Sunday, July 31, 2005

Foreclosure Investing in NJ - From The Star Ledger

The Star Ledger today has a big and informative story today about investing in foreclosed properties in the Garden State. (In other news, the Asbury Park Press is reporting on the front page that Truman has dropped an atomic bomb on Japan.)


Snip...

"In New Jersey, the number rose to 3,055, from 2,832. Currently one house in every 1,084 in New Jersey is in foreclosure.

Andrews, who founded his real estate firm Dreambuilder Investments in 2002, takes these types of problem loans off a bank's hands.

When he gets wind of the walking wounded, he zeros in on banks holding second mortgages and tries to strike a deal."

Start of Article

NJ Can Never Have Enough Malls

No one in Monmouth County should be required to drive more than five minutes from their house to a Gap or a Crate & Barrel. I hope the city elders of Manalapan realize that there are thousands of convenience deprived people that would benifit immensely from this project; not to mention the ratables.

"MANALAPAN — The proposal to build a 499,902-square-foot shopping center on farmland off Millhurst Road has hit several obstacles, as local officials have expressed concerns over increased traffic and a lack of involvement from the Monmouth County Planning Board."

Asbury Park Press Story


Luddites click here.

Please Visit this Weeks Carnival Of NJ Bloggers

This weeks Carnival of the New Jersey Bloggers is hosted by smadanek here.

Friday, July 29, 2005

Only 21 Foreclosures this Week

Each week we count the number of foreclosures listed by the Monmouth County Sheriff. This week the count is onl 21, which is down from last week's count of 29.

9 Reasons Why a Housing Bubble Exits

Here is reason number 3 according to this article.

3 - Lenders have been allowing riskier borrows to enter into this market in a big way. The so-called sub-prime applicants, the ones whose creditworthiness would in less speculative times be more closely scrutinized have been lured by, and this is how the Mortgage Bankers Association refers to it, "innovative" financing. These lower standards increase the risk of default at a time when the nation's bankruptcy laws are about to change.

Thursday, July 28, 2005

How Do I Get My Picture on The Two River Times Back Page?

Danny of Danny's Steak House writes a regular column for the Atlantic Herald. In general, the writing is usually good, or informative, or at the very least benign. However, I sort of cringed when I read the paragraph below. I don't think that Danny, or the woman that he referenced are necessarily wrong when Monmouth County is referred to as a "Club." When I think of the word "club" though, it reminds me of exclusion or stratification. What is interesting though, in my opinion, is that in the Monmouth County hierarchy of well-to-do-citizens, the stratification is not as pronounced here as it is in NYC, however, the striving is more aggressive and not subtle enough not to be occasionally laughed at.

Snip...

"One women customer of mine, who has lived here for years, commented that with her job in New York and her home in Little Silver she feels she is a member of the "Club." I loved her analogy as to how she viewed living here; it is one big club that we all are a part of. With all the facets that make up the fabric of living here I have always felt a sense of community about the area but actually a step above that. Her coining the phrase the "Club" hit the nail on the head for me. That was the feeling I have always had about living here, that we are all a part of something bigger then just living in a town."


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Bank Regulators Issue Warnings

“WASHINGTON, July 28 (Reuters) - U.S. bank regulators warned on Thursday that banks have eased both commercial and retail credit underwriting standards and should be careful to anticipate and manage risks properly.

"Ambitious growth goals in a highly competitive market can create an environment that fosters imprudent credit decisions," Barbara Grunkemeyer, deputy Comptroller of the Currency for credit risk, said in a statement.

Banks, faced with stiff competition to attract borrowers, eased requirements such as collateral and pricing when making loans in the 12 months ending March 31, the Office of the Comptroller of the Currency, which regulates national banks, said in an annual survey.”

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Fannie Mae and Freddie Mac Need More Regulation

If this bill ever passes the full Senate it should help reign in some of the market distorting actions on the part of Fannie Mae and Freddie Mac (GSEs). For example, the implied US Government guarantee of GSE issued debt results in lower mortgage rates than would be expected. If the legislation restricts how much the GSE’s can participate, then the commercial banks, which have lower than AAA ratings, will be forced to reduce the amount of underwriting they do and increase the interest rate that they charge. For the record, President Bush is in favor of the legislation.


“WASHINGTON, July 28 (Reuters) - A U.S. Senate panel on Thursday approved a bill to overhaul supervision of mortgage finance giants Fannie Mae and Freddie Mac that would require cuts in the companies' $1.5 trillion investment portfolios.

The Senate Banking Committee approved the bill from its chairman, Alabama Republican Sen. Richard Shelby. The legislation must now be considered by the full U.S. Senate, but many analysts and lobbyists questioned whether that would happen before the end of the year.”

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Shorting Home Builders Is Not Very Original

If you read the various blogs, housing forums and stock message boards, many of the housing bears suggest selling short the stock of house builders, such as Hovnanian, Toll Brothers and Pulte Homes. On the surface, this seems like a pretty smart way to make money from the eventual fall in real estate prices. However, I believe that the expected fall in house prices is pretty well reflected in the prices of many of these stocks anyway. As an industry, the stocks of the home builders are already trading at a very low multiple to earnings of about 11 times. This low multiple suggests that the market already thinks that the earnings of these company’s will fall or only grow at a very slow pace.

Wednesday, July 27, 2005

At Least The Jersey Shore is Not the South Shore

PMI, the mortgage insurance company posted its quarterly "high-risk" real estate market index today. Boston and Long Island NY were the two riskiest markets in the index. If you are ever depressed about what $600,000 will buy you at the Jersey Shore, take a look at what you get for that amount in towns like Merrick, or Syosset or most other places on Long Island. Then you won't feel so bad.


"• The highest-risk sites remain in coastal areas, with the biggest odds of falling prices in Boston (55.3% ) and Long Island (Nassau-Suffolk), N.Y. (54.0%). Six of the 10 highest-risk areas are in California."

Go to entire article

Beach Access Made Easier at The Shore

I'm a big believer in property rights and think that the recent eminent domain ruling by the US Supreme Court was idiotic. However, it is clear the too many New Jersey "beach" property owners do not know where their property ends and the public lands begin. Although it is usually not clear where the private property line ends, it is definately not at the waterline. What is especially galling on the part of some property owners is their percieved right to restrict access to public lands after taxpayer funded sand pumping projects have saved their houses from complete destruction.


"The state Supreme Court on Tuesday upheld an appeals court ruling that the public has a right to use portions of a private beach for sunbathing, and that the state can regulate what fees can be charged for that right."

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Weekly Eastern Monmouth County MLS = 2871

Every Wednesday we check the Multiple Listing Service for Eastern Monmouth County. This week the count is 2871. Last week the count was 2864. Since June 3rd, the count has increased 9.37% from 2625.

Tuesday, July 26, 2005

Boston Condo Sales Strong

It is interesting to see that the recent strong housing sales statistics were driven mostly by condo sales. It would seem that condos would attract more investors than single family dwellings, and as a result, more speculation.


“Sales of single-family homes in Massachusetts were flat last month as the state's roaring condominium market sapped some of the strength out of the traditional housing market.

The Massachusetts Association of Realtors said yesterday that sales last month of single-family houses were just 0.5 percent higher than in June 2004, while condo sales -- now nearly one-third of the market -- posted a 19.1 percent gain. On the heels of declining single-family sales in April and May, an insignificant increase in June is further evidence that a once-hot market is cooling, analysts said.”

Continue…

Vote in the Poll

Over the past few days, hundreds of people have visited this website but only 11, so far, have voted. Please vote so I can make up another poll.

