Saturday, March 25, 2006

"Bubbles do burst"

Economist Robert Shiller, of Irrational Exhuberance fame, gave a rather important interview to ABC/Nightline news yesterday. I say important because it means the housing bubble is beginning to get significant exposure and coverage in the mainstream news.

Robert Shiller, the Prophet of House Prices
Economics Professor Predicted the Dot-Com Bust; Sees Another on the Horizon

If a prophet is only as good as his last prophecy, then you'd be wise to listen to Robert Shiller. On "Nightline," Shiller offered his considerable analysis of the current real estate market … and he doesn't bring good news.
It was back in the heady stock market days of 1996 that Shiller, an economics professor at Yale University, gave voice to his first prophecy. He warned that the stock market was overheating and that investment had risen to what he described as irrational levels. The stock market crash that followed was no surprise to Shiller and proved that he had called it right.

Now he's warning that a similar collapse may soon apply to the real estate market. And there's evidence that he may be right here, too.
Shiller argued that human emotion, not strategic economic factors, drives prices and property buying.

He argues that many first-time buyers pay inflated prices simply because they fear they'll be left behind...

Shiller has traced the actual financial return that houses produce for their owners. He says that over the long term, house prices roughly match gains in people's incomes and that booms are more often followed by busts, thereby dissipating any major increases in equity.

The Star Ledger ran an AP piece on the New Home Sales report today:

New home sales plunge 10.5 percent

New home sales fell the biggest amount in al most nine years in February while home prices declined for a fourth straight month, raising concerns the once high-flying housing market could be in for a rougher-than- expected landing.
Analysts, who had been forecasting a much more moderate drop of around 2 percent in February sales, said the big decline and downward revisions to sales activity in the previous three months could be signaling that housing will slow more this year than had been expected. "The new home market looks like it is starting to stagger," said Joel Naroff, chief economist at Naroff Economic Advisers, a Pennsylvania forecasting firm. "Bubbles do burst."

Caveat Emptor!

At A Glance: Hanover Twp, NJ

At A Glance: Hanover, NJ

Listings As of 3/25
Total Active Listings: 51
Up To $500,000: 25
$500,001 - $1,000,000: 20
$1,000,001 And Up: 6

Listing Activity Since 3/1
23 Added
0 Back on Market
12 Price Reductions
13 Under Contract
5 Sold
9 Expired
6 Withdrawn
2 Temporarily Withdrawn

February Sales Activity
Up To $500,000: 5
$500,001 - $1,000,000: 1
$1,000,001 And Up: 0
Sales Prices were 7.43% below Original List Prices
(All data from GSMLS)

Price Reduced! 3/13 - 3/25

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.

There were a significant number of price reductions over the period, 1578 to be exact. The average price reduction for the group was approximately 4.3% off the prior list (not original list). The total dollar reduction was a staggering $39 million dollars.

On to the list!

MLS# 2233936 - Montclair, NJ
Original List $1,695,000
Previous Price $1,450,000
List Price $995,000 (Price Reduced 31.4%, 41.3% off Original List)

MLS# 2245996 - Bloomingdale, NJ
Previous Price $549,000
List Price $399,000 (Price Reduced 27.3%)

MLS# 2087848 - Franklin, NJ
Previous Price $1,200,000
List Price $899,900 (Price Reduced 25%)

MLS# 2255980 - Montville, NJ
Previous Price $2,400,000
List Price $1,900,000 (Price Reduced 20.8%)

MLS# 2257633 - Pompton Lakes, NJ
Previous Price $495,000
List Price $395,000 (Price Reduced 20%)

MLS# 2214336 - Union, NJ
Original List Price $625,000
Previous Price $499,000
List Price $399,500 (Price Reduced 20%, 36.1% off Original List)

MLS# 2105478 - West Milford, NJ
Original List Price $249,900
Previous Price $199,900
List Price $159,900 (Price Reduced 20%, 36% off Original List)

MLS# 2110202 - Hopatcong, NJ
Original List Price $289,000
Previous Price $255,000
List Price $210,000 (Price Reduced 17.7%, 27% off Original List)

MLS# 2256232 - Piscataway, NJ
Previous Price $399,900
List Price $339,900 (Price Reduced 15%)

MLS# 2235696 - Washington Twp, NJ
Previous Price $869,000
List Price $749,000 (Price Reduced 13.8%)

