Saturday, July 22, 2006

Lowball 6/25 - 7/22 (McGreevy Edition)

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.

We're going to break the list up by county this time:

Bergen County
MLS# 2234107 - Franklin Lakes, NJ
List Price $1,200,000
Sales Price $990,000 (17.5% Lowball)

MLS# 2258689 - Oakland, NJ
List Price $359,000
Sales Price $310,000 (13.6% Lowball)

MLS# 2230388 - Rochelle Park, NJ
List Price $699,000
Sales Price $612,500 (12.4% Lowball)

MLS# 2261027 - Waldwick, NJ
Original List Price $629,000
List Price $589,000
Sales Price $525,000 (10.9% Lowball, 16.5% off OLP)

MLS# 2224433 - Mahwah, NJ
Original List Price $1,399,000
List Price $1,299,000
Sales Price $1,160,000 (10.7% Lowball, 17.1% off OLP)

MLS# 2255102 - Mahwah, NJ
Original List Price $589,900
List Price $569,900
Sales Price $515,000 (9.6% Lowball, 12.7% off OLP)

MLS# 2248953 - Glen Rock, NJ
Original List Price $869,999
List Price $789,900
Sales Price $715,000 (9.5% Lowball, 17.8% off OLP)

MLS# 2222397 - Ridgewood, NJ
Original List Price $1,450,000
List Price $1,275,000
Sales Price $1,162,500 (8.8% Lowball, 19.8% off OLP)

Essex County
MLS# 2259117 - Belleville, NJ
List Price $299,900
Sales Price $225,000 (25% Lowball)

MLS# 2244511 - North Caldwell, NJ
List Price $2,325,000
Sales Price $1,900,000 (18.3% Lowball)

MLS# 2223354 - Belleville, NJ
List Price $575,000
Sales Price $490,000 (14.8% Lowball)

MLS# 2244141 - Fairfield, NJ
List Price $499,900
Sales Price $430,000 (14% Lowball)

MLS# 2256643 - Verona, NJ
List Price $599,900
Sales Price $527,500 (12.1% Lowball)

MLS# 2233491 - Millburn, NJ
Original List Price $4,860,000
List Price $4,595,000
Sales Price $4,100,000 (10.8% Lowball, 15.6% off OLP)

MLS# 2233910 - Millburn, NJ
List Price $2,999,000
Sales Price $2,688,000 (10.4% Lowball)

MLS# 2213205 - Millburn, NJ
Original List Price $1,319,000
List Price $1,275,000
Sales Price $1,155,000 (9.4% Lowball, 12.4% off OLP)

Morris County
MLS# 2268409 - Madison, NJ
Original List Price $509,000
List Price $495,000
Sales Price $375,000 (24.2% Lowball, 26.3% off OLP)

MLS# 2285379 - Montville, NJ
List Price $1,188,800
Sales Price $999,900 (15.9% Lowball)

MLS# 2270090 - Jefferson, NJ
List Price $225,000
Sales Price $190,000 (15.6% Lowball)

MLS# 2085328 - Florham Park, NJ
List Price $1,345,000
Sales Price $1,150,000 (14.5% Lowball)

MLS# 2264495 - Morristown, NJ
List Price $684,900
Sales Price $587,000 (14.3% Lowball)

MLS# 2201071 - Chatham, NJ
List Price $1,100,000
Sales Price $950,000 (13.6% Lowball)

MLS# 2233288 - Kinnelon, NJ
List Price $1,249,900
Sales Price $1,087,500 (12.9% Lowball)

MLS# 2103717 - Montville, NJ
Original List Price $1,194,800
List Price $1,134,800
Sales Price $995,000 (11.9% Lowball, 21.3% off OLP)

Union County
MLS# 2028729 - Linden, NJ
List Price $320,000
Sales Price $223,500 (30.2% Lowball)

MLS# 2268476 - Plainfield, NJ
List Price $350,000
Sales Price $250,000 (28.6% Lowball)

MLS# 2256843 - Westfield, NJ
List Price $1,799,000
Sales Price $1,450,000 (19.4% Lowball)

MLS# 2267689 - Rahway, NJ
List Price $349,000
Sales Price $286,150 (18% Lowball)

MLS# 2229396 - Roselle, NJ
List Price $224,900
Sales Price $190,000 (15.5% Lowball)

MLS# 2262774 - Fanwood, NJ
List Price $399,900
Sales Price $345,000 (13.7% Lowball)

MLS# 2239900 - Mountainside, NJ
List Price $499,900
Sales Price $435,000 (13% Lowball)


I'm sure, at this point, everyone is wondering why this edition of Lowball! was named "McGreevy Edition". It seems our ex-Governor has made the Lowball! list this week with his recent purchase in Plainfield, NJ:

MLS# 2281925 - Plainfield, NJ
List Price $1,475,000
Sales Price $1,300,000 (11.9% Lowball)

I can't say I cared too much for McGreevy as a politician, but I've got to respect the guy for lowballing.

More counties will be posted tomorrow!

Caveat Emptor!

What would you pay?

I've received a number of emails lately, which all asked the same question. If people are boycotting open houses, and not placing bids, how are sellers supposed to know that their homes are overpriced? It's a good question. Unless the sign in sheets are blank, and their home has been on the market a long time, they probably don't. Very few people in New Jersey are keeping as close a watch on the market as we are, agents included.

So here is what we're going to do. I want you all to go out to and find a listing or two that fits what you might be looking for. Once you find it, paste the link up as a reply, along with the price that you would seriously consider buying it for. You can post anonymously if you wish. This is a serious exercise, please don't post a link to a $4.5m home with a bid of $10.50.

Here is an example, chosen at random:

This property is in Parsippany, NJ. I drive past it every so often, and I just so happened to drive past last night. Naturally, being a card carrying member of the National Trust for Historic Preservation, this kind of place appeals to me. Am I looking for a house in this price range? No, not at all, I just like the place, so I'm going to use it as my example.

MLS ID#: 2270226

The house is on South Beverwyck and is probably recognizable by anyone familiar with the area. The current asking price is $1m, and it's been on the market approximately 3 months. I personally feel this house is a bit more overpriced than most, thus would offer somewhere in the $700 range.

I'll be posting my selections up later in the day, anonymously. However, if this home was in my price range, and what I was looking for, I would most certainly purchase the home at that price, barring any major structural issues (especially with the roof and underlying structure).

Caveat Emptor!

Liberty Harbor North Redevelopment

From the New York Times:

Echoing the Upper West Side

THE first condominium tower in the 80-acre Liberty Harbor North redevelopment area is now going up alongside a new light rail stop and the commuter ferry terminal at Pier 11 here.

Gull’s Cove, a 16-story tower that will hold 321 residences, ranging from studios to three-bedroom units, is just a small part of a master plan to transform a former industrial area into a neighborhood resembling the Upper West Side of Manhattan.

The master plan — recognized in 2001 by the American Planning Association as a model of “New Urbanism” because of the way it incorporates high-density housing, multiple transit connections and a pedestrian-oriented streetscape — was the creation of the Miami architect Andrés Duany. He is the designer of Seaside in Florida, where “The Truman Show” was filmed; it is considered a New Urbanist icon.

