Saturday, September 09, 2006

Will immigrants save housing?

From the New York Times Key Magazine:

The Immigration Equation

It’s often said that immigrants do the jobs Americans don’t want to do. They’ve just been assigned another task: Buy the homes of the baby boom generation. But this task is one that native-born Americans simply can’t do. There won’t be enough of them.

Many of the 78 million boomers, the first of whom turn 60 this year, will sell their property over the next two decades, says George Masnick, a research affiliate with the Joint Center for Housing Studies at Harvard University. Some will move to a smaller home or to their second home, others will move into a managed-care complex. And for some who never moved, it will be their estate making the sale. What many boomers should be asking right now is who will buy their 34 million homes. The buyers may well be immigrants, and not necessarily legal ones (about 12 million of the 35 million foreign-born people in America are illegal immigrants, according to estimates from the Center for Immigration Studies, in Washington).

Demographers say there aren’t enough potential homeowners in the echo boom (the children of the baby boomers) or in the generation that comes after that (still without a catchy name) to soak up that supply, no matter how slowly it goes on the market. (It is presumed that the bulk of the Gen Xers will have done their home buying by then.)

Without sufficient demand, prices will fall. Masnick predicts that as many as 90 percent of the homes will be bought by native-born Americans. “But the last 10 percent is central,” he says. “Without that 10 percent, it will be a buyers’ market.”
The good news is that there are enough young first- and second-generation immigrants to do the job. The popular telling of the American dream that has Smith selling to Schmidt who then sells to Shapiro will record the next chapter with Sung and Sanchez doing the buying. Dowell Myers, a professor at the University of Southern California who studies the impact of demography on urban planning, says, “The odds are that a white baby boomer won’t be selling to another white.”
But it’s no sure thing that immigrants will save the day. A lot can go wrong. “The danger is downward mobility,” says Fred Siegel, a professor at the Cooper Union for Science and Art, who has studied immigration patterns. “If a significant portion of recent immigrants are downwardly mobile, then that is bad news for the boomers. Who will afford the McMansions?”

Japan's Housing Bubble

Great narrative of the Japanese housing collapse by Michael Nystrom. Most definately a must-read. Here are a few excerpts from his story:

A Cautionary Housing Tale from Japan

In spite of the booming economy, my uncle, like many Americans today, was shut out of the housing market. Prices always seemed too high, but a pullback never materialized, so he waited until the right time to buy. While he waited, prices spiraled up and away until at last they were hopelessly out of reach. By the time I arrived in 1990, his family was living in a government-owned, rent controlled flat that was, by any standards, small: Two rooms that were each about 12 square feet, a small kitchen and a tiny bath to serve three adults (including his mother) and his two kids. (Japanese rooms are multi-use rooms, so at night when you're done eating and watching TV, the furniture is put away and the futons come out and everyone sleeps together on the floor). His was a unit on the first floor of a huge concrete building that sat in the middle of a sea of identical buildings. The picture below is not his actual building, but you get the idea.
By 1994, housing prices continued to drift lower until some units started to become, with considerable stretching and creative financing, affordable. So that year, by taking out a two generation, 60-year mortgage -- with his 16-year old son on the hook for the remaining years that he might not be able to pay -- my uncle bought his first home. The family had to scrimp, and both he and my aunt had to work more hours, but they were finally, proud homeowners. And it was a nice house - larger than their old house (but not much), in a nicer neighborhood, and on a higher floor with a view of the treetops. I even helped them move in. It was a happy day. I don't recall the exact price he paid, but I remember thinking that it sure was a lot! Somewhere north of half a million dollars. Those were the kinds of details were lost on me at that age.
I left Japan in 1994, and didn't return again for a visit until late 1998. In the intervening 4 years, housing prices had continued to fall, and fall, and fall to the point where my uncle's house was worth only half of what he had paid for it four years earlier: A couple hundred thousand, up in smoke, just as Japan's economy was mired in a 13-year slump. But he stuck with his loan, hoping the value will come back. And one day, it just might. So he makes his payments each month faithfully, and when he can no longer make them, his son will take over and pay off the remaining balance. And sometime, in the remaining 48 years on the mortgage, the house may once again be worth more than what is owed on it.

Realtors' President Can't Sell Home

From the Washington Post:

A Humbling Lesson for Realtors' President

He, of all people, should have known better.

The president of the National Association of Realtors, Thomas M. Stevens of Vienna, admits he didn't follow his agents' advice when the real estate market started to cool. That, he says, is why his old house in Great Falls has now been on the market for a year at the price of $1.45 million.

"What I should have done," confessed the senior vice president of NRT Inc., parent of Coldwell Banker Residential Brokerage, "was listened to my agent and cut the price by $50,000 to $100,000 early on, and the property would have sold last October."

Or, even better, he said, "I should have listed it a month earlier," when the market was only just beginning to lose air.

Now Stevens, like so many other home sellers in the Washington area and around the nation, is waiting for a buyer in a market that has totally reversed course since a year ago. With two or three times the number of properties listed this year as last in some neighborhoods, agents are urging sellers to lower their expectations, put on their best face and offer incentives such as closing cost help.
"They sent the letter telling me the listing was approaching a year" and that the price needed another look, he said. "They're doing their job as agents. I'm not doing my job as a seller."

But, he noted, in his defense: "Who knew last September how long this down trend was going to continue," after so many years of climbing upward?
When asked how long sellers should expect a sale to take these days, Stevens said 40 to 60 days would be typical. And if a house hasn't moved by then, he said, "You need to adjust the price. . . . But I didn't do that. And my house is still on the market."

Lowball Advice

From Bankrate:

Lowballing in a cool housing market

In the softening real estate market, how much wiggle room is there in negotiating for a house?
-- Kathi M.

I wish to purchase a home soon. My question is what is a reasonable lowball percent to offer on a house? When I ask agents, they are very vague. Is offering 10 percent below or more way off?
-- May in Mizzou

How low can I go without offending the seller?
-- Anthony S.

As markets that were overheated as recently as early 2005 have cooled considerably, this subject has become a hot one. With a temporary overabundance of housing on the market in many parts of the country, low bidders are truly in their element for the first time in about a decade. Offers that were laughed off just 18 months ago by confident sellers are suddenly being considered. Owners who once advised their agents to ignore offers by lowballers no longer have that luxury in most markets.

But don't expect sellers to flat-out panic. Most who bought their homes recently will not let their homes go for much less than they paid for them. On the other hand, owners who have been in their homes awhile and enjoyed a big run-up in value in recent years might be more willing to listen to lower offers because they'll still profit handily on the sale.
As always, homes most likely to sell at a big discount are those in dire need of wholesale repairs, preforeclosure homes and those owned by other highly motivated people (transferring out of town, buying another home and not able to afford two mortgages, had recent death in family, investor who bought at the wrong time, etc.). To them, offers of up to 15 percent or more under market are a little more palatable.

Knowing the seller's motives always gives you much more traction with any negotiable purchase -- especially a house.
But you have little to lose, currently, by going low. The worse that can happen is that your offer will be flatly rejected. For that reason, your best strategy might be to pinpoint several potential homes, make your low offers and see what sticks -- or at least who is willing to negotiate. In lieu of price concessions, many homeowners are offering to throw in appliances, furnishings and even such items as high-definition TVs. If you do the math, you might come out farther ahead than if you held out for an additional 1 percent or 2 percent.