MLS# 2252084 - Maplewood, NJ
Previous Price $1,150,000
List Price $995,000 (Price Reduced 13.5%)

MLS# 2208232 - Wayne, NJ
Original List Price $1,350,000
Previous Price $1,250,000
List Price $1,085,000 (Price Reduced 13.2%, 19.6% off Original List)

MLS# 2254014 - Summit, NJ
Previous Price $475,000
List Price $414,000 (Price Reduced 12.8%)

MLS# 2241487 - Westfield, NJ
Original List Price $824,500
Previous Price $799,000
List Price $699,000 (Price Reduced 12.5%, 15.2% off Original List)

MLS# 2220885 - West Caldwell, NJ
Original List Price $575,000
Previous Price $539,000
List Price $475,000 (Price Reduced 11.8%, 17.4% off Original List)

MLS# 2226699 - Harding, NJ
Previous Price $22,000,000
List Price $19,500,000 (Price Reduced 11.4%)

MLS# 2209563 - Wyckoff, NJ
Previous Price $1,250,000
List Price $999,900 (Price Reduced 11.1%)

MLS# 2245921 - Woodbridge, NJ
Previous Price $449,900
List Price $399,900 (Price Reduced 11.1%)

MLS# 2257493 - Bernardsville, NJ
Previous Price $997,000
List Price $887,000 (Price Reduced 11%)

MLS# 2226709 - West Orange, NJ
Previous Price $695,000
List Price $625,000 (Price Reduced 10%)

MLS# 2229698 - Millburn, NJ
Original List Price $1,775,000
Previous Price $1,649,000
List Price $1,495,000 (Price Reduced 9.3%, 15.8% off Original List)

MLS# 2208171 - Franklin Lakes, NJ
Original List $9,995,000
Previous Price $8,495,000
List Price $7,750,000 (Price Reduced 8.8%, 22.5% off Original List)

Caveat Emptor!

Friday, March 24, 2006

At A Glance: Mendham, NJ

Mendham Boro & Twp., NJ - Morris County
Mendham from City-Data

Listings As of 3/24
Total Active Listings: 129
Up To $500,000: 6
$500,001 - $1,000,000: 45
$1,000,001 And Up: 78

Listing Activity Since 3/1
37 Added
3 Back on Market
19 Price Reductions
18 Under Contract
14 Sold
8 Expired
5 Withdrawn
2 Temporarily Withdrawn

February Sales Activity
Up To $500,000: 1
$500,001 - $1,000,000: 1
$1,000,001 And Up: 7
Sales Prices were 8.84% below Original List Prices
(All data from GSMLS)

New Home Sales Plummet

Hot off the newswire:

New Home Sales Plummet in February

WASHINGTON - Sales of new homes plunged by the largest amount in nearly nine years in February while the median price of a new home dropped for the fourth straight month, providing fresh evidence that the nation's once-booming housing market is cooling off.

The Commerce Department reported that sales of new single-family homes dropped by 10.5 percent last month to a seasonally adjusted annual sales pace of 1.08 million homes. It was the second straight monthly decline and was much bigger than the small 2 percent dip that Wall Street was expecting.

Data from the Census Bureau can be found here:

February New Home Sales

Caveat Emptor!

Massachusetts Home Prices See Year Over Year Decline

From the Boston Herald:

House prices still in slide: Realtors report drop in median

Bay State house prices are falling on an annualized basis for the first time in a decade as Massachusetts housing continues to cool - bucking a national uptrend.

The Massachusetts Association of Realtors reported yesterday that median house-sale prices dropped to $339,450 last month, down 0.2 percent from February 2005.

The decline marks the first time since June 1996 that prices have fallen for any 12-month period as a whole.

“The days of bidding wars and double-digit price appreciation are over,” MAR President David Wluka said.

While median prices have fallen from one month to the next since peaking at $375,000 in August, experts view annualized declines as more statistically significant.

MAR also said the volume of Bay State houses sold last month fell 1.7 percent from February 2005 levels. That’s the fifth straight monthly decline - the market’s longest losing streak since 2003.

Significantly, Bay State activity cooled even as total U.S. house sales rose.

The Boston Herald left out the most interesting part of the MAR report.

MAR February Report

Predictions of steep price declines in home values made this past fall remain largely unfounded. While the current median price is 9.5 percent below the record high monthly median of $375,000 set in July and August 2005, today’s prices largely reflect healthier inventory levels, which has eased upward pressure on prices, rather than plunging property values."

