Saturday, September 16, 2006

"We took a lot less than we thought we were going to get"

From the Asbury Park Press:

Sellers may have to adjust expectations and prices

Sometime after Mel and Hildy Warren agreed to buy a new home in the Four Seasons retirement community in Manalapan about a year-and-a-half ago, they were surprised to find out that a couple also moving there had actually sold their old home right away and moved into an apartment while waiting for their new house to be built.

"Everybody laughed," Hildy Warren said. "We all wondered why they'd sell so soon. It turned out they were right."

The real estate market has changed a lot in the past year. The number of available homes is up and the days when sellers could stick a "for sale" sign on the lawn and name their price are gone, at least for now.

"Prices from last year are not what they are this year," said Iris Lurie, broker/owner of Century 21 Mack-Morris Iris Lurie in Marlboro.
"We listed it higher, thinking that was the correct price," Hildy Warren said. "The market was telling us differently."

Over the course of three months, they reduced their initial asking price, which they declined to reveal, in steps. "We weren't getting any offers and we got concerned," Hildy Warren said.

Finally, they cut it to about 10 percent below the initial price. That very day, they received and accepted an offer. They will close on the deal this month.

"We took a lot less than we thought we were going to get," Hildy Warren said. "Buyers are getting very good deals. If we had sold six months earlier, we would have gotten more."
The result is sellers are learning to recognize that conditions have changed. "They're slowly accepting it," Appleby said. "No one likes to think they missed the peak of the market."

The result is sellers must be a bit more humble in their asking prices, if they want their homes to sell, Appleby said. They must also put more effort into "curb appeal," sprucing up the home inside and out to make it stand out.

Don't buy stuff you cannot afford

Came across this poster in the window of a Valley National Bank this morning. What ever happened to paying for things with... money? When did the line between buying and borrowing get so blurred?

A little primer for those who think borrowing against your home to take a vacation is a good idea.

Caveat Emptor,

Nassau Home Prices Drop

From Newsday:

Nassau home prices actually drop

For the first time in nine years, Nassau County's closed median home prices dropped over the last year, leaving experts to wonder whether the housing market's downturn could be more significant - and longer-lasting - than first thought.

Adding fuel to the debate, median prices for homes under contract fell in both Nassau and Suffolk counties last month, according to data released Friday by the Long Island Multiple Listing Service. Nassau County's median home price stood at $495,000, 1 percent below last year's median of $500,000. It's a minor dip, to be sure, but it's still relatively early in the market's shift, sources said.

"This is the turn that we've been waiting for for a long time," said Pearl Kamer, the chief economist of the Long Island Association. "This is only the beginning of the downward cycle and only the beginning of the unwinding of the housing bubble. The price declines could continue for a long time."
Yet, Suffolk County saw a 1 percent dip in its median price for homes under contract year-over-year, while Nassau County's under-contract drop was 3 percent. Inventory in both counties is approaching record levels, achieved in 1990.

Pep Boys Going Condo

From the Jersey City Reporter:

67-story tower to overlook Newport Mall

A 755-foot residential tower called the "Metropolitan" is being proposed for land just south of the Newport Mall, at the site of where a Pep Boys Automotive store is currently located.

If it gets its city approvals, the structure at Sixth and Washington streets would be the second largest building in New Jersey. The largest building is already in Jersey City: the Goldman Sachs building at 30 Hudson St. stands at 791 feet.

Within a 10-block radius, there are several condo towers either under construction or that have been approved for construction, including: the 55-story Trump Plaza Jersey City on Washington Blvd. and Bay Street; the 33-story Athena on the corner of Washington Boulevard and Second Street; and the proposed San Remo I, San Remo, and Monaco condo towers located off Washington Boulevard behind the Doubletree Hotel.

The Metropolitan, when completed, will have 809 condominium units, 809 parking spaces on seven floors, and 12,445 square feet of retail space.

The tower is one of several that may be built in that 18-acre shopping area currently anchored by a Shop Rite supermarket and BJ's Wholesale Club. But those shopping stores will still remain.
Jersey City attorney Francis Schiller, representing the developers, said the Metropolitan project would be the first phase of a larger development project that would span over 20 years, with retail always having a presence in the plaza. Schiller said there will be a meeting with the city's Planning Department to create a master plan specifically for the plaza.

What prompted G&S Investors to look at a residential component? Lehne said the decision was based on them seeing the continuing development in Jersey City.

Schiller said there is no height restriction in the area, which is governed by the Hudson Exchange Redevelopment Plan. The height of this building, Schiller said, would provide "great view corridors" of the New York Skyline to the east and the Watchung Mountains to the west.

Builders get creative

From the Wall Street Journal:

New Home-Buying Tricks

Home builders have a new trick to try to sell you a new home: They will help you get rid of your old one.

Faced with falling sales, some builders are helping would-be buyers spruce up their current home by bringing in professionals who advise them on what furniture to get rid of and tell them whether they should rip off the wallpaper. Others are offering to make payments on the buyer's old mortgage (or the new one) in an effort to close the deal.

There is also renewed interest in so-called buyback programs: The builder, or a broker, agrees to buy your current home, for a preset price, if it turns out that you can't sell it.

The offers are coming both from local builders and national firms. For instance, Pulte Homes Inc. recently started pairing its customers with professional "stagers" who sweep in and do things like remove window coverings and touch up the paint, and covering up to $2,000 of the cost of the service. The program is available in about a dozen markets, including Detroit, Indianapolis, Sacramento, Calif., Tampa, Fla., and Washington, D.C.

In Phoenix, Lennar Corp.'s U.S. Home division is offering a program in which customers who sell their homes through Coldwell Banker pay 3% instead of 6% commission on the sale of their current home. (To make up for that, Coldwell Banker is paid a 3% commission for the sale of the new home.) In Detroit, Toll Brothers Inc. will make principal and interest payments of up to $2,500 a month on a buyer's new mortgage for the first six months, or give the buyer a credit equal to that amount at closing.

"Everyone is trying to be creative," says Larry August of Pacific Pride Communities, a central California builder. With so many homes on the market, selling an existing home is a "huge obstacle for anyone looking to purchase a new home." In some cases, Pacific Pride is making mortgage payments on customers' old homes for as long as six months.
In the Northeast, K. Hovnanian Homes, a unit of Hovnanian Enterprises Inc., often pays to have a customer's existing home appraised (a move also designed to ensure that the property goes on the market at a realistic price). In some cases, the company will also arrange for the customer to get a lower mortgage rate, pay brokerage commissions on the sale of the existing property or pick up several months of mortgage payments.

Landmark status for Duryea Road estate

From the Star Ledger:

Landmark status gains for historic estate

The C. H. Huestis House, a 22-room shingle-style Queen Anne Victorian once threatened with demolition, is a step closer to designation as a local historic landmark.

Montclair's council voted unanimously Tuesday night to introduce an ordinance to designate the Duryea Road estate as historic, clearing the way for a Sept. 26 public hearing to give landmark status to a private residence for the first time.
In August, Montclair's planning board recommended the designation.

"The board recognizes the significance of this 1888 dwelling and agrees with the Historic Preservation Commission that it should receive landmark status," Karen Kadus, the town's director of planning and development, said in a letter announcing the decision.
The estate was first nominated amid fears that a developer intended to tear down the estate and erect two houses. The owner, Jim Van Note, is now expected to restore the estate, but the nomination -- the first the HPC has ever initiated on its own -- nevertheless invoked a 180-day moratorium against any demolition.

Friday, September 15, 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.

Hard Landing Already Here?