Price Trends in Englishtown NJ


Chart of Price trends in Englishtown, NJ (07726). "On the left is number of units sold. On the right scale is selling price. All charts show the number of units sold (left scale) slowing dramatically compared to same period year/s prior." Thanks to a reader for the charts. What Springsteen song mentions "old" Englishtown Posted by Picasa

Price Trends Roselle, NJ


Chart of Price trends in Roselle, NJ (07203). "On the left is number of units sold. On the right scale is selling price. All charts show the number of units sold (left scale) slowing dramatically compared to same period year/s prior." Thanks to a reader for the charts. Posted by Picasa

Freehold, New Jersey Price Trends


Chart of Price trends in Freehold, NJ (07728). "On the left is number of units sold. On the right scale is selling price. All charts show the number of units sold (left scale) slowing dramatically compared to same period year/s prior." Thanks to a reader for the charts.  Posted by Picasa

Monday, July 25, 2005

Price Trends in Farmingdale, NJ


Chart of Price trends in Farmingdale, NJ (07727). Sent in by a reader. "On the left is number of units sold. On the right is selling price. All charts show the number of units sold slowing dramatically compared to same period year/s prior."
 Posted by Picasa

They’re Not Building Anymore Land in Oceanport

They are not building anymore land in Oceanport NJ. It doesn’t matter though, because thousands of years ago, ancient Egyptian, Greek, Chinese, Mayan and Roman engineers figured out they can increase the capacity of a dwelling by adding another story or two or four, etc. Incredibly, this secret of the ancients is being put to work in Oceanport where a six story building is planned, with river views, and no doubt, granite countertops.

“OCEANPORT — While neighbors rally against a proposed six-story high-rise on River Street that includes units to be set aside for affordable housing, local officials say they have set up a meeting with affected residents and the lawyer the borough hired to fight the project.”

Go to full article.

Home Prices Up Again

Some experts were saying to today that the latest strong housing numbers are because people rushed out to buy before interest rates went higher.

“WASHINGTON (Reuters) - Sales of previously owned U.S. houses hit a record pace in June, climbing 2.7 percent as home prices soared 14.7 percent from a year ago, the biggest jump in nearly 25 years, a trade group said on Monday.

Sales of existing homes surged to a seasonally adjusted 7.33 million unit annual rate last month from May's upwardly revised 7.14 million unit clip, the National Association of Realtors said. The total includes both single-family homes and condominiums.”

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Sell the House Now Candace, Sell It

People seem to be paying attention to the bubble in California more so than around here, The local papers out there have regular stories about the state of the real estate market in places like Lodi, or Sacramento, or San Diego.


[Fears of a bubble burst -- a drastic decrease in the pricing of homes because of inflation -- are keeping some people involved in real estate on the edge of their seats.

"There is no reason that a house should be worth 40 percent more today than it was two years ago," said Christopher Thornberg of the University of California at Los Angeles' economic think tank Anderson Forecast. "This is a bubble. And this housing market is heated far beyond the point of sustainability."]

Continue

Sunday, July 24, 2005

Boredom in Belmar & Guaranteed RE Returns

Here is an article from someone that visted Belmar recently. I never thought of Belmar as Artcic like, but he does have a point. Some parts of the Shore can get very dreary in the dead of December. Sometimes there is nothing more depressing than driving through Sea Bright or Point Pleasant or plenty of towns in between when the temperture is below 16 and the wind is blowing off the ocean at 35 MPH.

Snip...

["People are realizing that real estate is a smart investment to make, a safe investment," beams Bonnie Fitzgerald, president-elect of the New Jersey Association of Realtors. "It's one of the only investments where you're pretty much guaranteed to get a return on your money."

Really? Real estate provides a "guaranteed return?" Even from highly seasonal vacation properties? The effusive Fitzgerald might not have ALL the facts at her disposal. Home prices along the Jersey Shore tumbled about 40% shortly after the stock market crash of 1987. But why worry about such disquieting "one-off" events when prices are still soaring year-after-year?

Real estate – it is no secret – has been a terrific investment for several years, especially since 2000. It has been so terrific, in fact, that many investors consider it a "can't-lose" proposition, which is often the state of mind that prevails immediately before a given asset class is about to become a "can't-win" proposition.]

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Kara Homes McMansions

Kara Homes is putting up these homes in Atlantic Highlands on both the North and South sides of rte. 36. It is my understanding, and I have yet to confirm it, is that if you buy one of these homes, you do not own the ground underneath, you supposedly only own the home. Reading the company's website does not say this explicitly. However, the website does say that you do not have to do your own lawn maintenance, which suggests to me Kara Homes is retaining some sort of right. I guess this is done in condo communities all of the time, but if I am going to spend $650k on a home, I want to actually own the ground underneath. What if I want to add a deck, or put in a pool?

Here are more pictures of the Kara Homes in Atlantic Highlands.

In any case, if you know more about these homes than I do, please leave a comment.

Kara Homes Website

Everybody Has The Same Trade On

These investors seem to forget they are not brilliant and that they are not the first person on the planet to have thought of buying real estate and then turning around and selling it.


Snip..

[If home prices took a U-turn, investors financing their deals with riskier mortgage loans could find themselves owing more than their property is worth. And that could matter if they need to sell a property fast or cash in on some equity to foot other bills. Zero-down payment loans, interest-only loans, adjustable rate mortgages or so-called option ARMS are all popular with investors here, local investors and brokers say.

Jason Beacham, the 22-year-old broker, said he used standard zero-down, five-year adjustable rate mortgages to buy his two homes. He's not worried about his $410,000 in mortgage debt because he plans to sell before the interest rate starts floating at the five-year mark. Beacham said he expects the homes to appreciate at least 8 percent annually, given their locations in Savage and Bloomington. He's avidly searching for more.

"If I'm in trouble then there's a lot of people who are even in more trouble than I am," Beacham said.]

More...

More About Real Estate Bloggers

This is another article about blogging's influence on real estate. Ben Jone's thehousingbubble2.com site is mentioned as well as housebubble.com. The article points out that some bloggers are distrustful of the media. In my opinion, there is a certain amount of conspiratorial content in some of the real estate blogs, but this stems from naivete about some issues, rather than tin-foil hat type nuttiness. I don't, in general, subscribe to the idea that the media is purposefully trying to limit talk about the bubble, as I believe many mainstream papers are doing a good job of following the bubble's progress. The NY Times provides consistent coverage, as well as The Wall Street Journal, The LA Times and the Washington Post.

On the other hand, our local paper, The Asbury Park Press has not done any hard hitting exposes about the state of real estate at the Shore. Some might attribute the lack of coverage to maybe the paper's perceived reluctance to upset all of their real estate advertisers. I would guess that this is not the case and that the reason the Asbury Park Press doesn't cover the bubble is because the paper's business section is just a collection of Associated Press Wire stories. Also, the Impact Section on Sunday's usually doesn't have much room on Sunday's on account of the bi-monthly story about the joys of recycling.

Snip...

[Indeed, distrust of the mainstream media runs deep with bloggers.

Mickey Cheng, 42, a computer programmer in Thousand Oaks and a regular reader of the Housing Bubble 2, maintains his own site at housebubble.com.

"Newspapers are so heavily influenced by the real estate industry that they don't give you the correct view of the situation," he said.

Cheng, a renter, is waiting for home prices to fall back to Earth before buying again. In February, Cheng sold his 1,400-square-foot home for $560,000; he bought the house in 1993 for $215,000. He currently leases a two-story home with a three-car garage for $2,400 a month.]

More...

Saturday, July 23, 2005

Ponzi-Like Proportions

Snip...

["Housing turnover is now reaching Ponzi-like proportions," warns Stephen S. Roach, chief economist for Morgan Stanley.

Real estate mania is this decade's version of the irrational exuberance that pushed Internet stocks to ridiculous heights during the last decade, only to come crashing down at the beginning of this one. And just as many investors wish they'd never heard of etoys.com or XO Communications, a lot of would-be real estate tycoons may soon rue the day they started buying property."]