Liberty Harbor North is designed to echo the Upper West Side’s network of small city blocks with town-house-lined streets intersecting a few broad avenues facing the waterfront, according to Mr. Duany.

The overall plan includes 6,500 units of market-rate housing, one million square feet of hotel space, 750,000 square feet of retail space, 4.5 million square feet of office space and two parks totaling about 100 acres.

Ground Broken on Hovanian's JC Project

From the Hudson Reporter:

1,000+ new neighbors

Ground was broken Tuesday for two 500-foot skyscrapers, including 1,000 new condominiums and apartments, to rise at 77 Hudson St. near the waterfront.

The new project by K. Hovnanian Homes and Equity Residential is "just another step in the advancement of Jersey City," said Mayor Jerramiah Healy at the ceremony Tuesday.

The 1.76-acre parcel is located on Hudson and Sussex streets.
One tower will hold 420 condominiums to be sold by K. Hovnanian, and the other will hold 481 apartments operated by Equity Residential.

Equity Residential is expected to rent out the apartments during the winter of 2008, and K. Hovnanian is expected to occupy the condominium building during the spring of 2009.

K. Hovnanian plans to begin selling homes at the property around the end of this year.

Friday, July 21, 2006

Weekend Open Discussion

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

For readers that have never commented, there is a small link on the bottom of each new message that reads "# Comments". Go ahead and give that a click, you might be missing out on a world of information you didn't know about. While you are there, introduce yourselves to everyone. For new readers that have only read the messages displayed on the main page, take a look through the archives, a substantial amount of information has been put online in the past 6 months. The archives can be found at the bottom of the right hand menu and are categorized by month.

As always, anything goes!

No More Soft Landing?

From the L.A. Times:

Housing Expert: 'Soft Landing' Off Mark

Leslie Appleton-Young is at a loss for words.

The chief economist of the California Assn. of Realtors has stopped using the term "soft landing" to describe the state's real estate market, saying she no longer feels comfortable with that mild label.

"Maybe we need something new. That's all I'm prepared to say," Appleton-Young said Thursday.

The shift in language comes as debate over the real estate market is intensifying. The long-awaited drop-off is happening, but there's little agreement about how brutal the landing will be.
For real estate optimists, the phrase "soft landing" conveyed the soothing notion that the run-up in values over the last few years would be permanent. It wasn't a bubble, it was a new plateau.

The Realtors association last month lowered its 2006 sales prediction from a 2% slip to a 16.8% drop. That was when Appleton-Young first told the San Diego Union-Tribune that she didn't feel comfortable any longer using "soft landing."

"I'm sorry I ever made that comment," she said Thursday. "When I get my new term, I'll let you know."
Appleton-Young had no qualms about predicting a hard landing here: "We're expecting a fairly significant shakeout."

High Housing Cost Slows State Economy

From the Asbury Park Press:

New Jersey needs comprehensive review of housing policies

It seems New Jersey is perpetually debating the appropriate balance between home building and open space preservation — with both sides claiming the moral high ground on just what quality of life means.

Home builders rightly want to provide a sufficient supply of quality housing for residents of all incomes. Environmentalists rightly want to protect the quality of New Jersey's natural resources. Unfortunately, both goals have suffered under a complex regulatory structure.

A recent study by The Brookings Institution found that the state is losing its economic competitive edge and the threat is coming from "multiple forces, including rising housing costs, persistent race, class and place disparities, and unbalanced development patterns." In fact, New Jersey has the fifth-least affordable housing in the United States, according to the Brookings report.

Simply put, the state has a housing gap that makes it more difficult to live here. And, as housing grows ever more expensive, it squeezes those who can least afford quality housing and also has a harmful impact on the middle class. Without quality housing to continue to attract residential buyers and renters, communities suffer tax base loss and with it, the recurring revenues needed to deliver quality education and other important government services.

This is no longer a hypothetical situation. Numerous studies have cited a slowing of New Jersey's economy, a flattening of wages more severe than the national average and the loss of quality jobs.
This leaves the housing and environmental advocates fighting while the state's prosperity suffers. Diverse housing options are the lifeblood of a successful economy and the inability to provide these residential opportunities puts New Jersey at a serious competitive disadvantage with other states. Both sides can agree that open space can't all be plowed under and that new housing options should be directed back to the urban cores and inner suburbs. That's the easy part, but developing policies that logically pursue these goals is where the hard work begins.

Development Watch

From the Suburban News

Developer reduces proposal to 125 units on Birchwood Ave.

Developer Woodmont Properties this week presented a scaled-down plan for an active adult community on Birchwood Avenue, and again received an encouraging response from the Township Committee.

The company proposes to build Cranford Woods, a 125-unit age-restricted luxury complex, on a 15-acre parcel of land at 215-235 Birchwood Ave. The site is currently home to office buildings, and the township and developer will work to draft a "senior housing zone" agreement setting out guidelines and standards for the project.

When the project was first unveiled at a May 8 township meeting, the developer proposed 150 townhouses and condominium flats. Following a series of meetings with a municipal subcommittee and information sessions with local residents, the number of units has been reduced, though the design plans are otherwise similar.

From the Times Trenton:

15 takers eye site vacated by Manex

Fifteen different parties have expressed interest in developing the site owned by Manex Development that Mercer County has moved to take back, county officials said.

County Executive Brian M. Hughes said he would like to have control of the 7-acre property and put out a request for proposals from potential developers, but the county will wait for the result of an Aug. 4 hearing on a county request to take back the site.

County officials would not disclose the names of those interested in developing the property.

From the Record:

Show us the water, developer is told

A developer that wants to build 288 town houses must show that there's enough water in the ground to supply the project, a state appeals court decided this week.

K. Hovnanian must prove in three different ways that there is adequate water for the Eagle Ridge project, the Superior Court's Appellate Division ruled Tuesday.

The powerful developer considered the ruling a victory.

"The company would not be going forward with Eagle Ridge if there was any danger to the community water supply," said Andre Miesnieks, a regional K. Hovnanian executive.

From the Courier News:

Ground broken on Plainfield subdivision

Officials are praising the approval of six, single-family luxury houses in the city's West End -- a project officials are calling the first major subdivision of upscale housing the city has seen in almost a half century.

The development, named Shiloh at West 7th Street, received final approval last week after six years of uncertainty surrounding the fate of the project's site -- a 1.3-acre lot at 1045 West 7th St. once home to an abandoned, seven-family house and carriage home.

Those buildings have since been razed and the property cleared, with construction on the six-unit subdivision slated to begin in the coming weeks by Panjaur Builders of Jersey City. Referred to as "the kind of thing" she would like to see more of in Plainfield, Mayor Sharon Robinson-Briggs touted the development as a step toward the city's revitalization. "What this represents is six families who will realize the American dream of home ownership," Robinson-Briggs said. "I'm very happy to see this moving forward."

According to Mike Lipscomb, owner of ML Realty Group Inc. of Scotch Plains, the real estate firm marketing the development, each unit in the development will be from 2,600 to 3,200 square feet, with prices starting at $449,900.

From the Sentinal:

Board says housing plan lacks specifics

The South Brunswick Planning Board criticized a firm last week for not providing what it felt was sufficient information to even begin a critique of a concept plan for 76 luxury homes on the VanDyke farm.