State To Dwek: Pay Up

From the Asbury Park Press:

Judge orders state repaid for Dwek's bad tax check

After the state of New Jersey complained that Solomon Dwek's $205,000 income tax check bounced, a Superior Court judge Friday ordered that the full amount be paid from Dwek's frozen assets.

Judge Alexander D. Lehrer also allowed one of Dwek's largest claimants, PNC Bank, to pursue its lawsuit against HSBC Bank, the world's largest bank. Dwek is accused of defrauding PNC of $21 million after he deposited a $25.2 million check that bounced. Dwek spirited away most of the money, leaving PNC with a multi-million dollar shortfall, according to the FBI.

Dwek, 33, of Ocean Township, a major land developer in the area with an empire worth an estimated $420 million, faces federal bank fraud charges in criminal court.

Lehrer, a civil court judge, ordered that the state of New Jersey be paid $205,000 immediately to satisfy Dwek's estimated state income tax for 2005 and the first quarter of 2006.
Weir told Lehrer in court Friday that an investigator from the state had arrived at Dwek's house and threatened Dwek's wife, Pearl, "with arrest unless they paid their bill'' immediately.

More than 80 claimants say Dwek owes them $338 million.

Newton Takes Tough Stance On Illegal Immigrants

From the Township Journal:

Newton proposes tough illegal immigration laws

Following a trend that’s been seen in places like Hazleton and Allentown, Pennsylvania and Palm Beach, Florida, Newton town Councilman Philip J. Diglio proposed the adoption of a new ordinance for the town of Newton that would tighten the town’s immigration laws. The new ordinance contains 2 major parts. The first would make it illegal to hire or rent out to an illegal immigrant, punishing any business or landlord that “aids and abets (i) the hiring of illegal aliens, (ii) providing, renting or leasing real property to illegal aliens and (iii) funding, providing goods and services to, or aiding in the establishment or continuation of any day labor center...” without verifying legal work status. The punishment would be in the form of fines ranging from $1000-$10,000 for landlords. For business owners it would mean being barred from approval of any business permits, including renewals, and any city contracts or grants for 5 years or more.

The ordinance calls for non-US citizens who are legal to register for a permit to work or live in Newton. They would need proper identification, which the town would then use to do a background check to assure authenticity of provided documents. When all is found to be in order, then the non-citizen would be issued a document that they could use to apply for a job or for housing. All landlords and employers would be required by law to ask for this document before renting to or hiring someone.
Newton’s proposed ordinance to tighten immigration law has spawned criticism from a variety of groups and peoples. In a statement from Ed Barocas, legal director for the American Civil Liberties Union of New Jersey, he wrote, “If the Newton Town Council adopts this wrong-headed proposal, it will be subject to constitutional scrutiny like the other towns that have passed or plan to pass similar immigrant-exclusion ordinances. We believe these measures will be struck down. We believe this proposed law is unconstitutional and will make every person who looks or sounds foreign a suspect, including those who are here legally. You might as well paint a target on someone who is perceived to be a foreigner and say, ‘Treat me differently.’”

Friday, September 08, 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. Also a good place to post suggestions, requests for information, criticism, and praise.

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 year. The archives can be found at the bottom of the right hand menu and are categorized by week.

Jump in Non-Prime Mortgages

From Reuters:

Fed study shows 2005 jump in non-prime mortgages

U.S. mortgage lending data show sharp growth in the use of higher-priced "non-prime" mortgages for home purchases in 2005 over 2004, and even steeper gains in the incidence of such loans among blacks and Hispanics, a Federal Reserve study showed on Friday.

The mortgage data, gathered from lenders under the Home Mortgage Disclosure Act, shows more buyers were pushed out of the most favorable loan categories as they stretched to buy homes at the height of the U.S. housing boom. Home prices in many markets peaked in the third quarter of 2005.

The Fed study showed higher-priced first-lien mortgages, which it described as three percentage points over Treasury yields of comparable maturities, made up 24.6 percent of conventional home purchase loans on owner-occupied homes, compared with 11.5 percent in 2004.
The study said the jump in higher-priced lending was driven partly by a flattening of the Treasury yield which pushed up home mortgage rates, particularly for adjustable rate loans.

Consequently, loans with the same risk characteristics would have had higher interest rates in 2005 and more of them would have been categorized as non-prime under the Home Mortgage Disclosure Act.

It also said borrower-specific risks generally increased, pushing more buyers into non-prime categories.

"Evidence indicates that changes in risk characteristics varied across geographic regions, largely because of substantial house-price appreciation in some locals, and likely caused more borrowers to stretch financially to obtain loans," the Fed said.

Piggy-back lending -- the use of second-lien mortgages to allow buyers to buy homes with down payments less than 20 percent, also grew substantially in 2005 and accounted for more than half the increase in the number of higher-priced loans.

The above mentioned Federal Reserve study can be found here:

Higher-Priced Home Lending and the 2005 HMDA Data (PDF)

Too Little Too Late

From Motley Fool:

Housing Cheerleaders Losing Pep

I've spent the past few months casting a hairy eyeball at a lot of the pro-housing hypesters out there, the folks I feel have cheered on a dangerous bubble with little regard to the potential dangers to consumers' pocketbooks or the economy at large.

So I want to be sure to offer a golf clap to one of the outfits that's been in my crosshairs, the National Association of Realtors (NAR).

This organization exists to promote the well-being of all those folks out there who collect 6% every time we sell a home. Despite this obvious self-interest, the press out there in TV Land puts great -- to my mind, undue -- faith in the monthly pronouncements on the health of the real estate market that emanate from the NAR's head office. For the past couple of years, these have been positively bubblicious, to put it mildly.

I offer the golf clap because yesterday, for the first time that I can remember, it appears to me that the NAR came clean on the housing bubble, right out in public.

In this press release, David Lereah, the endlessly quoted chief economist for the organization, finally acknowledged openly that sales are tanking and prices going down. He used uncharacteristically firm language, tossing out lines such as,"...people who purchased last year with the intent of flipping are likely to get burned." Good on him, and good on the NAR.

Unfortunately, this may be too little, too late. After all, the NAR has been quietly admitting, for a few weeks now, that things are getting ugly in a lot of markets, and that a correction was necessary. This presentation on the NAR website shows the kind of candor the organization musters, at least when it's not sending out PR to the entire country.

"The housing market is looking sicker by the day"

From BusinessWeek:

Builders Brace for a Housing Downturn
Even this typically sunny sector is expecting prices to fall as prelude to a prolonged downturn

The housing market is looking sicker by the day. On Sept. 7, the perpetually optimistic National Association of Realtors acknowledged for the first time that housing prices are likely to fall on a year-over-year basis, at least for a time.
Mortgage rates, shmortgage rates. No one's paying attention to the cost of borrowing money these days because it seems trivial next to the risk of losing money by buying high and selling low—catching a falling knife, in the Wall Street vernacular.

