Saturday, July 08, 2006

If You Build It...

From the NY Times:

Betting on Demand for a Castle

THERE is a castle being built on speculation here beside the Saddle River: an 18,000-square-foot manse with a turret, two libraries, four laundry rooms, a six-car garage, nine full baths and a 14-seat home theater. The price tag says $12.9 million.

If they build it, will a buyer come?

"We're pretty confident — even in this slower market," said Michael Cantor, the head of Pinnacle Homes' custom homes division, which began construction of the castle 11 months ago. "We could build more $5 million houses here, I guess. I think that's a more risky undertaking in the current environment, frankly, than building this house."

Various market reports showed a drastic slowing of the high-end market in New Jersey this spring. Even in highly affluent Bergen County, home of Saddle River, the average time it takes to sell any house priced above $1 million is now 12 months, according to the Otteau Appraisal Group's analyses, which are widely read by real estate professionals.

Mr. Cantor agreed that the high-end sector is tightening. But in his view, the "high high-end" market for a unique house that can set a multimillionaire's heart aflutter in an instant does not wane with interest rate fluctuations or the size of a year-end bonus.
The 26-room castle, set on an exquisite 4.2-acre property that stretches 850 feet back to the riverbank from East Saddle River Road, was designed with a particular sort of very rich person in mind, he said — most likely someone in the entertainment field with ties to both coasts.

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!

What happened to the budget?

From the Star Ledger:

Lawmakers still debating budget

As an unprecedented state government shutdown entered its eighth day, lawmakers this morning began debating a $30.9 billion budget that will include New Jersey’s first sales tax increase in 16 years.

The final negotiations bogged down as lawmakers bickered over individual items in the spending plan. A preliminary analysis shows more than $310 million of legislative additions, often called “Christmas tree” items, are included in the spending plan. These items are cash grants that are sent back to home districts by lawmakers.

“This is the Atkins diet Trenton-style. A rush for pork,” said Assemblyman Kevin O’Toole (R-Essex). “I’m not shocked we’re standing here. People are still wrangling for the last nickel they can get for their districts or themselves. And we’ve been out of business for seven days. That’s shameful.”

The delays meant that state parks and motor vehicle offices will remain closed today.

There was no word on when action would be taken on other state government operations, including horse racing, the lottery, or when Atlantic City’s 12 casinos would reopen. All three operations have said they can be open within hours of Corzine signing an order to end the shutdown.

There were a few "minor" additions added to the budget, a last-minute sort of thing. From the AP via the Star Ledger:

Republicans rail against millions in budget add-ons

The $30.8 billion budget state lawmakers were considering Saturday included $270 million in last-minute add-ons.

The special projects were not part of Gov. Jon S. Corzine's original budget proposal, but were tacked on by legislators late Friday, including many that would help municipalities and organizations represented by key Democratic leaders.

As the Assembly budget panel considered the budget bill early Saturday, Republicans, who are not the party in power, railed against the items they categorized as gifts to influential Democrats' districts.
Paterson library, $1 million
Barnesboro Firehouse, Mantua, roof repair, $40,000.
Sewell Boys and Girls Club, renovations, $150,000.
United Jewish Appeal of River Edge, capital improvements, $50,000.
Municipal assistance to Trenton, Newark, Ewing, Irvington, East Orange, Orange and Gloucester City, $44 million.
Aid to school districts in Lawrence, Edison, East Brunswick and South Plainfield, $3.5 million.
Tourette Syndrome Association of New Jersey, $1.3 million.
Camden Eye Center, $350,000.
Cancer Institute of New Jersey, South Jersey, $6.9 million.
Cerebral Palsy of New Jersey, operating expenses, $500,000.
Veterinary Medicine Education Program, $1.3 million.
Montclair Art Museum, $200,000.
Community Theater of Morristown, $50,000.
Rutgers-Camden Performing Arts Center, $450,000.
Cherry Hill Township, library debt service, $1 million.
Passaic County Utilities Authority, incinerator debt, $3 million.
West Deptford, diesel-fired generator, $200,000.
Logan Township, sidewalk improvements, $110,000.
Paulsboro, property acquisition and demolition costs, $50,000.

Northeast and Western States on Unequal Footing

From Inman News:

Survey: Home-buyer, seller demand on equal footing

The U.S. housing market has reached a balance in buyer and seller demand, according to a survey released Thursday, with 41 percent of participating real estate agents saying they had more buyers and sellers, 40 percent saying they had more sellers than buyers and 19 percent reporting a 50-50 balance.

The most notable exceptions are in the Northeast, the Chicago metropolitan area and in the Western states, according to the survey from HouseHunt. Home buyers outnumber sellers by considerable margins in Chicago and the West, while sellers outnumber buyers in the Northeast.
Fifty-six percent of member agents said it is now taking, on average, more than 60 days from listing to contract to sell a house. This is up from 55 percent in the first quarter and 35 percent a year ago. Twenty-eight percent said it is taking more than 90 days to contract. Only 15 percent of existing homes are selling in 30 days or less.

Housing inventories are continuing to increase: 86 percent now report a good supply in virtually all price ranges. This is up from 81 percent in the first quarter and 38 percent a year ago.

Sixty-six percent of member agents reported that annual home-price appreciation is now 5 percent or less. This is down from 8-10 percent a year ago. Home-price appreciation of more than 10 percent is now 16 percent, on average.

The percentage of home sellers getting 95 percent or more of asking prices is currently 68 percent, compared with 90 percent a year ago. Three months ago it was 75 percent.

Adjusting to a Buyers Market

From the NY Times:

Adjusting to a Buyer's Market

WITH black clouds hanging over the Westchester County housing market for the first time since 1999, Michael and Kara Lyons are caught in a bind: they are sellers in a buyer's market and buyers at the same time.

Their two-bedroom co-op in northwest Yonkers overlooking the Hudson River has been on the market, listed at $250,000, for five months. A year and a half ago, in a booming real estate market, the condo would probably have been snatched up quickly, perhaps after a bidding war.

So, like many other sellers in a decidedly weaker residential market, Mr. Lyons said, he and his wife are wondering: "Do we lower the price, or do we take it off the market altogether and wait? And what about our plans for the new house?"

With the inventory of condominiums, co-ops, free-standing houses and two-to-five-unit buildings rising, many properties are staying on the market for extended periods of time.
The inventory in the county has almost doubled from its low point of 3,500 residential units on the market at the end of the fourth quarter of 2003, Ms. Endres said. By the first quarter of this year, the number of single-family homes, co-ops, condos and multifamily homes for sale was up to 6,585. While numbers for the second quarter of this year have not yet been released, they are expected to be even higher, she said.

Not surprisingly, asking prices are coming down — drastically, in some cases. Take a four-bedroom, three-bath barn-style house on almost 13 lakefront acres in Pound Ridge that went on the market a year ago for $7.5. It is still on the market, but now the price is $3.9 million.
While most brokers are not reporting such extreme price cuts, they are advising sellers to be realistic and open to lower offers. The average time on the market from listing to an accepted offer is four to five months, they said. A year ago, the average time on the market was less than three weeks, Ms. Endres said.
Loretta Rapisardi, an agent at Sotheby's International Realty, said many buyers, like Mr. Vera, bring a "business school mentality" to the bargaining table, after consulting sources like the National Association of Realtors. "They're much more analytical than buyers were two years ago," she said.
But, in general, sellers in all price ranges are being thwarted, said George Stone, a senior vice president for Sotheby's, which has several offices in Westchester. "In this market, everything is affected — condos, waterfront properties, center-hall colonials, you name it," he said. "There no curse or blessing on any style."

