Saturday, May 06, 2006

When Buffett Speaks... Listen.

From CNN/Money:

Buffett: Real estate slowdown ahead

The Oracle of Omaha expects the housing market to see "significant downward adjustments," and warns on mortgage financing.

On the real estate bubble

Buffett: "What we see in our residential brokerage business [HomeServices of America, the nation's second-largest realtor] is a slowdown everyplace, most dramatically in the formerly hottest markets. [Buffett singled out Dade and Broward counties in Florida as an area that has experienced a rise in unsold inventory and a stagnation in price.] The day traders of the Internet moved into trading condos, and that kind a speculation can produce a market that can move in a big way. You can get real discontinuities. We've had a real bubble to some degree. I would be surprised if there aren't some significant downward adjustments, especially in the higher end of the housing market."

On mortgage financing

Munger: "There is a lot of ridiculous credit being extended in the U.S. housing sector."

Buffett: "Dumb lending always has its consequences. It's like a disease that doesn't manifest itself for a few weeks, like an epidemic that doesn't show up until it's too late to stop it Any developer will build anything he can borrow against. If you look at the 10Ks that are getting filed [by banks] and compare them just against last year's 10Ks, and look at their balances of 'interest accrued but not paid,' you'll see some very interesting statistics [implying that many homeowners are no longer able to service their current debt]."

Harder To Become A Hair Stylist In New Jersey

Ever wonder why it's more difficult to become a hair stylist than a real estate agent in New Jersey? So do I. Do New Jersey homebuyers even realize that their barber needed more hours of education than the person brokering a hundred thousand dollar transaction? Now, I'm not trying to say that cosmetology and hairstyling aren't difficult. Having received a bad haircut or two in my day, I'm glad with the licensure requirements where they are, it's the requirements for a real estate license that scare me.

The reason for licensing requirements are twofold. First, to ensure that the applicant has had appropriate training in the profession, and second to provide a barrier to entry. Why would you want a barrier to entry? It's simply, it provides a level of consumer protection by ensuring the candidate is serious about the profession.

So is it harder to become a hair stylist or a real estate agent/broker in NJ? Let's explore.

Cosmetology and Hairstyling Licensing Requirements

Real Estate Licensing Requirements(PDF)

Hair Stylist: 17 years
Real Estate Agent/Broker: 18 years

Hair Stylist: High School or Equivalent
Real Estate Agent/Broker: High School or Equivalent

Prelicensure Training
Hair Stylist: 1200 Hours
Real Estate Agent: 75 Hour Course
Real Estate Broker: 150 Hours

State Licensing Exam Passing Grade
Hair Stylist: 75
Real Estate Agent/Broker: 70

Required Apprenticeship
To operate a Beauty Shop: 3 years as a licensed cosmetologist
To become a Real Estate Broker: 3 years as a licensed agent

Can someone please explain to me why it's more difficult to become a hair stylist in New Jersey? Again, I'm not trying to downplay cosmetology at all, I just don't understand why Real Estate Licensees are held to lower standards, yet they are permitted to participate in transactions of such magnitude. Next time you get a hair cut, sit comfortable and take confidence in the training of your service provider.

If the real estate industry is permitted to keep propogating the meme that real estate is an investment, than agents and brokers of those transactions should be held to the same high standards of other investment and financial professionals.

Proposed Real Estate Licensing Requirements
Bachelors Degree in Business
1,200 Hours of pre-licensure real estate education
1-year apprenticeship prior to agent licensure

At least the commission paid would be justified.

Caveat Emptor!

Friday, May 05, 2006

Weekend Open Discussion

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

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.

As always, anything goes!

New Jersey State Deficit Increases

From the Express Times:

State deficit now $5 billion

Meeting with a mix of resignation and disbelief in the Legislature, state Treasurer Bradley Abelow said Thursday an erosion in tax collections means New Jersey's deficit has grown by about $500 million.

The revised collection figures would mean Corzine is heading into next year with a $5 billion hole in his budget.

"The governor has directed us to find additional cost savings measures," Abelow said in an afternoon briefing given to reporters. "Literally, we're still opening envelopes, depositing checks and counting."

According to Treasury officials, collections of the Corporate Business Tax fell $150 million to $175 million short of budgeted projections while income tax revenue was down about $300 million to $10.5 billion.

While he did not give specifics, Abelow said sales tax collections were on track.