From Comstock Partners:

The Hard Landing For Housing is Already Here

The market is suddenly assuming that since energy prices are declining and mortgage rates are drifting down, consumer spending will pick up and the housing industry decline will end. In our view this outcome is highly unlikely. Our negative outlook for consumer spending is based far more on the end of the housing boom than it is on high oil prices. In turn, it now evident that housing is already undergoing a hard landing that can’t be cured by a downturn in mortgage rates, and that the situation is likely to worsen. Here are some facts to consider.

Ø 32.6% of new mortgages and home equity loans in 2005 were interest only, up from 0.6% in 2000

Ø 43% of first-time home buyers in 2005 put no money down.

Ø 15.2% of 2005 home buyers owe at least 10% more than their home is worth.

Ø 10% of all home owners have no equity in their homes

Ø $2.7 trillion in loans will adjust to higher rates in 2006 and 2007.

Ø 70% of borrowers who took out pay-option ARMS in the past year have loan balances larger than their initial loan.

Ø Homeowners face higher payments as mortgages are reset. Generally, monthly payments rise between $200 and $500 depending on the size of the mortgage.

Ø According to Reality Trac, August foreclosures were up 23% over July and 53% over a year ago.

Ø The number of homes for sale is at record highs, and inventories are 59% higher than a year earlier.

Ø New home sales are down 22% and existing home sales down 11%.

Ø The NASB housing market index has recorded an all-time decline.

Ø The housing affordability index is at a 15-year low.

Ø The house price-to-income (rents) ratio is off the charts. According to HSBC, in 18 states accounting for over 40% of national home values, the price-to-income ratio is 3.6 standard deviations above the mean.

Ø The OFHEO index of house prices deflated by the consumption price deflator has soared to a record high of 350 from 250 in 2001. From 1976 to 1996 it never was above 220.

Ø According to the NAR the year-to year prices of existing homes are now flat. A short time ago they were rising at a yearly rate of 16%.

Ø Nationally, home prices have not declined on a year-to-year basis since 1933. Recently, however, prices have been dropping in the North East, West and Mid-West.

Ø Sales incentives are now estimated at 3% to 7% of selling prices.

Property Tax Watch

From the Star Ledger:
More aid is needed for building of schools

New Jersey's school construction program needs an infusion of $3.25 billion to address a backlog of projects built up over the past two years during an overhaul of the program, a task force analyzing the school building program told Gov. Jon Corzine yesterday.
Lawmakers did not embrace the call for new funding.

"The first problem we have to face is changing the inflating cost of property taxes," said Senate President Richard Codey (D-Essex) "After that, we can focus in on this."

From the Jersey Journal:
Budget is up $13M - with $9M hole city is hoping to fill

Jersey City's 2007 municipal operating budget is $148 million - an increase of $13 million over last year's $135 million figure, according to city officials.

The Jersey City City Council voted Wednesday night unanimously and without comment to introduce the budget, even though Jersey City Business Administrator Brian O'Reilly said it includes a $9 million shortfall.
Last year, the city closed a $25 million shortfall in the 2005-2006 budget by raising property taxes 18 percent - increasing property taxes from $19.30 per $1,000 of assessed valuation to $22.85 per $1,000.

O'Reilly said he is hopeful of finding additional revenues to forestall another tax increase.

From the Cherry Hill Courier Post:
Trenton mulls regional property taxes

In a move that would significantly change how property taxes are collected in New Jersey, state lawmakers Thursday debated whether the state should move away from having each town collect property taxes.

An interfaith group that seeks to resolve inequality in New Jersey communities and a Minnesota law professor suggested that the state shift to regional property taxation, which they argued could help most homeowners and end competition for commercial development.

"It creates a community of interest," Myron Orfield, an associate law professor at the University of Minnesota, told a special committee considering New Jersey property tax changes as he detailed how the Minneapolis-St. Paul area has used regional property taxation for 25 years.

Assemblyman John Burzichelli, the committee co-chairman, said he found the testimony "very interesting," but didn't know if the idea would work in New Jersey.

"The issue is very engaging," said Burzichelli, D-Gloucester.

From the Home News Tribune:
Revamped property tax won't fix inequities of a flawed system

Yesterday, a group of them sitting on a committee considering changes in the state's tax structure, spent time listening to a recommendation that the property tax be collected by the state on a regional basis rather than by each municipality.

This approach, according to its proponents, would reduce property taxes for a majority of towns — meaning, of course, that it would increase property taxes for a minority.

And that shift, ostensibly, would correct some of the inequities in the way the tax is levied now.

The concept of a statewide property tax has been raised in New Jersey before, and it has gotten a rude reception from the public and from many folks who depend on the public for votes.
Those in government can't avoid that reality just because it's perceived to be politically unpopular.

But a statewide property tax is not the answer.

From the Herald/Record:
Public workers' benefits to be aired

The Joint Legislative Committee on Public Employee Benefits Reform will hold a public hearing Tuesday in Clifton on the potential for cost savings in pensions and health benefits provided to government workers.

The bipartisan panel is one of four commissioned by the Legislature to study ways to rein in property tax increases. Others are focusing on consolidation of local government services and public-school funding reform.
"We have spent more than a month gathering information from various experts and professionals from across the country," said Assemblywoman Nellie Pou, D-Passaic, a co-chairperson of the joint committee. "Now New Jersey taxpayers and residents will have the opportunity to air their ideas and opinions on pensions and benefits reform."

First Time Buyer or F'ed Borrower?

From the Asbury Park Press:

First-time buyers face hurdles in real estate market

Michael Knapp was eager to be the first person in his family to buy a home, but first he had to make a few concessions.

He settled for a townhouse, because he couldn't find a single-family home for less than $200,000 that didn't require a complete overhaul. He extended part of his mortgage from 30 years to 40 years. He needed roommates to help pay the mortgage, and so recruited his girlfriend, Trish Maas, and his friend, Jason Reineke, to join him.

"I could probably afford it on my own," Knapp, 24, said of the $187,000 townhouse in Brick. "But I wouldn't know where my next gallon of milk would be coming from."

After a run-up in prices, first-time home buyers in Monmouth and Ocean counties are encountering major financial hurdles in their bid to own a home. Their incomes, for example, haven't kept up with escalating home prices.

It's forced hopeful home buyers such as Knapp to lower their expectations and take greater financial risks. And even then they have to worry about their finances once they get into the home, experts said.
"It is really, really tough," said Drew Anlas, senior vice president of Select Mortgage Corp. in Brick. As a rule of thumb, buyers take three to three-and-a-half times their annual income to figure out how much they can afford. "If you're making $60,000 a year, that's $180,000 to $210,000. What's out there for $180,000 to $210,000?"

These days, not much. During the second quarter of 2006, the median price of a home in New Jersey was $373,900 and the average 30-year fixed-rate mortgage was 6.5 percent. That means the monthly payment on a median-price home, including principal and interest, was $1,891, according to the National Association of Realtors.

To afford that, the association said, families need to make $90,768 a year. The median family income in New Jersey during that time: $81,309.
He turned to a townhouse instead and began the process of getting financing. He had no savings and no equity built up from a previous house, so he signed for an unconventional loan to make his initial payments manageable.

He borrowed 80 percent of the purchase price and will pay only the interest for three years, after which the principal will be included and the monthly payment will climb. He borrowed 20 percent of the purchase price with a 40-year payout, instead of the traditional 30 years.

The hope is that prices will continue to rise, interest rates will remain reasonable and Knapp can refinance under more favorable conditions.

Rough ride ahead

From the WSJ Real Estate Journal:

Foreclosure Figures Suggest Homeowners in for Rocky Ride

By any measure, things are getting tougher for American homeowners.

