Saturday, May 27, 2006

New Jersey Economy To Slow

From the APP:
Anemic economy forecast for N.J.

Rising unemployment, a slowdown in the housing market and declining business for vendors could add up to an anemic economy for New Jersey in the coming months, according to the latest data from the Federal Reserve Bank of Philadelphia.

The regional bank's latest forecast for the Garden State, issued Friday, pegs economic growth through early next year at just 0.4 percent, a precipitous drop from the bank's last two forecasts of modest growth.

Economist Ted Crone, a vice president at the bank, said the drop "could be just a little blip."

"I would want to have a couple more months' data before we go out onto a limb" by predicting much slower growth, he said.

The prior two forecasts were for economic growth of 1.8 percent and then 1.4 percent, each over the subsequent nine months, but both were later revised. The most recent forecast, for example, was cut from 2.2 percent growth to 1.4 percent, and the 0.4 percent estimate could be revised later.

The data used for the latest forecast, collected in April, include the biggest jump in the state unemployment rate in more than three years, Crone said, from a 4.5 percent rate in March to 5.1 percent in April — the highest level in two years.

Meanwhile, vendors surveyed by the bank reported getting raw materials and goods to customers quicker, a sign they had less business to handle, and the number of new-home construction permits dropped from about 2,240 in March to 1,660 in April. Crone said the market for both new and existing homes has been slowing nationwide as well as in New Jersey, with prices increasing less rapidly and the inventory of unsold homes rising.

"We don't expect a total collapse. It's just like letting a little air out" of the once-hot market, he said.

Friday, May 26, 2006

Negative Personal Savings Rate The Norm?

From Smartmoney:
Inflation Eats Up Income Gains in April

Rising prices offset the gains in personal incomes in April, the Commerce Department said Friday.

Personal incomes rose 0.5% in the month, but consumer prices also rose 0.5%. Real disposable incomes (inflation-adjusted and after-tax) fell 0.1%.

Real per-capita incomes fell 0.2%.

Consumer spending increased 0.6% in nominal terms. In real, inflation-adjusted terms, spending increased 0.1%, starting the second quarter off on a weak note.

Core inflation -- as measured by the personal consumption expenditure price index, excluding food and energy -- rose 0.2% in April, as expected, after a 0.3% gain in March. Core inflation rose 2.1% in the past 12 months, the fastest gain since March 2005.

The increase in the core PCE index was 0.2497%, which rounded down to 0.2%, barely.
With spending rising faster than incomes, the personal-savings rate fell to negative 1.6% in April from negative 1.4% in March. The savings rate has been negative for 11 consecutive months.

Weekend Open Discussion

Greetings from the Jersey Shore.

Love is... unsecured wireless network.

Sorry for the lack of updates today, I'm down on Long Beach Island for the holiday weekend. Thought I'd get a chance to find internet access locally, but no dice. Well, until I found this an unsecured wireless network I can connect to from the deck. Thanks go out to whoever you are, I've got a beer and a burger here for you.

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.

Hope everyone has a great weekend. As always, anything goes!

Thursday, May 25, 2006

Existing Home Sales Fall, Inventory Hits New Highs

From the National Association of Realtors:

April Existing Home Sales

April Year-over-year Sales - Unadjusted
Nationwide -10.1%
Northeast -7.1%
Midwest -8.5%
South -7.7%
West -17.9%

Median Sales Price Changes
Nationwide 4.2%
Northeast 5.6%
Midwest -1.2%
South 3.4%
West 4.8%

Inventory is up a staggering 36.7% year-over-year. Current supply stands at 6 months, up 7.1% from last month.

April Year-over-year Sales (Condo/Coop Only) - Unadjusted
Nationwide -11.7%
Northeast -7.7%
Midwest -7.1%
South -16.7%
West -15.4%

Median Sales Price Changes (Condo/Coop Only)
Nationwide -0.2%
Northeast 3.7%
Midwest 5.2%
South -5.2%
West -6.8%

Condo/Coop inventory is up 62.2% year-over-year. Current supply stands at 7.1 months, up 2.9% from last month.

