball, 19.4% off Original Price)

MLS# 2207586 - Wharton, NJ
Original Price $354,900
Reduced Price $344,900
Sales Price $305,500 (11.4% Lowball, 13.9% off Original Price)

MLS# 2229072 - Clifton, NJ
List Price $449,999
Sales Price $465,000 (10.4% Lowball!)

MLS# 1600411 - Watchung, NJ
Original Price $1,990,990
Reduced Price $1,599,900
Sales Price $1,440,000 (10% Lowball, 27.7% off Original Price)

MLS# 2228369 - Byram, NJ
Original Price $319,997
Reduced Price $298,990
Sales Price $270,000 (9.7% Lowball, 15.6% off Original Price)

MLS# 2217651 - South Orange, NJ
Original Price $1,181,525
Reduced Price $1,100,000
Sales Price $993,790 (9.7% Lowball, 15.9% off Original Price)

MLS# 2111824 - Hanover, NJ
Original Price $434,000
Reduced Price $422,000
Sales Price $385,000 (8.8% Lowball, 11.3% off Original Price)

The Short List will cover homes from Hunterdon and Middlesex this week
Town/List Price/Sales Price
East Amwell/$540,000/$495,000
South Plainfield/$420,000/$395,000
North Brunswick/$255,000/$240,000
Old Bridge/$529,000/$519,000

Middlesex and Hunterdon sales look extremely 'thin' with a total of only 42 over this period. In comparison the 9 County North Jersey sales list is over 440.

And lastly, the home on the corner of Van Houten and Athenia Ave in Clifton finally sold for 26% off, at $335,000. It was originally listed at $449,900 and sat on market for over 250 days. In case your wondering why I'm telling you, this home was featured in "You can relist, but you can't hide" which illustrated the MLS relist trick to reset the Days on Market and Original Price.

Caveat Emptor!

Friday, March 17, 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!

New Jersey County Population Change Data

I'm sure many of you would like to see the Census Bureau data that was the basis for the Ledger article on population growth. The data is available on the Census Bureau site, for your convenience here is a link to one of the NJ tables. This data represents the population change from July 1st, 2004 to July 1st, 2005.

Annual Estimates of Population Change for Counties of New Jersey (Excel)

The biggest population loss was in Essex County, losing 3,958 souls, a loss of -0.5%. Hudson County was second with a loss of 1,838 individuals, a loss of -0.3%. The greatest percentage loss was seen down south in Cape May County, with a loss of -1.2%, which represented 1,175 people.

The biggest gainers were not in North Jersey, Central and South took the lead in growth. Atlantic up 1%, Burlington and Camden both up 0.5%, Cumberland and Gloucester up 1.5%, Ocean up 0.9%, and Salem up 1.6%. Should note here that Middlesex was the biggest gainer in the state with an increase of 5,851, an increase of 0.7%.

A quick look at the counties of Northern New Jersey shows stagnation. Growth seems to be taking place on the fringes (Sussex, Somerset, and Warren).

Bergen 0.1%
Essex -0.5%
Hudson -0.3%
Morris 0.6%
Passaic 0.0%
Somerset 1.6%
Sussex 0.7%
Union 0.1%
Warren 0.5%
9 County Total Growth 0.1% (An increase of 4,179)
NJ Total Growth 0.4% (An increase of 32,759)

Caveat Emptor!

Thursday, March 16, 2006

Fed won't act to preserve high home prices

From Marketwatch:

Fed's Kohn says Fed won't act to preserve high home prices

WASHINGTON (MarketWatch) - The Federal Reserve has no intention of preserving all of the recent gains in home price values, said Federal Reserve board governor Donald Kohn on Thursday. "If real estate prices begin to erode, homeowners should not expect to see all the gains of recent years preserved by monetary policy actions,' Kohn said in a speech prepared for delivery to a European Central Bank forum in Frankfurt, Germany. In his remarks, Kohn attacked the popular 'Greenspan put' theory that Fed policy would always protect investors from sharp asset market drops while doing nothing to restrain these markets when prices. "This argument strikes me as a misreading of history," Kohn said. "Conventional policy as practiced by the Federal Reserve has not insulated investors from downside risk," he said.