Ian Shepherdson of High Frequency Economics, an early bear on housing, said in a conference call with clients on Sept. 7 that the housing market is so far gone that "it's not rescuable anymore. The housing market is beyond the control of the Fed." He compared it to a football game played on a mountaintop. Once the football goes off the edge, he said, it doesn't stop until it reaches the very bottom.
Even the homebuilders, long an optimistic bunch, are all but throwing in the towel on the current market's condition. "We're running our business today as if we're in a prolonged downturn," CEO Ara Hovnanian of Hovnanian Enterprises told analysts Sept. 6.
In boom times, when home prices were rising 16% a year and many buyers expected that pattern to continue, they could borrow at 6% and, in effect, be paid 10% a year for living in their homes. Now that annual appreciation is roughly 0% and interest rates are roughly the same, says Shepherdson, the real cost of living in a house has increased enormously.
"The housing market party is over," economic forecaster Global Insight said Sept. 7. While not as bearish as High Frequency, it's predicting that housing starts will fall 10% this year and 13% in 2007. It predicted that second-half 2006 growth will average just above 2%, with housing being the main negative.
High Frequency Economics' Shepherdson argues that housing could remain weak for another two or three years. "This," says Shepherdson, "is pretty much an inexorable process."

Exuberance Waning

From the Philadelphia Inquirer:

Housing decline: How 'temporary'?

You know the boom is over when even the brokers start predicting lower prices. That was true of the stock-market bubble in 2001, and it's true now, as the air comes out of housing.

Yesterday, the National Association of Realtors issued its sales forecast for the rest of this year, saying an "inventory and price imbalance" will likely cause home prices to fall below the levels of a year ago.

Of course, the drop will be only temporary, the brokers' group says, just until "the market works through a buildup in housing inventory."

Anyone who didn't buy a house last year in hopes of "flipping" it for a quick profit should be fine, they assure us. And perhaps they're right.

But as long as "temporary" lasts, we could be in for a bumpy ride.
Closer to home, they found house prices in the Atlantic City area rose only 2.6 percent during the first six months of 2006. A year earlier, the same market saw prices rise nearly 8 percent.

But isn't a 2.6 percent increase still an increase? Not necessarily. Houses don't behave like stocks; when the market cools, publicly reported prices are the last thing to change.

First, sales volume slows down. Then sellers start offering "incentives" - discounted add-ons, flexible payment terms or subsidized mortgage deals. The real price can be falling for months before it shows up in anyone's statistics.

That means it could be a while before we know the size of this "correction." And the extent of the fallout - political as well as economic - is anyone's guess.
Alan Greenspan once referred to that kind of behavior as "irrational exuberance." The question now is, what happens when it stops?

Nail in the coffin for NJ business

From the Courier Post Online:

Uniformity under fire at tax hearings

Despite strong testimony against changing the state's uniformity clause, and none for it, lawmakers tasked with lowering property taxes continued lengthy hearings Thursday on the constitutional mandate that all property in a district be taxed equally.

Businesses have led the opposition fearing that removing this protection would lead to higher taxes and devastate an already poor business climate in New Jersey.

"This is not reform, this is shifting dollars," said Thomas A. Bracken, chairman of the New Jersey Chamber of Commerce. "Shifting dollars in this context would be the nail in the coffin for the New Jersey business community."
"The property tax burden in New Jersey has reached the point of break for homeowners," Burzichelli said. "And the uniformity clause, at least in the constitution, is the base and foundation that our tax system is built on."

As businesses tried to ward off a potential threat, representatives for farmers, hospitals and colleges lobbied to keep the tax perks that their groups get through exemptions granted from the uniformity clause.

Will A Pause Save Housing?

From Bloomberg:

Housing Market's Drag on U.S. Economy May Let Fed Stay on Hold

The faltering U.S. housing market will be more of a drag on growth than economists expected a month ago, allowing Federal Reserve policy makers to hold interest rates steady through the first half of next year, according to a monthly survey by Bloomberg News.

Gross domestic product, the sum of all goods and services produced in the country, will expand at an average annual rate of 2.8 percent this quarter and slow to 2.6 percent in the final three months of 2006, according to the median forecast of 81 economists surveyed Sept. 1 through Sept. 7. The fourth quarter estimate is a 10th of a percentage point lower than the prior survey. Growth averaged 4.3 percent in the first half.

Flagging home sales resulting from higher mortgage rates will remove a source of cash that helped drive consumer spending and economic growth during the five-year housing boom, economists said. The Fed's monthly regional survey showed consumer spending last month rose ``slowly'' and growth faded in some areas, strengthening the case for holding rates steady.

The housing market is declining ``a little more quickly than we had expected at the beginning of the year,'' said Scott Anderson, an economist at Wells Fargo & Co. in Minneapolis. ``It's not signaling a recession, but we do see a growth slowdown ahead.''
The housing market ``went from overheated to back-to-normal to under-heated,'' Ara Hovnanian, chief executive officer of Hovnanian Enterprises Inc., said yesterday. Hovnanian, New Jersey's largest homebuilder, said fiscal third-quarter profit fell 34 percent.

The slowdown in housing will leave consumers with less cash from refinancing and home-price appreciation, which lifted spending during the housing boom that ended last year. Higher fuel costs are also pinching consumers.

Thursday, September 07, 2006

NAR: Home Prices To Fall, Speculators To Get Burned

From the National Association of Realtors:

Home Sales Forecast Lowered, Prices To Dip Temporarily

Home sales during the rest of the year will be lower than earlier projections as the market works its way through an inventory and price imbalance, according to the National Association of Realtors®.

David Lereah, NAR’s chief economist, said the most obvious effect in the near term will be with home prices. “A year ago we had record home sales and tight supply with buyers bidding over the asking price,” he said. “This year sales are slowing, homes are plentiful and sellers are negotiating. Under these conditions, we’ll probably see prices dip temporarily below year-ago levels as the market works through a build up in housing inventory.”

“This is a normal pattern during a market correction, but home prices should return to positive territory within a few months and annual appreciation will be slower than historic norms,” Lereah said. “Keep in mind that over time, home prices rise at the rate of inflation plus one-to-two percentage points – buyers in most of the country who plan to stay in their home for a normal period of homeownership can pretty well bank on those historic averages, but people who purchased last year with the intent of flipping are likely to get burned.”

From Marketwatch:

Realtors expect home prices to fall

U.S. home prices will probably fall temporarily as the housing market corrects, the National Association of Realtors said Thursday.

Prices should bounce higher in a few months, said David Lereah, chief economist for the real estate group "as the market works through a build in housing inventory."
Median existing-home sales prices should rise about 2.8% this year and 2.2% next year, the realtors said in their monthly economic outlook. Median new-home prices are expected to rise 0.2% in 2006 and 2.4% in 2007.

"This year sales are slowing, homes are plentiful and sellers are negotiating," Lereah said. "Under these conditions, we'll probably see prices dip temporarily below year-ago levels as the market works through a build up in housing inventory."
Lereah said home prices typically appreciate at the rate of inflation, plus one or two percentage points. Buyers who plan to stay in their homes should see those gains, but "people who purchased last year with the intent of flipping are likely to get burned," he said.