Go...

Friday, July 22, 2005

Foreclosures Creep Up this Week

Monmouth County foreclosure count this week is 34. Last week the count was 29. No definite pattern or trend has yet to emerge concerning foreclosures in Monmouth County.

Another Nail For Housing

The Yaun devaluation could eventually lead to higher interest rates.

["This is another nail in the coffin of the housing bubble," said Christopher Thornberg, an economist with the UCLA Anderson Forecast. "Inflated prices are the biggest factor in the housing market. But this is going to hit mortgage rates, which are also a factor."]

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Where Housing Could Fall

Among other places,

Snip...

"The Northeast
- New York City has a 31 percent probability that prices will decline. During the housing slump in the '90s, job losses were the big problem. Now, it is the baby boomers who are moving out of the city. And if that trend continues, the high-end real estate market will take a hit.

In Washington, D.C., where government spending, and the resulting strong job market, has fueled the boom, home prices have risen 23 percent over the past year. There's a 19 percent chance that prices will slump as the government reins in spending."

More...

Thursday, July 21, 2005

Does Anyone Have Any Interesting Anecdotes?

I would like to read some anecdotes that describes the state of the housing market here at the Jersey Shore. If you have any, please post them here.

Here is my anecdote. Two people that I know who currently live in eastern Monmouth County are selling out. One is moving to Western Monmouth County and the other to Ocean County. They are taking advantage of the high house prices where they live now and selling. Since they don't work in NYC, they feel they can move further away from NYC and get more for their money.

As long as you don't have to commute to the city, Ocean County and the sticks of Upper Freehold look pretty cheap compared to Shrewsbury, Ocean Township and the other towns east of Highway 9.

China Revalues Their Currency

Today’s big news was that the Chinese have finally decided to un-peg the Yaun from the US dollar. This decision could have implications for the US housing market as seen in the drop in price in longer dated US debt. In short, many believe that the Chinese will limit their purchases of US 10 year and 30 year treasuries, which will cause the prices on these bonds to fall and the yields to rise. In turn this will cause US mortgage rates to increase because the rate that banks charged is typically at a spread to the 10 year note.

Snip…

“The renewed selling pushed yields on benchmark U.S. 10-year Treasury notes pushed above a key barrier at 4.25 percent that traders had repeatedly tested in recent sessions.

"That bid has dissipated," a bond trader at a Wall Street dealer said about the London-related buying. "There's still selling related to the yuan revaluation. In the long run, there'll probably be less Asian buying of Treasuries," he added explaining the market's concerns about China's move.

Just after 11 a.m. (1500 GMT), the 10-year note was 26/32 lower and yielding 4.26 percent, after ending the day on Wednesday at 4.16 percent. Technically speaking, chart watchers say that while an intra-day break above an important level like 4.25 percent does draw in more sellers, a close above that level would have more longer-term significance.”

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Rents are Out of Whack with Condo Prices in SF

Rents are also out of whack in this area.

“Still, the data give some insight into a housing market that has puzzled some experts.

While rents have stagnated or risen only slightly, the median price for a single-family home in the Bay Area vaulted 18 percent in June from the same month last year, hitting $644,000, research firm DataQuick said this week. The company also said the typical mortgage payment for Bay Area buyers in June was $2,651.

Ed Leamer, an economist at UCLA's Anderson Forecast, has illustrated the discrepancy between rents and median sale prices by calculating a price/earnings ratio for real estate.”

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Pricking the Bubble

I think today’s move by the Chinese will be an important catalyst for moving interest rates higher and housing prices lower. Over the next few days we are likely to see tons of experts offering opinions about the future direction of the housing market.

“The most likely bubble-pricking pin is massive speculation itself, and as prospective buyers stand aside, mounting inventories will precipitate a downward price spiral.

Signs of a peak in housing are significant and growing. Just as The Economist’s Dec. 4 to 10, 2004 cover story on the dollar’s demise triggered our forecast that the buck was about to rally (see “2005 Investment Themes,” Feb. 2005 Insight), the Time magazine June 13 cover story, “Home $weet Home,” is a superb indicator that the housing play is about over. By the time the editors of Time realize that a fad or the popularity of an individual is important enough to warrant a cover story, the end is nigh.”
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Get Ready for Forty Year Mortgages

This is getting ridiculous. Many in Congress are making absolutely no effort to stop Fannie and Freddie from adding gasoline to the hot housing market. Clearly, if Fannie and Freddie say they won’t buy 40 year mortgages, then there won’t be a market for them and banks won’t offer them. The President, Greenspan and some in Congress would like to reign in the GSE’s stupidity. Unfortunately, Fannie and Freddie are used as a slush fund by others in Congress to dole out low interest loans and grants to a few undeserving constituents, and as a result, these quasi-companies continue to distort real interest rates and ultimately the housing market.

Snip…

“In major metropolitan markets, especially on the West and East coasts, the prospect of owning a home is fast slipping away for many people, including minorities, who already lag greatly in homeownership.

Harvard's Joint Center for Housing Studies points out in its "State of the Nation's Housing" report that until 2004, falling mortgage interest rates helped to keep homeownership affordable even as prices escalated. But with long-term rates flat year after year and short-term rates rising, people will find it more difficult to buy a home.

To combat the housing affordability problem, lenders have created alternative financing, everything from hybrid adjustable-rate mortgages to interest-only loans. This is, indeed, a new era in mortgage lending.

For example, expect to soon see the mass marketing of 40-year mortgages, thanks in part to a recent announcement by Fannie Mae that it will now buy such mortgages from lenders.”

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Media Conspiracy in Boston

Snip...

"It's called a "Real Estate Bubble", and for the last 25 years Massachusetts has led the country in home price inflation. Since 1980, the price of the average single family home in this state has risen a whopping 591 percent. In the first quarter of this year alone, home prices rose 12 percent, a number that was reported as "healthy" by one of the slobbering real estate reporters who probably has never questioned anything the industry slings his way. Now I'm sure it has nothing to do with lucrative advertising contracts. After all, everybody loves to read that their largest investment just went up a few more bucks - unless you're a renter, of course.

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Wednesday, July 20, 2005

From Prudent Bear

This guy thinks that the housing boom can go on for several years, but that it will eventually end.

Snip

“In summary, the magnitude of the unfulfilled demand for housing combined with financial “new product development” can keep the current housing boom going for a few more years. However these new financial products have yet to stand the test of the vagaries of the environment- an economic downturn or an interest rate spike or other events that may cause lenders to pull in the reins.”

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Selling Mortgages to Anyone

The Wall Street Journal had an article today that basically tracks a day-in-the-life of a top performing mortgage broker, named Ben Ray, in California. In summary, he has been very busy lately and has made a lot of money. Most of the loans that he signs his customers up for are not the traditional 30 year fixed, but are often the more exotic ARMs and interest only loans.

Mortgage brokers like Ben Ray will probably be portrayed as the bad guy when the housing market collapses because of the loans that Mr. Ray qualified people for. However, Mr. Ray makes an important point:

[At Benchmark, Mr. Ray holds back. "I don't take stewardship for people's lives," he says. "I try to be fair, honest and act with integrity. But I'm not a marriage counselor. I'm not a parent. I don't put people's emotional issues in my bag when I walk out of here. The loans don't go home with me."]

The people that are taking on these loans are ultimately responsible for the eventual burden they will carry. I would guess that many people signing up for these loans are incredibly naïve, or stubborn, or greedy and do not ask any questions before signing on the dotted line. Plenty of these people seem to be looking for the proverbial free lunch.

Is “Speculative Fervor” the New “Irrational Exuberance?”

Greenspan’s testimony in front of Congress seemed to show additional concern, in his own cryptic and subdued way, that the housing market is too hot. I suppose the phrase “speculative fervor” will become the media’s new catch phrase in the weeks ahead.