Friday, July 07, 2006

Northern New Jersey June Residential Sales

Preliminary June sales data for Northern New Jersey is in..

The first graph plots the unadjusted sales data (closed sales) for the counties listed. Please note the lower bound of the y-axis, it is set to 1000, not to zero. I do this to emphasize the seasonal nature of the Northern NJ market.

The second graph displays the same sales data (2003-2006) for the first four months of the year. Again, please not the y-axis, this time it does cross at zero.

For those who prefer the hard numbers:

Average Sales (2003-2005): 2000
2005 Sales: 2013
2006 Sales: 1705
(Down 15.3% Year Over Year)

Average Sales (2003-2005): 1583
2005 Sales: 1578
2006 Sales: 1395
(Down 11.6% Year Over Year)

Average Sales (2003-2005): 2193
2005 Sales: 2256
2006 Sales: 2033
(Down 9.9% Year Over Year)

Average Sales (2003-2005): 2322
2005 Sales: 2383
2006 Sales: 1817
(Down 23.8% Year Over Year)

Average Sales (2003-2005): 2615
2005 Sales: 2725
2006 Sales: 2298
(Down 15.7% Year Over Year)

Average Sales (2003-2005): 3486
2005 Sales: 3682
2006 Sales: 2911
(Down 20.9% Year Over Year)

Data above is GSMLS Sales for Bergen, Essex, Hudson, Morris, Passaic, Somerset, Sussex, Union, and Warren Counties.

Caveat Emptor!

Construction Loans On The Rise

From the Herald/Record:

N.J. banks building bigger portfolios of construction, development loans

With home equity lending slowing down, New Jersey banks are increasingly counting on short-term loans to builders.

In the 12-month period ended March 31, construction loan portfolios at New Jersey-based banks were up 41 percent compared with the year-prior period, according to a Federal Deposit Insurance Corp. report released Thursday.

Construction lending nationwide grew by about 30 percent.

"Banks in New Jersey and nationwide are beefing up their construction and development lending," said Kathy Kalser, regional manager in the FDIC's New York office.

The increase reflects strong demand for housing construction loans, according to the FDIC's quarterly "State Profile" report on the economy.

Although the housing market has softened in recent months, home building speculators have been busy, and banks are eager to invest in floating-rate construction loans, which, in today's interest-rate environment, are potentially more profitable than fixed-rate mortgages, she said. The increase in construction loans also reflects commercial development like shopping centers and high-rise residential towers.

These construction loans can be riskier for banks than residential mortgages. After all, a lender behind a commercial project could be left holding the bag if a development fails. But if a mortgage debtor falls behind on payments, he can usually sell the house to repay the debt.

A majority of New Jersey's banks rely heavily on fixed-rate home loans, which generally are priced at rates below the current prime rate of 8.25 percent. These loan portfolios for New Jersey banks were up about 12 percent in the 12 months ended March 31.

Meanwhile, portfolios of home equity lines of credit are down 4.5 percent from a year earlier for New Jersey banks, as rates rise and borrowers refinance, paying off these increasingly costly floating-rate loans with new fixed-rate mortgages.

The report also suggests that some of the home builders taking out construction loans may have a harder time selling those new homes. The inventory of homes on the New Jersey market was 70 percent higher in April 2006, compared with April 2005, it said.

Some highlights from the FDIC State Profile Report:

New Jersey State Profile - Summer 2006

An increasing inventory of unsold homes suggests continued slowing in the state’s housing market. The supply of homes on the market in New Jersey was 70 percent higher in April 2006 compared with April 2005, and the increase was more pronounced in certain counties (see Chart 3). Unsold housing inventory in New Jersey represents an estimated 7-month supply, up from 3 months one year ago. The months of supply is higher for New Jersey’s high-priced homes, greater than $1 million, than lower priced homes. Home sales volume also is slowing in the state, declining by 14 percent through April (year-to-date) from one year ago.3

As the supply of unsold homes has grown, the rate of home price appreciation in New Jersey has eased from a high reached in late 2004. Nonetheless, appreciation rates remain high, and all of state’s markets recorded above U.S. average rates in first quarter 2006.4

To Hell With The Joneses

From Yahoo Finance:

Keeping Up with the Joneses Can Put You Behind
by Laura Rowley

You're watering your lawn in your worn-out shorts and flip-flops on a warm summer weekend when you notice your Armani-clad neighbors opening the door for their caterers.

They've ordered trays of gourmet food, bottles of top-shelf alcohol, and a huge tent for what will clearly be a midsummer night's dream party in their manicured backyard. Eyeing their shiny, silver BMW convertible in the driveway and their new family room addition, you think, "How can they afford that? What am I doing wrong?"
Boss' personal journey into covetousness started with her next-door neighbors, John and Tina, in her New York City co-op. They seemed to enjoy an easy, charmed life. Rumor had it that they paid cash for their apartment. They spent weekends antiquing upstate, jetted off to Paris for vacations, and ordered a steady stream of luxury goods that piled up at their door.

Meanwhile, Boss and her husband had relocated back to the U.S. from the Middle East just as a recession set in, and he couldn't find work. He eventually returned to business school and they relied on her freelance writing income, all the while hiding their financial stress from family and friends.

From these experiences, Boss decided to write a book focusing on the social psychology of money -- the relationship between the household and the outside world -- and asked her neighbors if they would agree to an interview.

As it turned out, the grass was not greener on the other side: Tina, unhappy in her career, had turned to retail therapy and racked up $21,000 in credit card debt without telling John. She and her husband had both been given money by their families (something they felt they had to hide from friends), and they actually did have a mortgage.
Boss says we naturally compare ourselves to peers who are doing better, but rarely look at a homeless person on the street and thank our good fortune. That tendency has been confirmed by numerous studies. For instance, Andrew Oswald of England's Warwick University and David Blanchflower of Dartmouth College found that even if our incomes are rising, we tend to become less happy if the incomes of others are increasing more.
But more and more people on our radar screen are living the good life -- at least in a material sense -- thanks to the democratization of credit and unprecedented levels of consumer debt. This prompts increasing speculation about how they can afford it. The reality is simple: Some of them can't, at least not without going into debt. But money is the last taboo, and few people speak about it honestly.

Plainfield Condos

From the Star Ledger:

64 condos proposed in Plainfield

A proposed 64-unit condominium project in Plainfield, which would be one of the largest residential developments built there in years, signals a shift in the makeup of an otherwise industrial swath of land.

But the ambitious project faces several hurdles, made apparent at Wednesday night's zoning board meeting, when preliminary designs were presented for a zoning variance.

The four-story complex proposed for 803 South Ave. would replace what is now Carfaro's Collision Center, which developer Salvatore Carfaro has run for 25 years. It would alter part of South Avenue, which for several blocks comprises auto repair and commercial businesses.