Caveat Emptor!

Jersey Realtor Turns Burglar

From the Record/Herald News:

Realtor was a burglar, cops say

It began in December, when a Mahwah man who had put his house up for sale returned from work one evening to find a camera and camcorder missing.

Sometime later, $2,000 in cash disappeared from a house for sale in Ramsey. On top of that, nearly $50,000 worth of jewelry was taken from another home.

On Wednesday, police arrested a real estate agent who they said used her position to swipe the jewelry, electronics and cash from several North Jersey houses in the past three months.

Susan Silok, 54, of Mahwah had entered the homes carrying an oversized purse, then slipped the items into a plastic bag, police said.
Silok, a Realtor for Coldwell Banker Residential Brokerage, turned herself in to Mahwah police on Wednesday. She was released without bail while police continue their investigation.
News of the arrest Wednesday rattled North Jersey's real estate community, primarily because agents say they work hard to earn a homeowner's trust.

Caveat Emptor!

Thursday, March 23, 2006

Don't Get Too Excited Over Existing Home Sales

The National Association of Realtors released their existing home sales report for Febuary to much fanfare this morning.

February EHS (PDF)

While starts came in above analyst expectations, they were down 0.3% year over year (6.93 in Feb '05 versus 6.91 in Feb '06). So, after 6 months of decline which included significant drops in December and January, sales tick up.

There didn't seem to be much fanfare over the declines in median prices..

Peak Pricing versus Feb '06
United States
Aug 2005 - $220,000
Feb 2006 - $209,000 (5% decline)

Northeast (Set a record)
Feb 2006 - $263,000

Aug 2005 - $189,000
Feb 2006 - $182,000 (3.7% decline)

Aug 2005 - $189,000
Feb 2006 - $182,000 (3.7% decline)

Nov 2005 - $332,000
Feb 2006 - $306,000 (7.8% decline)

(Declines are over the time period, not annualized)

Also of note is the fact that inventory is up to 5.3 months supply. Actual inventory has increased over 30% year over year.

Sales in the Northeast (unadjusted)
Febuary '05 - 68,000
January '06 - 58,000
Feburary '06 - 70,000

Let me note that these sales volumes do not reflect what we saw in Northern NJ over the same time period. Sales in Northern NJ (GSMLS only) declined approximately 18% in February (1705 to 1395).

Caveat Emptor!

Arbitrageur, not renter.

Why renting just might be more financially sophisticated than everyone thinks.

How many times have we all heard the term "bitter renter", how many times have you been called "jealous" for expousing your views on the housing bubble? Renters have always gotten the short end of the stick, stigmatized as not being financially savvy. It's the homeowners that are the intelligent investors. The public view, fortunately for renters, is incorrect, and I'm going to tell you why. Unfortunately, the answer is complicated and may be a bit difficult for many to understand. So grab yourself a cup of coffee and a chair, this is going to be a long ride.

We first need to understand what arbitrage is. Some readers might know it already, so just bear with me. The simplest definition of arbitrate is the exploitation of market imbalances. Ok, maybe that really isn't so simple, so lets just use an example again. Say you spend half of your day in Manhattan, and half in Jersey. While walking down the street in Manhattan, you see someone selling scarves for $10.00, you make a mental note of the price. Coming home that evening, you see a similar scarf for sale for $5.00 and a lightbulb goes off. You can buy scarves in Jersey for $5 and sell them in Manhattan for $10. So the next day, you board the train with a handful of scarves, and that evening you return home richer. You've exploited the imbalance in scarf pricing to profit, little did you know you've just become an arbitrageur.

You are probably wondering what the heck this has to do with renting or buying a home. Just hold tight, I didn't say this was easy. You need to understand arbitrage first, otherwise this whole exercise was a waste.

Arbitrage exists in many financial markets today, in stocks, bonds, currencies, etc. In fact, arbitrage opportunities almost always exist anywhere where you have market imbalances. I'm sure by now you have already thought of one of the biggest arbitrage markets available to the average joe.. You got it, eBay. If you can buy something at Costco and sell it on eBay for more, that is arbitrage. If you can buy something at a garage sale and sell it for more on eBay, that's arbitrage. If you can buy something on eBay for less than it sells for locally, that is arbitrage.

Now that we've beaten the horse to a pulp, lets understand why renting in today's market is actually exploiting the current market imbalances. You are no longer a renter, but an arbitrageur. Let's take a look.