From Bloomberg:

U.S. April Home Resales Fall 2% to 6.76 Million Rate

Sales of previously-owned homes in the U.S. fell last month, reinforcing expectations that a slowdown in housing will help cool economic growth this year.

Home purchases fell 2 percent in April to an annual rate of 6.76 million from 6.9 million in March, the National Association of Realtors said today in Washington. Compared with a year earlier, sales fell 5.7 percent.
Economists expected existing home sales to fall to a 6.75 million rate from an initially reported March rate of 6.92 million, according to the median of 57 forecasts in a Bloomberg News survey. Estimates ranged from 6.4 million to 6.95 million.

Montclair Twilight Criterium

While we're on the subject of Montclair, I'd like to invite everyone out to the Montclair Twilight Criterium tonite (Thursday, May 25th). While I'm not racing tonite, I am part of the crew putting this race on.

For those who don't know what I'm talking about, a criterium is a multi-lap bicycle race around a closed track, where the course is typically a short loop. This is an important race for us, we've been trying to put on a downtown crit for years. Not an easy feat once the politicians realize that you need to close streets. Hopefully we'll get a good number of spectators, the more that turn out, the better chance we have at making this an annual event.

Additional information on the event can be found here:
Montclair Challenge

For those who follow cycling, there are some big names coming out to race tonite, not just the usual local crowd. Looking over the registration list I even see a handful of national champions and olympians coming out. Cycling is a big sport in Northern NJ, however it's fallen from favor as a spectator sport, simply because it is difficult to get a race venue organized. We're trying our darnedest to give this sport the credit it deserves.

So come on out tonite! Don't give me any excuses about not being local, I know most local readers are within a few minutes drive! Those coming home on the Montclair Boonton Line tonite make a stop off in Montclair to watch.

The races start at 4, but the Pro race gets going around 5:30-6. Don't worry if you get there a little late, there will be plenty of action!

See you all there!

Montclair Attempts To Curb McMansions

From the Star Ledger:
Montclair says enough is enough

"A 5,600-square-foot estate has plenty of room."

"That's the rationale as Mont clair advances a new list of land- use amendments intended to shrink the kind of mammoth residences popping up within its borders."

""From our point of view, that's a good size house," Jonathan Mel lon, Montclair's assistant planner, said of new lot-coverage limits that would effectively halve the size of houses now allowed in residential neighborhoods."

""There were some builders who expressed concern that they would not be able to build appropriate sized homes," Mellon said. "Six thousand square feet is not exactly small.""

"On a 60-foot-by-150 foot lot, for example, simple setback require ments now allow 49 percent coverage, meaning a two-story house could have some 8,800 square feet, not counting any finished attic or basement. A 25 percent coverage would allow for a two-story house with 4,466 square feet; add a half- story -- Montclair's maximum allowable-- and the house would approach 5,600 square feet of living space."

""The net result would be reducing the size of houses," Mayor Ed Remsen said as the council scheduled a June 13 public hearing."

Wednesday, May 24, 2006

Toxic or More Toxic?

The Consumer Federation of America recently completed a survey and study of non-traditional mortgage products. Unfortunately, the results only serve to further confirm what we've seen and heard before, the bulk of these exotic mortgages are being taken by under-qualified borrowers.


As Americans struggle to become homeowners, the use of interest only and optional payment mortgages continues to increase. The burden of these “riskier” mortgages is falling on middle and moderate income borrowers with less than stellar credit scores according to new data released today in a study by the Consumer Federation of America. In addition, the analysis also found that African American and Latinos were more likely to receive payment option mortgages than whites and African Americans were more likely to receive interest only mortgages.

“While the lending industry has characterized non-traditional borrowers as financially sophisticated and savvy consumers, the truth is that many are far from affluent and could be betting the house on their mortgage,” said Allen Fishbein, Director of Credit and Housing Policy at Consumer Federation of America (CFA). Because home ownership is so critically important in financial security, these Americans are unwittingly putting their entire financial livelihood at risk.