Online foreclosure-data service RealtyTrac of Irvine, Calif., said yesterday 115,292 properties nationwide entered some stage of foreclosure last month, a rise of 24% from July and nearly a 53% increase from a year earlier.

Also yesterday, of Boca Raton, Fla., which also tracks foreclosures nationwide, said new residential foreclosures fell by 6.7% in August from July to 26,255 nationwide. The company's figures, however, show that foreclosures are up 7.3% compared to August 2005.

The divergent results can be explained by the way each company counts foreclosed properties. RealtyTrac data includes properties in the early stages of a foreclosure proceeding, even before the bank actually owns those properties. About 60% of these get remedied or the properties are sold before they get to the auction stage, said Rick Sharga, vice president of marketing for RealtyTrac.

A spokesman for said it only reports properties officially foreclosed and in the hands of the banks.

The trend is supported by data collected by the Mortgage Bankers Association, which reports the number of U.S. households late on mortgage payments fell slightly in the second quarter, but that a modest rise in delinquency and foreclosures is expected going forward.

The delinquency rate for residential mortgages was 4.39% in the April-June period, down from 4.41% in the previous three months, the MBA said in a survey that included 42.5 million loans. Home mortgages in foreclosure made up 0.99% of total mortgages at the end of the quarter, up from 0.98% three months earlier.
"With home-price appreciation continuing to decelerate," he said, August's "increase could be the beginning of an upward shift in the foreclosures market." President and CEO Brad Geisen said while the company has continued to see fluctuations in month-to-month data, "as we near the end of the third quarter, most housing and economic indicators point to a sustained period of increased new foreclosure activity across the country."

Agent misrepresented Towaco home

For those following the Towaco case. From the Daily Record:

Jury: Nothing wrong with a house in Towaco

A Superior Court jury decided Tuesday that a Weichert Co. real estate agent misrepresented the location of a Montville home and the school the buyers' son might attend, but said that the act did not cause the family a measurable loss.

The jury agreed with homeowners Theodore and Frances Vagias that the failure of real estate agent Gabrielle Dingle to use the "T-word"-- Towaco --when describing the location of the home, constituted an "affirmative misrepresentation" under the Consumer Fraud Act.
Dingle had testified that she was not aware until after the sale was completed that the home was in the Towaco section, and that she never specified which elementary school the child might attend.

The jury declined to rule that the misrepresentation they assigned to Dingle caused the Vagiases a substantive, measurable loss. If a loss had been determined, the Consumer Fraud Act calls for up to triple damages.

The Vagias' attorney Keith Harris told the jury in his closing that the loss suffered by the family was the 10 percent extra they paid for the home, as measured by a real estate appraiser he put on the stand, because they believed the home was in the Montville section of the township, and not Towaco. Harris placed the loss at $70,000.

Making room for strangers

A Letter to the Editor published in the Jersey Journal:

We're being pushed out

Enough with condo conversions in Jersey City. Out-of-town developers are pushing good people, who were born and raised in Jersey City, out of their homes in order to bring in a new crop of people who want to live in high-rise apartments surrounded by cement and glass, and who do not care to have neighbors.

We have neighbors and friends. These developers have a lot of nerve calling our homes and neighborhoods "blighted" - simply because we do not have money to make our homes look like a fairytale gingerbread house, but they are clean and comfortable and more importantly, they are home to us.

Why do we have to be pushed out to make room for strangers?

Thursday, September 14, 2006

Down payment? Charge it.

From the WSJ Real Estate Journal:

AmEx Makes Room on Its Cards For Down Payments on Condos

Coming up with the money for a down payment on a new condominium may soon be as easy as charging it: American Express Co. is expected to announce today that it will allow some customers to use its cards to make condominium down payments.

For now, the service appears to be limited to a select few: luxury-condo buyers in Manhattan. American Express is rolling out the program with New York real-estate firm Moinian Group, for one of its properties currently under construction -- the Atelier condominium in Midtown Manhattan. Both companies say they plan to expand the service to other properties and partners.

For condo buyers, the deal will allow them to earn reward points or frequent-flier miles on big transactions, while extending the amount of time they have to meet the down-payment requirements and eliminating the hassle of getting certified checks. Buyers will earn one point for every dollar charged.
Bill Glenn, American Express's head of merchant business, says the move is part of the company's efforts to expand the ways its clients can use its cards. The companies didn't disclose the terms of the agreement, although Moinian will pay American Express a fee on each transaction. The condo buyer won't be charged an additional fee.
Siva Tayi, a potential Manhattan condo buyer from Houston, plans to charge the 10% down payment on a $1.2 million two-bedroom unit in Moinian's Atelier condo on his Platinum card. "I thought it was a good idea to use the [card] and gain the points," says Mr. Tayi, who runs an information-technology staffing and outsourcing company. Not only does it eliminate the hassle of writing a check or having to wire money, he says, but with the 120,000 points he expects to get -- combined with the 300,000 points he has already accumulated -- "I can probably make a trip to India."

Five Stages of Grief

From Realty Times:

Realty Reality: "Five Stages" Applies to Realtors Too

The first stage, Denial, is similar to that observed in terminally ill patients. It is the first reaction of agents. They refuse to accept the diagnosis. They reject the data, no matter how carefully it is presented. While in the denial stage they will clutch at straws, often looking for second, third, and even fourth opinions. They will exaggerate the importance of even the slightest bit of good news.
After Denial comes Anger. Here there are important differences between real estate agents and terminally ill patients. The latter are inclined to be angry with God or some vague forces such as Fate. The anger of agents, however, tends to be directed toward some tangible being, such as the broker. It is the broker's fault that there are no good leads, no phone calls, etc.

The direction of anger will vary depending on the level of abstraction with which the agent is working. If it is the agent's personal lack of activity, then the broker is the likely target. However, if the agent really does perceive the problem to be larger, e.g. to be a local, regional, or even national phenomenon, then the agent may direct his anger to such entities as nay-sayers in the newspaper, economists, or even "the government."
After Anger comes the Bargaining stage. Here, the real estate agent is more like a terminally ill patient in that his bargaining is liable to be directed to some outer force (God, Fates, Forces of the Universe). This takes the form of, "If only something good will happen, I will do such and such." Those of us who have been around long enough to remember the early nineties will recall the Realtor's prayer, "Dear Lord, if you will give me just one more good market, I promise not to %&!* it all away the next time." That is bargaining.

Next, Depression is experienced. This is unlike the well-known inchoate clinical depression for which the sufferer cannot name a cause. The depression that characterizes the fourth stage is understood as a result of some reality. It is the depression experienced when one realizes that the days of big bucks are over, that it won't be possible to make the lease payments on that fancy car, that there won't be anymore $200 golf rounds, etc. It is depression with a focus.
Kubler-Ross observed a final fifth stage among terminally ill people, which she called Acceptance. But this should not be thought of as a happy or benign state. Rather, it is a giving up, a ceasing to struggle. It happens to real estate agents as well. Having recognized the reality of a dying market and after being depressed about the personal results thereof, the agent surrenders and stops struggling

Potential buyers wait to be "priced-in"

Great piece this morning from the Wall Street Journal:

How Low Will Home Prices Go?

Recently she's seen reasons for hope: Far more homes were showing up in their price range, and others she'd seen a year ago were being relisted at reduced asking prices. Melissa decided it was time to look around again, and last weekend she asked me to come along on a tour of open houses in her price range. My sister had a list of homes she'd found online, but I suggested we tour as many open houses as we could to get a feel for the market.