This is a big one folks. One of the greatest concerns with bubble sitters was that the Fed would drop rates dramatically to protect home price gains. The drop in rates would push mortgage rates low and reignite the boom. The Fed is making it very clear that it will not act to protect housing prices. This is without a doubt one of the most significant articles released to date.

Caveat Emptor,

Housing Starts and Permits Dip

From Reuters:

Housing starts, permits dip; still strong

The pace of U.S. housing construction slowed in February as permits, starts and completions fell, the government said on Thursday in a report pointing to moderation after a five-year rally in the housing market.

The Commerce Department said February housing starts dropped 7.9 percent to a 2.120 million annual pace, still faster than expected, from an upwardly revised 2.303 million unit rate in January.
Starts fell 23.5 percent in the U.S. Northeast, the biggest drop since May 2001. Construction declined 11.2 percent in the South and 10.4 percent in the Midwest, but rose 7.9 percent in the West.

Permits for future groundbreaking, an indicator of builder confidence, fell 3.2 percent to a 2.145 million unit pace from January's revised 2.216 million unit pace. Economists had expected permits to ease more, to a 2.110 million unit pace in February.

With rising mortgage rates, the U.S. housing market has begun to cool after a years-long run that shattered sales and construction records, and sent prices soaring more than 55 percent on average across the country. Long-term fixed mortgage rates climbed in February, according to data from mortgage finance company Freddie Mac.

Despite the negative spin, the starts and permits numbers were both still very strong. Builders are clearly showing no signs of slowing nationwide.

Further Information can be found at:

Census Bureau- New Residential Construction

For the Northeast:

Total Permits
Down 4.7% from January 06
Up 7.4% from February 05

Total Authorized, But Not Started
Up 6.3% from January 06
Up 9.0% from February 05

Total Started
Down 23.5% from January 06
Down 12.9% from February 05

Total Under Construction
No Change from January 06
Up 14.4% from February 05

Total Completed
Up 15.7% from January 06
Up 14.4% from February 05

Please note the confidence levels of these numbers, they can be found in this months report on the Census Bureau website.

Caveat Emptor!

Thinking of leaving NJ? You are not alone.

From the Star Ledger:

In Jersey, the growing is slowing
Census forecast shows population boom is starting to bust

New Jersey's continuing population slowdown is prompting some economists to warn it could be a symptom of serious economic illness in the nation's wealthiest state.

County-by-county population estimates for 2005 released yesterday by the U.S. Census Bureau showed declining growth rates in nearly every area of the state, with some counties experiencing dramatic drops.

It is happening in long-booming counties like Ocean, Monmouth, Middlesex and Somerset. It deepened in densely populated urban counties like Essex and Hudson. And growth slowed to a trickle in some sparsely populated counties like Sussex and Warren.

The basic explanation is simple: less immigration into the state and more residents leaving for other places.
The state's population grew by only 32,759 last year, according to the estimate -- about half the annual growth rate New Jersey had experienced through the 1990s and the early part of this decade. The estimated increase in 2005 boosted the state population by half a percentage point to 8.7 million, with the state in increasing danger of falling out of the top 10 in population nationwide.

Caveat Emptor!

Wednesday, March 15, 2006

Northern NJ Weekly Residential Inventory Update

Single Family Homes, Condo, Coop
(Bergen, Essex, Hudson, Morris, Passaic, Somerset, Sussex, Union, Warren Counties)
3/08 - 13,094
3/15 - 13,418 (2.5% Weekly Increase)

Single Family Homes, Condo, Coop
(Bergen, Essex, Hudson, Passaic Counties)
3/08 - 6,415
3/15 - 6,581 (2.6% Weekly Increase)

Single Family Homes, Condo, Coop
(Hudson County)
3/08 - 2,100
3/15 - 2,130 (2% Weekly Increase)

So just who is buying these days?

Ever wonder just who is buying these days? Well, here is the answer..