The proposed development is a controversial one, as it would sit atop the 300-year-old farm, Davidsons Mill Road, which residents and the township have both expressed an interest in preserving. The development's proximity to both a state park and a state-protected water body has also been a source of contention for residents in eastern South Brunswick, where the houses are being proposed.

The application, which complies with the area's zoning regulations and demands no waivers or relief, was proposed shortly after the township rejected a request by developer Morris Realty Associates to rezone the farm for industrial use so a warehouse could be built there.

During the July 12 hearing, the firm's planner, Gerald Linaz, described the tentative plans for the development using a sketch of the property and layout of the houses as a guide. The plan calls for the construction of 76 homes, 17 of which would be on 3-acre lots and 59 of which would be on 2-acre lots. One of these lots would be dedicated for preservation purposes, as the bodies of the original VanDyke family and, it is believed, their slaves are buried there.

Privatize State Pensions

From the Star Ledger:

State acts to 'privatize' pension funds

State officials yesterday adopted a plan to shift billions of dollars in state pension money to private investment managers and set a course to reduce the funds' heavy reliance on the stock market.

"What we are doing today arguably constitutes the most extensive readjustment of any pension program in any state in a single year," said Orin Kramer, chairman of New Jersey's State Investment Council and an architect of the new strategy. The council, a volunteer board that manages the pension funds, approved the move 7-1.

The sweeping changes in the $72.6 billion fund will cut the state's U.S. stock holdings by more than $16 billion in favor of larger holdings in toll roads, hedge funds and international stocks. The pension funds bankroll retirement pay for hundreds of thousands of teachers, police officers, firefighters and public employees.

Separately, the strategy will shift $18 billion of the portfolio's holdings into the hands of private managers, who are expected to earn fees of about $221 million a year for managing the state's funds.
The new strategy will generate a windfall for professional money managers, who are slated to collect about $221 million annually when the new investment plan is in place. Currently, the state pays about $6 million a year in administrative costs to the in-house staff that manages the stock portfolio.

Thursday, July 20, 2006

Wetlands Fines Totaling $1.7m Issued

From the Daily Record:

Mt. Olive builder fined $764K

A developer was fined nearly $764,000 for violating New Jersey's wetlands rules during construction of a housing development.

The state Department of Environmental Resources issued a $763,500 fine to developers Anthony and Golnaz Mortezai and Deerfield Estates/Resamir Estates for violating freshwater-wetlands and stream-encroachment permits on the construction sites of the development.

The Morris County fine was one of three major environmental fines announced today for violating state wetlands regulations, totaling $1.7 million statewide.
Elsewhere, in Mercer County, the DEP assessed a $630,000 penalty against Beazer Homes, New Jersey Division, for multiple violations of a freshwater-wetlands permit the DEP issued in 2000 to allow development of Wellington Manor at Hopewell,a subdivision on Pennington Road in Hopewell Township.

And in Salem County, the DEP took enforcement action against Stella Oldmans,LLC, and Edward Stella Jr., of Oldmans Township, for clearing up to 15 acres of freshwater wetlands and rerouting a stream on his Route 130 property.

Bernanke Loses Mind

Bennie, have you lost your mind? Say it ain't so, just say it ain't so. Allowing Fannie to expand it's portfolio during a housing collapse only serves to further increase the systemic risk these institutions pose.

From Marketwatch:
Bernanke open to GSE portfolio boost idea in deal context

Ben Bernanke said the idea of giving the regulator of Fannie Mae (FNM) and Freddie Mac (FRE) authority to allow them to increase their portfolios during housing market downturns might be worth considering, if it was part of an overall deal to subject the firms to strong and effective regulation.

But Bernanke, the chairman of the Federal Reserve Board, told the Senate Banking Committee that Fed research indicates such a proposal wouldn't have much market impact.

"In our research at the Federal Reserve, we have not found that to be a very important effect," Bernanke said during testimony before the Senate panel. "We found very little effect in that direction.

"And we would also point out that if you're going to do that, what you want to have in your portfolio is liquid assets, like Treasuries, not MBS (mortgage-backed securities), because you can't buy MBS with other MBS," the Fed chairman continued. "So you know, we have some concerns about that."
"Now having said that, I think it's worth, you know, for the purposes of trying to come to some kind of agreement on GSE (government-sponsored enterprise) legislation, I think we, you know, could perhaps discuss - consider the possibility that the director might provide some emergency ability to GSEs to make extra purchases during times in which the director judged the housing market to be in distress for some reason, but then to get rid of that extra portfolio, get rid of the extra MBS over a period of time when the emergency was eliminated.

"Again, we don't really see much evidence that this is necessary, but if that were part of an overall agreement that brought a strong and effective regulator to the GSEs, it might be worth considering," Bernanke added.

The Fed knows a full-scale housing bust is on it's way, regardless of what Ben said about an "orderly cooling" of the market this afternoon. I believe the key words in his statement were "so far".

There is only one reason to allow Fannie and Freddie to expand their portfolios during "emergency" situations, it is to keep the mortgage money flowing. The GSEs will likely be unable to sell these MBS's on the open market, thus they will have no other choice but to stockpile these loans in their own portfolios.

The GSE Bailout will make both the S&L and LTCM bailouts look like childs play.


Inventory Rising Across The U.S.

From the Wall Street Journal:

For-Sale Signs Multiply Across U.S.

The housing market continues to weaken in much of the country as inventories of unsold homes rise and many sellers cut their asking prices, a quarterly survey by The Wall Street Journal shows.

There is no sign of a broad collapse of housing prices about a year after the once-hot coastal markets entered a long-anticipated cooling phase. But the general level of prices is edging down in some areas and leveling off in others, while the supply of homes for sale keeps rising.

The number of homes on the market in Orlando, Fla., for example, is nearly five times the year-earlier level, while the inventory has quadrupled in Phoenix and Tampa, Fla., and nearly tripled in the Washington, D.C., area.
To examine the residential real-estate prospects for 26 major metro areas, The Wall Street Journal gathered data on inventories of homes for sale at the end of the second quarter from a variety of local sources; pricing trends based on surveys of real-estate agents by Daniel Oppenheim, an analyst at Banc of America Securities in New York, a unit of Bank of America Corp.; and projections of job creation by Moody's, a research firm in West Chester, Pa. Employment trends are among the most important factors in determining demand for housing.

Metro areas showing large increases of homes for sale and relatively weak employment growth include Boston, Los Angeles, Philadelphia and New York. Among the strongest markets overall are Houston, Dallas-Fort Worth and Seattle. All three areas are benefiting from robust job markets, and modest home prices are drawing investors and new residents to Texas.

Going To Get Worse Before It Gets Better

From the Record:

Consumer prices spike in region

Consumer prices have soared 5.6 percent in the metropolitan area in the past year, the biggest 12-month gain in 15 years.
The Bureau of Labor Statistics reported Wednesday that the Consumer Price Index for the North Jersey-New York region rose 0.5 percent in June due to sharp increases in housing, food and utility costs.

Even discounting the often-volatile food and energy sectors, the region's core rate of inflation is up 4.6 percent since June 2005.