The group is forecasting existing home sales to fall 7.6% in 2006 and a further 1.7% next year. New homes sales are expected to fall 16.1% in 2006 and 7.1% in 2007. Housing starts are projected to fall 9.6% this year and 9.8% next. The forecasts are slightly below the group's projections from a month ago.

Economists Say Selling Prices May Stagnate

From the Wall Street Journal:

Housing Slowdown Takes Its Toll

Economists believe cooling in the housing market to extend into next year and many forecasters in the latest survey predict no change -- or an outright decline -- in home prices next year.

Twenty-five of the 48 economists who answered the survey's question about housing predicted no change or a decline in a closely watched gauge of nationwide home prices during 2007. The average prediction for next year was for an increase of 0.43%, lifted by five economists who forecast gains of 5% or more.

The average forecast would leave home-price appreciation well below the expected rate of inflation. Just 27% of the respondents forecast an increase in home prices of greater than 2.7%, which was the economists' average expectation of the year-to-year increase in the Labor Department's consumer-price index for May 2007.

The housing market doesn't move uniformly across the country; some regions or individual cities often have price changes decidedly above or below the national average. But the economists' predictions stand in stark contrast to the red-hot price appreciation seen over recent years.
"The housing correction is just in its early stages now," said Joseph Carson of AllianceBernstein, who forecast a 5% decline for 2007. "Existing home prices have come down to no-change on a year-to-year basis. For new homes, prices are below year-ago levels when you include added features. The prices will have to go lower to give demand a lift in short term."

Jersey Slowdown Gaining Momentum

From the Press of Atlantic City:

Slower housing market means fewer demolitions

As tourists stow their beach bags for another year, Ocean City is getting ready for the launch of its second industry: teardowns.

Builders say they are seeing a dramatic slowdown in home construction on the island, reflecting a national trend. That could spell fewer demolitions, new homes and jobs on the island this fall.

“Our busy season usually starts in the fall. I hate to say it, but it's not going to be half as busy as past falls,” said Mark Tietjen, manager of Peter Lumber in Ocean City.

The New Jersey Builders Association said the number of home starts is down 15 percent statewide over last year.

“The slowdown is gaining momentum,” trade group spokesman Patrick O'Keefe said. “The watchword in new home construction is inventory management. Builders are not starting units unless they have firm commitments of sale.”
Ocean City builder Halliday Leonard has seen its workload drop off considerably. The company had 80 jobs lined up last fall. It has fewer than 20 planned for this fall.

“I haven't seen this kind of slowing in 16 years,” builder Scott Halliday said. “We're seeing a steep decline in the number of homes under contract or demolished.”

“They're doing 30 percent of the volume of a year ago. I think that's consistent with the information we're getting with building permits,” Mayor Sal Perillo said.

“In the housing market, you have people … betting that by the time the property is completed, it will be worth significantly more than when they started construction,” he said.

But these speculators no longer make up a substantial part of the new construction market.

“They're all owner contracts, not speculator contracts,” Halliday said.

As a result of the slowdown, his building company plans to give fewer jobs to subcontractors.

“We're going to do a lot of the work ourselves, keeping the work in-house,” Halliday said.

New Homes Market Continues To Weaken

From Reuters:

KB warns, Hovnanian quarterly earnings fall

A rapidly deteriorating U.S. housing market prompted KB Home to cut its forecast on Wednesday and luxury home builder Hovnanian Enterprises Incto report earnings and orders that fell for the second straight quarter.

After the close of the market, KB, the fifth largest U.S. home builder, cut its forecast for the fiscal year ending Nov. 30 and said fiscal third-quarter orders fell 43 percent, based on preliminary numbers.

Hovnanian, one of the largest luxury home builders, reported fiscal third-quarter net income that fell about 36 percent, while orders declined 26 percent.

"I think you'll expect more pre-announcements, more lowering of guidance, more missing estimates, orders coming in below expectations, yada yada," said JMP Securities analyst Alex Barron. "It's just starting. It's only the 3rd inning of the downturn."
"We do not know how long the elevated levels of resale listings will persist and it is equally difficult to predict what events might cause a reversal in buyers' sentiment," Ara Hovnanian, president and chief executive, said in a statement.
Since the U.S. home-buying market began its slide in about September 2005, home builders have felt the pain more sharply as they were in the hottest markets that had seen the greatest fall off in demand for new homes.

From the AP:

KB Home Lowers 2006 Earnings forecast

"Our earnings expectations for the third quarter and full year reflect an increasingly challenging housing market, where the supply of new and resale home inventories has built up in recent months in markets that have experienced rapid price appreciation or substantial investor activity, or both, in the past few years," said Bruce Karatz, chairman and chief executive.
The company said preliminary net orders for the quarter were down 43 percent from the prior year to 5,989, as cancellation rates have shot higher. Gross unit orders and traffic to new home communities each slid 11 percent in the third period.


From BusinessWire:

Beazer Homes Updates Fiscal Year 2006 Outlook

Beazer Homes USA, Inc. oday announced that it is revising its outlook for fiscal 2006 diluted earnings per share to be in a range of $8.00 - $8.50, compared to its previous outlook of $9.25 - $9.75. The Company expects to close fewer homes in the fourth fiscal quarter than previously forecasted, as net sales through the two months ended August 31 were 49% below prior year levels and cancellations of existing contracts rose to 50% from 26% in the same period in the previous year. As compared to prior years, a higher percentage of home closings are being deferred or cancelled, immediately prior to closing in many cases, due to worsening buyer sentiment and the inability of buyers to sell their existing homes. This revised outlook also contemplates potential charges to exit non-strategic land positions currently under review.

Disclaimer: The information on this site is provided for discussion purposes only, and are not investing recommendations. Under no circumstances does this information represent a recommendation to buy or sell securities.

Consolidate Jersey School Districts?

From the Star Ledger:

Maryland may show Jersey the way to pare school costs

New Jersey spends 10 percent of its school dollars -- $1,235 per student -- on administrative costs. In Maryland, the figure is less than 3 percent.

Whether looking at average per-pupil spending or the percentage of property taxes that go to fund schools, New Jersey outspends Maryland by a significant amount for one key reason: New Jersey has 611 school districts; Maryland has 24, one for each county.

The crash course on how Maryland operates its schools was provided to the Joint Legislative Committee on Government Consolidation and Shared Services in Tren ton yesterday by Maryland Assistant State Superintendent of Education Mary E. Clapsaddle via videoconference.

It delighted Sen. Bob Smith (D- Middlesex), the panel's co-chairman, who wants to create 21 coun tywide school districts to oversee local schools, eliminate hundreds of high-paid administration positions and consolidate purchasing and transportation.
When told by Assemblyman Jo seph Malone (R-Burlington) that New Jersey spends 10 percent of its school funding on administrative costs, Clapsaddle replied, "That is alarming." Maryland spends 2.68 percent -- or $240 per student -- on administrative costs, she said.

New Jersey spends $12,567 on average to educate a child, compared with $9,200 in Maryland.

New Jersey taxpayers see an average of 51 percent of their property taxes go toward school funding. In some school districts, it is as high as 88 percent. In Maryland, 24.6 percent of property taxes is used to finance schools.

Wednesday, September 06, 2006

"Finally, consider yourself warned."