From the Star Ledger:

Ask the Biz Brain

I'd like to help my son, age 25, buy his first house. He has not been working long enough to have established decent credit and probably could not get a mortgage on his own. Would it be wiser for me to co-sign for a mortgage with him, or take out a mortgage myself and have him pay me "rent" and eventually sell the house to him. My house in nearly paid for.

I'm speechless. Why does a 25 year old with no job, no credit, and likely no money need to purchase a house? The answer is, he doesn't. The idea of it is just short of pure insanity.

Garutti suggests if the son has not yet established a credit record, it raises concerns about whether he would be able to pay the mortgage each and every month. Are the parents ready to step in and pay off the loan if that happens?
If you do go ahead with the purchase, Larry Marks, a tax partner with Shipman, Sosensky Randich & Marks in Farmington, Conn., suggests the father guarantee the loan, or alternatively, co-sign the loan.

That way the son would have the opportunity to build up his credit while affording the father the benefits from a tax standpoint, Marks said. Having the son pay the father rent would not afford any tax benefits, Marks noted.

Caveat Emptor!

Living In NJ Is About To Get A Little More Expensive

From the Star Ledger this morning:

Corzine budget plan includes higher taxes

Gov. Jon Corzine is planning more than $2 billion in spending cuts, along with major tax increases that could include an additional penny to the sales tax, to balance the next state budget, a top administration official said yesterday.

The cuts include $100 million from higher education and a freeze on state aid for most school districts. That would increase the pressure on municipal officials to raise property taxes and on colleges to raise tuitions.

"You are going to hear the howling near and far," said the official, who is familiar with the budget planning and discussed it on condition of anonymity.

The official said Corzine has not settled on the mix of tax increases but that they will generate less than $2 billion. The source said it is "likely but not definite" they will include sales tax changes.

Four other Democratic sources said the governor, who personally briefed Democratic leaders on the budget Monday, is considering raising the 6 percent sales tax to 7 percent and extending it to some untaxed services. Those two moves alone could net about $1.4 billion.
As he readies Tuesday's budget address, the governor also hopes to save about $200 million through layoffs and other personnel actions involving 15,000 non-unionized state workers, the source said. Those moves would include layoffs of about 400 political appointees; salary freezes; a requirement that non-union workers contribute 10 percent of their health insurance premiums (there currently are no co-pays), and possibly some pension changes.

The governor has ruled out similar steps for unionized workers, at least until salary contracts are up for renegotiation next year.

All I'm going to say on this is don't blame Corzine, he didn't make this mess.

Caveat Emptor!

Northern New Jersey Foreclosure Statistics

Rick and team at RealtyTrac were kind enough to provide us with the foreclosure data on a county level for Northern New Jersey. A big thanks to RealtyTrac for going out of their way to get this for us. Please take the time to visit their site if you are interested in learning more about foreclosures.

Click to enlarge

I had asked the folks at RealtyTrac if they could prove me with county data on a month-by-month basis for the past year in order to determine if there was any obvious trend developing. While there seems to be a slight overall rise for the year, it is likely too premature to judge. The spike in October is a bit concerning, however it may likely have something to do with the bankrupcy laws that went into effect that month. I'll be keeping close tabs on the foreclosure numbers in the upcoming months.

If anyone has any more questions about the data or foreclosures, just post them up and I'll see if I can get someone from RealtyTrac to answer.

Caveat Emptor!

Tuesday, March 14, 2006

Home Auctions Hit The Northeast Again

It's nothing short of amazing that the real estate decline in the Northeast is playing out almost identically to the late 80's boom and early 90's crash.

To draw a parallel with the last crash, we seem to be around 1989-1990 at this point. We're hitting a period of uncertainty shortly after the top of the market. Sales are slowing, prices are falling (albeit slowly), and no one has a clear picture of the direction of the market.

Rewind to late 1989...

In a Cooling Housing Market, Real Estate Auctions Are Hot
December 3, 1989, Sunday
By CHARLOTTE LIBOV (NYT); Connecticut Weekly Desk

AUCTIONING off property, a sales method common in foreclosures, is being used more and more to market houses and condominiums in Connecticut as the demand for real estate continues to slacken.

And to 1990...