New Home Orders Drop

From Reuters:

Toll Brothers 2nd-Qtr Home Orders Fall 33% on Demand

Toll Brothers Inc., the largest U.S. builder of luxury houses, said fiscal second-quarter orders fell 33 percent as customers waited to see whether a glut of homes on the market would lead to lower prices.

Orders for the period ended April 30 fell to 2,076 from 3,120 a year earlier, Horsham, Pennsylvania-based Toll said today in a statement. It was the second consecutive decline following 10 quarters of increases for the builder, whose homes cost triple the national average.

Rising mortgage rates and record prices have chilled demand at the height of the so-called spring selling season, traditionally the busiest time for builders. Hovnanian Enterprises Inc., the largest builder in New Jersey, said on May 1 that orders for the quarter ended April 30 plunged 20 percent.
``We believe the excess supply on the market is a short-term phenomenon,'' Robert Toll, the company's chairman and chief executive officer, said in the statement.

The number of homes on the market increased as investors tried to sell properties or canceled contracts in mid- construction, the executive said. Prices on these speculative homes were being ``aggressively discounted,'' he said.
Demand from ordinary buyers eased because of ``worries about the direction of home prices,'' he said.

The company's cancellation rate in the quarter was 8.5 percent, compared with its historic average of 7 percent, Toll said.

Thursday, May 04, 2006

Fed Governor Bies Jawboning Lenders

From Reuters:
US regulators to issue bank market risk rules-Bies

Bies also reiterated concerns U.S. regulators have about the proliferation of non-traditional mortgage products, such as interest-only loans, and the easing of underwriting standards.

"While the credit quality of residential mortgages generally remains strong, the Federal Reserve and other banking supervisors are concerned that current risk-management techniques may not fully address the level of risk inherent in nontraditional mortgages, a risk that would be heightened by a downturn in the housing market," she said.

She also discussed proposed guidance on commercial real estate lending, which she said should be finalized within the "next several weeks."

The transcript of this speech is available here:
Supervisory Perspective on Current Bank Capital, Market Risk, and Loan Product Issues

Over the past few years, the agencies have observed an increase in the number of residential mortgage loans that allow borrowers to defer repayment of principal and, sometimes, interest. These loans, often referred to as nontraditional mortgage loans, include "interest-only" (IO) mortgage loans, on which the borrower pays no loan principal for the first few years of the loan, and "payment-option" adjustable-rate mortgages (option ARMs), for which the borrower has flexible payment options--and which could also result in negative amortization.

IOs and option ARMs are estimated to have accounted for almost one-third of all U.S. mortgage originations in 2005, compared with less than 10 percent in 2003. Despite their recent growth, however, these products, it is estimated, still account for less than 20 percent of aggregate domestic mortgages outstanding of $8 trillion. While the credit quality of residential mortgages generally remains strong, the Federal Reserve and other banking supervisors are concerned that current risk-management techniques may not fully address the level of risk inherent in nontraditional mortgages, a risk that would be heightened by a downturn in the housing market.

Mortgages with some of the characteristics of nontraditional mortgage products have been available for many years; however, they have historically been offered to higher-income borrowers. More recently, they have been offered to a wider spectrum of consumers, including subprime borrowers, who may be less suited for these types of mortgages and may not fully recognize the embedded risks. These borrowers are more likely to experience an unmanageable payment shock during the life of the loan, meaning that they may be more likely to default on the loan. Further, nontraditional mortgage loans are becoming more prevalent in the subprime market at the same time risk tolerances in the capital markets have increased. Banks need to be prepared for the resulting impact on liquidity and pricing if and when risk spreads return to more "normal" levels and competition in the mortgage banking industry intensifies.

Supervisors have also observed that lenders are increasingly combining nontraditional mortgage loans with weaker mitigating controls on credit exposures--for example, by accepting less documentation in evaluating an applicant's creditworthiness and not evaluating the borrower's ability to meet increasing monthly payments when amortization begins or when interest rates rise. These "risk layering" practices have become more and more prevalent in mortgage originations. Thus, while some banks may have used elements of the product structure successfully in the past, the easing of traditional underwriting controls and sales of products to subprime borrowers may have unforeseen effects on losses realized in these products.

Caveat Emptor!

Hat tip goes out to Calculated Risk for this piece..

Fortune - Real Estate Survival Guide

From Fortune via CNN/Money:

Welcome to the dead zone

Real estate survival guide: The great housing bubble has finally started to deflate, and the fall will be harder in some markets than others.