The building would have 107 parking spaces, split almost equally between above- and below-ground parking. There would be 16 two-bedroom units, ranging from 870 to 1,314 square feet and selling for around $400,000 each.
Not so, said Assemblyman Jerry Green (D-Union), who lives in the city and supports the South Avenue construction and the direction it takes Plainfield. "The train station there is a five-minute walk," he said. He added that the clientele Carfaro is attracting is geared toward professionals, many of whom work in New York City.

Carfaro, who attended Wednesday's zoning board meeting, said the complex will be "a great alternative for people in high-priced districts like Hoboken."

Montclair Revaluation

From the Montclair Times:

Knock knock. Nice door. $700,000.

Montclair Tax Assessor Joan Kozeniesky advised the residents to “sit back, relax,” in the auditorium of the Montclair Public Library, which was uncomfortable for some attendees due to the topic, and for others due to the air-conditioner failure on a hot and humid evening.

Three Appraisal Systems executives — President Ernest Del Guercio, Vice President Rick Del Guercio and Project Supervisor Jason Cohen — noted that municipalities are required to update their property assessments to reflect val-ues that can change through time.

The New Jersey Constitution requires all properties to be assessed for taxation at 100 percent of their market value. As most Montclair homeowners realized during the past several years of a blazing real estate frenzy, their properties have been taxed at a fraction of their market value. In recent years, the market value of residential and commercial properties throughout Montclair has dramatically escalated.

Several years ago, the Essex County Board of Taxation ordered Montclair to conduct a revaluation of all proper-ties in the township. “They look at the ratio of assessment to true market value,” Ernest Del Guercio said. “If a property sells for $500,000 and has an assessment of $250,000, it has a ratio of 50 percent … The further you get away from 100 percent, the more disparity you’re going to have.”
If there is mathematical proof that there`s been a downturn in the price of housing in Montclair, Rick Del Guercio said, then Appraisal Systems will “lower the estimate.”

Thursday, July 06, 2006

Tentative Budget Reached

From the Star Ledger:

Tentative budget deal struck

Gov. Jon Corzine and New Jersey’s Assembly Speaker have struck a tentative budget deal, signaling an end to the government shutdown that furloughed tens of thousands of state workers, closed state courts and parks, and halted gambling at Atlantic City casinos, four sources with knowledge of the deal said.

The specifics of the agreement were expected to be announced later today, along with a timetable for reopening state offices and casinos and resuming other services. The governor’s office said it will hold a news conference after 4 p.m., but offered no other details.

The breakthrough came on the sixth day of the stalemate and between Corzine and Speaker Joseph Roberts (D-Camden), who remained at odds over Corzine’s proposal to fill a billion-dollar shortfall by raising the state sales tax from 6 percent to 7 percent. Roberts wanted a mix of taxes and spending cuts, and insisted that any new revenues in the $31 billion budget be used to relieve property taxes.

Two sources said the compromise plan keeps intact Corzine’s sales tax hike for a decade, but calls for a 50 percent of the new revenues - an amount that would dedicated by a constitutional amendment - to be set aside to offset property taxes. In a nod to Roberts, the plan also leaves open the annual possibility of increasing that percentage dedicated to property tax relief, the sources said.

(To be updated as soon as information becomes available)

May Pending Home Sales Down 10.1% YOY

From the National Association of Realtors:

Pending Home Sales Index Leveling Out

The index of pending home sales, a leading gauge for the housing sector, rose slightly in May, an indication that the market is stabilizing, according to the National Association of Realtors®.

The Pending Home Sales Index,* based on contracts signed in May, was up 1.3 percent to a level of 113.4 from an index of 111.9 in April, but was 10.1 percent lower than May 2005.

The index is derived from pending sales of existing homes. A sale is listed as pending when the contract has been signed and the transaction has not closed; pending sales typically are finalized within a month or two of signing.
Regionally, the PHSI in the South was down) 1.7 percent in May and was 7.3 percent lower than May 2005. In the Northeast, the index was down 0.6 percent in May and was 7.8 percent below a year ago. The index in the Midwest was up 0.6 percent to 100.9 in May but was 13.6 percent lower than May 2005. The index in the West rose 9.9 percent to 110.1 in May but was 12.9 percent below a year earlier.

May Pending Home Sales Index(PDF)

Since there is quite a bit of data contained in these reports, I think a graph is useful to help illustrate the trend as well as the typical seasonal patterns. I've gone ahead and graphed the unadjusted pending home sales for the Northeast region from 2001 to 2006:

Caveat Emptor!

Early Stages of a Buyers Market in Manhattan

From CNN/Money:

Mixed messages on Manhattan home prices

Manhattan apartment prices have either stopped dead or have continued their upward trajectory. Two reports released Thursday gave conflicting reads, though both point to signs of softening.

A report by broker Prudential Douglas Elliman's showed a mean price gain from the first quarter to the second quarter of 6.6 percent, to $1.37 million. The median price gained 6.7 percent, to $880,000.

For the year, Prudential Douglas Elliman showed 5.2 percent growth in the mean and 13.5 percent growth in the median.

A second report, by The Corcoran Group, showed that the mean sales price declined 3 percent in the quarter, to $1.247 million. The median fell 3 percent to $775,000. The Corcoran Group also showed 3 percent declines for the year.

One negative trend that both parties agree on is that inventory grew: There were an average of 7,640 apartments listed for sale in the second quarter, from 6,904 the prior quarter and 4,965 a year ago, according to Prudential Douglas Elliman.

Time on the market also lengthened, to 144 days - that's six days more than the prior quarter. Corcoran found a similar trend.

"It's the early stage of a buyer's market," said Jonathan Miller, of Miller Samuel, the appraisal firm that computes the data for Prudential Douglas Elliman.
Prudential Douglas Elliman CEO, Dottie Herman, reports the Manhattan market is brimming with confident buyers - and sellers too are doing well, if they only listen to reason.

"The only things lagging," Herman says, "are properties that are not priced right. Some people got spoiled; things sold no matter what. Now it's a lot more balanced, but anything priced properly sells."

As a matter of fact buyers now often bid less than asking prices, almost unheard of during the height of the feeding frenzy. Miller says buyers negotiated a 3.5 percent discount, on average, during the quarter. "A year ago, there was no negotiating," he says.

New Jersey Shutdown - Day 6

From the Star Ledger:

Assembly panel to consider budget bill

The Assembly Budget Committee plans to consider a budget bill today, the first spending plan put on the table since Gov. Jon Corzine ordered a shutdown of state government six days ago when lawmakers failed to meet the July 1 constitutional deadline for a new state budget.

Introduced late last night, the proposal will not contain the one cent increase in sales tax Corzine has proposed. That issue has caused a s stalemate between the governor's office and the Assembly.

“This is a balanced budget that does not push our current obligations into a drawer and does not increase the sales tax,” said Assemblyman Louis Greenwald (D-Camden), the budget committee chairman.