By comparison, the national CPI rose just 0.2 percent in June. That is the smallest increase in four months, resulting from a temporary dip in energy prices.
Higher interest rates may have taken the steam out of the home-buying market, but that has put additional pressure on the rental market, especially high-end properties that consumers had been buying in the past, Kohli said.
"I think it's going to get worse before it gets better, I really do," he [Naroff] said. "I sense that we still have some issues that have to be dealt with, especially with energy prices remaining so strong, that the pressure to recoup some of those costs is going to be a real problem."

Do You Hear What I Hear?

From Forbes:

Selective Hearing

Despite the nuanced, even-handed tone of U.S Federal Reserve chief Ben Bernanke's speech on the outlook for the economy on Wednesday, the markets took it as assurance that the Fed is done--or nearly done--with its rate-tightening.

In prepared remarks he delivered to the Senate Banking Committee, Bernanke said that economic growth was showing signs of slowing and predicted, therefore, that inflation would moderate. He also acknowledged the risk that the Fed could go too far with its tightening.

But at the same time, he dwelt in his testimony on the causes of inflation and insisted in response to a Senator's question that a rise in inflation--along with the risk that global turmoil might cause energy prices to climb yet higher--were the two biggest threats to the economy.

Surprisingly, investors seemed to tune out Bernanke's comments on inflation risks. Stocks staged their biggest rally in three weeks, and bond yields fell.

Development Watch

From the Star Ledger:

Condo plan for GE site debated

Transforming the former General Electric industrial complex at the East Orange-Bloomfield border into market-rate lofts and condominiums would be a good fit for the nearly 20-acre site off the Garden State Parkway, proponents of a $200 million housing plan testified last night.
"The main building, at 5 Lawrence St., is an iconic, monolithic structure which appears to stand on top of the Garden State Parkway," developer Eugene Diaz said. "It might be one of the most recognizable buildings in the state."
"Everything at this property is screaming, 'I want to be residential,'" Diaz told the zoning board and nearly 100 people who attended the meeting at East Orange City Hall. "This property wants to be a fabulous residential development."

From the Hudson Reporter:

Aftermath of city's settlement with New Gold

Jersey City and New Gold Equities, the owners of the 110 and 111 First St. buildings, agreed two weeks ago to a settlement that lets the developer build 40-story towers at the site, in exchange for the dropping of lawsuits on both sides.
The settlement which would end all lawsuits filed by New Gold Equities, a New York-based real estate company with principal ownership by real estate mogul Lloyd Goldman, against the city. In turn, New Gold will be allowed to build one, possibly two 40-plus story towers on the 111 First St. site and one 40-plus story tower on the 110 First St. site.

Both sites were work-spaces for artists until New Gold evicted them.
New Gold is currently working with the New York City-based real estate firm the Athena Group to build the towers. The Athena Group is currently building a 33-story, 250 condo development at 389 Washington Blvd., only several hundred feet away from both the 110 and 111 First St. properties.

NJ Job Growth Forecast Grim

From the Star Ledger:

Rutgers forecast sees jobs malaise lingering

New Jersey can expect modest growth in employment through 2010 and its jobless rate will be higher than the national rate through the end of the decade, according to a forecast released yesterday by the Rutgers Economic Advisory Service.

"The state has to find something that has high growth and high income, and I don't think they've found it yet. Nothing to replace manufacturing and information services," said Nancy Mantell, director of the service, citing two sectors that continue to decline in the Garden State.

Most job growth in New Jersey will be in low-wage industries, such as education, health, and leisure and hospitality, Mantell said.

Strong growth is also expected in trucking and warehousing, but neither area provides a large number of jobs, she said.

Overall, New Jersey is to add 44,000 nonfarm jobs in 2006, about the same as last year, when the state saw a 1.1 percent in employment. The figure is to average 0.9 percent from 2006 to 2010, the Rutgers service found.
New Jersey housing permits declined for the three months ending in June, while the other states had gains. Housing prices in the Garden State fell compared to the same period in 2005, while prices remained steady in the other states, the regional bank found.

Wednesday, July 19, 2006

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)

7/12 - 18,573
7/18 - 18,714 (0.8% Increase)

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

7/12 - 9,187
7/18 - 9,229 (0.5% Increase)

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

7/12 - 2,623
7/18 - 2,641 (0.7% Increase)

Wednesday Economic Roundtable

First on the docket is the MBA Mortgage Index, from Marketwatch:

Mortgage applications fall 4.6%

Applications for mortgage loans at major U.S. banks fell by a seasonally adjusted 4.6% last week, the Mortgage Bankers Association reported Wednesday.

Applications were down 31.3% from a year ago.

The purchase index sank by 6.2% to a level 19% lower than a year ago. The refinance index fell 1.6% to a level 46% lower than a year ago.

From Bloomberg:

U.S. June Consumer Prices Rise 0.2%; Core Rises 0.3%

Consumer prices in the U.S. increased for a sixth straight month in June and costs excluding fuel and food rose more than forecast, suggesting Federal Reserve policy makers will keep raising interest rates.

Prices paid by Americans rose 0.2 percent after May's 0.4 percent increase, the Labor Department said in Washington. Excluding food and energy, so-called core prices rose 0.3 percent for a fourth straight month and exceeded the 0.2 percent median estimate in a Bloomberg News survey of economists.

Core prices increased 2.6 percent from June 2005, the biggest year-over-year rise since 2002, leaving inflation farther above the Fed's comfort zone. The report comes less than two hours before Fed Chairman Ben S. Bernanke presents his semi-annual economic report to Congress.

``Inflation pressures are picking up,'' Mike Moran, chief economist at Daiwa Securities America Inc. in New York, said before the report. ``Underlying conditions still carry inflation risk, with energy prices staying high and not much slack left in the economy.''

Core inflation has increased 0.3 percent for four straight months, the longest such stretch since January to April 1995. Medical care, rents and airfares all rose last month.

From the Associated Press:

Housing construction drops 5.3 percent

Construction of new homes fell by 5.3 percent in June, the Commerce Department reported Wednesday in another signal that the once-booming housing market is beginning to slow.

Builders started construction on new homes at a seasonally adjusted annual rate of 1.85 million units last month.

Applications for building permits, considered a good sign for future activity, fell for a fifth straight month, dropping by 4.3 percent in June to a seasonally adjusted annual rae of 1.862 million units.

Other topics for discussion today:

Bernanke's testimony to Congress, which is set to begin at 10 this morning. The topic will be updated as information becomes available.

Caveat Emptor!

Will This Time Be Different?

From the Philadelphia Inquirer:

This time, things will be different
By Andrew Cassel

Seem like old times? It might if you remember the late 1980s, says regional economist Jim Diffley.

Back then, the nation was bifurcated; growth was booming along the East and West Coasts, while Middle America - what sophisticates called the flyover states - struggled with a host of industrial, agricultural and energy-related woes.

More recently, something similar has been happening, particularly when you look at housing prices.
If that rings an ominous bell, it should. The boom of the mid- to late 1980s was followed by a bust that took its biggest toll on the same bicoastal set of states and metro regions, Diffley said.

As a reminder, he dug out some regional house-price statistics from that era that most real estate salespeople would prefer to forget:

In Boston, average home prices fell 11 percent between 1989 and 1991. Northern New Jersey fell even more - 14 percent - in the same period.

The trend took a little longer to reach the West Coast, but it lasted longer when it did. San Francisco home prices dropped 11 percent between 1990 and 1994. Los Angeles' average house plummeted 21 percent from '91 to '95.