Among the key findings:

• Significant Shares of Non-Traditional Mortgage Borrowers Earn Less Than $70,000 Annually. More than one third (36.9%) of interest only borrowers earned below $70,000 annually and about one in six (15.6%) earned under $48,000 annually. More than one third (35.0%) of payment option borrowers earned under $70,000 annually and about one in eight (12.1%) earned between under $48,000. ($70,000 was about the median for Atlanta, Philadelphia and Chicago metropolitan areas, according to HUD figures for 2005, and the national median is $44,300.)

• African Americans and Latinos More Likely to Receive Payment Option Mortgages: Latinos are nearly twice as likely as non-Latinos to receive payment option mortgages. One in fifty (2.1%) non-Latino borrowers received payment option mortgages compared to the 4.0% of Latinos that received payment option mortgages. African Americans were 30.4% more likely than non-African Americans to receive payment option mortgages. 2.2% of non-African Americans received payment option
mortgages compared to 2.9% of African Americans.

• African Americans were more likely than non-African Americans to receive interest-only loans. Nearly one in ten (9.0%) of African Americans received interest-only mortgages, 11.7% higher than the 8.1% of non-African Americans that received interest-only mortgages.

• Many Non-Traditional Borrowers Have Only Average or Even Weaker Credit Scores. More than half (53.8%) of payment option borrowers and nearly two-fifths (38.0%) of interest only borrowers have credit scores below 700. More than one fifth (21.4%) and about one in eight (12.1%) interest only borrowers had credit scores below 660.

• The majority of these two types of non-traditional mortgages are used to purchase homes. Nearly four out of five (79.0%) interest-only mortgages and nearly three fifths (57.5%) of payment option loans were used to finance the purchase of a home. The high proportion of purchase mortgages in the non-traditional mortgage portfolio tends to support the contention that the increased use of these mortgage products is related to the rapidly escalating cost of housing.

The full text of the study can be found here:
Exotic or Toxic? An Examination of the Non-Traditional Mortgage Market for Consumers and Lenders

New Jersey Association Of Realtors First Quarter Statistics

New Jersey 2006 Q1 Statistics are available on the NJAR website:

Caveat Emptor!

New Home Sales Down 5.7%, Inventory Up 27%

Census department released the New Home Sales data earlier this morning, that data is available here:


"Sales of new one-family houses in April 2006 were at a seasonally adjusted annual rate of 1,198,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 4.9 percent (±11.5%)* above the revised March rate of 1,142,000, but is 5.7 percent (±9.8%)* below the revised April 2005 estimate of 1,270,000."

"The median sales price of new houses sold in April 2006 was $238,500; the average sales price was $298,300. The seasonally adjusted estimate of new houses for sale at the end of April was 565,000. This represents a supply of 5.8 months at the current sales rate."

Keep in mind monthly revisions can be dramatic, March was revised downward dramatically, from 1213K to 1142K. Why is this important? Prior to the revision, April would have been down 1%, instead due to the revision, it's actually up 4.9%.
April median and average prices were below peak prices set in September of last year.

It's difficult to understand the trend when only talking about the monthly change, especially when the monthly changes can be somewhat volatile. The best way to view this data is visually, and Calculated Risk does a great job of graphing it out.

Calculated Risk - April New Home Sales

Year over year, sales for April were down 5.7% Nationwide. The Northeast saw the largest year over year decline (33.3%), followed by the Midwest (16.9%), and lastly with the West declining 12.5% YOY. The South saw an increase of 6.7%.

New Home Inventory is up 27% year over year in April with 565,000 units available, a new record.

Caveat Emptor!

Purchase Mortgage Applications Drop 7.1%

From Reuters:
US home loan demand fell despite lower rates

"U.S. mortgage applications fell last week, driven by a steep decline in home purchasing loans even as interest rates dropped, an industry trade group said on Wednesday."

"The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity for the week ended May 19 decreased 6.0 percent to 552.6 from the previous week's 588.0."

"The MBA's seasonally adjusted purchase mortgage index fell 7.1 percent to 396.4. The purchase index -- considered a timely gauge of U.S. home sales -- was also below its year-ago level of 482.3."

"Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.61 percent, down 0.05 percentage point from the previous week, which was its highest level in nearly four years."