Before the committee meets, Corzine will address the special session of the Legislature at 9 a.m. It will be the third straight day he has done so. In his first two speeches he implored both houses to accept a compromise or come up with an "acceptable alternative" to his plan.
The Assembly proposal is expected to net $320 million by extending the current 6 percent rate to several currently untaxed services or items. They include security services, magazines, computer services, seasonal rental properties and temporary employment services.

It also would save $100 million by dropping a proposed 10 percent increase in taxpayer rebates, and restore about $120 million of the $308 million that Corzine wants to cut from colleges and universities.

Treasurer Bradley Abelow withheld comment about the Assembly's plan last night. Corzine has said he would likely veto a budget that did not include a sales tax increase, though he has promised to consider any offering.

First-Time Homebuyers Squeezed

From CNN/Money:

Higher prices, higher rates: The 1st-time homebuyer squeeze

What a difference a year makes when you're in the market for a new home, especially if you're a first-time buyer.

Thanks to a combined jump in mortgage interest rates and home prices, a starter home in many areas of the country could cost you several hundred dollars more per month today than if you bought it last year.
The percentage gains were more muted - but still high - in richly-priced markets like the New York City-Northern New Jersey area, where the median price rose 11.2 percent to $458,500, an increase of about $46,000.

So for the first-time home buyer in Gainesville or New York, those price and rate increases can mean an extra $400 to $450 in monthly payments to own a home. That assumes you put down the same amount this year on the home as you would have last year.

If you can't put down 20 percent -- as many first-timers can't -- your monthly bite is likely to be larger because you'll have to take out a bigger loan and you may have to pay for private mortgage insurance, which can run up to $50 for every $100,000 in mortgage debt.
New York-based certified financial planner Stacy Francis of Francis Financial isn't a fan of 100 percent financing or interest-only loans since the point of buying a home is to build equity sooner rather than later.

While these loan structures may pay off in a booming housing market, buyers run the risk of owing the bank should they have to sell when prices are down. At the very least, if prices flatten, they'll have to pay for the selling costs, such as a realtor fee.

Ideally, Francis likes her clients to spend no more than 30 percent of their gross income on housing in high-cost markets like New York City. And she'd like them to shoot for a 20 percent down payment. If that's not possible, she recommends 5 percent to 10 percent down and having enough in liquid assets left over to cover three to six months of expenses, plus the costs of closing, moving, new furniture and bigger utility bills.

Wednesday, July 05, 2006

Sell Off of Dwek Properties Begins

From the Hub:

K. Hov bldg. among Dwek holdings sold

The copper-colored structure along the banks of the Navesink River in Middletown that once housed home builder Kevork Hovnanian's operations has been sold for $6.1 million.

In this case, the seller of the empty building at 10 Route 35 is not development titan K. Hovnanian, but beleaguered real estate mogul Solomon Dwek, who will not see a dime of the profits handed over by the buyer, Investment Properties of America, anytime soon.

Nor will Valley National Bank, which holds a $3.6 million mortgage on the property that Dwek paid $4.8 million for in July 2005, be immediately paid the money owed to that line of credit, despite the efforts of the bank's legal counsel last week in the Freehold courtroom of state Superior Court Judge Alexander D. Lehrer.

As Dwek, of Ocean Township, sat in the back of the courtroom on June 28, Lehrer signed a court order to approve the sale of the property known as The Waterview, which until recently housed the offices of K. Hovnanian Enterprises Inc., to Investment Properties, an out-of-state property management firm.
To date, Dwek owes a total of $180.6 million to PNC, Valley National, and 17 other banks that have loaned him money to purchase or improve his real estate, according to the Web site.

In addition, Dwek also owes a collective total of $154.2 million in claims to 60 individual creditors.
The sale of the K. Hovnanian building and an apartment complex brought a total of $11.6 million, which will be used toward Dwek's bailout, Lehrer said.

A 'Loud Pop' Is Coming,

From the Wall Street Journal:

Surviving a Real-Estate Slowdown

The real-estate market shows signs of slowing. Is there deeper weakness ahead? Fewer questions are more important to mutual-fund investors. Many own funds with real-estate-related shares -- not to mention homes and vacation properties. And many economists believe a slowdown of the housing market could hurt the overall economy.

To get a lay of the land, we tracked down Kenneth Heebner, who since 1994 has managed the $1.2 billion CGM Realty Fund. It has the best 10-year record of all real-estate-focused mutual funds, according to fund tracker Lipper Inc., up an average of nearly 22% a year during the past decade, well more than double the broader market. The fund also has one of the best one-year records, up 32% through June 30.
Mr. Heebner, 65 years old, is better positioned than many real-estate fund managers to speak about prospects for the housing sector. His fund has viewed its mission more broadly than most rivals, so he isn't shy about ditching real-estate stocks. Among big holdings for CGM Realty during the past year: coal-company stocks, a hot category that qualifies in Mr. Heebner's view because coal companies own a lot of land. He also runs three other mutual funds, including CGM Focus Fund, so he spends a lot of time looking beyond houses and hotels to other parts of the economy. These three funds have among the best five-year records in their categories.
WSJ: How is the housing market?

Mr. Heebner: A significant decline in prices is coming. A huge buildup of inventories is taking place, and then we're going to see a major [retrenchment] in hot markets in California, Arizona, Florida and up the East Coast. These markets could fall 50% from their peaks.

WSJ: What has you so concerned?

Mr. Heebner: I'm worried that more people will default on their mortgages. Risky mortgages such as interest-only and pay-option adjustable-rate mortgages require no principal amortization and in some cases payment of only a fraction of the interest due, have been widely used in the last two years. Some people got 100% financing for their homes. It made the tech bubble look like a picnic. When housing is going up rapidly and you can buy far more than your income can support, some people are eager to make big profits by extending themselves financially.

As housing prices fall more people will be under water, and these people are just going to walk away from their homes. They are going to say, 'I'm outta here.' You're going to see increasing foreclosures over the next several years. As [home] prices come down, it will create a difficult environment for home builders.
WSJ: More than 25% of homeowners don't have a home mortgage because they own their property outright. Won't this keep problems in check?

Mr. Heebner: Most people won't have problems and much of the country will be fine. I don't think anything will go wrong in places like Texas, Iowa City or Minneapolis. ... But prices are being set by a minority of participants in the market, [those who have borrowed the most and used the most aggressive types of mortgages]. There will be a loud pop in inflated markets. It's where prices were artificially inflated by people buying houses with risky mortgages that we'll see problems. ... The person who feels the pinch is the person who used an aggressive mortgage and is struggling to meet the mortgage payments.

Northern New Jersey Weekly Inventory Update

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

6/28 - 18,526
7/5 - 18,360 (0.9% Decrease)

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

6/28 - 9,165
7/5 - 9,089 (0.8% Decrease)

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

6/28 - 2,621
7/5 - 2,644 (0.9% Increase)

Runaway Housing

I came across this commentary/opinion piece from "News With Views" this morning. I'll add a disclaimer here, I don't know who this outlet is, or what their agenda might be. I just thought this piece was interesting, so I'm going post it up:

By Jon Christian Ryter

The price of the typical 3-bedroom, 3-bath, 3,000-plus square foot American home is skyrocketing beyond the ability of the atypical American consumer to purchase one—or keep up with the spiraling payments. The mortgage payment dilemma is based in large part on the creative financing plans that are used today to qualify moderate-income buyers for mortgage loans that everyone knows is well beyond the ability of the average wage earner to pay when the full mortgage payment matures in three to five years. On the other end of the home market spectrum—because of the megaprices being charged for older dwellings that were affordably priced homes less than two years ago—new home sales are plummeting because existing homeowners who want to "move up," are finding fewer takers for overpriced older homes. In many parts of the country, the sellers' market has completely vanished. The "bidding wars" where prospective home buyers start at the asking price and compete with one another has been replaced with an ugly bearish buyers' market where consumers are balking at Realtor-inflated older home prices that have more than doubled in the past couple of years.