The stories keep piling up. In many once-sizzling markets around the country, accounts of dropping list prices have replaced tales of waiting lists for unbuilt condos and bidding wars over humdrum three-bedroom colonials.

The message is clear. Five years of superheated price gains rescued America from stock market collapse, put billions in consumers' pockets, and ignited a building boom that bolstered the nation's economy. (To relive the frenzy, see "Riding the Boom.") But it's over. The great housing bubble has finally started to deflate.

You won't find that news in broad national statistics or the upbeat comments from the real estate industry. Thelatest official figures, for example, show both new and existing home sales rising in March, a mixed bag on prices - and a record number of new homes on the market.

Unmaking the myths

Real estate survival guide: The sudden shift in the nation's housing markets is exploding some long-held beliefs. Here's the conventional wisdom you should ignore.

The sudden shift in the nation's housing markets is exploding some long-held beliefs. The first is that a scarcity of buildable land on the coasts keeps a cap on supply and prevents prices from falling.

But high prices inevitably work their magic, encouraging more people to sell existing homes and sparking new construction. Sure enough, prices are already tumbling in Boston, where a swarm of downtown condos is swelling the number of properties for sale and punishing the price of all housing.

A second myth is that today's big homebuilders learned their lesson in past downturns and now launch projects only when they have firm buyers lined up. But housing starts are still running at near-record levels of some two million units a year.
A third tenet holds that home values never drop in areas where employment is rising. But today some of the hardest-hit regions rank among the strongest job machines, notably Northern Virginia and San Diego. The reason: Young buyers filling those jobs can't afford the houses for sale. (See a gallery of markets that are due for a fall, and ones that will hold up.)

Who will be hurt most?

During the boom, condos were catnip for would-be tycoons. Now investors are bolting, developers are slashing prices, and unsold units are piling up.

The most troubled sector of the housing market, the one that will fall first and fastest, is the condominium market. Typically cheaper than houses and easier to buy, sell or rent out, condos are catnip for investors.
Yet even as speculators flee, developers keep throwing up condos at a breakneck pace, in part because if they have already bought the land and poured the foundation, they have no choice but to finish the project.

Hot home markets to cool will your home fare?

According to the latest housing price forecasts from Fiserv Lending Solutions, a provider of mortgage and consumer lending services, Las Vegas real estate will tumble a whopping 8.2 percent in 2006, the largest predicted fall among the 379 metro areas studied.

Fiserv forecasts a significant stagnation in housing prices for the United States in 2006 -- median home prices overall will inch up only 1.5 percent this year. And many metro areas will experience drops, including some of the largest, and most expensive, ones such as New York (down 2.43 percent), Los Angeles (down 3 percent) and Washington (down 1.9 percent).

At A Glance: Piscataway, NJ

Listings As of 5/4 - (SFH, Condo, Coop)
Total Active Listings: 145
Up To $500,000: 122
$500,001 - $1,000,000: 23
$1,000,001 And Up: 0

Listing Activity Since 5/1 - (SFH, Condo, Coop)
12 Added
1 Back on Market
11 Price Reductions
6 Under Contract
1 Sold
5 Expired
3 Withdrawn
0 Temporarily Withdrawn

March Sales Activity - (SFH, Condo, Coop)
Up To $500,000: 20
$500,001 - $1,000,000: 2
$1,000,001 And Up: 0
Sales Prices were on average 3.2% below Original List Prices
(Activity data from GSMLS)

Can strong job growth burst the bubble?

From the NY Post:


TOMORROW could be the day of wreckoning for the financial markets.
Don't write, I know how to spell the word. It's the day of wreckoning because a strong employment report Friday morning could wreck any notion that the Federal Reserve will stop raising interest rates anytime soon. And the report is likely to be strong - too strong.

In case you've lost count, the Fed has raised interest rates 15 times over the past two years. That has resulted in a big jump in short-term interest rates - hurting adjustable-rate mortgage holders and the like - even though long-term borrowing costs haven't budged nearly as much as the Fed would have liked.
The jobless rate, as anyone with a brain stem knows, is a useless number because people who are chronically unemployed and who have given up looking for work aren't counted in the 4.7 percent.

But the tally of new jobs is watched by Wall Street to a fault. And, as you might already know, that's probably because the statistic is so faulty. This month's number is likely to come in over the expected 200,000 because of springtime assumptions that the Bureau of Labor Statistics makes.

These optimistic guesses probably have something to do with blooming cherry blossoms and bellowing politicians.
With inflation rearing its ugly head in the real world, interest rates could start rising even faster than they have been and make long-term mortgages so expensive that they would chill housing prices.