Residential Auctions More Popular
Published: October 7, 1990

RESIDENTIAL real-estate auctions, traditionally perceived as the last resort of desperate developers, are fast becoming an acceptable, sometimes preferable sales strategy, real-estate experts say.

In the midst of a real-estate slump that has left the state blanketed with for-sale signs, anxious sellers are more quickly turning to the auction block to lure cautious buyers to their properties. And according to auctioneers, real-estate agents, developers and the buyers themselves, the strategy is working better than anyone expected.

Now fast forward to today, March 14th, 2006...

Sellers literally put homes on the block
By Kimberly Blanton, Globe Staff
Published: March 14, 2006

Amid softening market, auctions growing more popular, despite risks

A growing number of homeowners and builders, unable to sell homes or condominiums the traditional way, through an agent, are turning to Sotheby's-style auctions like this 26-property sale last month in Newton. With the housing market softening in US cities from Boston to Naples, Fla., to Utah ski towns, the National Auctioneers Association reported that residential properties valued at $14.2 billion sold in 2005 in live auctions, a 24 percent increase over 2003 sales.

Auction houses said a growing surplus of homes on the market nationwide is expected to drive more owners to auctions in the future. Maine-based J.J. Manning, which typically holds one-house auctions, said this was its first auction of properties owned by multiple owners since the early 1990s downturn. The firm plans more this year.

Caveat Emptor,

Nothing But The Truth..

When was the last time you read an article like this? You might remember commentary on this same book a few weeks back by housing cheerleader Warren Boroson (who needed to resort to insult to make his point). Just more examples of the brisk changes in psychology. This piece is by Paul Farrell of Marketwatch.

Speaking truth or crying 'wolf'?

Back during the '70s recession I was a real estate expert with Morgan Stanley. We helped banks and REITs work out billions of loser portfolios, reorganize, file bankruptcy, even advised the U.S. Dept of Housing & Urban Development on the collapsed Federal New Towns program. I've worked for developers and mortgage bankers, got degrees in architecture and city planning, taught commercial real estate at Cornell University.

But oddly, like the rest of America, most of the time I don't think about the housing bubble that's about to pop. We ignore the coming storm.
My files are full of warnings from America's top economists predicting a housing market collapse and a widespread global disaster: Gary Shilling, Bill Gross, Jeremy Grantham, Robert Shiller, Robert Rubin and others take exception to the deceptive happy-talk of self-serving spinmeisters in Washington, Wall Street, realty brokers and homebuilders.

Lately, powerful voices are challenging the happy-talk. In his latest "Investment Outlook: The Gang That Couldn't Shoot Straight" Pimco's Bill Gross takes direct aim at President Bush's Economic Report prepared by ex-CEA boss and now Fed Chairman Ben Bernanke. He bluntly accuses them of outright lying: "It's not so much that the report was a compilation of untruths or even half-truths. It's just that it failed to tell the truth," hiding the fact that we have "borrowed from the future to pay for today's party."

The party's about over. Economist Gary Shilling recently wrote in Forbes: "The current housing weakness will develop into a full-scale rout ... It's clearly a bubble and is nationwide ... The house price collapse will induce a painful recession that will send U.S. stocks into a tailspin ... China will suffer a hard landing ... and weakness in the U.S. and China will spread worldwide."

Unfortunately, bubble warnings are routinely dismissed. Our brains can't handle all the bad news. Besides we've been brainwashed into short-term thinkers, incapable of long-term planning. Witness the collective denial and paralysis toward mounting deficits from out-of-control federal budgets, foreign trade, war debt, state, municipal and consumer debt, under-funded pensions, Social Security and Medicare shortfalls.
For example, assume you live in one of America's top 40 metro areas. You bought last year for $500,000 with $450,000 in mortgages. If the market drops just 10%, your equity's gone.

And if it drops the predicted 47.2%, your home's worth $250,000, you really are in trouble. If you lose a job, or suddenly get hit with extraordinary expenses, or just can't make tax and mortgage payments, or otherwise forced to sell, you could be wiped out under the tough new bankruptcy laws.

So please read Talbott's book closely: Is your home is at risk? Then quickly decide whether you can hang on in a housing collapse, a stock market bear and another long recession. And if not, consider taking his advice to sell now.