Two markets exist for a single similar product, housing. Those two markets are the rental market and the purchase market. You can get the same goods, housing, through both markets. You have two options if you want housing, buy or rent. The price of the good in either market is typically driven by economic fundamentals like median income, unemployment, interest rates, supply and demand for the good, etc. Just a few short years ago, pricing in both of these markets was similar. Stop, I'm not saying it cost the same to rent and buy, the cost is not, until you begin to factor in housing appreciation or depreciation, taxes, maintenance, rental increases, and the opportunity cost of the down payment. Yes, just a few short years ago these markets were both driven by similar fundamentals, thus arbitrage opportunities did not exist. Yes, a long long time ago in a universe far far away, it might have made sense to buy, but not anymore.

Why? Because house prices have become disconnected from the fundamentals that kept both markets in check (think of it as a form of arbitrage equilibrium). But something happened, the price in the purchase market shot up dramatically since the late 1990's, and the price on the rental market did not. A lightbulb should be going off in your head right now. Yes, a market imbalance has been developing opening the door for arbitrage. Let's walk through it.

You have two options:

1) Purchase housing in the purchase market, and provide that good to yourself.
2) Rent housing in the rental market, and provide that good to yourself.

In either case, the end result to you is the same, you were provided with equivalent housing. Rent-buy arbitrage asks the question, if a market imbalance exists that favors renting, why buy? How do we even know that a market balance exists?

I don't think I have to explain housing appreciation to anyone, it's been entirely out of control, but lets take a look at median rents in New Jersey.

Gross Rents - Historical
New Jersey
1990 - $756
2000 - $751
(Inflation Adjusted)

New Jersey Housing Characteristics
New Jersey (Median Gross Rents)
2000 - $837
2001 - $844
2002 - $843
2003 - $874
2004 - $877

I'll try to provide a graph of the relationship, but I don't have all the data I need on hand right now to graph a long enough time series of the data. However, if I did, from 1995-1999 you would see that the movement between the two markets moved in similar fashion, from 2000-2006 the rental market increased only slightly while the purchase market price disconnected from fundamentals and skyrocketed.

Now that we've identified an imbalance between the two markets, how do we exploit it. Well, I can tell you that you'd just be better off renting right now, but I'm sure you want to see it worked out. So here we go.

There just so happens to be a property on the GSMLS that is available for either rent or purchase. That property is located in Clifton, NJ, in a townhouse community.

The house exists in two markets:
Purchase Market Price $489,500
Rental Market Price $1,995/mo

(Now, I'm going to argue that because it's not currently rented, the rental price is likely higher than the market wishes to bear. Because this buyer purchased it for $450,000 recently, his carrying costs are much higher and thus must *ask* a higher rent, but let's not get too deep into that).

So lets examine the cost in the purchase market:
Down Payment: $97,900
2005 Taxes: $8,545
PITI: $3,203 (at 6.4%, 30y fixed)
Maintenance: $175/mo
Total Monthly Outlay: $3,378

On the rental market:
Total Monthly Outlay: $1,995

Monthly Differential: $1,383

Not so simple. We need to factor in:
1) Housing Appreciation
2) Housing Upkeep
3) Tax Increases
4) Maintenance Increases
5) Tax Benefits
6) Opportunity cost of the down payment
7) Interest rates
8) Rent Increases
9) Risk premium of purchasing
etc etc etc

Instead of working out all the math here, we're going to use one of the better rent versus buy calculators to do the work for us. I'm going to warn you, don't use a rent/buy calculator on a realty or mortgage site, they are almost always going to come up with a "buy" recommendation. Instead, use a caolculator from the Center for Economic and Policy Research (CEPR), you can find it here:

Costs of Ownership v. Renting Calculator

I've gone ahead and plugged in all the numbers, but I recommend that you go through the exercise yourself (I used the 28% tax bracket, 10y timeframe). The CEPR calculator tells us that if we can rent an equivalent place for less than $3,400 a month, take it. Well wait a minute, that exact same home is available for rent at $1,995 a month, why is the rent so low? Is something wrong? No. The imbalance between the two markets is so big it should be slapping you in the face. What is causing your cognitive dissonance is the fact that $1,995 a month seems like a big number. It really seems like you are throwing away that 2 thousand a month.. Well, let me assure you, you are not throwing away anything.

Some factors to consider.
1) What would the difference between your standard and itemized deductions be? Calculate those tax benefits for yourself to see the real impact that the property and mortgage interest deductions would add.