So it's entirely possible that there will be a delayed reaction to those 15 rate hikes. Interest rates might not only continue their rise - but quickly surge - even if it's against the Fed's wishes.

A New Old Way To Tax New Jersey Property

From the Star Ledger:

A 2-tiered solution to the property tax plight

A regional planning group looking at ways to overhaul the state's property tax system says the best idea is one that dates back more than a century: a two-tiered system that would impose higher taxes on land than buildings.

The Regional Plan Association said the system would discourage sprawl, encourage affordable housing and protect the autonomy of municipalities.

Alexis Perrotta, co-author of the 23-page report, claims it would stop sprawl in it tracks because it would put a premium on taxing land.

"It doesn't cost you any more to build up. But it costs to build out," Perrotta said.
With New Jersey officials contemplating a major property tax overhaul, perhaps as early as this fall, the commission evaluated several broad reforms mostly aimed at school tax burdens, which make up the lion's share of property tax bills.

Other ideas include varying the school property tax by state planning area, adopting a single school tax rate for the entire state, consolidating all school districts at the county level and charging one county rate, and replacing half the school tax bill with an income tax surcharge.
Assemblyman Louis Greenwald (D-Camden), chairman of the Assembly Budget Committee, said the idea of a two-tiered tax system, first suggested in 1879 by economist Henry George, is "interesting on its face" but needs more review. "We are at a crisis point and we have to start to address alternatives," he said.

Wednesday, May 03, 2006

It's time to let me know what you think

The time has come for some criticism of the blog and the blogger.

I want to know what you like about the blog, and more importantly, what you dislike.

Do you think I cover the issues fairly?

Too much economics or too little?

Do you want to see more nationwide or regional news, or should the blog stay focused?

What do you want to see more of, and what would you like to see less of?

Do you have any ideas for a new weekly feature? Let's hear them.

Do you want to contribute to the blog? Let's hear your ideas.

Northern New Jersey Residential Inventory Update

Single Family Homes, Condo, Coop
(Bergen, Essex, Hudson, Morris, Passaic, Somerset, Sussex, Union, Warren Counties)

4/26 - 15,648
5/3 - 16,111 (3% Weekly Increase)

Single Family Homes, Condo, Coop
(Bergen, Essex, Hudson, Passaic Counties)

4/26 - 7,622
5/3 - 7,792 (2.2% Weekly Increase)

Single Family Homes, Condo, Coop
(Hudson County)

4/26 - 2,259
5/3 - 2,243 (0.7% Weekly Decrease)

Jobs Key To Housing?

From CNN/Money:

Working on the housing boom

Those looking to glimpse the future of the housing market may want to start watching help-wanted ads rather than the real estate section.

Experts who say the housing market is cooling, but won't implode, argue that solid job growth should be enough to prevent a collapse in home prices. But others who see a housing "bubble" ready to pop say a developing slowdown in home building itself could hurt job growth enough to put a big dent in housing.

"The economy was healthy when the stock market plunged in 2000," said Dean Baker, co-director of the Center for Economic and Policy Research in Washington and an outspoken advocate of the housing bubble theory, but stock prices "had gotten out of line with reality."
Past housing downturns have seen builders slash their work forces by up to 40 percent, said Baker, the housing market bear, and with an estimated 3.5 million people working in residential construction, the loss of more than 1 million jobs would obviously cause problems for the labor market.

Add job losses at mortgage firms, building supply retailers and real estate agencies and the downturn in home building could itself further weaken one of the key supports for real estate.
"Those people losing their jobs are the classic home owners. This could be a vicious circle," he said.


The past provides some insight into what the future might hold for New Jersey. The collapse of the housing market in the early 90's went hand in hand with job losses across the region.

From the BLS:

Construction Jobs (in thousands), Statewide, Seasonally Adjusted, 1990-2006

(click to enlarge)

Total Nonfarm (in thousands), Statewide, Non-Seasonally Adjusted, 1981-2006

(click to enlarge)

Caveat Emptor!

N.J. Economy Losing Edge

From the Cherry Hill Courier:

Steps urged for state to keep economic edge

To retain its economic edge, New Jersey must offer more housing choices, encourage better land use and reduce "racial, class, and space disparities," an independent research and policy institute says in a new report.

Nationally, New Jersey ranks high in income level, educational attainment, homeownership and employment but "is beginning to lose its competitive edge," said Bruce Katz, vice president and director of The Metropolitan Policy Program, part of the Washington-based Brookings Institution.