From SmartMoney:

What Now for Real Estate?

SEPT. 11 TRIGGERED a chain of events that fueled the biggest real estate boom in American history.

To be fair, the foundation was already set. After the technology bubble popped in 2000, investors grew wary of the stock market and started considering real estate as an alternative investment. Then after 9/11, equities became even more volatile. The Federal Reserve aggressively dropped interest rates to historic lows. Lenders loosened lending guidelines. And folks were fearful of travel and stayed home to nest instead.

Indeed, nervous Americans took their travel budgets and money earmarked for the stock market and shifted it into either the purchase of larger homes or renovations, says Celia Chen, director of housing economics for Moody's As a result, real residential investment (both renovations and home purchases) increased as much as 40% over the past five years surpassing levels seen during the last real estate boom of the late 1980s, according to the Economic Policy Institute, a Washington, D.C.-based nonprofit think tank. Those who rode the real estate market were well rewarded. Home prices jumped 47% over the past five years while the S&P 500 increased nearly 19%.

But just as the memories from Sept. 11 are beginning to fade, so is the strength of the real estate boom. The National Association of Realtors reports that in July existing home sales decreased 11% compared with the prior year and existing home prices increased less than 1% during the same time frame. And anyone who isn't well diversified is likely to get hurt.

"Many of the drivers that had supported the housing market during the last five years have retreated," says Chen. "Now we are in the midst of a downturn and will be seeing more softening for at least the next year."
Finally, consider yourself warned. Recall the most important lesson investors learned back in 2000: All cycles come to an end. So it's time for all those novice speculators to reconsider investment properties in places like Miami and Southern California. Those who hang on trying to squeeze every last bit of profit out of the real estate market may get burned just like all those stock market investors did back when the technology bubble burst.

NJ economic growth rate at 5 year low

From the AP via the Morris Daily Record:

NJ economic growth rate lowest in 5 years

Economic growth in New Jersey has declined to its slowest rate in nearly five years, hobbled by increasing initial unemployment claims and falling housing permits, the Federal Reserve Bank of Philadelphia reported today.

The regional bank's latest monthly forecast projected modest economic growth of 0.6 percent through the spring.

The nine-month growth rate has not been so low since 0.4 percent was projected in November 2001, when the economy was emerging from a recession but still reeling from the terrorist attacks two months earlier.

The bank's nine-month forecasts, issued each month, have been steadily declining since a 2.5 percent projection in January.

"This is certainly consistent with the employment growth data that we've seen in New Jersey. We've had a pretty dramatic decline in private-sector job growth in the state," said James W. Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University.
"Corporate America is not about to pack its bags and leave this state," he said. "But when it has decisions about where to expand, New Jersey is not on the radar screen," he said.

New Jersey is on pace to add about 34,000 jobs this year, less than half the 75,000 it should, and over one-third of the new jobs are in government even though that sector accounts for less than one-fifth of all jobs, Hughes said.

The diminished growth rate indicates that New Jersey's economy is slowing along with the national economy, said economist Ted Crone, a vice president at the Philadelphia Reserve.

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)

8/30 - 18,743
9/6 - 18,687 (0.3% Decrease)

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

8/30 - 9,170
9/6 - 9,119 (0.6% Decrease)

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

8/30 - 2,661
9/6 - 2,683 (0.8% Increase)

Beige is the new black

The Federal Reserve released the September Beige Book this afternoon. The full report can be found here:

Summary of Commentary on Current Economic Conditions

Second District--New York

Economic activity in the Second District has shown signs of decelerating since the last report, though business contacts generally report that the labor market remains steady and strong. Manufacturers report widespread increases in input prices; they also note further deceleration in business activity and are a bit less optimistic about the near-term outlook. Retailers indicate that sales were on or close to plan in August, while prices were relatively flat. Tourism activity was mixed around generally robust levels: New York City hotels continue to report strong revenue growth, but Broadway theaters report that attendance, though still high, retreated in July and August.

Both new home construction and the home purchase market continued to slacken in July and August, but Manhattan's apartment rental market reportedly strengthened further. Office markets across the New York City metro area were steady to stronger in July and August while the market for industrial space was mixed. Activity in the securities industry activity is reported to have weakened across the board in July and August. Finally, bankers again report widespread slackening in loan demand, somewhat tighter credit standards, and little change in delinquency rates.

Construction and Real Estate
The region's housing market has slackened further since the last report, with the notable exception of Manhattan's rental market. Housing permits have weakened markedly in recent months, with July particularly soft. Based on the first seven months of the year, single-family permits in the New York-New Jersey region are on track for their weakest year since 1996. Multi-family permits, though down in recent months, remain at relatively high levels. More currently, New Jersey homebuilders report that the inventory of homes on the market continued to increase in August, and that market psychology has worsened. Builders have begun advertising price reductions on new properties instead of merely offering concessions. Nonetheless, an industry expert notes an increasingly large gap between asking prices and offers, which has caused inventories to swell.

Manhattan's co-op and condo market slowed further in July and early August. The inventory of homes on the market is reported to have risen noticeably, and units are staying on the market for longer. Both the number of transactions and total sales volume were down from a year earlier in August; the high end continues to be the most active market. At the same time, Manhattan's rental market was characterized as increasingly robust in July and August, across the board, but especially at the high end of the market: The inventory of available units has continued to shrink, rents are up, and prospective renters are signing leases more quickly than in the recent past.

Post-9/11 Economic Recovery

From the Record:

N.J.'s post-9/11 boom has abated

Five years ago, after the Twin Towers fell, New Jersey seemed the logical landing place for many of the displaced companies.

It happened -- for a short while.

American Express, Merrill Lynch, Morgan Stanley and Lehman Bros. all shifted employees to New Jersey in the scramble for office space after 9/11.

But the flow soon fizzled, and some companies moved back to New York.

State Labor Department statistics show that while the number of New Jersey-based financial services jobs jumped by 15,000 immediately after the attacks, 5,000 of them were gone a year later.

Some companies stayed, among them Garban Intercapital, an electronic stock brokerage now based in Jersey City, and Marsh & McLennan, which moved 1,100 employees to Hoboken.

New Jersey is now seeing a second surge, largely into Jersey City, fueled by New York's economic good times, which have pushed up the cost of office space in the midtown and downtown markets.

N.Y.C. proves pessimists wrong, remains heart of financial world

At the time, observers said the attacks would accelerate the economic downturn already under way and trigger mass layoffs and widespread business closures. They wondered if residents and companies alike would flee New York for the suburbs. They suggested that downtown Manhattan might lose its position as the center of world capitalism.

Though some of those things happened, the worst-case scenarios didn't. To the contrary, the metropolitan region – especially New York -- has returned to health, and remains a global finance center, though lower Manhattan still has a ways to go toward full recovery.

An analysis by The Record shows that 18 of the 32 larger tenants at the World Trade Center based on office space moved to midtown Manhattan.

Another 12 stayed downtown, while other prominent companies that were not tenants in the Twin Towers, such as Goldman Sachs and American Express, also stayed.

More important for New York, only a few WTC tenants fled permanently for the suburbs.
Yet employment figures in both New York and New Jersey are now close to the pre-attack levels.