“WASHINGTON, July 20 (Reuters) - Federal Reserve Chairman Alan Greenspan warned on Wednesday of "speculative fervor" in some regional U.S. housing markets, but said any fall in home prices was unlikely to have a broad impact on the economy.

In comments that reminded some market players of his 1996 warning of "irrational exuberance" in stocks, Greenspan said he could not rule out declines in home values even though the U.S. economy had weathered the end housing booms before without "significant" drops in the national level of prices.”

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Eat at Wind and Sea

One of my occasional off real estate topics concerns the lack of professional service at many the local Jersey Shore restaurants. Although it’s usually more fun to write about poor service, I am using this space to praise the good experience that I had at Wind and Sea in the Highlands this past weekend. This was the fourth or fifth time I have eaten there and as usual, our waitress was helpful and attentive and not the typical “teenager on summer” break with a crappy attitude that other places at the shore seem to go out of the way to hire. Also, I thought my meal was very reasonably priced, especially compared to other places to eat that are on the exact same street and have the same exact view, like Bahrs and the Inlet Café.

Back to Checking the MLS Every Wednesday

The Eastern Monmouth MLS is working again. The number of houses listed as of today was 2864, which is up 9.1% from 2,625 on June 3rd.

Some experts have said that home buying generally takes a break once the summer starts and as a result inventories often rise in the summer months. I’m not sure if this is true or not, or it is just an excuse to hide a possibly deteriorating market.

Tuesday, July 19, 2005

How a $350k House Becomes a $600k House.

By now it’s quite obvious that easy money has fueled the increase in house prices for at least the last two years. The remaining housing bulls are not making the case very convincingly that demographics and a favorable supply/demand dynamics are the reason for the huge increase in house prices. It seems to me that the mortgage originators are quickly running out of creative financing vehicles, such as interest only loans and negative amortization mortgages, and that it is only a matter of months before prices at the Shore flatten and then head south.

Snip…

“Some experts say these non-traditional loans are artificially extending the housing bubble. The math is simple — consumers who can make a $2,000-a-month mortgage payment can afford a $350,000 loan using a traditional mortgage. With an interest-only loan, their buying power jumps to over $430,000. With a negative-amortization loan, that payment could get an eager couple into a $600,000 home. Consumers who want to buy a home with a traditional mortgage are easily outbid by those with exotic loans, pushing prices higher.”

Continue

Remember When Sea Bright Used to Flood

Over the weekend, while driving up Ocean Avenue I passed by those new McMansions in Sea Bright where the Tradewinds beach club and bar used to be. The houses, which are still being constructed, certainly look pretty solid. Even though I’m sure those houses are safe, I wonder if the people that are buying know at all what Sea Bright used to be like before all of the sand was pumped on the beach. I distinctly remember going down to Sea Bright after a big Nor-easter and seeing giant boulders and logs in and around the north parking lot of Tradewinds. Before the sand was pumped on the beach in front of Tradewinds, and elsewhere, the waves on a normal non-stormy day were at the sea wall.

Eventually, the beaches in Sea Bright, and further down the coast, are going to lose sand and the beaches won’t be there to protect the new private property being built on the west side of the wall. Given that the Tradewinds mansions are priced north of $3 million, it doesn’t appear to me that prospective buyers are pricing in the highly likely loss of the protective beach sometime in the next 15 years.

Here is the satellite view of Tradewinds before it was demolished. Before the beach replenishment project the waves went all the way to the sea wall.

The UK Market is Slowing

“July 19 (Bloomberg) -- U.K. house prices fell for an 11th month in June, a gauge of the Royal Institution of Chartered Surveyors showed, threatening to damp household confidence in Europe's second-largest economy.

The balance between estate agents and surveyors reporting home values rose and those saying they fell in the three months through June was a seasonally adjusted minus 42 percent, compared with minus 46 percent in the quarter through May, the Royal Institution of Chartered Surveyors said today in London. It was the longest period the measure has been negative since 1995.”

Continue…

The Bubble Talk is Frenzied

Looking at some of the comments on the various real estate message boards, it appears that tensions are starting to run high between the bulls and the bears about the direction the market is taking. The Wall Street Journal Real Estate forum has recently degenerated into the accusation that people who rent are natural wife beaters. On another forum, which tracks condo development in Hoboken, buyers of a Toll Brothers project are suggesting that others are trying to talk down prices with lies and slander about the condition of a building.

Regardless of who is right or wrong, the forums sound just like the Yahoo and Ragingbull message boards of the dot com era, with longs accusing shorts of making up lies so that the price of pets.com will fall. Toll Brothers now, seems to have taken on the roll of CSFB then, as the evil underwriting overlord that manipulates prices so that only they will profit.

Monday, July 18, 2005

Prudential Advises to Go Slow

"With the white-hot housing market smelling more like 1990s' dot-com-frenzy - a phenomenon that sending a chill through many analysts' mind - a regional real estate brokerage is preaching a new mantra to investors.

Prudential Rand Realty Inc. of White Plains is not asking investors to quit their dream to get rich. It is advising them not to move at rocket speeds, as many day traders did during the Internet revolution, when bubble-stock company AOL Inc. acquired the world's largest media company, Time Warner Inc., virtually for nothing."

Continue...

Las Vegas Foreclosures Jump 37%

It looks like some speculators in Vegas are trying to cash out and are not finding enough “greater fools.” As the bubble begins to leak air, the first ones out the door are going to be speculators since they will not actually have a need for a house.

[SACRAMENTO, Calif., Jul 18, 2005 (BUSINESS WIRE) -- Foreclosures.com, a California based investment advisory firm specializing in distressed properties, reported today that notices of trustee sales in Clark County, NV rose to 602 in June from 438 in May.

"Defaults had been tailing off from their January high of 639," said Foreclosures.com president Alexis McGee. "Now they're heading up again." Ms. McGee went on to say that, while it was difficult at this stage to pinpoint causes of defaults, it is very possible that some speculators who came late to the party were getting trapped as they try to resell.]

www.foreclosures.com

Greenspan is Scheduled to Talk this Week

I hope he says something about the housing bubble. My guess is that he will specifically mention the bubble in a continuing effort to deflate it slowly, but also at the same time, try not to scare corporations from making more investments.

[WASHINGTON (Reuters) - Federal Reserve Chairman Alan Greenspan, in probably his last semi-annual testimony to Congress this week, will paint an upbeat picture of growth but drop no hint the Fed is ready to pause raising interest rates.

Greenspan, due to retire on Jan. 31 2006, will address Congress on Wednesday and Thursday. He may also air his views over the country's rampant housing market and the "conundrum" of low, long-bond yields.

But the performance will be most closely watched for clues of whether the U.S. central bank is weighing an end to its yearlong policy tightening campaign.]

Go…

On the Boardwalk, But Not Past Dark

Over the weekend I took a ride to Asbury to check on its revival and it was evident that some progress is being made. Although the western end of Cookman Ave. has some nice shops and places to eat, the side streets and eastern end of Cookman still need a lot of work. Also, it looks like both the north end near the beach and the south end of town on Wesley Lake, have major residential construction projects going on. Unfortunately, in between the north and south ends of town it still looks like the South Bronx circa 1979. I’m hoping that when the real estate crash comes, it doesn’t force the seemingly brave developers in Asbury to abandon their current projects. However, I can’t help but think that these projects have been partly financed with “assurances” with speculators who will run screaming from their investments once it becomes apparent they will never make a dime.

29 Foreclosures Listed This Week

The weekly foreclosure count in Monmouth County has been pretty low the past couple of weeks, after hitting the low 40s in June. From what I have read about foreclosures, low foreclosure rates are not unusual in a high priced market, since the property can often be sold before the foreclosure process begins. When prices start to level out, then maybe we’ll see higher foreclosure rates in Monmouth County.