"Fixed 15-year mortgage rates averaged 6.23 percent, down from 6.26 percent the previous week. Rates on one-year adjustable-rate mortgages (ARMs) decreased to 6.02 percent from 6.07 percent."

"The ARM share of activity rose to 30.5 percent of total applications last week from 29.9 percent the previous week."

North Jersey Weekly Residential Inventory Update

(Garden State Multiple Listing Service)
Single Family Homes, Condo, Coop
(Bergen, Essex, Hudson, Morris, Passaic, Somerset, Sussex, Union, Warren Counties)

5/17 - 16,846
5/24 - 17,138 (1.7% Weekly Increase)

(New Jersey Multiple Listing Service)
Single Family Homes, Condo, Coop
(Bergen, Essex, Hudson, Passaic Counties)

5/17 - 8,217
5/24 - 8,465 (3% Weekly Increase)

MLSGuide -
Single Family Homes, Condo, Coop
(Hudson County)

5/17 - 2,344
5/17 - 2,419 (3.2% Weekly Increase)

From Junk To Gold

From the Star Ledger:
Board to review Montville housing plan

"A plan for 400 age-restricted homes on the site of an auto junkyard in Montville made it over the first hurdle last night."

"In a 5-0 vote, the township committee referred the proposal from the G.I. Auto Salvage property on Bloomfield Avenue to the planning board for review. The board will consider whether to change the zoning on the site from industrial to residential. That first step is needed before the plans can be considered."

"Junkyard owner Rene Avila had brought the proposal to the township committee several months ago. At a meeting with the junkyard owners in January, the committee requested additional information before it could consider a zoning change."

"One problem the development faces is access only from Bloomfield Avenue, in front of the property. The state Department of Transportation had turned down a request to have access directly to Route 46."

"The plans for the age-restricted homes are the latest move in a half-century of history between the township and G.I. Auto Salvage. The township's legal issues with the junkyard date to 1951, when the company sued the town because it refused to issue it a license."

Tuesday, May 23, 2006

Lowball! 5/13 - 5/23

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.

Not going to break this up this week, primarily due to time constraints. The activity for this time period is very different than what we saw over the last period. It seems that the majority of the lowball offers are now the lower priced side. On to the list, right off the top.

MLS# 2264965 - Wanaque, NJ
List Price $199,900
Sales Price $125,00 (37.5% Lowball)

MLS# 2220651 - Sussex, NJ
List Price $155,000
Sales Price $100,000 (35.5% Lowball)

MLS# 2101025 - Hope, NJ
List Price $99,900
Sales Price $67,000 (32.9% Lowball)

MLS# 2222382 - Washington Boro, NJ
List Price $119,900
Sales Price $95,000 (20.8% Lowball)

MLS# 2214050 - South Orange, NJ
List Price $215,000
Sales Price $175,000 (18.6% Lowball)

MLS# 2213350 - Springfield, NJ
List Price $404,000
Sales Price $335,000 (17.1% Lowball)

MLS# 2065407 - Millburn, NJ
Original List Price $2,995,000
List Price $2,499,000
Sales Price $2,075,000 (17% Lowball, 30.7% off Original List)

MLS# 2250897 - Newark, NJ
List Price $595,000
Sales Price $500,000 (16% Lowball)

MLS# 2265714 - Plainfield, NJ
List Price $294,900
Sales Price $253,000 (14.2% Lowball)

MLS# 2096841 - Millburn, NJ
Original List Price $1,595,000
List Price $1,395,000
Sales Price $1,200,000 (14% Lowball, 24.8% off Original List)

MLS# 2072465 - Ogdensburg, NJ
List Price $259,900
Sales Price $225,000 (13.4% Lowball)

MLS# 2105998 - Elizabeth, NJ
List Price $289,900
Sales price $251,000 (13.1% Lowball)

MLS# 2235371 - Newark, NJ
List Price $299,000
Sales Price $260,000 (13% Lowball)

MLS# 2227732 - Hawthorne, NJ
List Price $399,995
Sales Price $350,000 (12.5% Lowball)

MLS# 2238623 - Westfield, NJ
List Price $2,195,000
Sales Price $1,937,000 (11.7% Lowball)

MLS# 2257589 - Washington Boro, NJ
List Price $260,000
Sales Price $230,000 (11.5% Lowball)

MLS# 2202675 - Fanwood, NJ
Original List Price $475,000
List Price $450,000
Sales Price $400,000 (11.1% Lowball, 15.8% off Original List)

MLS# 2238660 - Ridgewood, NJ
Original List Price $519,000
List Price $509,900
Sales Price $457,000 (10.4% Lowball, 11.9% Lowball)

The last listing here is a very special one. The current seller (Prudential Relocation) purchased this property on 12/12/2005 for $507,250, and has sold it at a substantial loss.