Philadelphia's price drop back then wasn't as pronounced, mainly because our gains in the mid-1980s weren't as large either. Houses stayed roughly flat here through about 1996.

Jersey City Slowdown

From the Jersey Journal:

Throughout Downtown, a slowdown?
Experts fear slowdown in real estate market

Rising federal interest rates combined with growing concern among the nation's lenders over how much supply Jersey City's Downtown can handle has some experts and local officials predicting a significant slowdown in the city's bullish residential market.

The apparent shift in momentum comes at a time when Jersey City planning officials are bracing for upwards of 20,000 new units - from rentals to condos - in the Downtown region alone over the next decade, and it's now unclear whether the city will hit that target as the market emerges from its borrower-friendly epoch.

The perception of a flooded market has already slowed down one major Downtown project, and one of its high-profile developers - mega mogul Donald Trump - recently told The Jersey Journal the second phase of his Trump Jersey City project "may or may not get built, depending on market conditions."

The attorney for Metro Homes, James McCann, defended a postponement of a payment to the city saying that the lenders for the project have become jittery about the prospects of selling out the second of two towers.

"The banks are a little more skeptical of condo developments, because of the supply," said Dave Barry, of Applied Development.

Jersey Residential Market Swells

From the Jersey Journal:

Supply is giving buyers the edge

The swelling residential market supply has taken the negotiating power out of the hands of the developers and put it into the hands of buyers for the first time in years.

"Buyers now have more negotiating power and more selection as the market gets flooded with units," said Mike Berney, regional director with Liberty Realty.

Home sales in Hudson County are down 10 percent from this time last year, while the average price of a home has shot up 21 percent from last year to $475,000, Berney said.

"The market may no longer support the price (but) homeowners are stubborn when they are selling," said James Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University. "Units are staying on the market for much longer."

Hughes said Hudson County's home sales statistics are typical indications of a market slowdown - which usually happens when the federal interest rate goes up.

"We have yet to invent a way to make booms last forever," Hughes said.

Development Watch

From the Star Ledger:
Bloomfield mayor backs $200 million housing plan

As the East Orange zoning board mulls whether to allow a developer to transform the old General Electric industrial complex into market rate condominium lofts and townhouses, Bloomfield Mayor Raymond McCarthy Jr. yesterday endorsed the housing proposal for the East Orange-Bloomfield border.

"It's a project we're looking for ward to, with great anticipation," McCarthy said of the $200 million proposal, called Parkway Lofts, by Prism Capital Partners LLC of Englewood. "It will change (Bloomfield's) Watsessing Center. It will take a business center, that has gone downhill for years, and put a new vitality back into it. We're looking forward to that."
Granting the zoning variance would pave the way for Prism's 760-unit condominium loft and townhouse complex -- bordered by Lawrence Street, on the site's elongated western boundary in Bloomfield, and North Arlington Avenue, on the eastern boundary in East Orange -- to get going.

That Prism proposal, coupled with a separate 300-unit housing proposal for part of the adjacent and former Westinghouse Lamp Company-turned-Westinghouse Electric Co. site, "will make that area come alive with new people, new ideas, and great new vitality," McCarthy said.

From the Jersey Journal:
Now home really is history

A 19th-century house located at 210 Fourth St. in Jersey City was demolished Monday - apparently without permission from the city's Historic Preservation Commission.

In fact, Jeb Gallagher of the Historic Preservation Commission said the organization didn't know about the demolition work until they began receiving phone calls Monday morning from confused and agitated neighbors who were also unaware of any plans concerning the house.
"There should be repercussions," said John Gomez, founder and former president of the Jersey City Landmarks Committee, adding that he believes Hamami should face fines for violating a preservation site.

Tuesday, July 18, 2006

Sound Off About Public Workers' Benefits

The Record/Herald is running a multipart series entitled "Runaway Pay". The special report can be found here:

Runaway Pay

Here is a taste of some of the topics:

Can N.J. afford the rising cost of teachers and cops?

We're grateful to our police officers. We count on them. We're proud of them.

Our state is going broke paying for them.

Same goes for teachers. We wish we could afford them, but we're having trouble.

We're having trouble paying for New Jersey's nearly 500,000 public employees. Especially at their current salaries and fringe benefits. Especially with New Jersey's property taxes among the steepest in the nation and rising.

Unions drive a hard bargain

So when it comes to contract negotiations, the high-stakes poker games that largely determine property taxes, local officials know who holds the best cards: the unions that represent the majority of their employees, the Policemen's Benevolent Association and the New Jersey Education Association.

Cops and teachers who, a generation ago, were underpaid and overworked are now enjoying compensation and working conditions that are the envy of the private sector. Experienced patrolmen in North Jersey routinely make $100,000 or more, and public-school teachers can top out at more than $90,000 and typically pay nothing for health insurance throughout their careers.

Workers' health care causing pain

But in New Jersey's public sector, where nearly 78,000 employees of the state government and state college system enjoy free medical coverage for themselves and their families, things are moving at a much slower pace, if at all. Winning even the smallest concessions during contract negotiations is an uphill battle because of strong unions, tough bargaining rules and rigid state guidelines about employee contributions.

"I've said it in negotiations," said Jeff DeSimone, a Ridgefield Board of Education member. "In the real business world, a businessman couldn't stay in business paying these types of benefits."

Home Builders' Confidence Lowest Since 1991

From Marketwatch:

Home builders index falls to 15-year low

Home builders' confidence plunged to a 15-year low in July, reflecting growing worries about rising interest rates and declining affordability, the National Association of Home Builders said Tuesday.

The NAHB/Wells Fargo housing market index fell three more points to 39 in July, the lowest since December 1991. A reading of 50 would mean sentiment is balanced equally among builders who think the market is good and those who think it's poor.

The index peaked at 72 last June and has fallen in 11 months since then. It's the fastest decline in the 21-year history of the index, which has had a fairly good record of predicting the number of new homes started.

From the NAHB:

Builder Confidence Slips Again In July

Increased concerns about interest rates and housing affordability caused builder confidence in the market for new single-family homes to slip three more notches to 39, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for July, reported today.

“The HMI is down from its most recent cyclical high of 72 in June of last year, and reflects growing builder uncertainly on the heels of reduced sales and increased cancellations related to eroding affordability as well as an ongoing withdrawal of investors/speculators from the marketplace,” said NAHB Chief Economist David Seiders.
All three component indexes fell in July. The largest decline was in the index gauging sales expectations for the next six months, which fell five points to 46. The index gauging current sales of new single-family homes fell four points to 43 and the index gauging traffic of prospective buyers fell two points to 27.

Builders in the West region, who have been the most optimistic in the HMI for some time, recorded the biggest dip in confidence this time around, with a nine-point decline to 51. Builders in the Northeast posted a five-point decline to 36, and builders in the Midwest posted a four-point decline to 21. The HMI for the large South region edged up two points to 50, although this measure still is down considerably from a cyclical high of 77 in June of last year.