Full list.

Peak Oil and Peak Credit

Snip…

“The conclusions in the above quotation from The Economist are appropriate, but it's worth adding that, as seen in 1Q 2000, as long as the uptrend is intact the street will believe the most preposterous stories.

It is possible that this could be more widely understood by October.”

Whole article here.

She Says Not to Time the Real Estate Market

This article advises us of the danger of trying to time the real estate market.
For some reason,I suspect that if I told Ms. Liebman I was thinking of buying,
she would tell me what a great “time” to buy it is.

[It's not just about the money, according to Pamela Liebman, CEO of the Corcoron Group, a real estate brokerage with offices in New York City, Florida, and Long Island.

"To make a decision on your home on a purely financial basis makes no sense," argues Liebman. "Will your kids have to change schools? Will your rental have enough room for all your things?" ]

Sunday, July 17, 2005

Hottest Markets Showing Signs of Fatigue

This article provides a good synopsis of what is happeming to real estate in some of the hottest areas of the country.


Snip...

"Some of the conditions noted by Galbraith are cropping up in today's real estate market.

In one key speculative casino, Las Vegas, MLS listings which were 14,380 in April, and 17,005 in late May, hit 18,124 in early July. Price reductions have been running about 5% per week in that market, and that's right at a time when a surge of new and very expensive high rise units is coming on stream."

Continue...

The Eastern Monmouth MLS is up Again

For some reason the MLS system was giving screwy counts for the past two weeks. However, it seems to be working now with 2,846 listings in Eastern Monmouth County as of today. The last time reliable data was available was June 29, and the number of listings was 2759, which means listings increased 3.15% since late June.

Environmentalist Does Not Want Hovnanian Project

Hovnanian wants to remediate and develop an old piece of property in Atlantic Highlands. It's probably not a bad idea, since the area is not used for anything else and HOV seems willing to clean up any petro-chemicals that might be in the soil.

Typically though, at least one environmentalist type is opposed to this effort, like they are opposed to almost every other development project that has been proposed anywhere since about 1967.


Snip...

"Now you have to keep in mind, developers have a tendency to say anything to get approval. They will declare that the project will not impact the environment, traffic, schools, or water. Yet, when the project is all done we found out that it has and the developer is long gone."

Or as I would say.

"Now you have to keep in mind, environmentalists have a tendency to say anything to refuse approval."

The Weekly Foreclosure Count is Delayed

For whatever reason, the Monmouth County Sheriff Office did not publish the list of foreclosed houses on Friday like they usually do. Hopefully it will be up tomorrow.

Saturday, July 16, 2005

An Entire LA Times Article About the Housingbubble2 Blog

No wonder traffic here is so strong for a Saturday.

Snip...

"Jones' blog, thehousingbubble2.blogspot.com, is one of the more popular of a growing number of blogs providing news, data, commentary or reports about the sizzling housing market.

Since January, the number of sites related to real estate, excluding Realtors' marketing sites, has jumped 19%, according to online market research firm Hitwise. Some offer consumer information and advice, while Jones' and others are rampant with pessimistic musings about the nation's housing boom going bust.

"It's the best suspense novel you've ever read," said Debbie Daly, a renter in Agoura who is a nonpracticing real estate agent and frequent contributor to Jones' blog. "How it will end, I don't know, but I'm riveted."

Blogs in general have been gaining momentum for some time and gained a critical mass during last year's presidential election.

The current outbreak of real estate chatter in the blogosphere seemed to follow a pattern identified during the election: A surge in media attention on an issue feeds consumer interest and vice versa, setting off a "buzz storm," said Jonathan Carson, chief executive of Internet market researcher BuzzMetrics."

Continue...

Friday, July 15, 2005

"We're past the peak", in Palm Beach

Palm Beach Post Staff Writer

Friday, July 15, 2005

ORLANDO — Palm Beach County's hot housing market is in no danger of a bubble — a plunge in prices and demand — but the heady days of making a fast killing in real estate are over, two prominent housing economists said Thursday at the Southeast Building Conference.

"It's a risky time to buy with the intention of making a lot of quick money," said Bradley Hunter, South Florida division director for Metrostudy in West Palm Beach.]

More...




Thursday, July 14, 2005

Rent Don't Buy

If this Long Branch two bedroom condo is available for $550k, why would I want to pay $609.5k for this Long Branch two bedroom condo in the same development. Especially if I can rent the same type unit in the same development for $2,400 per month.

Lets see. If I take out a $500K mortgage at 5.5% for 30 years, my monthly mortgage cost will be $2,839 per month. Then I add $1000 per month for taxes and $400 per month for maintenance and my monthly nut is $4,239 before any tax benifits. Assuming a 25% tax rate, my monthly cost is reduced to $3,415, which is still $1000 more than it costs to rent. I think I would take the rental before buying.




Peruvians Are Fueling the Bubble in Miami

Snip.

"Indeed, developers are going all-out to charm their clients, and more and more those clients include the world's wealthy elite from such countries as Argentina, Mexico, Australia, and Germany. These foreign buyers, in fact, are one of the important reasons the housing bubble continues to grow in hot markets like Miami, New York, and Las Vegas. In many cases, they're taking advantage of the strong euro or trying to get their money into a dollar-denominated hiding place.

The result: In Miami, for one, some condo buildings have as much as two-thirds of their units owned by foreigners. Call it America for Sale.

"No question, foreigners are part of the bubble," says Stephen Wayner, first vice president at Bayview Financial Exchange Services LLC in Miami."


Un-affordability is on the Upswing

The Wall Street Journal (subscription only) says that an important shift in house affordability occurred from the fourth quarter of 2004 to the first quarter of 2005. For the first time since 2002, the average initial mortgage payment increased quarter to quarter instead of decreasing.

Snip…

“Some of the most powerful fuel helping to sustain the five-year housing boom has been the onslaught of creative mortgage products -- from interest-only loans to adjustable-rate mortgages carrying starter rates as low as 1% -- that have allowed buyers to keep initial payments down even as home prices have soared. As a result, the average initial monthly mortgage payment largely has declined since 2002, according to an analysis by Bear Stearns Cos.

But in a significant shift, those numbers reversed direction in the first quarter of this year. The average initial mortgage payment for home buyers climbed to $2,338 in the first quarter from $2,060 in the fourth quarter of 2004, according to the investment bank. The Bear Stearns analysis looked at jumbo mortgages, which are loans above $359,650.”



What Makes A Bubble?

Mortgage and unemployment rates do not have to go to 8% for the bubble to burst.

Snip…

“The bubble exists because of speculators. Pent up demand and lack of supply is not the cause, otherwise the rental market wouldn't be so depressed. Current supply is in fact outstripping population growth. The excessive demand is produced by speculators. Since this doesn't satisfy the demands of housing anyone, the demand is totally artificial, thus creating totally artificial prices.”

Continue...


Eminent Domain in Long Branch

The councilman's quotes further on down in the story brings up a pretty good point. When the seizure process began 6 or 8 years ago, that section of Long Branch had little going for it, due in part to "normal" housing prices. Now that we are in the midst of a housing bubble, it doesn't appear that those that are being forced to sell are able to participate to the fullest extent in the high bubble prices.


"LONG BRANCH — City officials authorized the use of eminent domain to acquire 15 properties for the second phase of Pier Village but acknowledged widespread use of the process may not be necessary to close the deals.

City Attorney James G. Aaron said Hoboken-based Applied Development, which is now completing the first phase of the residential and commercial project on the oceanfront, is in negotiations with all but two of the property owners. The project is rising between Laird Street and Morris Avenue."

Continue...