The original owner tried to sell the home, unsuccessfully. It was originally listed on 6/2005 for $599,000 (MLS# 2085164) where it sat for 101 days. It was reduced to $545,000 before it was withdrawn. It was relisted under a new MLS number (2211162) on 11/05 at $539,000 where it sat for an additional 84 days, being reduced again to $519,000 before being withdrawn. The current listing went active in January of this year at an OLP of $519,000. The accurate Lowball! amount would be somewhere around 23%, with the seller taking a $50k loss plus commission and other expenses.

Caveat Emptor!

Fannie Fiasco

From Office of Federal Housing Enterprise Oversight (OFHEO):


"Washington, DC – James B. Lockhart, Acting Director of the Office of Federal Housing Enterprise Oversight (OFHEO), today released its Report of the Special Examination of Fannie Mae. The report details an arrogant and unethical corporate culture where Fannie Mae employees manipulated accounting and earnings to trigger bonuses for senior executives from 1998 to 2004. The report also prescribes corrective actions to ensure the safety and soundness of the company."

"“The image of Fannie Mae as one of the lowest-risk and ‘best in class’ institutions was a facade,” said Lockhart. “Our examination found an environment where the ends justified the means. Senior management manipulated accounting; reaped maximum, undeserved bonuses; and prevented the rest of the world from knowing. They co-opted their internal auditors. They stonewalled OFHEO,” Lockhart said."

"During the period covered by this report—1998 to mid-2004—Fannie Mae reported extremely smooth profit growth and hit announced targets for earnings per share precisely each quarter. Those achievements were illusions deliberately and systematically created by the Enterprise’s senior management with the aid of inappropriate accounting and improper earnings management."

"By deliberately and intentionally manipulating accounting to hit earnings targets, senior management maximized the bonuses and other executive compensation they received, at the expense of shareholders. Earnings management made a significant contribution to the compensation of Fannie Mae Chairman and CEO Franklin Raines, which totaled over $90 million from 1998 through 2003. Of that total, over $52 million was directly tied to achieving earnings per share targets."

10,000 Sussex Acres Preserved

From the Star Ledger:
Sussex preserves 10,000th acre of farmland

"Sussex County has reached a milestone of preserving 10,000 acres of farmland over the past 17 years."

"Officials will mark the achievement Friday with a celebration at a picturesque Stillwater farm that dates to 1741 and was preserved last week."

"Farm owners Gus and Elsie Roof and their sons, George and Leon, raise beef cattle, chickens and crops on 85 acres next to the old Stillwater Grist Mill along the Paulinskill River."

""We didn't want to see houses back there on our field behind our house," 84-year-old Elsie Roof said. "We're still running the farm, and the boys will keep it up.""

"Farmland preservation in Sussex started slowly in the late 1980s and early 1990s, when only two farms totaling 121 acres were preserved. In the mid-1990s, however, the program started growing, and has picked up steam in recent years."

New Ferry Terminal Opens

From the Star Ledger:
The ferries will be pulling out of Weehawken in style

"In a mass transit version of the past revisited, state and local officials yesterday christened a new $44 million ferry terminal at a light-rail station along the Weehawken waterfront where decades ago trains delivered passengers to ferries plying the Hudson. "

""With the Hudson-Bergen light-rail station across the street, our vision of an interconnected, seamless web of mass transportation has ultimately become a reality," U.S. Sen. Robert Menendez (D-N.J.) said at yesterday's ribbon-cutting ceremony for the ferry terminal at Port Imperial."