In many boom markets oversold homeowners are trying to refinance mushrooming mortgage payments that have resulted from the unique forms of creative financing that put them in homes they simply couldn't afford and should not have purchased. Fixed rate mortgages that were sold with 0% interest for one or two year years suddenly becomes mortgages with 6% interest—and the mortgage payments that they could barely afford at 0% have ballooned. Or the homeowner was cajoled into taking an adjustable rate mortgage that is spiraling out of control each anniversary as the Fed continues to increase the prime rate to slow inflation—at the expense of home owners who were assured by overzealous mortgage brokers that the low interest gravy train express would not slow down in their lifetime.

Now, in many of the slowing real estate markets, new home owners are being asked how much of their genuine equity—the down payments and the principle paid in their monthly mortgage payments—they are willing to lose to get rid of their expensive albatross. For many, the American dream is fast becoming the Nightmare on Elm Street. One such home buyer is San Diego homeowner Cortney Henderson who celebrated her graduation from UCLA San Diego with a Ph.D. in biomedical engineering by purchasing a modest new home—for $540 thousand. Her home is a simple one-story bungalow with an attached garage—the kind of house you'd find in Montana or Idaho, or Rudyard or Trout Lake, Michigan for $85,000 to $99,000.
Henderson should never have been given a half million dollar loan—regardless of her credit score. Her $27,000.00 down payment (she earned her down payment as an egg donor at a fertility clinic—something you fertile housewives might think about when you and your husband are trying to find the down payment for your new home) helped cinch the deal. The rule-of-thumb used by mortgage bankers to determine if you can afford the house you want to purchase is whether your fixed monthly debt obligations—not just your mortgage—are less than 25% of your net income. In Henderson's case, her mortgage payment (including insurance and taxes) ate up 70% of her gross earnings. If it was not for the $700 a month her boyfriend kicked in to help her, Henderson would have already lost her home. If she has an ARM [adjustable rate mortgage], the odds are better than even that she would be forced to sacrifice her home in a "get-out-from-under-the-mortgage" fire sale within a year or two. That's because, San Diego is viewed as one of a dozen markets where major home pricing "corrections" are about to take place. If that happens, Henderson will be stuck with a home priced well above market, and will likely be forced to dump the house for less than the current balance of her mortgage to get rid of it.

Condos For Aeromarine Site

From the Holmdel Independent:

One man's garbage is another man's treasure

It's not easy being green, especially in Central Jersey, where sometimes the only open space left is the result of long-abandoned garbage dumps.

Andy Willner, executive director of the NY/NJ Baykeeper, points to the old Aeromarine property as a perfect example of a dump worth saving.

The Aeromarine Plane & Motor Co., a once-busy aircraft manufacturing plant, opened shop in 1917, supplying training planes to the Navy during World War I and boasting many of aviation's early innovations.
Eventually, it became a dump. Operated by the borough, the landfill was built atop a salt marsh next to the Raritan Bay; it collected industrial and commercial waste between the 1950s and 1970s; it is estimated to contain over 600,000 cubic yards of trash, according to one report.

But where others see a landfill, Willner sees potential.

"It's a green oasis on a quickly developing coast," Willner said last week while hiking through the mud and thick brush of Aeromarine's sprawling natural setting.
The property is now dubbed by the state as "an area in need of redevelopment." The special designation means the borough has the right to choose who and what is developed there, within reason, despite the wishes of the owner.
Although complicated in the details, the heart of the battle is simple: both sides want to build housing on the site - the owners just want to build more. The pending three lawsuits will ultimately decide the specifics of the development, but the end result is presently a tossup between the owner's requested 569 condos or Keyport's plan for a mix of 320 various units, either condos, single-family homes and/or commercial space and other amenities.

New Jersey Is Closed

From the Star Ledger:

Special budget talks fail to curtail state shutdown

An emergency legislative session and impassioned plea from Gov. Jon Corzine couldn't break the state's billion-dollar budget impasse yesterday, fueling a raging political war and sending taxpayers a message that might echo for days:

New Jersey is closed.

On the fourth day of the shutdown Corzine ordered for all nonessential state government services, he declared the situation had gone "from unfortunate to unacceptable" and urged legislators to adopt his spending plan and the sales tax increase it includes.
The impact of the state government's first-ever shutdown had been cushioned by the extended holiday weekend and an agreement to allow some state services to keep operating. But as millions of people who live, work or have business in the state return to their typical routines today, it is likely to hit with a thud.

Roughly 45,000 employees -- more than half the state work force -- will again stay home. Thousands of visitors will be turned away from state-run beaches and parks. Construction crews, motor vehicle services, racetracks and the lottery have been idled. And Atlantic City's 12 casinos will face the gravest financial threat in their history, forced to shutter their doors in the heart of their busy season.

The casinos lost yet another legal bid to keep operating even if state casino commission inspectors are furloughed.

Tuesday, July 04, 2006

Independence Day 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!

Common Sense (Real Estate) 101

From Realty Times:

Back to Basics: Common Sense Real Estate 101
by Jim Crawford

Real estate is cyclical by nature. And in our current market, conditions are rapidly changing both in my market and across the nation.

When showing homes in this current market, I often acknowledge to myself that something is really wrong with the picture. Have you ever gotten the feeing that the home you are showing will not sell in your lifetime? Perhaps pricing, appearance, and marketing are missing from the big picture? It's as though the home was listed without a marketing plan. Someone just placed a sign in the ground!
Pricing a Home to Market: A real estate professional does not list a home at any price the seller chooses. We've gotten used to listing the home at the seller's price. We did not have to qualify the price. Some agents were just buying the listing!

Telling the seller the home is worth way more than the market value just to get the listing. The only problem is that now the homes are not selling! We are in buyer markets in many areas of the nation. If you are so sure the home will sell at the agreed upon listing price … then place in the listing agreement a clause that states, "At no time during the term of the listing agreement will you request a price reduction!"
Don't Posture: When another offer comes in, work it! Don't say I have another offer coming in when you don't! If you do the buyer will step back and wait. Several weeks later when the listing is still showing as, "ACTIVE" the buyer may come back at an even lower price. Selling is not based upon manipulation, or "Liar's Poker!" It is employing time tested strategies, and negotiation skills that allow us to earn a very good living.

America's Bubble

From the Daily Reckoning:

America's housing bubble
By Bill Bonner

Tomorrow is the 4th of July. Independence Day for the United States, the land of immigrants. Many people in America are taking a long holiday weekend. But here at The Daily Reckoning headquarters in London we recognise no national holidays. There is always something to be reckoned with, regardless of time of day or country of origin. Today, we reckon with the fact that gold has jumped back from its recent correction and now is once again over our dollar-target buying price of $600.