Wednesday, July 13, 2005

"This is basically a pyramid scheme"

Those are pretty harsh words about the state of the real estate market. If you read further down in the article, some experts try to argue that there is a shortage of land in the Las Vegas area. If there is one area of the country that does not have a shortage of land, its the greater Las Vegas area.

[Christopher Thornberg, senior economist with UCLA's Anderson Forecast, said the rapid housing appreciation happening nationwide is not supported by traditional economic fundamentals.

"Housing prices are growing at a rate of something like 10 percent a year (nationally)," he said, speaking at Colliers International's Summer Trends event.

Thornberg said that with low interest rates and record home construction numbers, there is little logical reason for prices to be climbing.

"There is just no justifiable reason for prices to go up, except pure speculation," he said. "This is basically a pyramid scheme. This can only work as long as people are coming in at the bottom end. Unfortunately, you are running out of them."]

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“Carnival of NJ Bloggers”

The NY Times has an article today about the “Carnival of NJ Bloggers.”

"IN a perfect world, the Carnival of the New Jersey Bloggers would be a proper carnival you could take your kids to, with cold lemonade at the Parkway Rest Stop, sword swallowing by Mister Snitch!, dunk-the-blogger booth at Mary's Lame Attempt at Fame, house of horrors at the Bad Hair Blog and the rest.

But then who in New Jersey contemplates a perfect world? So, absent perfection, for another glimpse of New Jersey Ascendant, check out the weekly assemblage of all things Jersey that has taken on a life of its own on the Internet."

Continue...

Here is the Carnival logo and link Button


Carnival-small

Not For Sale

The Wall Street Journal (subscription required) has an article today about how some home owners in hot housing areas are putting up signs on there properties that say “Not For Sale.”

“Consider it a sign -- or signs, rather -- that homeowners throughout the U.S. are getting fed up with the booming housing market and especially the rapid pace of development.

With soaring home prices encouraging developers to snap up available land, homeowners in some of the booming regions have begun posting "Not for Sale" signs in their homes and yards to protest the activities of overly aggressive developers and other would-be house buyers.

The "Not for Sale" signs are popping up in the midst of what appears to be one of the longest and most broad-based housing-boom cycles ever. Home prices rose nearly 11% nationwide in 2004, the highest jump since 1979.”

"Stresses and Strains"

This commentator believes that the economic imbalances will eventually result in a bursting of the bubble.

Snip…

“We have been through this many times before, most recently in the early 1990s, when hundreds of banks went belly-up, requiring a taxpayer bailout of $150 billion to protect depositors. Just five years ago, we saw the stock market bubble burst, wiping out vast sums of wealth. Both incidents resulted from a tight Fed policy, came about unexpectedly and while many experts told us economic fundamentals were sound.

I believe there are many stresses and strains in our financial system right now due to the housing bubble, Fed tightening, large budget deficits and international financial imbalances. We might survive a threat from one, but not all. Sooner or later, there will be a correction.

Big Toxic Property

Ciba-Geigy has apparently come up with a plan to develop a huge piece of property, which is also a superfund site. Last week we pointed out a Hovnanian plan to develop a site in the Highlands that also requires remediation. Fixing these sites up is a good idea. However, I can’t help but think that as memories dim, and disclosures are forgotten, successive owners of the properties in the future will be angry when they find out too late that their house is sitting on a former toxic waste dump.

“DOVER TOWNSHIP — New homes, a golf course and a mix of retail and office space could be developed on the former Ciba-Geigy Corp. Superfund site if a conceptual plan for the property becomes reality.

The plan, prepared by the Manhattan-based firm HLW International LLP, was presented Tuesday to the Toms River-Ocean County Chamber of Commerce.

It includes about 400 acres set aside for residential development on the Ciba site's northern section, 200 acres for a golf course in the southern area of the property, more than 200 acres of mixed office and retail use in the site's center, and a 150-acre park along the Toms River.”

Continue…

Tuesday, July 12, 2005

National Foreclosures Up Slightly

We have been tracking the number of foreclosures in Monmouth County and have data that go's back about a year. The number of foreclosures in Monmouth had been growing pretty steadily until about two weeks ago, and then it backed off. Here is a link to last week's chart that shows the foreclosure trend.


"BOCA RATON, Fla., July 12 /PRNewswire/ -- According to data released today by online foreclosure listing service, Foreclosure.com, 23,057 new foreclosed residential properties were listed for sale in the U.S. during June 2005. The number represents an increase of 1.4 percent from May 2005. The total number of U.S. residential foreclosure properties available for sale in the U.S. during the month of June was 75,083, an increase of 1.4 percent from May."

More...

A Bubble Test

When you buy an asset purely on the expectation that someone exists that will pay more than you, you are speculating and not investing.

Snip…

“So investors can begin an informal test for bubble conditions by examining their own motives for buying a stock. If we are working from some reasoned appraisal of what the company might earn in five or 10 years, based on a study of its business model, we can hope we are on solid ground. If it's because ``they're talking about a price target of $500,'' probably not.

So too with houses, which in their essence are places for people to live in, not price-appreciation vehicles. It's a reasonable certainty that people will always need a roof over their heads; price appreciation is a wish, not a need.”

Continue…

Look Out Below, Down Under

As this article points out, the Australian housing market is starting to get pummeled. Even though Australia is thousands of miles from the Jersey Shore, it could be a harbinger of things to come for our area.

“The property market slump is starting to bite and it looks as though the rough ride could last a while.

Sydney is enduring its worst real-estate climate for 15 years and Melbourne, while a little better, isn't far behind. A 22 per cent fall in established home sales, hefty falls in building approvals and disappointing sale prices paint a really ugly picture.

The question is, where are we in the cycle: the depths of the downturn, the finish or just the start?

All investment markets ride a boom/bust cycle but in property a bust can be followed by a long period of stagnation. Think about this:

* The Economist magazine's property index shows that Australian house prices are overvalued by 50 per cent; that the last property boom was bigger than the dotcom bonanza of the late 1990s; and that the global housing market of developed countries has been on the same roller-coaster.”

Continue...

Maybe No Slowdown Until 2006

The Mortgage Bankers Association is predicting that the housing market stays hot through at least the end of the year. The market seems to have momentum all of its own and I would probably still shy away from aggressively betting against future, near term, real estate gains. Although there is little evidence of a house price correction, maybe the release of corporate earnings over the next few weeks will offer some insight as to what bank lending practices were like in the second quarter, or how homebuilders view the market.

“WASHINGTON, July 12 (Reuters) - The hot U.S. housing market will hit records in 2005 but begin to cool off in 2006, the Mortgage Bankers Association said on Tuesday in a forecast that changed earlier predictions of a slowdown this year.

The group said sales of both new and existing homes will hit new highs for the fifth consecutive year as long-term, fixed mortgage rates climb gradually through the end of 2005.

Existing home sales should increase 2 percent this year but decline by 3 percent in 2006 while new home sales rise 2 percent in 2005 and then drop 4 percent in 2006, Mortgage Bankers Association Chief Economist Doug Duncan said.”

Monday, July 11, 2005

High Vacancy Rate at Shore Could be Interesting Signal

This article points out that there are a lot of summer houses in LBI that are still available for rent. In my opinion, this is an interesting development and is a telling signal that the supply/demand dynamics are not balanced at the Shore. The only way that the excess rental supply can be absorbed is by reducing the rental prices. The high rental asking prices are obviously necessitated by the exorbitant prices paid to purchase the property in the first place. Eventually, some of the over-levered owners of LBI properties are going to have to sell their properties because the rental income is below the carrying cost of the property.

Notice that the article says that this is the “third year in a row” that the rental market has been trending downward. Probably not coincidently, we seem to be in about the third year of the housing bubble.


[“Filling rentals on LBI no breeze this summer

By NICOLETTE KOTSIANAS For The Press, (609) 978-2013

The signs are still everywhere.