"The terminal opens to the public today, replacing the existing terminal -- a converted ferryboat -- several hundred yards to the south."

"The ferry terminal and light-rail station are the centerpiece of a transit village that Arthur Imperatore, who revived ferry service along the Hudson two decades ago, and his son Arthur Jr. envision along two miles of waterfront they own at the foot of the Palisades. The younger Imperatore said the complex, which the Imperatores are developing with partners, is to include some 2,200 residential units, 1.3 million square feet of commercial space, a 400-room hotel and a parking deck with 1,500 spaces reserved for ferry users."

"The terminal and light-rail station sit astride a riverfront corridor of burgeoning economic development, with residential complexes, office buildings, shopping malls, restaurants and marinas on what were once abandoned railroad yards and rotting piers. Arthur Imperatore Jr. said the first 44 brownstones of the 2,200 residential-unit complex planned for Port Imperial have been selling for $2 million apiece."

""It's become a very hot real estate market," he said. "People want to be near the ferry. It's a very good place to live.""

Monday, May 22, 2006

New Jersey Revenues Falling Short

From the Daily Record:
State revenue falling short of expectations

"State Treasurer Bradley Abelow plans to pull the state's purse strings even tighter on an already difficult budget after the latest round of revenue projections."

"Abelow is planning about $110 million in additional budget cuts after new projections predict state revenues will fall short of expectations. The cuts will come on top of the more than $2 billion in spending the Corzine administration says it has already slashed."

""Clearly, the job of balancing the (fiscal year 2007) budget has become more difficult," Abelow said today while detailing the latest revenue projections to the Senate Budget and Appropriations Committee."

"The deficit comes largely because Abelow now expects to have $440 million less in revenues for the budget that begins July 1 than first projected. The current budget, which ends June 30, is expected to have $330 million more in surplus than first predicted, however, helping to narrow the new gap."

"One casualty of the projections will likely be Gov. Jon S. Corzine's proposed income-tax breaks for people with low incomes. Cutting that plan will save the state $105 million."

"The new shortfall results from lowered expectations on income tax collections, which Abelow predicted will fall $160 million short of what he originally projected, and corporate business taxes, will he expects to drop by $155 million compared to the governor's first plan."

"an almost ten fold increase" in N.J. Foreclosures

From Businesswire: Northeast Foreclosure Activity Up Sharply

"California based, a real estate investment advisory firm and nationwide foreclosure lists publisher, reported today that 2006 foreclosure activity in the Northeast is up sharply from 2005 levels."

""According to our research, foreclosure activity in New Jersey reached a level of 4,425 filings in the first quarter of 2006 as opposed to just 459 in the same quarter in 2005. That's an almost ten fold increase," warned Ms. McGee. She added that she expected the situation to get worse through the rest of 2006 and into 2007."

"Ms. McGee expressed concern that homeowners were still using their houses as ATM machines. She continued, "Freddie Mac just reported that 88% percent of the loans they purchased in the first quarter of 2006 were cash-out refinances. With the real estate markets going flat, the refinance resource will dry up. And with interest rates continuing to rise, payments on so-called exotic adjustable loans would become unaffordable for many households.""

"Ms. McGee pointed to a recent report from the FDIC stating that 49.5% of recent purchase money loans were categorized as "high risk loans." "These interest only loans and option payment ARMS are financial time bombs that are going to lead to trouble for many homeowners," she said."

"She added that she found it "amazing" that some lenders were still pushing home equity loans and lines of credit up to 125% of the home's value. "With markets cooling down and prices leveling off, that's another recipe for disaster," said Ms. McGee."

Newark Next To Gentrify?

From the Star Ledger:
Corzine should make transit a platform for economic growth

"Past governors were wise to prescribe smart growth as a cure for New Jersey's sprawl, traffic congestion and open space ills. Moving forward, Jon Cor zine should be the first governor to crystallize a new theme that distinguishes New Jersey by promoting the "growth" in smart growth. And, given the results of Newark's recent mayoral election and the soon-to- open Newark city subway extension, our state's largest city presents a ripe opportunity."