2) Opportunity cost of the downpayment. The appropriate downpayment for this home is $97,900. Let's just say your average return over the next 10 years would be a miniscule 5% yearly (low risk investments). In 10 years that sum would grow to approximately $160,000. If you like to live on the edge and expect a 7% yearly return, that amount would be closer to $200,000.

3) Opportunity cost of the monthly differential. Each month you would have close to $1,400 extra money. Over the course of the first year that differential adds up to $16,000 cash. If the past few years of rent increase are any indicator of future trends, that number isn't going to add up significantly. Can one of the finance readers calculate the exact amount. I'm guessing that invested at 7%, the differential will add up to close to $200,000 in 10 years.

So, at the end of 10 years the arbitrageur will have close to $400,000 in liquid investments on hand. In order for the purchase market position to pay off in the same time period, we would need a continued appreciation of approximately 6% a year over that same time period to break even.

Are you so sure the housing market will continue to appreciate at above historic returns for the next 10 years? The purchase position is not adequately priced to reflect the risk inherent in purchasing at the top of the bubble market.

So the next time someone calls you a renter, correct them. You are an arbitrageur.

Caveat Emptor,

At A Glance, East Hanover, NJ

East Hanover, NJ - Morris County

GSMLS Listings As of 3/23
Total Active Listings: 43
Up To $500,000: 9
$500,001 - $1,000,000: 33
$1,000,001 And Up: 1

Listing Activity Since 3/1
14 Added
4 Back on Market
15 Price Reductions
3 Under Contract
5 Sold
8 Expired
4 Withdrawn
4 Temporarily Withdrawn

February Sales Activity
Total Sold: 9
Up To $500,000: 3
$500,001 - $1,000,000: 6
$1,000,001 And Up: 0

Sales Prices were 7.27% below Original List Prices

Wednesday, March 22, 2006

Weichert Realtors Consumer Fraud Lawsuit Reinstated

From the Star Ledger (

Court agrees: Location, location, location

A real estate agent who misrepresents the section of town where a house is located can be sued for consumer fraud, a state appeals court ruled today.

The unanimous ruling by the three-judge court reinstates a lawsuit against Weichert Realtors by a couple who thought they were buying a house in the “more prestigious” Montville section of Montville Township, Morris County.

In fact, the house was located in the township’s Towaco section, according to the ruling. It added that the buyers, Theodore and Francis Vagias, discovered that when “they were unable to send their son to the highly rated elementary school in Montville.”

According to the ruling, Montville Township has “three distinct sections: Montville, Towaco and Pine Brook.”

A lower court had dismissed the lawsuit, noting the real estate agent had correctly informed the couple the house was in Montville and simply forgot to add the word “Township.” That judge added that implying the house was located in a more prestigious section of town was mere “puffery” rather than consumer fraud.

The appeals court disagreed. It said that “for most people, the purchase of a house will be the most important investment of a lifetime.”

In reinstating the lawsuit, Appellate Division Judge Susan L. Reisner began by quoting the real estate profession’s well-known mantra: “Location, location, location.”

“It is not unusual in this state for buyers to pay astonomical prices for houses in areas considered to have particular cachet,” Reisner wrote. “Given the importance of location in the purchasing decision, buyers are entitled to expect that the Realtors who are assisting them in their housing search will know where the houses are actually located.”

Northern NJ Weekly Residential Inventory Update

Single Family Homes, Condo, Coop
(Bergen, Essex, Hudson, Morris, Passaic, Somerset, Sussex, Union, Warren Counties)
3/15 - 13,418
3/22 - 13,779 (2.7% Weekly Increase)

Single Family Homes, Condo, Coop
(Bergen, Essex, Hudson, Passaic Counties)
3/15 - 6,581
3/22 - 6,822 (3.7% Weekly Increase)

Single Family Homes, Condo, Coop
(Hudson County)
3/15 - 2,139
3/22 - 2,169 (1.4% Weekly Increase)

GSMLS and NJMLS saw their biggest weekly jumps for the year this week. Not only are listings hitting new records, the pace at which new listings are hitting the market is increasing as well.

Mortgage Purchase Applications Continue Decline

From Bloomberg:

U.S. MBA's Mortgage Applications Fell 1.6% Last Week

A gauge of U.S. mortgage applications fell last week to the lowest level of the year as home purchases and refinancing declined, a sign housing will be less of a source of strength for the economy.