New Jersey ranks low in wage growth and has been losing high-wage jobs and gaining low-wage ones, Katz said.

Tuesday, Katz presented his findings to a group of Garden State housing, transportation and policy experts gathered in a State House committee room. The day before, he gave the same PowerPoint presentation, entitled "Prosperity at Risk: Toward a Competitive New Jersey," to Gov. Jon S. Corzine's senior policy staff.

"The governor has already begun to address many of the critical issues raised in the report," said Brendan Gilfillan, Corzine's spokesman.

Tuesday, May 02, 2006

Cash-out Refi Party Not Over Yet

From Inman News:

Freddie Mac: Cash-out refis up in first quarter

In the first quarter of 2006, 88 percent of Freddie Mac-owned loans that were refinanced resulted in new mortgages with loan amounts that were at least 5 percent higher than the original mortgage balances, according to Freddie Mac's quarterly refinance review.

This percentage is up from the fourth quarter of 2005, when the share of refinanced loans that took cash out was a revised 81 percent, and is the highest since the third quarter of 1990, the mortgage giant said.

"The share of all mortgages that were for refinance fell slightly in the first quarter of 2006 to 44 percent from 45 percent in the fourth quarter of 2005. Over that same period interest rates on all mortgages increased between 0.02 and 0.25 percent," said Frank Nothaft, Freddie Mac vice president and chief economist.

"Almost no one is refinancing to reduce their interest rate in today's environment. In fact, the first quarter of 2006 is the first time in 20 quarters in which the new mortgage rate was higher than the old one for more than half of refinancing borrowers," Nothaft said.
"Total mortgage originations were down in the first quarter by an estimated 24 percent, but the strong overall refinance share along with the very high proportion of borrowers who extracted equity through refinance led to an extraction of home equity through prime first-lien refinances of $59.6 billion in the first quarter," Cutts said.

"This volume is down only 16 percent from the fourth quarter of 2005's revised equity extraction volume of $70.9 billion. We expect the share of all refinance borrowers who take out cash to remain high in 2006, but as mortgage rates continue to climb, the refinance share should drop to around 33 percent," Cutts said.

NAR Pending Home Sales Down 6%

The National Association of Realtors released the March Pending Home Sales Index report this morning. It can be found here:

March Pending Home Sales Index(PDF)

Nationwide pending sales were down 6% year over year for March. YOY declines were seen across the U.S., Northeast down 1.1%, Midwest down 9.3%, South down 1.6%, West down 13.3%.
From Reuters:

U.S. March pending home sales index down 1.2 pct

Pending sales of U.S. homes edged lower in March, signaling weaker sales ahead, as rising mortgage rates weigh on the market, a trade group said on Tuesday.

The Pending Home Sales Index, based on contracts signed in March, stood at 116.2 in March, down 1.2 percent from February and 6 percent below a year ago, according to the National Association of Realtors.

It was also weaker than Wall Street expected. Economists had pegged the index at 117 for March.

Otteau Report - First Quarter 2006

The Otteau Report For Q1 '06 is online and available at the Otteau Group website. There is quite a bit of data contained in these reports, they should keep you all busy for hours.

Projected Absorption: 7 Months
Supply & Demand Ratio: 48%
Unsold Inventory: 5342 (Up 84%)

Projected Absorption: 5 Months
Supply & Demand Ratio: 55%
Unsold Inventory: 2124 (Up 38%)

Projected Absorption: 8 Months
Supply & Demand Ratio: 41%
Unsold Inventory: 2429

Projected Absorption: 7 Months
Supply & Demand Ratio: 47%
Unsold Inventory: 3115 (Up 66%)

Projected Absorption: 7 Months
Supply & Demand Ratio: 46%
Unsold Inventory: 1801 (Up 65%)

Projected Absorption: 7 Months
Supply & Demand Ratio: 45%
Unsold Inventory: 2204 (Up 92%)

Projected Absorption: 9 Months
Supply & Demand Ratio: 44%
Unsold Inventory: 1175 (Down 3%)

Projected Absorption: 5 Months
Supply & Demand Ratio: 50%
Unsold Inventory: 2131 (Up 60%)

Projected Absorption: 8 Months
Supply & Demand Ratio: 42%
Unsold Inventory: 951 (Up 40%)

NJ Housing News

From the Star Ledger:

Caldwell weighs 'steep slope' limits

A proposal to build 10 condominiums along Central Avenue in Caldwell near Bloomfield Avenue is scheduled for a hearing Wednesday night before the borough's zoning board.