We laid out our best guess as to what is happening on Friday: The US is still following Japan into a long, hard slump – with softening real estate leading the way. That we had expected Britain to get their first has yet to change our opinion. “America’s day of reckoning is nigh,” says a headline in this week’s MoneyWeek. Quoting Barron’s Alan Abelson, MoneyWeek remarks that “it has been the greatest housing bubble since shelter-seeking man first crawled out of his dank cave.”
“A housing slowdown is especially ominous since the sector has underpinned growth over the past years...” MoneyWeek warns. Why? Because the US recession of 2001-2002 was followed by very weak job growth. Those few jobs that were created tended to be related to one of two big industries – housing and war. Both industries flourished on cheap credit. US homebuyers, just like their British cousins, need low rates in order to buy houses they otherwise can’t afford. They need cheap credit, too, so that they can refinance...taking out what little equity they have so they can spend the money on things they don’t really need. And the empire needs low rates in order to finance its war against terror - more specifically, its periphery wars to subdue the poppy growers of Afghanistan and the desert tribes of Mesopotamia.
But now, Ben Bernanke is fighting his own war. He is out to prove that he can battle inflation, and win. As we pointed out last week, this use of overwhelming force against a minor enemy may have unintended and unpleasant consequences. It may trigger an unexpected flank attack - by deflation! As the US housing bubble deflates, a lot of people are going to have a lot less money in their pockets – agents, brokers, granite counter-top makers, developers, road builders...and all the millions of people who have come to depend on rising house prices for their spending money. That’s why David Rosenberg of Merrill Lynch puts the odds of a US recession next year at 40%...and why we would put them even higher.

Toll Bros To Build Seaside Condos

From the Asbury Park Press:

Condos may replace rides at Funtown Pier

The Borough Council will hear a proposal Wednesday from the owner of Funtown Pier about turning the 77-year-old amusement venue into condominiums.

Mayor Robert Matthies scheduled a special meeting of the council for 6:30 p.m. to hear the "very tentative" plans for the pier, which straddles the Seaside Park-Seaside Heights boundary.
"The general consensus is that Bill (Majors) has done everything possible to make it (the pier) successful," D'Onofrio said. "It's been a gallant attempt, but the fact that he is even considering selling is telling about how well he can be a viable competitor with other amusement venues.
Matthies estimated condominiums, which could sell for as much as $1.5 million and would be developed by Toll Bros., would add between $40 million and $60 million to the borough tax rolls and dramatically change the landscape of the 600-foot stretch of boardwalk businesses in Seaside Park.

"There has been no application; this is an informational session only," Matthies said. "The council has to listen to a proposal like this."
More than 200 condominium units have already been approved in other locations in Seaside Heights.

Monday, July 03, 2006

"This party is about over" - CEPR

From the Center for Economic and Policy Research:

Fed Treading on Thin Ice as U.S. Housing Bubble Weakens
By Mark Weisbrot

Everyone recognizes that the U.S. economy is slowing, but the question is, how bad will it get? One disturbing sign is that the Federal Reserve is raising interest rates as the economy slows, and it is not clear when it will stop. This is not good because each rate hike is deliberately designed to slow the economy by causing both consumers and businesses to borrow and therefore buy less. The idea, as Fed economists see it, is that as overall spending is reduced, employers will hire fewer workers. As unemployment rises, employees are in a weaker bargaining position, and this leads to slower wage growth. Slower wage growth, the Fed hopes, will lower inflation.
But it’s about to get worse. Since the mid-90s the country has accumulated an enormous housing bubble, as house prices nationally have risen nearly 70 percent after adjusting for inflation. In some bubble areas, mostly the east and west coast, the real increase has been over 100 percent. Since house prices have historically increased at about the same rate as inflation, this means that more than $5 trillion of excess paper wealth – similar to the stock market bubble of the late 1990s – has been created. Just as bursting of the stock market bubble caused a recession in 2001, the collapse of the housing bubble will almost certainly do so.

There is evidence that this bubble is already beginning to burst: new home sales, existing home sales, and the median price of existing homes were all lower in the first quarter of this year as compared to peaks last year. Vacancy rates for new homes are rising.

House prices do not have to collapse at once in order to tip the economy into recession. Many Americans use their houses as an ATM machine, borrowing against the value of their homes. These home equity loans, including hundreds of billions of dollars “cashed out” when people refinanced their homes as mortgage rates hit record lows in recent years, are what has driven the U.S. economic recovery since 2001. Falling home prices leave less equity that homeowners can borrow against. The personal savings rate is at a record low for the post-World-War II era, hitting negative 1.6 percent in April.

Rising mortgage interest rates will finish off the housing bubble if oversupply and a psychological reversal of the speculative mania don’t do it first. This party is about over, most unfortunately for the majority of Americans who never got to join in the festivities.

Setting Prices In Slow Markets

From the Wall Street Journal Online:

Sellers Find It Difficult to Set A Price in a Volatile Market

A year or two ago, pricing a house was simple. Sellers only had to look at what their neighbors were charging, add 10% and wait for the bidding wars to begin.

Now that the market has grown uncertain, homeowners are at more of a loss when deciding what price tag to put on their property. So in an attempt to attract buyers, some sellers are experimenting with non-traditional strategies for setting prices. Approaches include starting high and cutting the figure every few weeks, dropping the price to a different bracket to attract new shoppers or giving a range of numbers rather than one set figure.

Home-sellers are trying these strategies as real-estate markets across the country continue to send mixed signals. Listings are on the rise -- they are triple last year's levels in parts of Southeastern Florida and five times higher in Phoenix. In Washington, D.C., home builders are dumping inventory and undercutting existing home prices by offering rebates on closing costs or outright discounts. Overall, home prices are growing at the slowest pace in two years, though they were still up 12.5% in the first quarter from a year earlier, as measured by the Office of Federal Housing Enterprise Oversight. In some affluent places, like Palm Springs, Calif., and Palm Beach County, Fla., single-family home prices have flattened or declined.
When times are slow, most agents recommend setting a price that's just at or 5% below the market. Yet not everyone takes that advice. Below, a sampling of four unusual pricing strategies.
Two weeks ago, Rita and Daniel Davis put their three-bedroom Craftsman bungalow in Minneapolis on the market for $284,900.

A week later, the price tag was $279,900.

Cutting the price is common practice -- just not so quickly. In Minneapolis, sellers generally wait 30 to 45 days before making a reduction, says Mary Leizinger, a real-estate agent who is working with the couple. The fast drop wasn't due to unfamiliarity with the market. Before they listed their house, the couple had visited seven others for sale nearby. They discovered that many were similar to theirs, and worse, there was something for sale on every block. By cutting their price within days, the couple hopes to send a message that they're flexible. "We're between a rock and a hard place," says Ms. Davis, a businesswoman.
In February, Jonathan Hinkle, a telecommunications account manager, put his five-bedroom home in Lansdowne, Va., on the market for $1.35 million. He purposely set it high and cut the number by $50,000 a few weeks later -- and continued dropping it by $50,000 every few weeks until it reached $1.05 million. Mr. Hinkle, who bought the house two years ago, says that's close to the lowest price at which he can afford to sell.
Cincinnati professor John Bryan tried to price his home carefully. He surfed through local listings online and then waited until May, when real-estate sales are traditionally strongest, to put it on the market. (He bought a new five-bedroom home in January, a slow month for sales.) He finally set the price at $324,000.