What we saw was bleak news for sellers in our region, but good news for buyers like Melissa and Joe: block after block of open-house signs. In fact, we were hard-pressed to find a street that didn't have at least one home for sale -- and many had more than one. What's more, most of the 20 or so homes we visited were vacant -- a sign that homeowners have moved on and are motivated to sell, or that speculators are looking to unload properties before prices go any lower. (Asked why one home was vacant, one agent said frankly: "This was a 'flip' that flopped.")

Though some of the agents we encountered continued to promote their "charming" homes as "a steal," a surprising number were more candid. "The owner way overpriced this home," said one. "I bet if you offered $30,000 less they'd jump at it." We believed her, because she was running the open house as a favor for another agent.

Another sign of a turning market: We saw very similar houses with prices all over the map -- ranging from the low $200,000s to $270,000. That's evidence that sellers aren't sure what houses are worth these days, with some reluctant to accept that market dynamics have changed.

"They look at home-price comparisons from a year ago when there was far more demand than supply," says Pat Lashinsky, senior vice president of Emeryville, Calif., real-estate firm ZipRealty. Now that there's excess supply, he says, sellers need to be more willing to negotiate.
After our exhausting open-house blitz, Melissa asked for my thoughts. Though I'm too young to have experienced the 1980s real-estate market implosion, something told me that things are going to get a lot worse for sellers before they get better. To get an expert's take, I asked Robert J. Shiller, a Yale economics professor, for his insight on where the East Coast real-estate market may be headed.

"We don't know exactly what's going to happen because we've just experienced the biggest housing boom this country has ever seen," he says. In addition to homeowners struggling to sell existing homes, construction is at near-record levels: The last time this much inventory entered the market was 1950, when builders were building suburban homes for soldiers returning from war, he says.

Parsippany superintendent spoof

From YouTube:

From the Daily Record:

Parsippany superintendent lampooned in YouTube video

Incoming Schools Superintendent LeRoy E. Seitz will not start until Oct. 2 but he is already the subject of an anonymous, "Saturday Night Live"-style spoof on the hugely popular YouTube Internet site.

Seitz' $192,000 annual salary and benefits are being lampooned in a fake TV ad that utilizes music and images from Bud Lite's iconic "Real Men of Genius" commercials.
Board president Robert Perlett, who had not seen the video, was not amused.

"I think that it's cowardly. It's also childish," Perlett said.

The producer, identified only as Parsippany Lampoon, did not return an e-mail sent Wednesday through the YouTube site. The video was posted on Tuesday.

It is unclear whether the same person is responsible for several other recent videos on YouTube mocking Lake Parsippany members, Council Vice President James Vigilante and others.

Very significant reforms?

From the Asbury Park Press:

Panel eyes "significant" changes to state benefits

Lawmakers continued batting around ideas Wednesday about how to tackle two of the largest expenses that help drive the state's notoriously high property taxes — bureaucracy and worker benefits — though without concrete action.

One Democrat heading the committee examining public worker benefits promised "very significant" reforms after a briefing on the growing costs of public employee health coverage but was not specific.

Lawmakers are examining the costs of New Jersey's many levels of government and employee benefits as part of four committees searching for ways to reduce property taxes.
Beaver said the state could save nearly $500 million by requiring all state employees to pay 10 percent of their health care premiums, as was suggested in a December report by the Benefits Review Task Force appointed by then-Gov. Codey.
"I think ultimately we're going to be looking at some very, very significant reforms," Pou said.

The Ballad of Eminent Domain

From the Star Ledger:

The eminent domain outlaws

Songwriter Woody Guthrie, who chronicled the injustices of the 1930s, wrote in "The Ballad of Pretty Boy Floyd": "Some will rob you with a six gun ... And some with a fountain pen ... And as through your life you travel ... You won't never see an outlaw drive a family from their home."

Those words embody the horror of eminent domain abuse. Under the guise of "economic redevelopment," politicians and their developer friends are stealing people's homes and businesses. These modern outlaws are armed with bogus "studies." Fast-talking politicians are promising communities riches, but they are abusing the law to enrich only themselves and their friends. Entire communities, from trailer-park residents in Bergen County to business owners in New Brunswick to families in Long Branch, are facing upheaval just so bankers and developers can make millions on property they have no right to own.

Politicians in Trenton are deaf to the pleas of people like the Halpers in Piscataway, who lost their farm, and Lou and Lil Anza lone, an 89-year-old couple in Long Branch who are losing the place they have called home for half a century.

In 70 years, apparently not much has changed in America.

-- Ed Mueller, New Brunswick

The writer's property in New Brunswick has been condemned.

Wednesday, September 13, 2006

Bye Bye A.C.!

Something a bit more lighthearted. From The Record:

Monopoly outgrows A.C.

Goodbye, Boardwalk. Hello, Broadway!

On Tuesday, Hasbro, the maker of Monopoly, revealed its latest version of its most popular board game – a more contemporary edition that abandons the Atlantic City streets featured on the game's board since 1935 in favor of more-recognizable landmarks from 22 cities across the country.

After an Internet vote that drew more than 3 million ballots from consumers, New York's Times Square earned the coveted Boardwalk spot and will cost – reflecting the changes since the game's first edition – a cool $4 million. (In a twist sure to roil some New Yorkers, Park Place has been replaced by Boston's Fenway Park.)
The inflated prices are one of several changes that Hasbro believes will make the new version more relevant to today's consumers. Players can go to jail, or perhaps a white-collar, minimum-security prison, for infractions such as insider trading.

Game pieces now include a box of McDonald's fries, a Motorola cellphone and a cup of Starbucks coffee (monopoly, indeed). Some of the classic pieces have given way to more modern interpretations: The Scottish terrier is now a Labradoodle. The open-cockpit race car becomes an environmentally friendly Toyota Prius. And a speedy jet replaces the plodding battleship. None of the companies paid for inclusion in the new edition, Hasbro officials said.
Not everyone was quite as excited about the changes, however. In Atlantic City, the Convention and Visitors Authority's executive director, Jeffrey Vasser, sent a letter this spring asking Hasbro to reconsider, and thousands of residents signed a protest petition. The game's use of Atlantic City points to the city's popularity in the 1930s, when it was sometimes called "The World's Playground."

On Tuesday, Vasser said assurances that the original game would survive, along with the new Community Chest card that gives out $1 million for winning at Atlantic City casinos, have muted the complaints; many residents, he said, had mistakenly believed the new game would replace the old one.
The game's predecessor was invented by Elizabeth Magie, Orbanes said, who intended it to warn against the excesses of unrestrained capitalism. Ironically, once a man named Charles Darrow popularized the game now known as Monopoly using Atlantic City properties, it became a celebration of materialism.

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)

9/6 - 18,687
9/13 - 18,886 (1.1% Increase)


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

9/6 - 9,119
9/13 - 9,184 (0.7% Increase)

MLSGuide -

Single Family Homes, Condo, Coop
(Hudson County)

9/6 - 2,683
9/13 - 2,705 (0.8% Increase)

Home Prices Expected to Fall for Remainder of 2006

From the National Association of Realtors:

NAR: Home Prices Expected to Fall for Remainder of 2006
(full text posted)

Housing prices are expected to continue to have a limited fall throughout 2006, according to testimony submitted by the National Association of Realtors at today's Senate Banking Committee hearing, titled the Housing Bubble and Its Implications for the Economy. In addition, NAR noted that the sellers' market is transitioning to a buyers' market, which can be healthy for some local economies.

"For the past five years, the housing market has been a steadfast leader in the U.S. economy," Thomas M. Stevens, president of NAR, told the Senate Subcommittee on Housing and Transportation and the Senate Subcommittee on Economic Policy. "After five years of outstanding growth, the housing market is undergoing a period of adjustment and becoming more and more of a balanced market between buyers and sellers," said Stevens.