But a vote by the Caldwell council tonight on whether to restrict building on "steep slopes" in the borough may affect that proposal and others suggested for hilly sections of the community.
Last month, the zoning board began hearing the application for 10-attached condominiums on a two parcels of land 32,000-square-feet in size on Central Avenue. The projected, titled "The Brownstones at Caldwell" would require a variance to put a residential development in a business zone.

The proposal calls for two buildings, each with five condominiums, no more than three-stories in height. Each unit would have a driveway, a single-car garage and a deck.

A new look on the way for Cranford's south side

For decades, the south side of Cranford's downtown was an architectural hodgepodge of clashing buildings, with an ultra-modern bank next to an 1890s-era hotel lo cated near a strip mall.
But over the next few years, much of that is going to change, not only because of the Cranford Crossing project now under construction -- a parking garage, 22,000 square feet of retail and office space and 50 luxury condominiums -- but because plans are in the works for commercial and residential developments that will redefine the east and west ends of the central business district.
Downtown Cranford is experiencing an incredible development surge. In addition to Cranford Crossing, a 3.5-acre site bordered by South Avenue and the Rahway River is slated for commercial development and an estimated 100 townhouses.

Another 75 residential units were just approved for a 4-acre va cant tract on South Avenue, alongside the old Central Railroad of New Jersey tracks. The three-story residential complex will become the defining point for the eastern end of the downtown area; on the western edge, a Walgreens will soon replace the Bradley Corru gated Box Co. on South Avenue, Prunty said.
While Cranford may be in the spotlight now, when it comes to the communities along the Raritan Valley Line, the focus is likely to shift to Somerville, where a 112-acre site, a former dump, is slated for development. The site is within easy walking distance of the train station.

Clinton Twp. accepts Windy Acres plan

To a mix of grudging acceptance and glum objections last night, the Clinton Township Council and planning board approved the latest version of their settlement with Pulte Homes over the proposed Windy Acres development.

The council approved the contract 3-0. Mayor Nick Corcodilos did not participate because he is a nearby property owner, and Councilwoman Rose Marie Malaker was absent because of illness.
The first option under the new contract remains from last year. Pulte could build 365 age-restricted units plus 90 residences for low- or moderate-income persons on former farmland, and would provide land for another 60 affordable homes.

From the Asbury Park Press:
Developer argues that Mount Laurel took land illegally

The state Supreme Court on Monday heard arguments in a case that could have national implications for a municipality's right to use eminent domain to slow development and preserve open space.

A developer, MiPro Homes LLC, wanted to build 23 single-family homes on a 16-acre parcel at Elbo Lane and Hainesport-Mount Laurel Road in Mount Laurel. The township seized the property to preserve it as open space.

MiPro sued the municipality, and a lower court ruled the township acted legally. The Supreme Court did not issue a decision.
Baron argued the township acted in "bad faith" by waiting to condemn the land until after the developer received necessary approvals. The land was zoned for residential development in the municipality's master plan, he said.

"If the condemnation can take place without any planning, what would stop a municipality from taking any property because they don't like the use?" he said.

From the AP via the Star Ledger:
Jersey's economic growth tails off early in 2006

Economic growth in New Jersey slowed in the first three months of the year, burdened by an increase in initial unemployment claims, the Federal Reserve Bank of Philadelphia reported yesterday.

The regional bank's latest monthly forecast projected moderate economic growth of 2.2 percent through the end of the year.

"Basically, the first quarter in New Jersey was a little slower on most measures, but overall, the economy is in pretty good shape," said a bank economist, Vice President Theodore Crone.
"Housing was a big driver previously, and now it's going to level off," as it is doing nationally, he said. "It is sort of the exhaustion of a rapid expansion."

From the Herald/Record:
Sharing helps towns cut costs

With hundreds of municipalities -- all with their own infrastructures -- and soaring property taxes, finding any way to cut costs is no longer a luxury for local officials in New Jersey.

It's a necessity.

"We have 566 towns, approximately 700 fire districts and hundreds of school districts," said Susan Bass Levin, commissioner of the state's Department of Community Affairs. "Each year, the budgets get tighter, costs go up and towns face the pinch of rising utility bills, collective bargaining and increasing health insurance.

"We need to do a better job of streamlining our operations."
So why aren't more municipalities sharing services?