Tuesday Economics Roundtable

From Marketwatch:

U.S. June PPI up 0.5%, core PPI up 0.2%

U.S. producer prices rose by a larger-than-expected 0.5% in June, but core inflation increased 0.2% as expected, the Labor Department reported Tuesday. Higher energy and food prices accounted for most of the gain in June in the producer price index for finished goods. Energy prices rose 0.7% in June. Food prices rose 1.4%, the most since October 2004. Prices of crude materials fell 1.7%, while intermediate goods prices rose 0.7%. Core intermediate goods prices rose 0.8%. The 0.5% gain in the PPI was much larger than the 0.2% expected by economists surveyed by MarketWatch. The core rate was exactly as predicted.

From Bloomberg:

China Economy Grows 11.3 Percent, Most in a Decade

China's economy grew 11.3 percent in the second quarter, the fastest pace in more than a decade, and the government said it will clamp down on lending and investment.

Spending on factories and real estate accelerated in June, the statistics bureau said today, helping gross domestic product grow faster than the 10.4 percent median forecast among 30 economists surveyed by Bloomberg News. It was the biggest expansion since 1994, when the economy was a quarter the size.

The figures added to speculation the central bank will raise lending rates for a second time this year and order banks to rein in credit in the world's fastest-growing major economy. China may also allow faster currency gains to curb a trade surplus that's flooded the economy with cash and strained relations with the U.S.

``We are concerned about the overheating situation,'' said Masahiro Kawai, head of the Asian Development Bank's office of regional economic integration. ``There is an even stronger case for a tighter monetary policy and a more accelerated pace of the yuan's appreciation.''
``Inflation is likely to surprise on the upside,'' said Liang Hong, an economist at Goldman Sachs Group Inc. in Hong Kong. ``If consumer prices start to show much more momentum, the government's tightening doses will be stronger.''

From Bloomberg:

U.K. Inflation Accelerates to Match Nine-Year High

Inflation in the U.K. accelerated more than economists expected in June as energy costs climbed, matching a nine-year high and increasing the prospect that the Bank of England will raise interest rates.

Consumer prices rose 2.5 percent from June 2005, the same level as in September, which was the highest since the series began in 1997, the Office for National Statistics in London said today. The reading exceeded the 2.3 percent median prediction in a Bloomberg survey of 32 economists. Prices increased 0.3 percent in the month.

The inflation rate has exceeded the Bank of England's 2 percent target for two months as record oil prices push up gasoline costs, household bills and factory goods prices. Investors raised bets on an increase in the benchmark interest rate by the end of the year after today's report.

``Inflation is certainly higher than the Bank of England was expecting,'' James Knightley, an economist at ING Bank NV in London, said. ``It's all down to energy at the moment. There's risk of a rate hike later this year, probably in November.''

Investors expect the bank will lift its benchmark rate a quarter-point to 4.75 percent this year. The yield on the interest-rate contract maturing in December rose 6 basis points to 4.96 percent as of 12:07 a.m. in London.

Development Watch

High Bridge housing plan will proceed after ruling

After two stinging setbacks in major lawsuits, High Bridge officials have decided not to appeal an affordable housing ruling that cleared the way for a long-proposed 170-unit development.

In separate rulings last month, an appellate court upheld the state Council on Affordable Housing's handling of the case, and rejected a borough effort to send it back to the zoning board.

Plainfield senior condos planned

Bingo on the first floor, a two- bedroom on the second.

Plans for a new Plainfield Senior Citizens Center call for 63 condominium units to be built above it, which would also be marketed to seniors. The project would free the city from spending anything on construction costs and would generate about $400,000 a year in taxes.
Green said he was pleased that the condominiums would bring in about $400,000 in taxes each year and would not require the city to give the developer tax breaks. The condominiums, Green added, will not be low-income housing but something seniors "can look for ward to purchasing." Because of federal and state budgetary constraints, Plainfield can no longer look for federal or state dollars, he added.

Benefits for luxury townhome buyers to include swim pools

Under a redeveloper agreement it's signing with the BLRA, Trammel Crow has agreed to pay the BLRA $18.4 million for the rights to build 530 "luxury rental" apartments on the two westernmost blocks of the Bayonne Bay tract comprising 7.42 acres. Trammel Crow is providing a deposit of $11.3 million now and will pay the rest by June 1, 2007.

Trammel Crow's would-be partner for developing Bayonne Bay - D.R. Horton - backed out at the 11th hour and the BLRA hopes to find a replacement, by Aug. 1, to build the balance of the approximately 1,700 apartments projected in the Bayonne Bay master plan. BLRA officials predict the 32 acres of developable property within Bayonne Bay will, ultimately, be sold for more than $100 million.

Mannington Twp. officials warn of housing boom

The possibility of more than 5,000 new homes coming to this rural farming township is not out of the question if current zoning rules aren't amended, officials here have been told.

If current zoning standards remain in place, that number could even increase to more than 6,000 new homes and more than 10,000 new residents, according to township planners Philip Caton and Linda Weber.

South Jersey Market Slows

From the Courier Post:

Region's housing market softens

In the first solid sign the housing market has turned south, home sales in Philadelphia, South Jersey and Delaware fell in the first six months of 2006 compared with a year ago for the first time in about a decade, according to a report released Monday by a real estate firm.

The research division of Prudential Fox & Roach Realtors in Devon, Pa., said sales in the 12-county region fell by more than 4 percent from January to June, and the number of days it took to sell a home on average soared by 48 percent to 32 days.
"The market feels very slow right now," said Steve Storti, senior vice president of marketing for Prudential. "I have every expectation that this will continue at least until the end of this year."

He said the housing market started to falter last winter and the downturn accelerated beginning in April.

Graduation The Happiest Day In Glen Ridge

From the Star Ledger:

Moving day follows kids' graduation day in one high-tax town

It was a proud moment. Eva Fenning's triplets were graduating from top-ranked Glen Ridge High School. On the lawn of their Ridgewood Avenue home stood the traditional congratulatory sign with the triplets' names: Brad, Blane, Brittany.

But just a few feet away was a telltale sign of what lay ahead: "For Sale."

In tax-stressed towns such as Glen Ridge, families are grabbing for a real-estate listing as soon as their youngest slip out of cap and gown. Many families are counting on the savings in property taxes to fund college tuition bills.

"My friends never believed me" when she said she'd be leaving town, Fenning recalls, but the move translates into huge savings. How much each year? "Only $13,000," she says tongue-in-cheek.

The postgraduation home sales extend to neighboring Montclair, where head-craning drivers can spot blue-and-white ribbons -- the colors of Montclair High's Mounties -- tied to trees just feet from "For Sale" signs.

In Glen Ridge, which a few years ago was top-ranked not just for its schools but for "tax trauma," according to a 2002 Star-Ledger analysis of New Jersey towns, the evidence is everywhere.

Monday, July 17, 2006

Foreclosures Accelerating

From Inman News:

Foreclosures accelerate in some areas says property foreclosures are accelerating in the Midwest, Southeast and New England for different reasons.
In New England, rising energy costs, a flat housing market and interest rate hikes are factors that helped drive 3,074 homes in Massachusetts into foreclosure in the last 60 days, reports. Home prices in Massachusetts are off about 4 percent from their 2005 peak, the company said.

The drop in property values "makes it harder for folks being squeezed by rising mortgage payments to sell their way out of foreclosure in an orderly way," said president Alexis McGee. blames falling property values and rising interest rates for the upswing in foreclosure activity in Georgia and Florida, a situation "exacerbated by the widespread use ... of exotic mortgage products" and high negative amortization.