The Mortgage Bankers Association's weekly application index dropped 1.6 percent to 565.0 from 574.4. The Washington-based group's purchase gauge fell 2.3 percent to 393.6 from 403.0. ...
Purchase applications are down 26 percent since reaching a high in June of last year, the mortgage bankers group said.
The mortgage bankers group's gauge of refinancing fell 0.6 percent to 1574.5 from 1583.6. The index is down 47 percent from a 12-month high reached in June.

Purchase applications have been sliding downward rather dramatically since last summer. If current mortgage applications are at the lowest levels of the year, it's highly unlikely that we're going to see any "Spring Boom" this year. While sales will certainly pick up above February levels, it looks like sales volume this year will continue to be significantly lower than levels set in the previous years. Many housing economists are calling for 2006 to be a record year, if the trends that begun in the Fall and through Q1 continue, I can't see how that will be the case.

Caveat Emptor!

What Happens When The Music Stops?

From ABC News:

Housing Woes: Interest Rate Increases and Foreclosures

Heidi never imagined that she could lose her home outside Dallas. But rising interest rates and skyrocketing monthly mortgage payments have left her staring at foreclosure. She's just one of many Americans who might be forced to move as the housing market cools.
"We couldn't keep up with the payments," she explained one dreary, wet Sunday morning in late winter. "The payments went from $1,700 a month almost to $3,000 a month, so this being my first home, my dream home, I had to lose it."

Heidi's situation is not unique. She is one of millions of Americans who took out ARMs to purchase a home during the recent housing boom.

As those initially low monthly interest rates started to get reset, homeowners could see their monthly payments rise to levels beyond their ability to pay. Interest rates for nearly a quarter of all mortgage debt, or $2 trillion, will be reset in 2006 and 2007, according to Moody's

As home prices soared at double digit rates during the recent, red-hot housing market, many stretched themselves financially to purchase a home. The use of lower-interest rate ARMs, interest-only mortgages or option-ARMs that allowed home buyers to choose how to pay each month soared during the same period. According to the Mortgage Bankers Association of America, ARMs now represent 25 percent of the more than $8.5 trillion in outstanding loans.
"I think it's a bomb waiting to go off," said William Apgar, reflecting on the future of interest rate increases for those with ARMs. Apgar has studied foreclosures in Atlanta and Chicago as a lecturer at Harvard's Kennedy School.

From the Christian Science Monitor:

Homeowners stretched perilously

If the nation's real estate boom collapses, its first victims may well be low-income minorities and immigrants in a big US city like Boston.
The trend is especially worrisome, the analysis shows, because these vulnerable homeowners tend to be minorities and immigrants who, experts say, often hold the riskiest mortgage loans.
Homeowners "call us and are heartbroken," says Robert Pulster, executive director of the Ecumenical Social Action Committee, which works with Boston residents on the brink of losing their homes. "They thought it was their dream."

More trouble lies ahead, some experts warn.

"I would suspect that as home prices soften, you are probably going to see a ramp-up in defaults, delinquencies, and foreclosures," says Nicolas Retsinas of the Joint Center for Housing Studies at Harvard University. "It is not that they were not stretched before, but if you couldn't make the mortgage payments, you would sell. If the market is softer, it is not as easy to do this."
"A lot of them just do not listen. They want a house," he says. "I try to advise them: You can get a house, but you might not be able to stay in it."

Caveat Emptor!

At A Glance: Ridgewood, NJ

Ridgewood, NJ - Bergen County
Ridgewood from City-Data

GSMLS Listings As of 3/22
Total Active Listings: 65
Up To $500,000: 5
$500,001 - $1,000,000: 39
$1,000,001 And Up: 21

Listing Activity Since 3/1
32 Added
0 Back on Market
9 Price Reductions
10 Under Contract
5 Sold
4 Expired
4 Withdrawn
0 Temporarily Withdrawn

February Sales Activity
Total Sold: 8
Up To $500,000: 2
$500,001 - $1,000,000: 5
$1,000,001 And Up: 1
Sales Prices were 1.98% below Original List Prices

Notice of Default (Pre-Foreclosure)
3 properties received a Notice of Default in March
Foreclosure Information from Realtytrac

Please note that Ridgewood is covered by two MLS systems, GSMLS and NJMLS. Some listings are listed on both systems, others are exclusive to system. I consider NJMLS to be the primary MLS system for Bergen county. Thus, these statistics may not portray the current Ridgewood market with total accuracy. This data should be considered a guide and not gospel.