Caveat Emptor!

Monday, March 13, 2006

Just Where Do Your School Tax Dollars Go?

The SCI (State of New Jersey Commission of Investigation) released a new report today, "Taxpayers Beware, What You Don't Know Can Cost You", that takes a look into questionable and hidden compensation for public school administrators. The full report can be found here:

Taxpayers Beware, What You Don't Know Can Cost You(PDF)

Education and schools are hot topics on this blog, a quick look at just about any active set of comments will show a stream of questions and statements on schools. It's obvious that education is a top priority for many of us. We're willing to pay the high taxes typically associated with top school areas. But just where does that money go? This report is a big eye opener. I, for one, had no idea that administrative compensation was so high. While I feel that these people should be fairly compensated for their work, I don't quite understand the justification for quarter million dollar salaries.

Caveat Emptor!

Sunday, March 12, 2006

What do you want? Open Discussion

This is a multipart thread for Sunday.

First, I'd like to ask everyone why they visit this blog and what I can do to give you more of what you want. Do you enjoy the Price Reduced and Lowball features? Do you look for local news recaps? National news? Economic viewpoint? Real estate statistics? Any ideas that you would like to share?

Second, I'd like to know the towns that you are interested in. I'd also like to know the average prices you are willing to pay. If you are willing to provide pricing info, please do so anonymously.

Lastly, I want to know what would be the argument or statistic that would finally convince you that the bubble has burst.

Please, take some time to provide some feedback. It helps me to understand what everyone is looking for.

Caveat Emptor!

Price Reduced! 2/26 - 3/12

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# 2235518 - Montgomery, NJ
Previous Price $449,900
Current Price $350,000 (Price Reduced 22.2%)

MLS# 2249229 - Newton, NJ
Previous Price $246,900
Current Price $194,900 (Price Reduced 21.1%)

MLS# 2250186 - Bernards, NJ
Previous Price $1,125,000
Current Price $899,000 (Price Reduced 20.1%)

MLS# 2228176 - Montville, NJ
Previous Price $1,200,000
Current Price $974,900 (Price Reduced 18.8%)

MLS# 2111446 - Edgewater, NJ
Original Price $819,000
Previous Price $779,000
Current Price $639,900 (Price Reduced 17.9%, 21.9% off Original Price)

MLS# 2111426 - Edgewater, NJ
Original Price $639,000
Previous Price $609,000
Current Price $515,000 (Price Reduced 15.4%, 19.4% off Original Price)

(Note, both Edgewater listings are in the same hi-rise and owned by the same person.. Flipper?)

MLS# 2250090 - Parsippany, NJ
Previous Price $369,900
Current Price $309,000 (Price Reduced 16.5%)

MLS# 2238440 - Mountain Lakes, NJ
Previous Price $2,600,000
Current Price $2,200,000 (Price Reduced 15.4%)

MLS# 2227166 - Montclair, NJ
Previous Price $3,450,000
Current Price $2,950,000 (Price Reduced 14.5%)

MLS# 2241827 - Montclair, NJ
Previous Price $799,900
Current Price $699,900 (Price Reduced 12.5%)

MLS# 2251894 - Chatham, NJ
Previous Price $599,900
Current Price $525,000 (Price Reduced 12.5%)

MLS# 2246909 - Sparta, NJ
Previous Price $675,000
Current Price $595,000 (Price Reduced 11.9%)

MLS# 2108156 - Harding, NJ
Previous Price $959,900
Current Price $849,000 (Price Reduced 11.6%)

MLS# 2201693 - Totowa, NJ
Original Price $569,
Previous Price $539,900
Current Price $479,000 (Price Reduced 11.3%, 15.8% off Original Price)

MLS# 2227559 - Warren, NJ
Previous Price $1,795,000
Current Price $1,594,500 (Price Reduced 11.2%)

"The Short List"

Town/From Price/To Price/Reduction
West Orange/$549,000/$499,000/9.1%

1243 properties were reduced over this two week period. The average reduction was 4.4%, up from the 3.8% seen over the previous period.

Caveat Emptor!