"People bought homes they really couldn't afford, and now they're losing them as these loans reset to market rates and they can't find affordable refinancing options," McGee said.

Parsippany The 17th Best Place To Live

From the Daily Record:

Parsippany makes Money's Top 100

Parsippany is included in the Top 100 of Money magazine's annual "Best Places to Live" list.

The magazine named Fort Collins is the "Best Place to Live" in America for 2006, in a list that also included five New Jersey cities.
Five Garden State cities were also listed in the top 100: Parsippany, Cherry Hill, Edison, Middletownand Wayne.

New Brunswick was also ranked second on a separate listing of cities with the most singles and, with a median age of 24.6, the city also came in third in a ranking of cities with the youngest populations.
Cities are ranked on a series of factors, including cost of living, employment markets, median income, property taxes and housing prices. Crime, congestion, public schools and climate also go into the mix, executive editor Craig Matters said.
The annual "best places to live" feature has appeared in Money for many years, Matters said. Last year the magazine focused on prime suburban areas. The rankings and associated data available online proved so popular editors decided to expand to small cities.
National attention doesn't necessarily attract more people or businesses to those communities, Matters said.

"We are not a leading indicator, we are following," he said. "People already know these are great places to live."

Sobering Statistics

Hat tip to Marinite (of the Marin Real Estate Bubble Blog) and Jay for this link. From the Mortgage Brokers Association for Responsible Lending:

Data Collected by the Mortgage Brokers Association for Responsible Lending

Data Collected by the Mortgage Brokers Association for Responsible Lending

1. 37.2% of non-agency mortgage backed securities were no document loans in 2005.i

2. 49.3% of ARMS with interest only features originated in 2004 lacked full documentation.ii

3. As of September 2005, Adjustable rate Mortgages (ARMs) accounted for roughly 70% of the prime mortgage products originated and securitized and 80% of the subprime sector.iii

4. In 2006 97.5% of borrowers are likely to face a payment shock of at least 25% and 75% of borrowers could face a shock of 50% or more.iv These changes neglect additional shocks that would result from the repayment of principal because of current interest only payments!

5. Payments will increase on 41% of the outstanding subprime loans in 2006 alone.v

6. As of March 22, 2006 53.1% of interest only ARMS had a prepayment

7. 70% of borrowers with Option ARMs (Arms that allow negative amortization) are currently making minimum payments.vii

8. In 2004 $600 BILLION of consumers' spending power was from borrowing against home values. That is double the value of President Bush's tax cuts, as estimated by Brooking Institution scholar Peter Orzag.viii

9. 2nd homes accounted for 14% of new mortgages in 2004; in 2000 it was only 7%. Mr. Greenspan said that the fact that someone can sell a 2nd home without moving, "suggests that speculative activity may have had a greater role in generating the recent increases than it customarily has had in the past."ix

10. Residential housing now makes up 16 percent, or $1.9 trillion, of the gross domestic product and is the economy's largest single sector, slightly bigger than the industries and services that supply health care.x

11. In 2005 the FBI convicted only 170 people nationally for mortgage fraud. In 2004 that number was 172 people. According to the FBI the hot spots for Mortgage Fraud activity in 2004 (per capita) were: California, Nevada, Utah, Arizona, Colorado, Missouri, Illinois, Maryland, Georgia, and Florida.xi

12. In the San Francisco Bay Area alone, almost 75% of mortgage loans taken out last year (2005) allowed borrowers to delay the payment of principle. Negatively amortized loans jumped to 29% of the Bay Area mortgage market from less than 10% in 2004.xii

13. The following chart shows the percentage of Bay Area loans that were interest only or Option ARMs (know as negative amortization).xiii

Year Interest Only Option Arm
2005 42.6% 29.1%
2004 43.7% 9.6%
2003 20.3% 0.8%
2002 12.0% 1.7%
2001 2.9% 1.6%

Cherry Hill Downtown

From the Asbury Park Press:

Cherry Hill going "downtown"

Before the 1960s, when this community boomed into a quintessential New Jersey suburb with 70,000 residents, a landmark mall, well-regarded schools and cul-de-sac after cul-de-sac of homes, there were two main features of town: farms and the Garden State Park horse racing track.
In contrast to the nearby colonial villages and older railroad suburbs such as Merchantville, Maple Shade, Collingswood and Haddonfield, Cherry Hill grew up without ever getting a downtown.

When the 225-acre racetrack closed in 2001, it created a rare second chance to build a new center of the community.

The original developers promised a downtown modeled after some of those quaint neighboring communities. But that's not exactly what's going up now after a shake up in developers and years of legal wrangling over how much housing should be built on the site for lower-income people.
The first parts of the redevelopment to go up — big-box stores, including a Home Depot and a Wegman's, an oversized supermarket with a cultish following, that are already open and condos for senior citizens under construction — have given concern to advocates for creating walkable communities.
When it's complete — likely in several years — the development will also have office buildings with easy access to a train station, an off-track betting parlor, some 5,000 residents in an array of housing options, a 10-acre park including an amphitheater, a fancy, horse-themed fountain and playing fields, Morris said.

While one early plan called for some single-family homes and keeping many of the mature oak and sycamore trees along the stables, neither is happening.

The housing has become denser, township officials say, because of requirements to include 200 units of affordable housing among the roughly 1,700 residential units.

Speedwell Ave Redevelopment

From the Star Ledger:

A new face for Morristown

A strip of aging buildings along Morristown's Speedwell Avenue would be reduced to rubble and in its place would rise a four-story complex of some 700 homes and 50 shops, according to a proposal to be discussed at this week's council meeting.

"It's a whole new face for the community. It's a wonderful opportunity," Mayor Donald Cresitello said. "This is what was anticipated with the Highlands legislation, that cities would be reborn."

But others feel the town needs to proceed carefully.

"The Hispanic community has really led to a renaissance of that area," said Jose Bastarrika, a lawyer whose Speedwell Avenue office lies within the redevelopment zone. "I'm not against redevelopment. I'm not against improvements, particularly as they relate to traffic. But I think the town has to pay attention to a community that's thriving."
The roughly $200 million project would displace the occupants of about 90 apartments and 20 small businesses, according to Cresitello. Residents would be relocated by the developer, but shop owners who rent would need to find other quarters on their own, he said.
It would provide more than 100 units of affordable housing and about 1,200 underground parking spaces, Cresitello said. Plus, the developer could widen the congested avenue to include four driving lanes and two parking lanes, he said.

The area has been designated "in need of redevelopment," so the town can use its powers of eminent domain to force reluctant property owners to sell.

"Do you let one property owner hold up a $200 million rebirth of the community?" he said. "I don't think so, but some people do."

Sunday, July 16, 2006

Adjustable Rate Mortgages - " all the makings of a classic horror story"

This one comes to us from Damon Darlin at the New York Times. Many of you may recognize the name, Damon is a regular contributor toThe Walkthru, the NY Times real estate blog.

Keep Eyes Fixed on Your Variable-Rate Mortgage

The raising of interest rates on millions of adjustable rate mortgages over the next several years has all the makings of a classic horror story.

As home prices appreciated from ridiculously high to unbelievably higher, more Americans began using mortgages that allowed them to buy more house for less of a monthly payment. Next year, a large portion of those rates move up and homeowners who opted for the exotic mortgages could find their payments doubled. Talk about bloody. They need to find a way to minimize the pain.