"These are quality-of-life services which are different from manufacturing widgets in the private sector," Dressel said. "You have to be concerned about making sure that all [residents] are going to receive the same level of services under a new cooperative agreement.

Monday, May 01, 2006

Lowball! 4/22 - 5/1

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.

On to the list!

MLS# 2218107 - Little Falls, NJ
List Price $396,900
Sales Price $310,000 (21.9% Lowball)

MLS# 2210393 - Andover, NJ
List Price $299,000
Sales Price $250,000 (16.4% Lowball)

MLS# 2109439 - Franklin, NJ
Original List Price $850,000
List Price $775,000
Sales Price $650,000 (16.1% Lowball, 23.5% off Original List)

MLS# 2228760 - Phillipsburg, NJ
Original List Price $150,000
List Price $125,000
Sales Price $105,000 (16% Lowball, 30% off Original List)

MLS# 2215218 - Verona, NJ
List Price $1,500,000
Sales Price $1,288,000 (14.1% Lowball)

MLS# 2099115 - Manville, NJ
List Price $335,000
Sales Price $290,00 (13.4% Lowball)

MLS# 2089382 - Livingston, NJ
Original List Price $479,000
List Price $459,000
Sales Price $400,000 (12.9% Lowball, 16.5% off Original List)

MLS# 2109910 - Montgomery, NJ
Original List Price $1,750,000
List Price $1,599,000
Sales Price $1,405,000 (12.1% Lowball, 19.7% off Original List)

MLS# 2103382 - Fredon, NJ
List Price $337,500
Sales Price $298,000 (11.7% Lowball)

MLS# 2236513 - Montclair, NJ
List Price $215,000
Sales Price $190,000 (11.6% Lowball)

MLS# 2240203 - Vernon, NJ
List Price $202,900
Sales Price $190,000 (11.3% Lowball)

MLS# 2063093 - Franklin Lakes, NJ
Original List Price $2,899,000
List Price $2,699,000
Sales Price $2,400,000 (11.1% Lowball, 17.2% off Original List)

MLS# 2113198 - Chatham, NJ
List Price $1,225,000
Sales Price $1,100,000 (10.2% Lowball!)

MLS# 2222387 - Bloomingdale, NJ
Original List Price $450,000
List Price $399,999
Sales Price $360,000 (10% Lowball, 20% off Original List)

MLS# 2101534 - Independence, NJ
Original List Price #359,900
List Price $349,900
Sales Price $315,000 (10% Lowball, 12.5% off Original List)

Caveat Emptor!

Personal Savings Rate Negative Yet Again

From the BEA:


Personal income increased $88.8 billion, or 0.8 percent, and disposable personal income (DPI) increased $78.4 billion, or 0.8 percent, in March, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $51.8 billion, or 0.6 percent. In February, personal income increased $33.2 billion, or 0.3 percent, DPI increased $23.1 billion, or 0.2 percent, and PCE increased $20.0 billion, or 0.2 percent, based on revised estimates.
Personal saving -- DPI less personal outlays -- was a negative $32.5 billion in March, compared with a negative $58.3 billion in February. Personal saving as a percentage of disposable personal income was a negative 0.3 percent in March, compared with a negative 0.6 percent in February. Negative personal saving reflects personal outlays that exceed disposable personal income. Saving from current income may be near zero or negative when outlays are financed by borrowing (including borrowing financed through credit cards or home equity loans), by selling investments or other assets, or by using savings from previous periods. For more information, see the FAQs on "Personal Saving" on BEA's Web site.

Gallup Housing Poll

From the Gallup Poll:

Confidence in Housing Market Dips

The volume of U.S. home sales is near the record high seen in 2005, but Americans are much less confident today than they were a year ago about the advisability of buying real estate. Just 52% of Americans say now is a good time to buy a house, down from 71% last April and 81% in 2003. Residents of the East and West are especially likely to consider it a bad time to purchase a new home.
Housing looked like a good deal in the recent past when single-family homes were experiencing back-to-back years of double-digit appreciation and, in many markets, savvy investors could flip a home in a matter of months for a hefty profit. Now that the increases appear to be slowing, and home values are leveling off at fairly high prices, prospective buyers are naturally more concerned about paying top dollar. Rising mortgage interest rates -- though still "favorable" according to the National Association of Realtors -- may also diminish the degree to which Americans feel they can afford a new home.