New York City's workforce, at 3.66 million, is about 32,000 lower -- less than 1 percent -- than on 9/11, and New Jersey has 91,000 more jobs than five years ago.

"I think it proves how resilient the economy is," said James W. Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University. "You put New York and New Jersey together; you have got close to 8 million jobs. That's a huge, huge enterprise. So it takes a lot to derail it."

Prices Fall In 87 Metro Areas

From the NY Times:

Home Prices Fall in Nearly One-Fourth of Metropolitan Regions

Prices of traditional single-family dwellings fell in 87 of the nation’s 379 major metropolitan areas from the first quarter to the second, the government reported yesterday, as the overall value of homes leveled off across the country.

On a quarterly basis, prices were lower in Boston, Sacramento, Pittsburgh and much of the Midwest, where the loss of manufacturing jobs has hit the housing market hard.
Price declines are spreading to more parts of the country. The 89 areas affected in the second quarter compares to 66 metropolitan areas where prices fell in the first three months of the year. In the fourth quarter last year, only 29 areas reported such declines.

Prices were lower in five states — Michigan, Massachusetts, Maine, Ohio and Indiana — though the declines were less than 1 percent. Just one state, Iowa, had a price decline in the first quarter and none did in the fourth quarter last year.

“The slower sales get, and given where inventory is, it is going to require sellers to cut prices in certain markets,” said Celia Chen, director of housing economics at Moody’s

Ms. Chen noted that the index showed that prices were still rising in much of California, Arizona and Florida, states that experienced some of the biggest rises during the recent boom. But that may be in part a result of the fact that the government’s home price measure does not include homes with mortgages greater than $417,000.

By comparison, data from the National Association of Realtors showed that the national median home price for existing homes, the price at which half sold for more and half for less, increased 0.9 percent in June from the same month a year ago. That measure, however, is not adjusted for changes in the quality and size of homes sold from one year to the next, which the government index does take account of.

New Jersey Losing High Tech Jobs

From the Star Ledger:

N.J. losing technology 'toddlers' to other states

A report from the Stevens Institute of Technology warns the state is fast losing its telecommunica tions expertise to hungry states such as Texas and California. So unless New Jersey spends half a billion dollars during five years on grants and tax breaks for "toddlers," the state will miss out on jobs and revenue from the next wireless revolution, Stevens said in a 58-page proposal.

"The technology is growing. It's not a shrinking pie. But New Jersey's slice of this pie continues to diminish," said Stevens professor M. Hosein Fallah, a former Bell Labs engineer who authored the paper for the Hoboken school.

The pitch follows a state-spon sored study last year that traced New Jersey's loss of thousands of high-tech jobs, a major source of tax revenue. Stevens said more research jobs may be lost through the proposed merger of telecom giants Alcatel and Lucent Technologies, parent of Bell Labs in Murray Hill. State policy should encourage laid-off researchers to start companies here, Fallah said.
New Jersey must do something to create high-tech jobs, said Rutgers University economist James Hughes.

"Other states are being very aggressive," said Hughes, citing Pennsylvania's investment of a portion of its tobacco industry settlement in tech ventures.

New Jersey has lost 14 percent of its high-tech jobs since 2000, across a range of sectors including telecom, according to a state study co-authored by Hughes last year. While only 7 percent of the state's 4 million workers hold high-tech jobs, those jobs account for almost a third of the state's income tax revenue.

Tuesday, September 05, 2006

Steps Towards Fiscal Responsibility For NJ?

From the Star Ledger Online:

Panel OKs higher medical co-payments for teachers, state workers

More than 200,000 teachers, local government workers and government retirees face higher co-payments for doctor’s office visits and prescription drugs, under a policy change approved over the vocal opposition of organized labor today.

With two union representatives opposing and others union representatives deriding the plan from a packed hearing room floor, the State Health Benefits Commission voted, 3-2, to raise the co-payments.
Altogether, the changes are scheduled to save the state about $74 million a year. The massive opposition they generated served notice of the difficulties lawmakers can expect as they consider wholesale changes to the benefits program to help rein in property taxes.

Under the new provisions adopted today, teachers and other local government employees enrolled in the State Health Benefits Program will see the co-payment for a doctor’s office visit rise from $5 to $10. The co-payment on most prescription drugs also would rise from $5 to as much as $15.

Representatives of the state teacher’s unions promised to challenge the changes in court, saying the higher payments would violate the terms of negotiated labor contracts.

Cutting School Aid a Solution for High NJ Taxes?

From Newsday NY:

Democrats push to end special treatment for poor, urban schools

Lawmakers plan to develop a new school funding formula that ends special treatment for poor, urban schools, two Democrats said Tuesday as legislators continued debating how to cut New Jersey's highest-in-the-nation property taxes.

Such a plan would end years of disputes over state funding disparities between suburban, rural and city schools, but also would have to pass muster with a state Supreme Court ruling that has demanded equality between poor and wealthy schools.

Sen. John Adler and Assemblyman Herb Conaway, co-chairmen of a special committee mulling school funding as part of property tax reform talks, said their goal is to develop a funding formula that can imposed upon every school district, no matter its locale.

"It doesn't seem like a crazy idea to treat people fairly wherever they live," said Adler, D-Camden.
"We could move to a unified system, but in order to do that the Legislature has a very heavy burden," Sciarra said. "They're going to have to come up with proof it will deliver the level of resources needed by all students in the state."
Those districts have about 22 percent of the state's student population, but they get about 55 percent of all state school aid.
"We'll treat kids fairly no matter where they happen to live," Adler said. "That's at least an achievable goal. That's all the courts have been telling us to do for a long time."

The Supreme Court ruling stems from concerns that children in poor city schools don't receive the same quality of education as those in wealthy suburban schools.

It requires the state to provide substantial aid to 31 districts designated as needing special help so their funding is equal to the state's richest school districts.

Northern New Jersey August Residential Sales

Preliminary August 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 graph, it is set to 1000, not to zero. I do this to emphasize the seasonal nature of the Northern NJ market.

(click to enlarge)

The second graph displays the same sales data (2003-2006) for the first four months of the year. Please note that this graph does cross at zero.

(click to enlarge)

The third graph displays only August sales, 2000 to 2006 YOY.

(click to enlarge)

The last graph displays YOY August sales, broken down by county.

(click to enlarge)

The 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)

Average Sales (2003-2005): 3495
2005 Sales: 3338
2006 Sales: 2428
(Down 27.3% Year Over Year)

Average Sales (2003-2005): 3661
2005 Sales: 3668
2006 Sales: 2599
(Down 29.1% Year Over Year)

Caveat Emptor!

Q2 OFHEO Home Price Index



U.S. home prices continued to rise in the second quarter of this year but the rate of increase fell sharply. Home prices were 10.06 percent higher in the second quarter of 2006 than they were one year earlier. Appreciation for the most recent quarter was 1.17 percent, or an annualized rate of 4.68 percent. The quarterly rate reflects a sharp decline of more than one percentage point from the previous quarter and is the lowest rate of appreciation since the fourth quarter of 1999. The decline in the quarterly rate over the past year is the sharpest since the beginning of OFHEO’s House Price Index (HPI) in 1975. The figures were released today by OFHEO Director James B. Lockhart, as part of the HPI, a quarterly report analyzing housing price appreciation trends.