Caveat Emptor!

Tuesday, March 21, 2006

Corzine Proposes Record Budget

From Bloomberg:

Corzine Proposes Record $30.9 Bln New Jersey Budget

New Jersey Governor Jon Corzine proposed a record $30.9 billion state budget that includes an increase in the sales tax and new levies on alcohol and cigarettes.

Spending would rise by 9 percent, or $2.6 billion, over the current fiscal year. The budget reflects ``already legislated, mandated, negotiated, and inflated'' costs, Corzine said today in his first budget address before the state Legislature.
Under Corzine's proposal, sales tax collections would rise by $1.43 billion, as rates climb to 7 percent from 6 percent and the tax is applied to more consumer services. Only California has a higher rate at 7.25 percent, according to the Federation of Tax Administrators. Cigarette taxes will climb by 35 cents to $2.75 a pack, the highest in the nation.
His budget calls for 1,000 job cuts through layoffs and attrition of non-union employees. It reduces support for state universities and colleges by $169 million to less than $2 billion, and keeps unchanged funding to cities and most schools, other than payments for employee pensions and increased aid for building new schools in the state's poorest districts.
Corzine's plan would raise almost $1.1 billion by boosting the sales tax, and $248 million by applying the tax to services that were exempt. New Jersey would raise $58 million with new taxes on alcohol, luxury cars, realty transfers greater than $1 million and water usage.


Corzine Budget Speech

It is my honor and responsibility to stand before you today and offer my best ideas to meet our state's recurring structural budget crisis. My administration's work over the past two months has surely deepened my understanding of the challenge of fixing our broken fiscal policies.

I must say, Gov. Codey was on target when in November he jokingly said, his transition report can be summed up simply, "the state is pretty much broke." Today more than in November, I realize he was pretty much right.

So what are your thoughts on how this new budget will affect the state economy and local housing?

Caveat Emptor,

At A Glance: Millburn

Millburn, NJ - Essex County

Millburn from City-Data

GSMLS Listings As of 3/21

Total Active Listings: 125
Up To $500,000: 4
$500,001 - $1,000,000: 27
$1,000,001 And Up: 94

Listing Activity Since 3/1
50 Added
5 Back on Market
23 Price Reductions
26 Under Contract
11 Sold
13 Expired
6 Withdrawn
2 Temporarily Withdrawn

February Sales Activity
Up To $500,000: 0
$500,001 - $1,000,000: 8
$1,000,001 And Up: 3
Sales Prices were 6.11% below Original List Prices

Caveat Emptor!

Monday, March 20, 2006

NYC Open House Report

This one, from the Walkthru Blog, slipped through:

Bleak Open Houses

Another indication that the New York City housing market is slowing can be found in a report on open houses released yesterday by the Manhattan brokerage firm Barak Realty.

The company analyzed and charted average attendance at Sunday open houses from Jan. 15 through March 12 and found that attendance had declined 13.7 percent from Feb. 19 through March 12, compared with the previous four-week period.

Barak Realty Open House Report

During the 1st quarter, average open house attendance for most recent four weeks (2/19 - 3/12/2006) was 13.7% lower than previous four weeks (1/15 - 2/5/2006.) As yet another sign of the slowing market, apartments are staying on the market for longer periods, and buyers are shopping with lower intensity.

Take the report with a grain of salt as almost no information was given on sample set size, areas and price ranges covered, etc. Unfortunately, I don't believe any local realtors are doing anything similar, if so that data has not been made public.

Caveat Emptor!

9.1% of New Jersey Jobs are Housing Related

From USA Today:

Slowing home market to ripple through job market

With the allure of easy money, thousands of Americans flocked to jobs in the real estate industry during the boom years.
As the housing market slows, there will likely be a lot of stories of people who are bailing out of their real estate jobs and other professions related to housing — appraisers, mortgage brokers and home construction workers — and many not by choice. This could send shock waves through the job market and the economy.

That's because housing helped drive the economy out of the last recession. Almost four out of every 10 jobs created in the past four years were in housing-related fields. At the end of last year, a record 9.8% of U.S. workers were employed in the real estate industry, up from 8.2% a decade ago, according to Moody's Only the health care industry added more jobs.

"Job growth is the main engine for consumer spending," says Scott Anderson, senior economist at Wells Fargo in Minneapolis.