He received one contract, for $307,000, but that fell through. He has just lowered the price to $299,900, even though he may lose money on the deal after closing costs and commissions. (He bought at $250,000 in 1998 and added $56,000 in renovations, including a new kitchen, air-conditioning system and landscaping.) He hopes the new price will bring his listing to the attention of a new group of Internet shoppers. Mr. Bryan says he is disappointed that he had to drop the price so low, but he thought it was the best solution. "I'm trying to break a psychological barrier," he says.

Soft or Hard?

From the Atlanta Journal-Constitution:

Soft landing or hard?

Maybe the economy is coming in for a soft landing. Or maybe you'd better fasten your seat belt and hold on tight.

Most economists seem to agree: The economy, which turned in especially zippy growth during the first quarter of this year, is slowing to "below trend" expansion. And there is general accord on what will follow: leveling off and a return to cruising speed.

A few say the landing will turn to recession.

The sweeping support of the best-case scenario makes Dean Baker scoff. "I went back and looked at the 'Blue Chip' forecast in September of 2000. Of 50 economists, six months from recession and not one of the 50 saw it. Not one predicted the recession."

Barring an unexpected shock, whether we do slip into recession depends on two factors: whether the Federal Reserve keeps raising interest rates until growth stalls and whether the four-year housing boom is petering out.

Baker, co-director of the Center for Policy and Economic Research, puts the chances of recession at about 80 percent.

No one can be 100 percent certain whether we get the soft landing or something more painful. For every sign pointing toward recession, at least another one offers reassurance. But clearly the economy has lately carried some extra burdens: mainly, energy prices and higher interest rates, thanks to the Fed's campaign of rate increases. Yet, the economy has continued to expand.
the business sector," Hyland said. "That is what's going to save the economy from a significant slowdown."

Baker is skeptical: That might cover a mild housing decline, but not something more dramatic.

If housing falls to its levels during the mid-1990s, a boost to business spending will not be enough to compensate. To keep up, the pace of investment would have to double, Baker argued.

Moreover, the economy's shock absorbers are somewhat tattered. Americans' debts are near record levels, savings have been negative for the first time since the Depression and the government is already deep into deficit financing.

The biggest threat to a soft landing may not be one huge danger so as much as the weight from several burdens together.

"If we had just high energy prices, if we just had high interest rates — I'd be more confident," said Roger Tutterow, dean of Stetson Business School at Mercer University. "It is the combination of the two that will really tax the consumers in the second half of this year."

World Housing Boom May Cool Slowly

From Bloomberg:

Global Housing Boom May Cool Slowly, Avoiding a Crippling Bust

The biggest global housing boom in three decades may end not with a bang, but with an extended whimper that will keep the economy growing.

Markets for dwellings in the U.S., France, Spain, New Zealand and parts of China are coming off the boil as home-price inflation slows in response to higher interest rates. So far, the rise in borrowing costs has been modest, giving builders and buyers time to adjust.

``We're seeing a cooling-off of the housing market,'' says Raghuram Rajan, chief economist at the International Monetary Fund in Washington. ``We haven't seen a bust.''

Housing prices in industrial countries have doubled in real terms in a decade, the Organization for Economic Cooperation and Development estimates, raising the prospect of a quick reversal. If prices ease rather than collapse, the world economic expansion may be able to continue without sustaining too much damage.

``The global economy should remain buoyant,'' says Nariman Behravesh, chief economist of Lexington, Massachusetts-based consultant Global Insight Inc. He sees world growth slowing to 3.3 percent next year from 3.8 percent in 2006 as housing cools.
U.S. home prices were 12.5 percent higher in 2006's first quarter than they were a year earlier, according to data compiled by the government's Office of Federal Housing Enterprise Oversight. That was down from 13.3 percent in last year's fourth quarter, and is the slowest rate of appreciation in more than a year. ``We're right on course for a soft landing in the housing sector,'' says David Lereah, chief economist at the National Association of Realtors in Washington.

Historically, just 17 percent of local housing booms in the U.S. go bust, according to data compiled by the Federal Deposit Insurance Corp., a government agency that regulates banks. And that typically occurs only when local regions are under severe economic stress, such as Texas in the mid-1980s after oil prices plunged.

``Busts have been pretty rare,'' says Richard Brown, chief economist at the FDIC in Washington. ``The most common way for a boom to end is through an extended period of stagnation.''

NJ State Goverment Remains Shut Down

From the Star Ledger:

No break in budget crisis

New Jersey's historic state government shutdown entered its third day today with no end in sight as Trenton's ruling Democrats openly acknowledged they were getting nowhere in efforts to agree on a new state budget.

On this first business day of the shutdown, Motor Vehicle Commission offices will not open, state courts will handle only urgent matters and more than half the state's work force will be off the job. Wednesday shapes up as a critical day, when Atlantic City casinos and the state's racetracks, beaches, parks and campgrounds are slated to close.
Corzine remained locked in a stalemate with Assembly Speaker Joseph Roberts, a fellow Democrat who is leading the charge against the governor's plan to raise the sales tax from 6 percent to 7 percent. The governor insists that is needed to balance the budget responsibly, while Roberts contends it could be avoided with a mix of other taxes and spending cuts.

Pressure ratcheted up on Roberts yesterday as Republicans talked of a possible coup to unseat him and casino workers urged him to give in to Corzine to keep gaming halls open.
Two Republican lawmakers, speaking on condition of anonymity because of the sensitivity of the talks, said they had discussed the possibility of a coup with administration officials they would not identify. They said several GOP members remain resentful of tough campaigns Roberts waged against them last year and would like to join with anti-Roberts Democrats to elect a new Speaker. The lawmakers said DeCroce might face a rebellion in his own caucus if he turns Democrats down on a deal to help oust Roberts.

Sunday, July 02, 2006

"New Urbanism" Coming To Wood-Ridge

From the Record:

'Next Big Thing' in Wood-Ridge

A TRENDY, large but human-scaled "New Urbanism" development is to begin rising this fall in Wood-Ridge, an unpretentious town of 7,600 people in southern Bergen County.

Wood-Ridge is a densely settled community and the development will cover 80 acres, prompting the question: Where will they put it? The answer: in an old parking lot, a vast expanse of rutted asphalt and weeds used now to store tractor trailers.

In World War II the lot served an adjacent factory, the Curtiss-Wright aeronautical plant that made engines for B-29 bombers, including the Enola Gay, the plane that dropped an atomic bomb on Hiroshima. The factory was immense, a single building under a roof that spread over 32 acres. The workforce included many women, Rosie the Riveters who worked in shifts around the clock.
First thing he saw was the rail line that ran along the western edge of the tract. This was NJ Transit's Bergen Line, which carried commuters from Northwest Bergen to the PATH terminal in Hoboken, where they boarded trains to Lower Manhattan. The Bergen Line has since been connected as well to the new Secaucus Junction rail transfer station, providing a ride to Midtown Manhattan. The line had stations in Garfield, north of Wood-Ridge, and in Rutherford, south of it, but none in Wood-Ridge.