Take a drive along Long Beach Island's main thoroughfare and look down the residential streets of the bustling shore community. Rental signs are planted in lawns advertising that, even in the second week of July, there are still vacancies.

With the July Fourth sparklers now fizzled out, real estate agents say that some homeowners on the island have scrambled to drop prices for a week's stay in their home. Those scouring the Web for a summer rental will find dozens of new, more affordable properties popping up this week, listings that were not there just two weeks ago.”]

go...


And a reader ads,

This isn't just a Jersey Shore story.

The same is true for vacation properties in the Carolinas. Think about it (I don't remember where I picked this up). You have more and more people buying second homes. Maybe before those people came to the area and rented.

They're now not only out of the market, but expanding it by looking to rent their own second home for a stretch. The simple economics of expanding supply and increasing demand with an element of compounding.

Ben Jones Site is Back at the Old URL

Best Article About Jersey Shore Real Estate Yet

You can’t afford a house at the shore because this guy owns three. As the article points out, prices at the Shore have gone through the roof. I think what will help force prices lower eventually is when Mr. Swanick decides he only needs two houses (one in Philly and one at the Shore) because the other two houses the he owns are not increasing in value by 15% each year, and he decides to sell.

“The rise in prices along the 127-mile (204 kilometer) stretch of Atlantic Ocean is three times as fast as in the rest of the U.S., according to data from the association. The surge was featured in a June 29 broadcast by Philadelphia's WPVI-TV entitled ``Jersey Shore Housing in Demand,'' which said area residents are taking advantage of low mortgage rates to buy second homes in areas where they grew up.

John Swanick, a partner at a Philadelphia-area accounting firm, is one of those who returned. After vacationing in Sea Isle City as a child, he bought a place in 1992. Swanick, 44, currently owns three properties in town and said he may buy one more in the next few weeks. He estimates the four-bedroom townhouse he bought in January 2001 for $485,000 is now worth $1.3 million.”

more...

An Eye on San Diego

House prices at the Jersey Shore don’t seem as ridiculous as Southern California. When prices finally do fall in California though, I think that the whole nation will feel it as national banks are forced to raise their lending rates across the board in order to make up for increased loan losses.

["Trees don't grow to the sky," said Delores Conway, director of the Casden Real Estate Economics Forecast at the University of Southern California's Lusk Center for Real Estate. "Twenty percent annual price increases are not sustainable. We are anticipating a soft landing. That doesn't mean prices won't go slightly negative, a 5 percent depreciation or thereabouts in the next couple of years."

But California, with a history of boom-or-bust economies, may be on a different course from other high-priced areas.

Continue...

"In most parts of the country when we have seen unsustainable price gains, rather than price declines we have seen a period of very slow gains," said David Berson, chief economist of Fannie Mae, the federally chartered mortgage company. "In California when we have seen rapid price increases, they have tended to be followed by declines." ]

Philly ‘Burb in Jersey is Best Place to Live

I’m glad that the other Jersey towns that made the list (Chatham, Princeton and Hackettstown) are no where near the Jersey Shore. The last thing this area needs, if you are a potential house buyer, is positive press touting how “wonderful” the Shore is.


[MOORESTOWN, N.J. -- In this tree-lined suburb of Philadelphia, the schools are considered top-notch, police dutifully caution motorists who don't yield to pedestrians and, each winter, they make a big deal out of something called Random Acts of Kindness Week.

If you think that makes Moorestown sound idyllic, you're not alone. In an issue being sent to subscribers this week, Money magazine proclaims it the nation's best place to live.

Money looked at towns with at least 14,000 people and crunched the numbers on population, property value, school quality, recreation, safety and other factors. Magazine reporters were dispatched to the 12 top towns to decide which had the most community spirit.]


Rest of article...

Sunday, July 10, 2005

Ben Jones New URL

This is the new, maybe temporary, URL for the Ben Jones "The Housing Bubble" Blog.

http://libertysoup.com/

Granite Counter Tops, Sub Zero Fridge, '83 Datsun

The theme of a shrinking middle class seems to be popular with the press this weekend. Before people start selling their houses because they owe too much debt, maybe we'll notice people selling off their $35,000 SUVs and buying older model fuel effcient cars, like the Datsun 210 from 80s.

Snip...

"A new class seems to be developing. I call it the “House Poor”. In this over-heated real estate market where homes are selling above list prices and speculative buyers are quickly flipping properties at a record pace, the House Poor are keeping up with the rising cost of living by paying the bills through home equity extraction, home-equity loans and cash-out refinancing. While many homeowners believe they can live like the upper class and appear to be wealthy, they’ll be the first to end up in the poor house. Those easy money real estate speculators who purchased several investor properties are now beginning to see that renters are more difficult to find these days but the bills to maintain their properties keep coming in."

Full article...

Everything Luxury

Another article about the middle-class being priced out. I don't think anyone, no matter how little they make, wants to appear that they are at best middle-class, so they spend all of their money on their most conspicuous asset, which is their house.

Snip...

"That's because virtually all of the new apartments and houses are "luxury" units aimed at professionals with big-city salaries and empty-nesters with generous retirement accounts and houses to sell. The equivalent of 22 times the number of units in midtown Manhattan's Trump Tower will be built in coming years across the northern suburbs.

Yet, this next wave in housing shows a distinct mismatch with the needs of the vast majority of people living here. Only one in five households in the northern suburbs earns the $130,000 or more needed to afford the new housing. Two out of five make $60,000 or less."

More...

Talking About Red Bank

At this site, www.wirednewyork.com some forum participants are discussing why Red Bank might be a nice place to live. I generally agree that Red Bank is nice and often consider buying there my self one day. However, probably unlike some people that are not completely familar with the town, I realize that I would have to send my kids to a private or parochial school since Red Bank's school sytstem is in pretty poor shape. On the whole, I think Red Bank's crappy schools are reflected in the house prices, and I wouldn't be surprised if the relative cheapness of Red Bank property completely offsets the dollars needed to send the kids to a private school.

["I have not been to Red Bank yet, but I will get there this summer. I know 3 couples in Hoboken that are in the process of moving there now. Supposedly, Red Bank is drawing a ton of people from Hoboken as their choice for suburban life when they leave the 'boken."]

Here is the whole discussion.

Condos Fueling the Boom

When I used to own a condo, I distincly remember hearing stories that in the 80s, condos were the last to rise in value and the first to fall. I'm hoping that when this bubble has finally run its course, I'll be able to afford both a house at the shore, and either own or rent an apartment in NYC.

Snip...

"Lines of people waiting to buy condos for quick profits and white-hot real estate - it's all part of what some analysts are calling the biggest real estate bubble in America. In Miami, the construction crane could become the new state bird as some 25,00 new units are punching into the skyline - with another 40,000 on the drawing board. And with prices going up 27 to 37 percent per year in the past two years, some buildings' ownership is up to 70 percent investors.

The huge new supply of condos, combined with sharply rising prices, is causing some to break out the storm-warning flags."

Go...

Influential Housing Blog Hacked

Ben Jones site at www.thehousingbubble2.blogspot.com is having technical problems and may have been hacked. It looks like he might try to get things going again at http://libertysoup.com/

It will be interesting to find out if his site was actually hacked. If it was hacked, it might be time to break out the tin-foil hat.

Editorial Questioning the Existence of a Bubble

The thing that makes the stock market less risky than the real estate market is that government rules prevent you from leveraging up more than 50%.

Snip..

"Now, these trends would be something to worry about if the rush on housing were like the high-tech boom that led to the stock market collapse at the end of the 1990s. But it isn't. As Federal Reserve chairman Alan Greenspan has said, there are "signs of froth" in some housing markets that could lead to a quick drop in prices, but nothing that threatens the economy nationally.