Stevens said that with the falling demand and increased supply, home prices still realized slight appreciation though it was less than 1 percent, where over the past few years homes were appreciating at double-digit rates. "While recent developments raise concern, it is important to remember that the housing market varies significantly across the country," said Stevens. One-third of the country (by population) is still seeing rising home prices, including Alaska, New Mexico, Vermont and many states in the South, excluding Florida. States that experienced the greatest increases in home prices in recent years are experiencing significantly lower sales, such as Arizona, California, Florida, Nevada and Virginia.

"Contrary to many reports, there is not a 'national housing bubble,'" said Stevens. "We were seeing home prices and mortgage debt servicing cost-to-income ratios increase to unhealthy levels in some housing markets, which precipitate an adjustment." Also contributing to the cooling housing market is an increase in mortgage rates of nearly one point, speculative investors pulling back and first-time buyers being priced out of the market.

Adjustments to the housing market are not unique and can often times be necessary, said Stevens. In addition to the rapid appreciation of years past, the rise in mortgage rates affects a homebuyer's ability to finance and purchase a home. "Pressure is being felt in the housing market due to rising mortgage rates," said Stevens. "With rising interest rates, homebuyers have become exhausted financially which explains why sales have tumbled in higher-priced regions of the country."

NAR forecasts a drop in home sales of around 8 percent in 2006, followed by another 2 percent decline in 2007. These numbers are based on the stabilizing of mortgage rates and modest expansion of the economy. Also predicted is that home price growth will be minimal-less than 3 percent in 2006 and 2007. However, NAR warns that a significant shift in interest rates or a change in the economy would change this forecast. NAR notes that a soft landing is possible under the right circumstances and affordable mortgage financing is an important component in achieving this.

"Because the housing market strongly supports the economy and drives consumer spending, it is imperative that the Congress adopt policies that encourage homeownership and make purchasing a home obtainable for the millions of families who desire to own a home of their own. NAR stands ready to work with Congress to continue to open the door to the American dream of homeownership," said Stevens.

In 2005, the housing sector directly contributed more than $2 trillion to the national economy, accounting for 16.2 percent of the economic activity, according to testimony by the National Association of Realtors.

Lowball! Bergen & Passaic 8/23 - 9/13

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 original 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 Bergen and Passaic for the range specified, I'll publish the rest of the counties as time permits.


(click to enlarge)


(click to enlarge)

Sorry about the images, it's just much easier for me to post these as graphics.

Caveat Emptor!

NJ jobless rate ticks higher

From the Asbury Park Press:

N.J. jobless rate higher in August

New Jersey's economy didn't add enough jobs in August to keep up with the number of people entering the work force, the state's Department of Labor and Workforce Development reported Tuesday.

The Garden State added 400 jobs, but its unemployment rate rose to 5.4 percent from 5.1 percent in July. That made for tough odds for workers seeking new jobs.

"More (difficult) than I thought initially," said Peter Burnett, 42, a retail manager from Carteret, who was at a job fair at the PNC Bank Arts Center in Holmdel on Tuesday looking for a job that would pay more. "I gave myself four months (to find a job), and it's been nine months."

The report was the latest evidence that New Jersey's economy isn't keeping pace with that of the rest of the country. The United States added 128,000 jobs in August and had a nationwide unemployment rate of 4.7 percent compared with 4.8 percent in July. Because New Jersey represents about 3 percent of the nation's employment, it should have gained 3,840 jobs.

Inventory Up, Prices Down

From the Wall Street Journal Online:

Rising Inventory of Unsold Homes Is Likely to Put Pressure on Prices

A continued rise in inventories of unsold homes in August is likely to put more downward pressure on home prices in parts of the U.S.

Inventories of homes in 18 large metropolitan areas across the country expanded by 4.7% in August from a month earlier, according to data compiled by ZipRealty Inc., a real-estate brokerage firm based in Emeryville, Calif. The data are based on single-family homes and condos included in local multiple-listing services of homes for sale.

The biggest increases -- 16% in the Dallas area and 13% in Seattle -- came in markets that have been relatively strong recently. A sharp rise in inventories in those areas is likely to help restrain price increases. Other sizable increases came in Orlando, Fla. (8%), San Francisco (6.1%) and Miami (5.6%).
Home sales have plunged over the past year in many areas where prices had soared over the preceding five years, notably in California, Florida, Arizona, Massachusetts and the Washington, D.C., area. Many potential buyers are waiting for prices to come down further. The persistent weakness in these markets has prompted many housing experts to say prices will have to decline more to revive sales.
Ivy Zelman, a housing analyst at Credit Suisse Group in Cleveland, estimates that prices of newly built homes in San Diego, Sacramento, Calif., Phoenix, northern Virginia and southwest Florida already are down as much as 10% to 15% from a year ago. That estimate includes "concessions" from builders, such as upgraded kitchens or help with closing costs, which are disguised price cuts. But Ms. Zelman still sees more price declines ahead. "We believe that the housing market is still in the early innings of a hard landing that will likely take several years to develop," she says.

First Suburbs Unite

From the Star Ledger:

'First suburbs' are finding strength in numbers

They are described as the "first suburbs," towns that sprang up along the borders of New Jersey's cities in the past century and a half.

They include West Orange, Caldwell, East Orange, Maplewood, Rahway, Franklin, Parsippany and over 90 others. Half of the state's population lives in these towns or in the neighboring cities.

Most are fully developed and tax-stressed. Their school systems are financially strained, their housing, roads and sewers are aging, their business districts fading and their population is becoming increasingly diverse racially and economically.

What they do not have, in the view of people who want to see these towns prosper, is one voice. A voice that can shout for the attention of the state and federal government and business.
"For decades, the state has concentrated on developing rural and exurban areas and on redevelopment in urban areas," said Michelle Loxton, an OPEN Society spokeswoman. "Comparable public sector reinvestment has not been focused on older developed communities."
He said first suburbs cannot dig themselves out or stop the cycle of decline once it begins.

"They simply do not receive the attention the center cities have justifiably deserved in this country for sometime," Puentes said. "They do deserve attention because they do need assistance."
Among the towns that are either joining the coalition or have been asked to consider it are: Belleville, Bloomfield, Glen Ridge, Maplewood, Montclair, Nutley, South Orange, West Caldwell, Highland Park, Spotswood, Clark, Cranford, Fanwood, Garwood, Kenilworth, Plainfield, Roselle, Roselle Park, Scotch Plains, Springfield, Hamilton, Hightstown, Hopewell Borough and Pennington.

What about South Jersey?

From the Courier Post Online:

Study: S.J. good place to live

South Jersey is one of the best places in America to relocate -- but not retire, according to a study by the Retirement Solutions Foundation.

Based on a healthy job market, relatively affordable housing and good quality of life, the area ranked third, behind Phoenix and Orlando, Fla. Three of the six areas on the list are in Florida. Madison, Wis., rounds out the picks.

The rankings were based on statistics from the National Association of Realtors, the Places Rated Almanac and the Milken Institute, a California-based economic think tank.

Jane White, president of the Morris County-based foundation, said people who live in the six markets will do well to sell their homes when they stop working and move somewhere less expensive.

"These aren't places to retire -- they're places you live and work now so you'll have a market for your home when you're ready to retire," she said.
"Housing has been appreciating at a good pace yet but isn't overpriced," she said. "But a lot of people won't be staying here when they retire because of the taxes."
Hamilton plans to travel to France and then likely to Charlotte, N.C., when she retires.

"People can use the equity they have in their homes and wind up with a good quality of life," she said.

Tuesday, September 12, 2006

City residents better off?