“These data are a strong indication that the housing market is cooling in a very significant way,” said Lockhart. “Indeed, the deceleration appears in almost every region of the country.”

From Marketwatch:

U.S. 2Q OFHEO home price index up 4.7% annualized

U.S. home prices were appreciating at a 4.7% annual rate in the second quarter, the slowest gains since 1999, the Office of Federal Housing Enterprise Oversight said Tuesday. In the past year, home prices are up 10.1%. The purchase-only index is up 8.3% in the past year. The deceleration in OHFHEO's home price index is the fastest in the three-decade history of the index. "These data are a strong indication that the housing market is cooling in a very significant way," said James Lockhart, OFHEO director. In the first quarter, home prices had risen at an 8.8% annualized rate, with prices up 12.8% year-over-year.

A Tooth-Rattling Plunge?

From the IHT/NY Times:

America's housing slump

With economic signals flashing that America's housing boom is over, speculation has now turned to how deep the slump will be and how long it will last, with predictions ranging from a smooth descent to a tooth-rattling plunge. Come what may, conventional wisdom holds that as long as you don't plan to sell your house any time soon, you'll be all right. The downturn is unlikely to wipe out all of your accumulated gains - the thinking goes - so you can cash in later.

Or can you?

The downturn in housing is overlapping with the retirement of the baby-boom generation, which starts officially in 2008, when the first of 77 million boomers become eligible for Social Security. Most of them are homeowners, and many of them will presumably want to sell their homes, extracting some cash for retirement in the process. Theoretically, that implies a glut of houses for sale, which would surely mitigate an upturn in prices, and could drive them ever lower. The result would be less housing wealth for everyone and less to live on for those who had planned to retire on the house.

Still, no one can be sure what will happen. Economists agree that the retirement of the baby-boom generation will influence housing prices, but differ over how powerful the effect will be. But one thing is reasonably certain. The question would not be such a burning one if Americans, especially those near retirement, had adequate savings to see them through. Even before the personal savings rate went negative last year, Americans were meager savers.

The housing bust may be what it takes to reverse that. Even a shift from profligacy to thrift would not be entirely good news, however. For an economy based on consumption, the change to less free-spending ways could be excruciating.

The house party is over, but Americans don't yet know how bad the hangover is going to be.

Affordable Housing Deed Restrictions To Expire

From the Star Ledger:

Affordable housing in N.J. nears its 'sunset'

As part of a sweeping national trend, New Jersey could soon begin losing tens of thousands of affordable housing units built decades ago with either federal housing subsidies or financial incentives offered by state judges.

Private developers, who agreed to keep the units affordable for between 10 and 30 years in exchange for the breaks, are being tempted to sell or convert the buildings by soaring condo prices and a hot rental market.
"Many deed restrictions will continue, either because of the nature of the owners or the nature of the market," said DCA Commissioner Susan Bass Levin. "But the potential number of deed restrictions expiring over the next 10 years could be upwards of 50,000."
The problem is magnified in New Jersey because 35,000 affordable units built by private developers came with similar "sunset provisions" that remove controls in 10 to 30 years. Nearly all that housing was built after a landmark 1983 state Supreme Court decision, which offered builders density bonuses in exchange for setting aside some units for the poor.

The first of those units began to expire in recent years, catching tenants and even some politicians by surprise. The housing is scattered statewide, from the poorest cities to the wealthiest enclaves.

New Jersey, Still Open For Business?

From the Express Times:

Valley's space to grow lures companies

Beth Gorin's journey from northern New Jersey to the Lehigh Valley is a microcosm of a bigger picture.

Hailing from the hustle-bustle of Bergen County's fast-moving suburbs, the new head of Lehigh Valley Economic Development Corp. sees uncharted waters here.

At first glance, the business climate of Bergen County, a densely populated region just west of Manhattan supported by a highly skilled work force, appears unbeatable.

But Gorin, who headed the Bergen County Economic Development Corp. for three years, witnessed frustration beneath the surface.

"Within the state of New Jersey - we always hear the phrase location, location, location - but there is no available space that businesses need to grow," Gorin said.

New Jersey's neighbors have taken notice of that discontent, which stems from a built-out landscape and a tax and regulatory framework many business leaders say is burdensome.

"Other states are throwing incentives, left and right, at New Jersey corporations," Gorin said.

Flip over to the Lehigh Valley, where developable land is not scarce, real estate costs less and many entrepreneurs say they find a more welcoming atmosphere, enhanced with cost-saving programs.

It's that receptiveness that lured Gorin here.

"My tagline in Bergen County was Bergen County is open for business," said Gorin, who began her job with LVEDC on Aug. 7. "Believe me, Pennsylvania is much more open for business."

Monday, September 04, 2006

Housing Down For The Count?

From RealtyTimes:

Housing Market On The Ropes

A flurry of economic reports unleashed in August left the national housing market reeling and on the ropes as it headed into the final round of what is typically the heavy buying season.

With each month like another grueling round for a pugilist in dire need of a cut doctor, the housing market is sweating prices and bleeding sales as it faces the grim possibility of going down for the count.

Yet, even with the wind all but knocked out of the housing bubble and hopes for a comeback slim, some experts hesitated calling the fight after more than a month of mortgage interest rate declines put some punch back into buying power.
The Standard & Poor's/Case-Shiller Home Price Index of 10 major metropolitan areas reported in August that single-family home prices revealed zero appreciation from May to June, after only a 0.5 percent gain from April to May as the market braced for price depreciation.
"Home prices are clearly decelerating," said Yale University economist Robert Shiller, the chief economist at MacroMarkets LLC, who has warned of a house price bubble going bust. Shiller predicted the tech-sector driven stock market bust more than half a decade ago and co-developed the index with S&P.
Six of the 10 metro areas showed a month-over-month decline from May to June, with Boston reporting the largest monthly loss and an annual price loss of almost 2 percent, the index revealed.
John Burns Real Estate Consulting reported 84 of 100 of the nation's largest housing markets are overpriced with only 13 markets below historical median affordability levels and three at their historical affordability level.

Burns said in nine markets, prices are so high the markets were worse off in August in terms of affordability than in the early 1980s when interest rates were 18 percent or more. They were New York; Washington, D.C.; Los Angeles; Seattle; Portland; Baltimore; Edison; , Nassau; and Naples.

Who's on first?

From the Record:

Lou's on first, but never lived in Wayne

Did Paterson native Lou Costello build the white stucco Spanish-style villa that's for sale on Hamburg Turnpike in Wayne?

The real estate agent who listed the house at $870,000 thought so, and advertised it that way.

But the comedian's daughter said: No way.

"I can tell you assuredly and with 100 percent certainty that my father never lived in Wayne or built a house there," said Christine Costello, reached at her home in Los Angeles.