Duany started with that. He would build a station in Wood-Ridge, like the historic Mission-style station in Ridgewood farther north, but better, he said, across the tracks from a new town center, which would have a ceremonial tower and an open plaza for public events. There would be a variety of homes, all within walking distance of the station and town center, which would have stores and offices.
The plan that was ultimately reached envisions 737 residential units, increasing the borough's population by a third. The development, on 80 acres, will be called Wesmont Station. It will include a new public middle school, two baseball fields, a running track, and a field for football and soccer. The school, to be built by the developer, will be financed with property taxes paid by Wesmont Station. The athletic facilities and rail station will be provided free of charge to the borough.
Of the residential units, 217 will be single-family houses, 135 rental apartments, 131 condos, 77 condos for seniors, 166 town houses and 11 work-live spaces for artists and craftsmen. Prices and rents have not been announced, nor can I find any mention of state-required affordable housing.

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.

Have a great weekend everyone, and as always, anything goes!

No House Party

From The Street:

Maven: No House Party
By Marek Fuchs

Let me explain. From the conglomerates of the 1960s on to the Internet of the 1990s and real estate of the current decade, overvalued markets are always justified by the business media with constant story lines about how different things are this time. Once it starts to become apparent (like now) that there is such a thing as gravity, we enter the classic second state of business media delusion. And it's potentially more dangerous.
Having justified the bubble for so long, the business media never simply walks away. What always comes, instead, are a series of articles about how the worst of the damage has already been done and that it's no big deal, just part of the natural course of things -- a flesh wound. Moreover, that there are safe havens amid the carnage or that there are actual bargains! The reasoning is formulaic and often heavy on buzzwords, jargon and quotes from people who have a reason to tout the lunacy back into existence.
Examples have been chronic in print and on television so let me touch upon a few so you'll know what to recognize. After all, this is not a market to jump back into. The demographic push of baby boomers buying homes coinciding with the taming of inflation (and thus interest rates) over the past generation has been enormous. With baby boomers starting to downsize and inflation and interest rates trends, at best, in flux, this is a market that could very well not perform better than inflation over the next generation.
"We are," he said, "transitioning from a period where people had to pay the offer price or above to a period where they are looking at a more normalized bid/offer spread. It's just they don't know ... where that proper pricing will be."

Sounds like prices are plummeting, buddy.

The key step to assessing whether a market has hit bottom is to read and listen. When you hear people honestly assessing the damage and professing no hope -- that's a bottom. When people are in denial and are slinging jargon -- well, we ain't there yet.
Until such troubles are spoken about openly, a bottom is not in sight.

By the way, before we continue this "adjustment" any further, are any of you gullibles out there interested in a three-floor beauty? Good schools and the neighbors are usually tolerant. Since I can't take it with me, I figure I'm better off with immediate cash.

Housing Bubble Looms

From the Asbury Park Press:

Housing bubble looms on horizon
By Al Hassinger

Real estate has been a hot topic. Owners talk about the latest house that sold or is listed in their area or the money a friend made selling property. But as things have cooled, the conversations are about the potential of a real estate bubble.
There are two camps in this debate. The first says there is no bubble and the market will simply cool. That is the soft-landing crowd. This group may be involved in the industry as home builders or real estate agents.

There are also investors who bought houses to "flip." Flippers are gamblers, hoping to get someone to pay more for the same property in a short amount of time because of a perceived scarcity of houses.

Also in the soft-landing camp are people who have used increasingly creative financing to buy larger, more expensive, houses. These are people who bought houses with adjustable rate mortgages with little or no money down. Some of these mortgages are interest only or negative amortization products. These borrowers have to be optimistic because they have little or no equity in their homes. The only thing that keeps their heads above water, equity wise, is a rising market.

The second camp are those who believe there is a bubble. They are more than likely seasoned property owners. They invest for the long term. Real estate investors bought property that had real net income. People bought houses that they could afford on their incomes and, if the monthly costs were too high, they bought smaller houses or put down more money to lower their monthly payments. They also locked in long mortgages, giving them piece of mind knowing what their payment would be for years out and knowing they would be building equity.

Seizing the The Harvestone Farm

From the Daily Record:

A Morris family farm awaits its fate

Steven Linz said he could not talk much about the state's proposal to take a chunk of his farm and turn it into wetlands. His family has owned the Harvestone Farm in Washington Township for three generations.

Now, because of possible legal implications, he is not talking much about the farm.

"My grandmother bought the land," Linz said this week. "It's been a family farm since 1960. We want to keep it in the family."

That is all he says now because he is a little nervous about what's going to happen next. He received a letter a couple of years ago asking whether he'd sell a piece of his farm to the state. The state Department of Transportation wanted the land as part of a legal requirement to replace wetlands that would be lost miles away as part of several road improvement projects in Byram and other parts of Sussex County. Linz's answer was a simple no.

The next time Linz heard from the state, according to those familiar with the case, was a few months ago, when officials said they were preparing to use eminent domain to seize the property.
"I think it's stupid," he said.

Tittel said it makes little sense for the state to target land that is not threatened by development. He referred to some wetlands mitigation projects as "a con game"-- a way to justify the destruction of wetlands for public projects.

Tittel said people living downstream from destroyed wetlands who get more flooding would not be helped by the creation of wetlands in another county. He said created wetlands often fail because they are not monitored, although state officials say they are required to be monitored for three to five years.

A state Department of Environmental Protection study from four years ago revealed that more than half of all freshwater wetlands mitigation projects had failed. DEP officials said some projects failed because developers squeezed them onto inappropriate sites near wetlands that had been destroyed. In some cases, they said, off-site wetlands mitigation projects in another part of a watershed have a better chance to succeed.

Million Bucks At The Shore

From the Asbury Park Press:

What does $1 million buy you?

The real estate market might be cooling off, but with five consecutive years of double-digit growth in home prices in Monmouth and Ocean counties, it's not hard to spend more than $1 million on a house.

But those big bucks won't go as far in tony Mantoloking as they do in Dover Township. You might get a modest Cape Cod-style house in Rumson for $1.1 million or a brand-new 5,500 square-foot home in Freehold Township for about the same price.

In Lacey's Lanoka Harbor section, you can find a 5,000-square-foot Colonial along a man-made lagoon for $1.1 million. But in Long Beach Island's Harvey Cedars, $1.1 million will fetch a much-smaller 1,830 square-foot home.
In Monmouth and Ocean counties, 1,175 of the 9,899 houses currently for sale on the Monmouth/Ocean Multiple Listing Service, or about 12 percent, were priced at more than $1 million. Of the 2,665 Ocean County listings on the Jersey Shore Multiple Listing Service, which has more southern Ocean County listings than the Monmouth/Ocean MLS, 355, or 13 percent, were more than $1 million.
"Something that used to be $700,000, you know, may be a million or plus," said Tim Gillen, broker at Gillen Realty Inc. in Dover Township.