"The organizing principle for the governor's smart-growth economic development should be to use pub lic transit stations to anchor future jobs, housing and mixed-use investment. The timing couldn't be better -- energy concerns are mounting, confidence in our newly interconnected public transit system and Newark's new administration are at a high point and developers across the state are flocking to build "transit villages.""

"This transit-based approach can forge a coalition of local economic development, housing and transit advocates, satisfy developers and make sense to the public. By encouraging the location of new investments close to transit hubs where multiple transit lines converge, as well as in transit villages at outlying stations, a host of worthy policy goals can be accomplished. Lagging urban revitalization would be spurred. Emerging suburban redevelopment would be expanded. Diverse forms of hous ing to meet market needs would be built. Transit ridership would increase. And the growth in highway congestion would be eased."

"The policy leverage to this approach lies in encouraging future office construction at appropriate transit hubs instead of along the state's highways. Potential sites can be found within walking distance of transit stations in Newark, Jersey City, Camden, Trenton, Elizabeth, New Brunswick and Secau cus. Suburban office parks are difficult, if not impossible, to serve by public transit, resulting in 95 to 99 percent of their workers commuting by car."

"Over the longer term, New Jersey would benefit from a few more bona fide transit hubs in its strug gling cities, where redevelopment and transit use could flourish. One way is to create more locations where transit lines converge, such as by expanding or building new light-rail and bus rapid transit lines that connect to existing hubs. Examples include reviving the extension of the RiverLINE light rail system into the state office complex in downtown Trenton, restoring cross-county rail service to Elizabeth and considering a bus rapid transit system for the greater New Brunswick area."

"This overall initiative, if decisively adopted and implemented, would provide new momentum and definition for New Jersey smart growth. Let's hope the Corzine administration's economic development strategy seizes the opportunity."

Housing Bear Growls

From BusinessWeek:
The Growl of a Housing Bear

"John Talbott warned that home prices were ready to fall back in 2003, when he wrote the best-seller The Coming Crash in the Housing Market (McGraw-Hill). A former Goldman Sachs (GS ) investment banker who sold debt for clients including Fannie Mae (FNM ), Talbott criticized the managements of the housing-finance giant and rival Freddie Mac (FRE ) for enabling noncompetitive forces to boost home prices. In this year's followup Sell Now! The End of the Housing Bubble (St. Martin's Griffin), Talbott's take is: "We are in for a fairly rough ride in the housing market for the next five to seven years.""

"What do you think is happening to the housing market right now?
The smart money is getting out. The inventory of homes for sale is increasing dramatically across the country. That's typically what happens before you see price declines.... The investors who are flipping homes for profit, like non-owner occupied condominiums, those are the people you would expect to sell first. You're already seeing that happening."

"How much do you think prices will decline, and how long do you think it will take?
I think that it's a worldwide phenomenon, and in the 25 cities that have had price run-ups, which make up 40% of the market, we'll see corrections of 40% to 50% in real terms over the next six years. It has already started, and you'll see it happening in more cities in the May-June time frame."

"How did housing prices get so high?
The banks have made a terrible mistake in how they calculate how much to lend. In the early 1980s, about a third of your income had to go to your mortgage and those worked out fine. Today, they've increased that limit to about 40% of your income, and they think those should work out fine, too. But the banks have actually been lending too aggressively."

"We're seeing hints about the housing market all over the place. When and how do we know what's really happening to it?
Because of the cyclicality of the business, prices have been down in most places four months in a row. Most cities have seen slight declines in December, January, February, and March. What typically happens is when the weather warms up in spring, people want to move their children during the summer before school starts. The buyers start to come out and then prices start to shoot up in May and June. Those are the two key months. The question is what happens in May and June. Will there be a flood of for sale signs -- people trying to get out at the peak? Or will buyers return to the market?"

"What role does the Federal Reserve play?
The Fed messed this up. They had a bad situation with the Internet bubble in 1999 and 2000, and to keep that from turning into a recession they lowered the federal funds rate down to 1% and held it there for four years. That created this real estate bubble. "

Sunday, May 21, 2006

Flippers Flop

From the Palm Beach Post:
Home flippers' investments flop

"Joe Passarelli wakes up anxious and sweaty some nights, wondering how much longer it will take to sell his never-lived-in townhouse south of Stuart."