From Newsday:

Report: NJ cities in better shape, but not their residents

Many of New Jersey's cities have seen an increase in jobs and property values over the last 10 years, but the changes are not bettering the lives of their residents, according to a report released Tuesday.

The study by the Housing and Community Development Network of New Jersey found housing prices, property values and job growth in 30 cities have outpaced the rest of the state since 1999.

But it found long-term city residents can neither afford the new homes nor qualify for new jobs. The survey also shows that nearly half of city children live in single-parent households.

"New Jersey cities are doing better today than they were 10 years ago, but unfortunately the residents of the cities aren't faring quite as well," said Staci Berger, advocacy director for the network.

The report also questioned whether the positive gains in cities would continue, citing concern about inflated real estate prices, and unpredictable state aid and tax incentives.
"The cities have become an economic engine for New Jersey," said Alan Mallach, the report's author and a former Trenton housing and development director. "They are no longer what people consider to be a drag."

Lawmakers to meet on housing bubble

From Reuters:

Lawmakers to probe housing "bubble," mortgages

U.S. lawmakers will question some leading government and industry economists about the perils of a possible 'housing bubble' in a Wednesday hearing.

Lawmakers wanted the session "because we've heard a great deal about the possibility of a housing bubble for several years now," said Sen. Wayne Allard, a Republican from Colorado.

The hearing, "The Housing Bubble and its Implications for the Economy," will be held in an open session of the Senate Banking Committee at 10 a.m..

Next week, the same committee will hold a hearing on the growth of innovative mortgage products that have mushroomed along with the housing sector.

Lawmakers behind Wednesday's hearing said that they were concerned that a steady flow of soft housing data could put the nation's economy in peril.

House prices increased by their smallest margin in over six years during the second quarter of 2006, a recent government study found. Sales of new and existing homes, too, are much slower than their recent break-neck pace.

"The economy has been buoyed for some time by unrealistic expectations about the appreciation of housing prices," said Jack Reed, a Democrat from Rhode Island, who is helping sponsor the meeting. "Now that the housing market is cooling, the economy may be headed for a bumpy landing."

The lawmakers will hear from several chief economists like Richard Brown of the Federal Deposit Insurance Corporation, Patrick Lawler of the Office of Federal Housing Enterprise Oversight, Dave Seiders of the National Association of Homebuilders and Tom Stevens of the National Association of Realtors.

Where do your tax dollars go?

From Bloomberg (No Link):

New Jersey, Running Pension Deficit, Tackles Double Dipping

As a municipal court judge in Asbury Park, New Jersey, Mark T. Apostolou spends two days a week settling traffic summonses and disorderly conduct offenses. For that, he makes $52,000 a year.

Add on six municipalities where he sits in a similar capacity, and his earnings balloon to $235,816, based on a list of the 50 highest-paid public employees in New Jersey who have more than one government job. If Apostolou, 52, retired now, he would be entitled to a pension exceeding $80,000 a year, under a formula from the state treasurer's office.

New Jersey leads the U.S. with the most workers receiving incomes or pensions from multiple public jobs, which is banned in many states. For more than 50 years, measures to prohibit the practice have died in the Legislature, where 19 of 120 current members hold another government job. The issue is being revived again as lawmakers seek cost savings after promising to cut property taxes that are the highest in the nation.

``Higher property taxes, lawsuits, bankruptcy, a completely defunct public-employee benefits system and ruined lives'' may result if the system isn't fixed, said Assemblyman Thomas Giblin of Essex County. He is a member of the legislative panel working on the problem.

The state is spending $1 billion this year, out of a budget of $31 billion, to pay pensioners, Treasury spokesman Mark Perkiss said. Governor Jon Corzine and the Legislature authorized putting $1.1 billion into the system for future pension
obligations, about 58 percent of the amount needed.

The system is $18 billion short of being fully funded, after lawmakers tackling budget gaps made only partial payments in recent years. Still, the $1.1 billion contribution is more than in the past 10 years combined. New Jersey, the 10th-most-populous state, has more than $30 billion of debt.
In most states, holding more than one public office is illegal, unconstitutional or just not done, said Jon Shure, president of New Jersey Policy Perspective, a nonprofit organization in Trenton that researches state issues. In a June report, the group said New Jersey had the most politicians holding multiple offices.

A 2004 report by the Center for Public Integrity, in Washington, showed that 33 percent of New Jersey legislators received income from another government agency, a third more than the second-ranked state, Delaware, he said.

The decline is just beginning

From The New York Sun:

Real Estate Recession Coming

Some realtors and economists now argue that the decline in home prices will be modest and is nearly complete.

They are very likely to be mistaken. This decline is just beginning and will become more severe because of a recession that will be triggered by the falling home prices. This in turn will lead to a surge in unemployment and many of the newly-unemployed will no longer be able to afford their homes.

The first factor that led to the unprecedented surge in home prices of more than 50% in the last five years is that the Federal Reserve began to pursue an extremely easy money policy in 2001 to buffer the economy from the implosion of the stock price bubble of the late 1990s.
The second factor that drove home prices upward has been the creativity of the lenders in developing new forms of credit. Financial firms became much more creative in designing mortgages that reduced the monthly payment of the borrowers and thus enabled them to buy more expensive properties. More borrowers opted for adjustable interest rate mortgages, or ARMS. Some provided only for interest payments for five or ten years. A recent innovation was the negative amortization mortgage, sometimes called the option ARM. The interest payment that the borrowers made for three or five years was less than the amount required based on the interest rate, and the borrowers' indebtedness increased.
The decline in spending that will follow from the combination of the sharp decline in new home construction and the much smaller borrowing against lower home values will lead to a sharp increase in the unemployment rate. Foreclosures and price drops will follow.

The decline in household wealth that will follow from lower home prices is likely to be comparable to the decline in 2000, 2001, and 2002 that followed from the lower stock prices. Moreover the sharp slowdown in the rate of economic growth is not good news for corporate profits.
The New York area will be sharply affected both by the decline in home prices and in stock prices. Homes in the metropolitan area will remain more costly than in most other parts of the country, but they will become much more affordable than they now.

NJ Homeowners sue real estate agent for fraud

From the Daily Record:

Jury to decide what's in a name

A Morris County jury is expected to begin deciding today whether a real estate agent's description of a new home as being in Montville constitutes fraud because the new homeowners claimed they later discovered that it is in Towaco --which they claimed was a less prestigious location.

In their lawsuit, Theodore and Frances Vagias claimed in 2001 that they told Weichert Co. real estate agent Gabrielle Dingle that they were seeking a home in a prestigious community.

After looking at about eight homes, they settled on one for sale for $743,435 in a then-new development called Woodmont Court at Montville.

The Vagiases claimed that only after the purchase was completed did they find out that the home they were led to believe was in the Montville section of Montville Township -- which reflected the prestigious address they were seeking -- was in fact in the Towaco section of the township, which they claimed was less prestigious.

The location of the home, the couple claimed, would mean that their son would have to attend a different school than they were seeking -- one with a lesser reputation.
The case is being heard before Superior Court Judge Catherine M. Langlois in Morristown after the state appeals court overturned an earlier trial court dismissal of the case.

The Vagiases filed the original lawsuit in 2002 under the Consumer Fraud Act, claiming that Dingle's statements were intentionally misleading.

The trial judge ruled that Dingle's statements were an "omission," not an affirmative misstatement, according to the appeals court decision. The appeals court ruled that the Consumer Fraud Act prohibits both affirmative acts of deception and acts of omission "with intent that others rely on such concealment, suppression or omission."

NJ Government Downsizing

From the Star Ledger:

Newark considering pink slips for 800

Up to 20 percent of Newark's municipal work force could be laid off due to a "savage structural deficit" in the city's budget, Mayor Cory Booker said.