Many will refinance their loans. But for others, whose mortgages now exceed the value of their homes or whose debt payments exceed 40 percent of their incomes, there may be no other solution than to get out of their houses. With the housing market cooling, selling it may not be easy. Some may default on their loans.

With more homes on the market, prices could begin to fall. That reduces home equity — the difference between the amount borrowed and the total value of the home — and could force people whose loans change in 2008 and 2009 to consider selling, further accelerating the drop in prices. Some of those cities with the highest proportions of interest-only loans are also at the greatest risk of falling prices.
On a personal level, however, there is going to be pain as homeowners struggle to make higher payments. In 2003, of all new mortgages, 10.2 percent were interest-only, meaning the homeowner paid only the interest for the initial period of the loan. According to Loan Performance, a research firm, 26.7 percent of all loans were interest-only last year and another 15.3 percent were payment-option adjustable rate mortgages, which allow homeowners to choose how much they paid each month.
Traditionally, interest-only loans and adjustable-rate loans were used by people who expected to live in a house only a short time, but such loans have turned into “affordability products” as housing prices rose. The interest rate on the loans, while below that of conventional 30-year fixed-rate mortgages at the beginning, resets after 3, 5, 7 or 10 years, depending on the loan. So, homeowners who took out loans in 2004 could find, for example, that their initial 4.25 percent loan climbs to 6.25 percent or 7.25 percent next year.
Sometimes, though, homeowners may have to take more drastic steps. The lender may not be interested in refinancing a home loan when the value of the home is below the loan amount. That could happen because a homeowner took out all the equity in a previous refinancing. (Freddie Mac estimates that Americans took $556 billion out of their homes through cash-out refinancings and home equity loans since 2004.)

It could happen if the price of the house has fallen or if the owner has been making only the minimum payment on a payment-option loan so that the loan balance has actually grown. (It is what the industry calls a negative-amortization loan). The best option then is probably to sell the house and scale back. Homeowners may also want to sell if they can clearly see that there is no way they can make the higher, refinanced payment.

In that case, it is better to act now before a few million other interest-only mortgage holders dump their homes on the market.

Is the Grass Greener in PA?

From the Star Ledger:


When Tim and Kim Kryman went searching for a new house, they considered staying in New Jersey but quickly realized they would have to broaden their search to find their dream home.

The Phillipsburg couple found it in a bucolic hamlet south of Route 80 in Pennsylvania, where a subdivision of 20 large houses was carved out of former pastureland.

"A lot of our friends had jumped the border," Kim said one recent morning as she prepared sandwiches for her twins and for friends visiting from New Jersey. "I love the privacy, but price was a big factor. I'm a stay-at-home mom, and we did not want to have to sacrifice."

The Krymans didn't have to, picking up a new four-bedroom house with hardwood floors and a fireplace on two acres for less than $350,000. Their property taxes will be about $6,500.

They are part of an exodus of New Jerseyans and New Yorkers who have decided the grass is greener on the other side of the Delaware River.
Since 2000, more than 19,000 New Jerseyans have moved to Pike and Monroe counties -- with residents of the North Jersey counties of Morris, Bergen, Sussex and Essex leading the way, according to the Internal Revenue Service, which uses income tax returns to track migration patterns.
While many newcomers have found everything they were looking for in Pennsylvania, some have discovered the commute to distant jobs can be physically taxing and also take a toll on families.

"All of these builders and real estate people sold our new residents a lot of dreams," said John Sivick, the top elected official in Lehman Township, a Pike County community that grew 25 percent in the past five years. "They said you can live in the Poconos and still get to your job in New York and New Jersey. After many years, people have begun to realize the strain they are under."

The Land of Towns and Taxes

From the Star Ledger:

How Jersey became the land of so many towns -- and taxes

One state, 21 counties, 566 municipalities and 616 school districts. Government and bureaucracy at every level.

Maybe, in a Jersey kind of way, it all makes sense.

The reasons for this abundance of towns and school districts -- and the relentless property tax problem that comes with it -- are as varied as the landscape. Some communities grew up around the big cities of New York and Philadelphia. Others began as oceanside resorts, or as stagecoach stops. In some places, people sought out a home where drinking wasn't allowed, or where playing golf on Sunday was. Some school districts were formed to ensure racial segregation.

Historians say there was no grand plan in making this a state that has more municipalities per square mile than any other. Groups just acted on their own interests, and the state didn't get in the way.

The late Alan Karcher, a speaker of the state Assembly in the 1980s, was once moved to write that by the end of the 20th century, the boundaries of New Jersey towns looked like "a web woven by a spider on LSD."
The average property tax bill in the state last year was nearly $5,900 -- an increase of 29 percent in four years. The average homeowner uses about 5.6 percent of personal income for property taxes, according to William G. Dressel, director of the New Jersey State League of Municipalities. The national average is 3.6 percent.

And leaders from citizen activist groups claimed this week 44 percent of all tax revenue in New Jersey comes from property taxes, compared with a national average closer to 30 percent.

Piling on the Debt

From the Press of Atlantic City:

Credit-card debt engulfs America as spending outweighs income

In “Hamlet,” Shakespeare's Lord Polonius said, “Neither a borrower nor a lender be.” Today's consumer philosophy is closer to the 1980s bumper sticker: “He who dies with the most toys wins.” Polonius would be laughed out of the home electronics superstore.
But some homeowners can't escape credit-card debt be-cause they have turned it into mortgage debt. They took out home equity loans to pay off creditors. That's happened a lot. Nearly one-third of equity loans in 2004 went to pay off debt, according to the Federal Reserve.

Shifting credit debt to mortgage payments usually lowers the interest rate. It allows interest to be deducted on income tax returns. Still, draining equity out of a family's main asset may be a sign of credit problems. It's especially troubling if a family runs up its credit cards again.

Clayman and other attorneys say there are fewer bankruptcies when housing prices are high and interest rates are low. Higher equity helps manage debt.

Unfortunately, the lawyers look at mortgage and interest trends, and predict that more families' finances are living on borrowed time.
Some buyers could not afford a big down payment in the roaring housing market of recent years. The mortgage industry created no-equity loans. The buyer keeps payments low by paying only interest until he sells the house at a profit. Some buyers took loans with “negative equity.” They borrowed more than the house was worth.

Lenders also provided adjustable-rate mortgages, which start with a low interest rate that changes according to market trends. Seventeen percent of adjustable mortgages sold in 2004 and 2005 offered a starter rate of 2 percent or less.

Two problems have developed. Housing prices have started declining. And the Federal Reserve keeps raising interest rates to fight inflation.

Higher interest rates will affect millions of adjustable-rate mortgages. Rates are expected to increase on a quarter of all outstanding U.S. mortgages either this year or next, according to

Many recent buyers' adjustable mortgage payments could double.

Christopher Cagan, research director for First American Real Estate Solutions, studied the possible impact of rising interest rates. An increase from 1 percent to a 6 percent market rate could rocket a monthly payment from $965 to $1,800.

Even if it took a few years for rates to rise that high, Cagan said, many people would lose their homes. If a homeowner holds no equity and his house has lost value, he would make nothing if he sold it.