"If we don't get the job creation that we need to sustain spending, the economy could be in trouble as we get into '07," he says. "If we don't get any help from these other (non-housing) sectors, longer-term the implications are slower job growth, which means slower consumer spending, which would eventually discourage businesses from spending. You'd have this downward spiral in growth."

The provided map puts New Jersey housing related jobs as 9.1% of the total job base, a significant number, but a number inline with the rest of the country. Many have argued that the housing bubble wouldn't burst due to strong job growth across the country. I'm sure many of them didn't factor in the fact that job creation and the housing bubble went hand-in-hand.

Caveat Emptor!

Eminent Domain Abuses Across New Jersey

From the Philly Inquirer:

N.J. seizes initiative on eminent domain

In the most densely populated state, eminent domain backlash began even before the U.S. Supreme Court turned it into a national issue.

To many New Jersey towns that craved tax revenue but had precious little vacant land to build on, the power to take private property and redevelop it is appealing.

But this sparked the fury of property owners from Camden to the Shore and gained the state a reputation among activist groups as one of the worst abusers.

Now New Jersey is reexamining its eminent domain and redevelopment laws. The Assembly is holding hearings where land-use wonks and angry citizens have offered thoughts, and legislators are pushing bills that call for moratoriums and limits.

At the very least, lawmakers seem to be moving toward tightening the criteria to take property and increasing the amount of compensation owners receive.
Opponents of eminent domain wonder how much change will get past a Legislature packed with members who have ties to developers or hold a second public office in which the power could be useful.

"What's unique about New Jersey is the real cozy relationships between developers and lawmakers, and so many lawmakers are mayors and councilmen and don't want to give up this authority," said Thom Ammirato, a GOP consultant who works frequently on eminent-domain issues.
Proponents of change have a powerful ally in Gov. Corzine, who opposes most uses of eminent domain for economic development.

And from The Real Estate Bloggers Blog:

The True Eminent Domain Battle Ground - New Jersey

As New Jersey and other states around the country discuss in their legislatures how to best address eminent domain, the legislatures must make a decision. Are the rights of the homeowner or property owner more important to them than the opportunities for development and growth of their tax base? For a politician this is a tough question. For a New Jersey politician this is a VERY tough question.
But the problem is that the property rights of the one person are abused. They trusted our system to protect them. And everyone in the community has the sinking feeling that they may be next, because the government always continues behavior that brings in money. Have you ever seen a tax taken off of the books? So the people in the community have a sick feeling in their stomach as they know something is very wrong.

And they are right. Private property is one of the factors that made this country great. We need to have the total trust that the government can not come and just take our property at their desecration. If someone wants to buy it bad enough, make them pay a price that is high enough to entice me to sell. Do not pay that difference to the politician to make him do you bidding with the force and power of the government.

Caveat Emptor!

Sunday, March 19, 2006

Is that the sound of the market crashing?

From the NY Times today:

That Sound You Hear? The Market Coming Down to Earth

AS clusters of open-house balloons bob across the suburbs of the metropolitan area, from the New Englandy enclaves of Fairfield County, Conn., to the salt-sprayed boroughs of the Jersey Shore, the question remains: whither the housing market?
New Jersey's inventory swelled, too, up 46 percent in January over the previous year. Westchester had the least growth in the number of houses on the market, 13 percent more at the end of 2005. If you add in co-ops and condominiums, the rise in inventory was 21 percent.
Bill Hanley, president-elect of the New Jersey Association of Realtors and manager of Weichert Realtors in Metuchen, N.J., agreed. "Before we had one home for 10 buyers," he said. "Now the one buyer can look at 10 homes."

For sellers, the new market dynamic can lead to frustration. Gary Harman watched in recent years as his neighbors sold Cape Cod-style homes for more than a half-million dollars. At the end of December, he put his house, in East Hanover, N.J., on the market for $539,000. None of the more than 25 people who came to see it made an offer. He has since dropped the price twice, to $519,900. He believes his house stands out because of the abundant custom wood molding he installed himself. "The discouraging part is that when the people go through the house, they don't even take that into consideration," he said. "You could have holes in the house and it wouldn't matter."

Self-installed custom wood moulding? Surely that doubles the 'value' of the home. I guess not since Gary lowered the price to $499,900. The MLS# is 2229112. Bonus points to any reader that can actually find any custom wood moulding in the listing photos.

Caveat Emptor!