"There are going to have to be major personnel reductions," Booker said yesterday after a 9/11 memorial service. "We are reviewing every way to recoup money and stop waste. At the end of the day, we have to spend less money, and that's personnel."

Booker said 10 to 20 percent of the city's 4,000-person work force -- between 400 and 800 employees -- could lose their jobs, but a final number won't be determined until several forensic audits are completed and the city embarks on its 2007 budget process.
With the 425 layoffs announced by the Newark Housing Authority two weeks ago, the potential for 1,200 layoffs at two of the largest employers of city residents has union leaders concerned.

"This is the middle class in this city. It provides jobs and decent wages and it's about to be hit again," said Rahaman Muhammad, president of Service Employees International Union Local 617. The union represents 600 city sanitation workers, crossing guards and 911 operators.
"The union's position is that layoffs would not be reasonable," said Mike James, president of Newark Council 21, the union that represents the city's white-collar workers.

Reassessment Angst

From Courier News:

Franklin residents seeing red over taxes

Some residents of Franklin's age-restricted communities think their homes are assessed too frequently and that errors by the township assessor led to unfairly high assessments.

While complaints about property taxes are nothing new -- especially in New Jersey -- the residents have gained an important ally: the Township Council.

In July, the council asked the Somerset County Board of Taxation for at least a one-year suspension of tax assessor Burnham Hobbs Jr.'s annual reassessment policy and a review of assessment practices within the township.
Hobbs, on the job about 20 years, has defended his work. So has Franklin Mayor Brian Levine, who was the lone dissenting vote against the resolution. Levine said he supports a one-year freeze on assessments in order to resolve any issues, but he said the township's real issue is high property taxes, which result from high spending.
"If we do not reassess each year, you end up transferring real estate taxes," Hobbs said. "They get transferred from neighborhoods that have gone up more rapidly to neighborhoods that have gone up more slowly."

"We make millions of dollars each year for this town on added assessments and omitted assessments," Hobbs said. "And we show the reason why we want to continue making re-inspections of all the properties -- is because things do change. Basements get finished, decks get added, air conditioners get added, without permits, and that's what we find."

Monday, September 11, 2006

A Global Housing Bubble?

From the Economist:

Checking the thermostat
Property prices are cooling fast in America, but heating up elsewhere

HOUSES are not just places to live in; they are increasingly important to whole economies, which is why The Economist started publishing global house-price indicators in 2002. This has allowed us to track the biggest global property-price boom in history. The latest gloomy news from America may suggest that the world is on the brink of its biggest ever house-price bust. However, our latest quarterly update suggests that, outside America, prices are perking up.

America's housing market has certainly caught a chill. According to the Office of Federal Housing Enterprise Oversight (OFHEO), the average price of a house rose by only 1.2% in the second quarter, the smallest gain since 1999. The past year has seen the sharpest slowdown in the rate of growth since the series started in 1975. Even so, average prices are still up by 10.1% on a year ago. This is much stronger than the series published by the National Association of Realtors (NAR), which showed a rise of only 0.9% in the year to July.
Elsewhere, our global house-price indicators signal a cheerier story. House-price inflation is faster than a year ago in roughly half of the 20 countries we track (see table). Apart from America, only Spain, Hong Kong and South Africa have seen big slowdowns. In ten of the countries, prices are rising at double-digit rates, compared with only seven countries last year.

European housing markets—notably Denmark, Belgium, Ireland, France and Sweden—now dominate the top of the league. Anecdotal evidence suggests that even the German market is starting to wake up after more than a decade of flat or falling prices, but this has yet to show up the index that we use, which is published with a long lag (there are no figures for 2006). If any readers know of a more timely index, please let us know.
An OECD study published last year adjusted the price/rent ratio for interest rates and other factors, to estimate how overvalued home prices were around the globe. Updating those figures to take account of price rises since then suggests that housing is now 35-50% overvalued in Britain and Australia and perhaps 20% too dear in America. A return to fair value will mean either rising rents or falling prices. If rents continue to rise at today's pace, many years of stagnant prices will be required to bring the price/rent ratio back to its long-term average. Especially after a giddy ascent, it is too soon to talk about a soft landing before a return to firm ground.

Did 9/11 play a role in the housing boom?


Housing Rises in Terror's Wake

When the Twin Towers fell on Sept. 11, 2001, a glowing symbol of American capitalism was destroyed. Just a few months later, Americans were already talking about a new symbol of the nation's mighty wealth potential: the U.S. housing boom.

But could there have been a U.S. housing boom without the events of 9/11? It's a matter of much debate. What is clear is that certain factors that would lead to a real estate recovery were already in place before the attacks, most prominently the Nasdaq's plunge earlier that year.

Perahaps it's best, then, to say that without 9/11, there would have been a recovery in the housing market, which was in a funk in 2000 and the first half of 2001. But the terror attacks unleashed a series of policy actions that insted spurred a boom.

Most experts agree that the U.S. housing boom was caused by a confluence of factors set in motion in 2001 -- including very low mortgage rates and a newfound desire for tangible assets like real estate.

"In terms of the nationwide housing market boom, certainly the interest rate declines helped," says Lawrence Yun, an economist with the National Association of Realtors. "But there is also some element that is hard to quantify. In more uncertain times, people prefer having a tangible asset."

It's a mistake, though, to think that 9/11 alone created these factors. In fact, the Nasdaq's plunge in the spring of 2001 first put the ball in motion for the Federal Reserve's rate cuts and the flight to hard assets after millions of Americans saw their paper wealth evaporate in the dot-com bust.

Debt Epidemic

From the Daily Record:

Debts render many hopeless

It seems that we have an epidemic on our hands.

Recently, Reed Fraasa, a Certified Financial Planner in Riverdale, encountered several new clients who struck him as being at the ends of their ropes.

All of them apparently had made the same mistake: They were overwhelmed by their debts.

No, they had not splurged on their credit cards.

They had refinanced their houses -- and had spent most or all of the money they had withdrawn.

"They had no idea where the money went," Fraasa recalls.

And they were full of despair. They saw that their debts were not going away. And the debts were straining their marriages.

"They felt hopeless," he says.

Where had the money gone?

New, expensive cars -- or new leased cars. Improvements to their bathrooms and kitchens. New furniture. A summer home.

Another wreck on the turnpike?

From the Record:

Xanadu's likely savior takes risks, reaps rewards

Just a few weeks ago, Meadowlands Xanadu was looking like another wreck on the turnpike.

Years behind schedule, the ballyhooed retail/entertainment attraction was just a steel skeleton sitting forlornly in the parking lot of the Meadowlands Sports Complex. Costs had ballooned to $2 billion and its developer, the Mills Corp., was in financial crisis. Critics wondered if the project was damaged beyond repair.

Then Colony Capital arrived on the scene, announcing a proposal that could jump-start the project. The Los Angeles-based private investment company has a track record that may bode well for the Meadowlands. Its principal, Tom Barrack – described in a recent Fortune magazine cover story as "The World's Greatest Real Estate Investor" – built his fortune with a contrarian strategy of finding opportunity where others see only problems.
In its proposal announced Aug, 22, Colony said it would pump in up to $500 million and secure additional financing. Colony, which is known for its resorts and casinos around the globe, would be calling the shots and Mills would fade into the background.
"It's like starting on the 50-yard line," said Howard Davidowitz, chairman of Davidowitz & Associates, a New York-based retail consulting and investment banking firm. "One of the things they see is that a lot of the work and money has already been spent and they believe the project can be completed."