"Despite slashing his asking price by $55,000 to $285,000 and keeping vigil at sparsely attended open houses for six months, he still has no takers."

""They come, they look, they give a low-ball offer and they leave," said Passarelli, 50, a New York native. "

"If he doesn't sell the four-bedroom home, he'll have to walk away from contracts on two other investment homes — one in the new Port St. Lucie community where he lives and another in West Palm Beach. If he pulls out of those deals, he's down $80,000."

""I was never much of an investor before this wild craze began, and somehow I backed into it," Passarelli said."

"Passarelli made out well last year, grossing about $100,000 on a home he flipped in St. Lucie West and an additional $50,000 from his mortgage and real estate business. But this year is emerging quite differently."

""The end result is it may have to all be given back," he said."

"One in Martin's Crossing, a former commodities trader who lives in Palm Beach Gardens, offered to give away a flat-screen TV. The investor, who asked not to be identified, also intercepted buyers approaching the community's welcome center, then redirected them to his home."

"After carrying a mortgage for about six months, he finally sold one of his single-family homes in April for $350,000 — less than the $353,000 he paid. He earned enough off a second investment home in the community to recoup his losses, but some of his friends weren't so lucky. One walked away from a $40,000 deposit."

"As with the Internet boom of the late 1990s, those who stand to lose most in this shifting market are novice investors and those who bought too much too late."

Old Bridge Development Plans Never Materialized

From the Star Ledger:
Old Bridge seeks balance that developers promised

"During the 1980s, when Old Bridge was still dominated by farms and wide swaths of undeveloped land, township officials approved plans for major developments, hoping to create a mix of housing, retail and commercial space during the next 20 years."

"But those plans never fully materialized as the officials envisioned."

"Instead, the developers -- who promised everything from retail to office space, train stations and road improvements -- built only housing."

"Now township officials are trying to put the brakes on any further housing developments where they can, hoping to force developers Michael Alfieri and Atlantic Realty to live up to their end of the bargain."

""They promised the sun and the moon and the stars," Mayor James T. Phillips said. "But all we got was very high-density housing and not one stick of commercial or retail ratable for the township.""

"Edison-based Alfieri's general development plan, which was approved in September 1985 for Metropark South, along the Laurence Harbor near the Garden State Parkway's Exit 120, included housing, a train station, a seven-story hotel, 2,605 parking spaces, 800,000 square feet of office space and 10,000 square feet of retail. Alfieri was also to fund nearby road improvements as part of the agreement."

"Since the approval of Alfieri's original plan, however, only Bridgepointe, a high-end development consisting of hundreds of townhouses, has been built."

"Officials say holding the developers to their agreements will result in a more balanced community."

""The key to our future is smarter growth," said Gillespie, who was appointed by then-Gov. Richard Codey as the state ombudsman for Smart Growth from 2005 to 2006. "It's a more conservative approach, where we certainly want less residential that isn't going to be a positive revenue generator.""

Jersey City Boom

From the Star Ledger:

"There's a gold rush happening on New Jersey's Gold Coast."

"Within an eight-block radius of City Hall in Jersey City, a half- dozen heavy duty cranes stand like giraffes looking over an unprecedented wave of residential development."

"Consider that 4,600 housing units are under construction in the city and another 4,400 are approved. Ten thousand more -- vir tually all in luxury skyscrapers -- are planned during the next decade, an infusion of wealth and highly educated professionals into a city many had given up for dead a generation ago."

"The city already has huge demographic divides. The downtown below the Palisades and along the Hudson River has been transformed from a Latino barrio to an increasingly wealthy, white and Asian enclave over the past two decades."

"The money is creeping up the hill, but the downtown still has the feel of a separate city. Brownstones the city all but gave away during the early 1980s sell for nearly $1 million. Parks like Hamilton and Van Vorst are filled with young children, and residents are no longer moving away to the suburbs after their children reach school age."

"Asked whether he believed the rush of new development was going too far, Healy said: "I'm not going to say there is too much success, too much prosperity. This city was hurting for a long time. I'm happy for whatever interest, investment and development done in Jersey City.""