The recent decline in consumer optimism about the housing market is seen with all major income groups and regions of the country. Across three income levels -- high, medium, and low -- the percentage of Americans saying now is a good time to buy has declined by about a third just in the last year, and by even more since 2003.

Americans' appetites for the housing market appear to be diminishing, and it's not due to their perceptions of overall economic conditions. Ratings of the national economy are about as negative today as a year ago. Roughly a third today call economic conditions "excellent" or "good" and even fewer believe conditions are improving.

Sunday, April 30, 2006

Weekend Open Discussion

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

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.

As always, anything goes!

NJ Homeowners Couldn't Afford To Buy

From the Daily Record:

Poll: Homeowners can't afford new home in own town

Donna Mackey bought her four-bedroom house in Butler 20 years ago for about $120,000. She estimates it's worth about $325,000 now, but that sum couldn't get her the home she would want if she were looking to buy in Morris County today.

"I could find maybe a two-bedroom (home) with absolutely no yard and tiny rooms," said Mackey, 47. "I don't even think I could stay in the same town. I could never get four bedrooms. I don't really think I could be in Morris County anymore."

Mackey's predicament is not unusual in the Morris area or the state, according to a recent Monmouth University/Gannett New Jersey newspapers poll, which found that 78 percent of New Jersey homeowners would not be able to buy a house in their own town if they were first-time homebuyers.
Maria Creutz, 24, of Jackson, said she and her husband cannot afford to purchase a home in New Jersey and she holds out little hope of a political solution.

"Lawmakers do not consider affordable housing a priority,"she said. "They have roofs over their heads, so they don't think about the rest of us."

Jersey Shore Development

From the Star Ledger:
Coastal development: Where should it stop?

After storms lashed the Jersey Shore in 1984, 1991 and 1992, policymakers vowed to change the way development was regulated along the state's densely built shoreline.

But when lawmakers reauthorized the state's coastal development law in 1993, a new provision gave homeowners a guaranteed right to rebuild, regardless of how much damage their property sus tained in a storm.

The rules already contained a gaping loophole that allowed 24-unit condominium complexes to be built without a state permit, and yet another revision from 2000 handed Atlantic City casinos the right to build on piers.

Fast forward to 2006, and the barrier islands are far more built up than ever before. Tens of billions of dollars worth of oceanfront mansions line a shifting and vulnerable necklace of sand.

In the wake of Hurricane Ka trina -- which devastated New Or leans, broke the National Flood Insurance Program and sent ripples of concern through the ranks of private insurers -- the wisdom of coastal development is again at center stage.

So far, reformers have focused on restoring the insurance program to solvency, with members of Congress talking tough about raising premiums on older properties or even yanking coverage for properties that are repeatedly flooded.

But a few witnesses at congressional hearings dared raise a more basic issue: Wasn't it time, they asked, that coastal states like New Jersey stopped building in harm's way?
Given the soaring price of real estate, tear-downs have become big business on the barrier islands. They have eliminated many of the older, flood-prone structures, but replaced them with much more expensive houses.

Many are owned by people who don't know the dangers.

A lull in severe storms on the East Coast has produced a whole generation of beachfront property owners who don't remember the 1962 storm -- the last Big One -- which killed at least seven people along the Jersey Shore and washed away hundreds of houses.

Fort Monmouth Pricetag: $2 Billion

From the Star Ledger:

For sale by Army: Its Jersey gold mine

Everyone agrees Fort Mon mouth sits on some of the most valuable real estate in New Jersey. Thanks to new thinking at the Pentagon, we may find out exactly how valuable after the Army closes the communications research center in 2011.

The Pentagon, after years of practically giving away closed installations in the spirit of job creation and economic development, is likely to chase top dollar for pieces of the 1,110-acre site in Mon mouth County, government officials and defense analysts say.

And that could mean as much as $2 billion.

"The Department of Defense is realizing that some of these parcels of land are worth quite a bit," said Ellen Stein, director of New Jersey's office of military affairs. "So they're moving away from 'economic-benefit' conveyances to market-value sales."
"It's unclear what would move the Pentagon to a public auction, but they have a lot of wiggle room and we're afraid they're going to do what they want," said Ford, whose organization represents officials redeveloping closed installations.
Most officials envision Fort Monmouth's land being separated into parcels. New housing is likely on some, businesses parks possible on others. The Pentagon also re tains the right to transfer land for free for parks, airports, hospitals, wildlife conservation or education.
Now, with a hot real estate market and desirable properties to sell, the Pentagon sees a way to make money -- and move properties quickly, Ford and others say.