Even skeptics concede that having a company with Colony's resources and reputation will bring stability and help attract tenants. Mills, on the other hand, is facing liquidity problems, a federal Securities and Exchange Commission investigation and shareholder lawsuits.

Price Reduced $8m

From the New York Post:


The real-estate bubble appears to be bursting, or at least deflating, for Eddie Murphy's "Bubble Hill" property in New Jersey.

The comedian, who originally listed the nearby Englewood Cliffs property for $30 million (making it New Jersey's most expensive home) in December 2004, has whittled it down to $22 million.

In August 2005, we reported that Murphy lowered the price of the 32-room, 25,000-square-foot Colonial on 5 gated acres by $3 million, just after his wife, Nicole, filed for divorce.

"I still think he's going to have to come down lower than $27 million," one local broker told us at the time. "While it is grand, it's also a bit on the gaudy side." Grand it is, with its own screening room, bowling alley, indoor pool, gym, guesthouse and professional music studio. The former "Saturday Night Live" cast member, who went on to become one of Hollywood's highest-paid actors in the 1980s, bought the then-unfinished property in 1986 for a reported $4.5 million. It's where he proposed to Nicole in 1993.

Sunday, September 10, 2006

Just who should pay for New Jersey schools?

From the Associated Press via Newsday:

New Jerseyans without schoolchildren: Why should we fund schools?

George Rogozin's three children have finished public school, but the 78-year-old East Greenwich man still watches much of his taxes go to educate children _ other people's children.

His annual property taxes have nearly doubled in recent years to $5,400, and like all New Jerseyans most of Rogozin's property taxes go to public schools.

"I'm on a fixed income and it's becoming ever so difficult to keep up," Rogozin said. "When I pay my quarterly tax amount that eats up that month's Social Security paycheck."

Rogozin is part of a growing chorus of New Jerseyans wondering why they have to pay property taxes to fund schools if they don't have children using schools.
"I am not against property taxes, but why should a person that has owned a property in New Jersey for 13 years with no kids be just as liable for the school tax bills as the parent of the kid that uses the schools?" Anderson asked.

As New Jersey lawmakers consider how to reduce the highest-in-the-nation property taxes, many, particularly senior citizens, hope they consider exempting people without school children from paying school taxes.
Jeff Muller, of Mantua, doesn't think people without children should be completely exempt from property taxes "because society benefits from educated children." But he thinks people with children should pay 90 percent of school costs.

"The more school kids you have, the more your tax burden should be," said the 43-year-old who doesn't have children and saw his property taxes rise from $4,000 to $7,000 in recent years.

Buyers sit this round out

Thought this piece from the LA Times was interesting. Since the North Jersey news is rather light this Sunday, I decided to include it.

Buyers play wait and see

"As much as you read and hear about it, it was still a total shock to see what prices were like and what you get for your money compared to other places," he said.

Swiger, who sold his Louisville, Ky., home for $500,000 and rented a Huntington Beach town home for $3,000 a month, said he plans to hold off and buy this winter.

"I'm going to roll the dice a bit," he said, "and see if prices come down in the next six months."

He isn't rolling alone. Sobered up from frenzied exuberance over last year's housing gains by this year's declining sales, price reductions and increased housing inventory, a growing segment of Southland buyers are waiting on the sidelines for a significant downshift in prices.

Bob Taylor, owner of Bob Taylor Properties Inc. in Highland Park, noticed the change in buyers in May.

"Unless they can get a good offer accepted, about 75% to 80% of my clients are saying they want to wait up to one year for 10% to 15% price adjustments," Taylor said.
And they appear to have a reason to wait. DataQuick Information Systems reported that the Southern California median price slipped from $493,000 in June to $492,000 in July. The number of sales dropped to 24,669 in July, down about 27% from 33,561 in July 2005.

With an estimated one-third of Southland properties currently "wildly overpriced," according to John Karevoll, chief analyst at DataQuick, a La Jolla-based real estate research firm, patience could be a home shopper's best virtue.

"If you're a buyer, there's no hurry at all," said Edward Leamer, director of the UCLA Anderson Forecast, which provides quarterly economic projections. "Prices are going to be a little weaker a year from now, and there'll be more listings and more choices."

How much weaker remains to be seen, but Leamer anticipates an annual 2% to 3% drop in home prices for three to five years.

Lack of... Water?

From the Express Times:

Builder to begin homes project

Developer K. Hovnanian Enterprises had expected to start construction on a 101-home Hunter's Brook complex off Willow Grove Street more than three years ago.

The major homebuilder is now ready to start construction after water was made available from the Hackettstown Municipal Utilities Authority.

The authority had to wait about seven years to get a new well approved, Executive Director Bruce Smith said. Getting a new well is a long process, including well location, drilling, construction and waiting for state approval, he said.

"(K. Hovnanian) knew we didn't have water capacity available at the time," Smith said. "They understood the situation."

Other developments were put on hold by the lack of water, including part of the 700-home Woodfield complex in Mount Olive Township, N.J.

Company spokesman Doug Fenichel said Friday the wait for water was nothing out of the ordinary for the company.

"The long wait is typical of regulatory processes in the state of New Jersey," he said. "Less important than what it means to us is what it means to home buyers. It costs more when you have to (wait)."

Double Whammy

From the Asbury Park Press:

Falling home sales, rising jobless rate could be a double whammy for economy

WHEN THERE ARE MORE "home for sale" than "help wanted" signs, the U.S. economy may be mired in recession.

Most gauges are confirming that the housing market has hit the brakes and may be in a tailspin. Existing-home sales dropped a more-than-expected 4 percent in July and the number of unsold houses is the largest since 1993. New-home sales fell 22 percent from the same month last year. And construction spending fell the most in five years.

While higher mortgage rates and affordability concerns have been the bogeymen in the current U.S. housing decline, little attention has been paid to the combined demons of unemployment and adjustable-rate mortgages.
If job growth and consumer spending shrivel because of a meltdown in housing — an industry that has employed about one in 10 Americans since 2000 — then the trends could fuel each other and create a maelstrom for the U.S. economy.

There's yet one more gremlin: Not only is unemployment above the national average in the sourest housing markets, there are a lot of "subprime" adjustable-rate loans that are due to readjust and sock homeowners with higher monthly payments.
While buyers will see some heavy discounting if the current slump is prolonged, sellers should beware. More foreclosures put more homes on the market and sink prices further.

Bernards Limits Home Sizes

From the Star Ledger:

Bernards measure limits size of homes

Homestead Village is a cozy enclave in Bernards Township that sprouted in the late 1930s on what was formerly a peach farm and an estate owned by a descendant of John Jacob Astor, of the wealthy Astor family.

Modest Colonial homes went up in the neighborhood off South Finley Avenue by Homestead Road and Winding Lane until a moratorium on construction was imposed during World War II.
In the half-century since then, development has soared and tastes have changed, prompting some to look at the neighborhood with an eye toward demolishing the older homes and building much larger ones some refer to as McMansions or "monster homes."

Mayor John Malay believes something needs to be done about that.

"They are out of character with other homes," he said. "Imagine living in a Cape Cod and a large, 35-foot-tall home goes up next to yours. There's a bit of a disconnect there."

So to address what the mayor called a "very disturbing trend" of so-called "bash and build," an ordinance has been drafted that would restrict the width of homes in the neighborhood.
The township committee had earlier considered another version of the present proposed code, but officials said they felt the restrictions on homeowners in the village zones in the neighborhood of Hillside Avenue would be too onerous.

This newer version "goes a long way to set up a guideline" for people who are contemplating tear-downs, Deputy Mayor Donald Cross said.

"We don't want to hinder people to build on their land, but they have to take into consideration their neighbors," he said.