The listing for the house, still up on the Coldwell Banker Web site Thursday evening, says it was "originally built in 1925 by Lou Costello in replica of his own Hollywood mansion."
How the name of Lou Costello came to be attached to the house is a bit of a mystery. Robert Lindsay, the listing agent with Coldwell Banker, said the story came from the house's owners, who said the previous owner had a plaque that mentioned Costello. (Neither of these owners could be reached by The Record, and the plaque – if it existed at all – is apparently lost to history.)
He said Thursday that he would remove the Costello reference from the Internet listing.

In any case, he said, the house is under contract, commanding the full asking price to a buyer who plans to turn it into an office building. Costello's name was not an attraction for the buyer, and Lindsay said he never thought it would be a key selling point -- just an unusual feature that was worth mentioning in the listing.
State Real Estate Commission spokesman Marshall McKnight said he could not comment on this case, but e-mailed language from the New Jersey real estate advertising rules, which bar "false, misleading or deceptive claims."

Lowball! 8/22 - 9/4 (Sussex, Somerset, Union)

Welcome to another edition of Lowball!

Lowball! takes a look at home sales from a 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 from the past month and pick out the sales that have the highest percentage difference between list 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.

Here are the lowball sales for Sussex, Somerset, and Union Counties from 8/22 through 9/4. Sorry, but I'm a bit pressed for time this morning, so counties were combined and presented as images.

Lowball! Greater than 15%

(Click to enlarge)

Lowball! 10% to 15%

(Click to enlarge)

New Jersey Job Growth

From the Daily Record:

Work is changing

Some records show that nineteenth century union leader Peter J. McGuire was the first to suggest a day honoring those "who from rude nature have delved and carved all the grandeur we behold."

Nowadays, so many of us who labor have little in contact with "rude nature."

Manufacturing jobs in New Jersey declined by 6,000 this year through July and overall private sector employment in the state rose by a mere three tenths of one percent during the same time period. Total private-sector employment in New Jersey -- at 3,433,000 jobs --is now only 3,000 jobs above the peak reached six and a half years ago, according to the New Jersey Business and Industry Association.

Where are jobs being created? The answer is in government.

Since December 2000, public-sector employment in New Jersey has expanded by a net 53,200 jobs, a 9 percent increase. Virtually all of that increase has been in state and local government; federal government employment has remained largely stable. Thus, over the last six and a half years, state and local governments have added more jobs than the private sector (a net gain of 53,200 vs. 3,000), and over the same period they have achieved a much higher rate of job growth (9 percent vs. one-tenth of a percent).

It is naturally better for people to have jobs than to be unemployed. Still, on this Labor Day, it is noteworthy that government expansions are responsible for more and more of the jobs New Jersey residents hold. That would be a mere economic footnote if not for the fact the state is in property tax crisis. Clearly, all of those public jobs -- and the generous benefits that accompany them -- need a lot of financial support. And a lot of that support is coming from property taxes.

It is a proper government function to provide services to people. Employees are needed to do that. At the same time, you wonder how long a state can be viable when government is creating so many more jobs than private industry is.

If America sneezes, the rest of the World catches a cold

From The Globe and Mail (Canada):

The housing collapse heard round the world

Real estate agent Andrea Gaus knew the market was out of whack when the price of a typical four-bedroom house near good schools in the leafy Maryland suburbs of Washington shot past the $1-million (U.S.) mark.

“It got to the point where appreciation was so high that it priced people out of the market,” Ms. Gaus said.

But the peak has passed, and the consequences of the deflating bubble are buffeting the housing market, in Washington and across the United States.
“Look how fast prices were going up. The same thing is happening on the way down,” observed Ms. Gaus, who's been selling homes in Potomac for 16 years.

“It's a very tough market.”

The once red-hot housing market has fizzled. And the topic du jour among economists, investors and policy makers is whether the end of the housing boom signals the beginning of the end of a long run for the world's mightiest economy, and by association, the rest of the planet.

The U.S. housing crash may prove to be the economic equivalent of the canary in the coal mine — a warning of impending danger in an economy that has surged too far, too fast. Many experts are now openly speculating about a possible U.S. recession next year, brought on by consumers reacting to the shrinking value of their nest egg. If they're right, the fallout could prove to be far nastier than the collapse of the technology bubble at the start of the decade.
Think it all doesn't matter to you? Think again. For nearly a decade now, the United States has been the economic driver for much of the world — Canada included. The United States has been sucking up excess savings and consuming everything in sight, from cars to homes and everything that goes in them.

“It's hard to imagine that a U.S.-centric global economy wouldn't be at risk in the aftermath of a bursting of the U.S. housing bubble,” warned Morgan Stanley chief economist Stephen Roach, one of Wall Street's most outspoken worrywarts.

“The non-U.S. world remains heavily reliant on selling exports to wealth-dependent American consumers. As the United States comes to grips with the aftershocks of another post-bubble shakeout, so too must the rest of the world.”

As he put it: “If the American consumer sneezes, countries in both the developed and the developing world could easily catch a cold.”

Sunday, September 03, 2006

Lowball! 8/22 - 9/3 (Essex and Morris)

Welcome to another edition of Lowball!

Lowball! takes a look at home sales from a 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 from the past month and pick out the sales that have the highest percentage difference between list 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.

Here are the lowball sales for Essex and Morris Counties from 8/22 through 9/2:

MLS #TownOriginal ListList PriceSale Price% Off OLP% Off LP
2256064South Orange$419,000$329,000$315,00024.8%4.3%
2259008West Orange$1,650,000$1,299,000$1,250,00024.2%3.8%
2276200North Caldwell$950,000$799,000$780,00017.9%2.4%
2205447Cedar Grove$1,499,000$1,399,000$1,250,00016.6%10.7%
2275929Ciry Of Orange$299,000$259,000$250,00016.4%3.5%
2260030East Orange$399,900$349,000$339,00015.2%2.9%
2242960West Orange$499,000$459,900$425,00014.8%7.6%
2280617West Caldwell$715,000$648,000$617,50013.6%4.7%
2248270West Orange$399,900$359,900$350,00012.5%2.8%
2256178West Orange$489,000$449,000$429,00012.3%4.5%
2271546Glen Ridge$599,000$569,000$530,00011.5%6.9%
2273497North Caldwell$1,095,000$1,095,000$975,00011.0%11.0%
2277164Glen Ridge$649,000$579,000$579,00010.8%0.0%
2264981South Orange$949,900$899,900$850,00010.5%5.5%
2281870West Orange$519,000$465,000$465,00010.4%0.0%
2256797East Orange$249,900$249,900$225,00010.0%10.0%


MLS #TownOriginal ListList PriceSale Price% Off OLP% Off LP
2252531Mountain Lakes$2,099,000$1,699,000$1,625,00022.6%4.4%
2246110Mount Olive$465,000$399,999$399,00014.2%0.2%
2280059Mount Olive$335,000$299,900$290,00013.4%3.3%
2273187Florham Park$769,900$699,900$675,00012.3%3.6%
2249362Florham Park$565,000$545,900$500,00011.5%8.4%
2277795Morris Plains$439,900$399,900$390,00011.3%2.5%
2220084Parsippany-Troy Hills$329,900$329,900$293,40011.1%11.1%
2300701Mountain Lakes$594,500$594,500$530,00010.8%10.8%
2230668Florham Park$1,250,000$1,199,000$1,125,00010.0%6.2%

Caveat Emptor!