This is because, unlike stocks, real estate - even when it loses market value - still has practical use. A stock can evaporate into thin air, but you can live in a house, rent it, renovate it or tear it down and rebuild. You can even sit and watch the paint peel if you want, because it's yours."

Go...

Steel Bubbles

["The housing bubble seems to be made of steel," Leaf said. "It may be a bubble that's not going to break."

Such talk defies history. Real estate is a cyclical business, affected by supply, demand, interest rates, economic conditions and personal tastes. And whenever someone thinks things never will change, they have a tendency to change just about then.

Many here recall a time not so long ago when San Diego's housing market soured after a boom that had prompted the same concerns about rising prices and a lack of affordability that are heard today.

The last real estate downturn in San Diego began around the time of the 1991 Persian Gulf War.]

Continue...

Saturday, July 09, 2005

Charting Housing and the Nasdaq

Here are two charts that compare the Nasdaq and the residential housing markets.

http://www.rambling-thoughts-on.blogspot.com/

More About Atlantic Highlands Hovnanian Project

"ATLANTIC HIGHLANDS — A developer presented a revamped proposal for the McConnell Oil site on Wednesday as residents continued to speak against the plan, saying it still is too dense.

Barry McCarron, the Shore-area president for K. Hovnanian, presented conceptual plans for a community of 42 residential units. The plan includes 32 two-story, 3,000-square-foot, single-family homes and two two-story buildings each holding five 1,000-square-foot town houses."

Friday, July 08, 2005

The MLS System is Acting Weird

I had been checking the MLS for Eastern Monmouth County on each Wednesday. Unfortunately it is now spitting out weird numbers that seem out of whack with the earlier number of listings. For example, the number of houses listed now is about 400, but last week it was 2,700. In any case, I probably will not be able to rely on these numbers anymore.

The number foreclosures listed by the Monmouth County Sheriff was down substantially this week from 39 to 24. Posted by Picasa

The High Oil Prices Will Sink Us

The housing market in Toronto and other parts of Canada are as hot as any other in North America. The author argues that high energy prices might eventually help deflate the bubble. Personally, I bet the catalyst for the property bust will involve some sort of unwarranted government intervention in either the real estate market directly or other markets indirectly. A number of congress people on both sides of the aisle have been clamoring for trade protections against China and I can imagine a situation where the Chinese seek some sort of retribution and end up destabilizing currency and/or credit markets.

“YOU DON'T have to be a rocket scientist to figure it out:

Sooner or later these gouging world oil prices -- which hit a record high of over $61 US a barrel yesterday -- will kill off the consumer, and global economies will fall.
In fact, this could be the trigger to burst a real estate bubble in many parts of the world, where overly indebted consumers have kept the house of cards from caving in by borrowing heavily against rising home equity with interest-only loans.

But for now there's no end in sight to an explosive real estate market, especially here in Toronto, where condos are going up everywhere and June crunched in as the second-best ever for the Toronto Real Estate Board.

In total, an amazing 9,153 homes sold in the GTA last month -- down 1% from the best June ever last year, when 9,275 homes sold. “

Continue…

Talk of an NYC Condo Glut

Even though all these condos are going up in NYC, I still doubt the number represents a “glut.” As the article points out, there are very few condos compared to co-ops and I think if there were more, plenty of people would be willing to sell a larger co-op to buy a smaller condo, since co-ops come with so many strings attached.

“Even by conservative estimates, the amount of new development hitting the market in Manhattan in 2005 will be double that seen in 2004.

The Real Deal counted 4,827 new apartment units approved for sale in Manhattan last year. There have already been 3,028 units approved for sale in the first four months of 2005, putting Manhattan on pace to have 9,084 new units added in all of 2005. (The numbers don't include rental units, which aren't required to file similar offering plans with the state.)”


Continue

Middle Class Priced Out

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“A growing number of homeowners are realizing they can no longer afford to live in their home even though they’re “mortgage free”! The conservative sane homeowner who purchased a home over five years ago and refinanced a 30-year mortgage – without taking money out - is now stuck paying higher inflated taxes. Indeed, the home’s value hasn’t really gone up because the price and the cost of everything associated with maintaining it is spiraling out of control. In a very real sense, as the house price rises, the value is forced down because it becomes so much more expensive to pay for the darn thing!”

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Welcome to Sea Bright, Give Me Your Money, Go Home

Unlike some of the other shore towns further south, Sea Bright has never been a day trip destination for people from up north. The town is close enough to the NYC ferries to make it attractive to live in during all seasons and seems to be a more popular place to live for singles compared to the other towns in the area. I always thought that Sea Bright had a slightly more “bennies go home” attitude than other towns, so that even if one did stop to shop, you usually didn’t feel welcome. Also, even though the bar scene has quieted down compared to 10 to 20 years ago, I’m sure a lot of those bar patrons, that are now all grown up, associate the town with its not-so-friendly police force when passing through and just keep going.

“SEA BRIGHT — Borough resident Christina Doxey would someday like to see people actually coming into the downtown rather than just passing through it.
A member of Sea Bright’s combined Planning and Zoning Board of Adjustment, Doxey envisions visually pleasing storefronts along Ocean Avenue, sporting colorful facades fascinating enough to entice motorists coming through town to stop in.”

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Thursday, July 07, 2005

NJ Pensions Invest in Real Estate

This will eventually cause property taxes to go up in NJ even more.

"When the tech boom went bust A few years ago, New Jersey's public pension fund was among the hardest hit in the country, suffering a loss in its tech-laden portfolio of nearly one-third of its value, or $30 billion. Now the State Investment Council has another great idea: In January it decided to jump into--this can't be a surprise--real estate."


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Another Hovnanian Development

Hovnanian plans to build a new development over a toxic waste dump in Atlantic Highlands. (Note to self and others: Before buying a house made by Hovnanian, make sure it was not built over a toxic waste dump, a uranium mine, or an ancient haunted Indian burial ground.)

"ATLANTIC HIGHLANDS, NJ - K. Hovnanian Homes filed an application Wednesday for a use variance with the Atlantic Highlands Planning Board for the development of 32-single family homes and 10 multi-family units on the former McConnell Fuel Oil tract fronting on Sandy Hook Bay."

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Condo Conversions In Jersey

The Jersey Shore probably doesn’t have that many rental properties compared to other so there is probably not much condo conversion going on. In Hoboken though, and some parts of Jersey City, the conversions are becoming rampant. The huge Tea Building in Hoboken is turning going condo and so is the North Constitution. I bet the developers that own these projects figure they can get a so much more cash up front than they ever would trying to rent the places out.

[“The number of apartments being renovated and sold as condos is escalating at a time when single-family homes are beyond the means of many Americans.

At least 70,800 apartment units were sold to condominium developers nationwide in 2004, up from 7,800 in 2002, according to Real Capital Analytics, a New York consulting firm.”]

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According to other posts I have read on other blogs, when the condo market catches fire, that is when the real estate market in general is near a peak. The condo market in North Jersey and the Shore is certainly very hot right now.

Too Much Speculation

Here is a decent writeup.

"Since rental yields are so low, those buying properties as investments are by definition speculating," writes Peter Schiff, president of Euro Pacific Capital. Buyers of vacation homes "are also speculating, as inherent in the decision to buy such properties is the expectation of price appreciation. Absent such a forecast, it is far more economical to vacation in hotels."

Maybe Housing is Cooling

There seems to be very little statistical evidence that housing market is cooling, but more anecdotal evidence seems to be surfacing. According to one Monmouth County broker, the southwestern part of the county is seeing homes move slightly more slowly than a few months ago. Still, that is hardly evidence of a pronounced drop off in demand for houses.

[“Realtors across the country tell the NAR that houses are taking a bit longer to sell, according to Lereah. Nor are bidding wars for properties nearly as rabid as they've been in recent months.

In sizzling markets from California to Florida, some houses still sell in a day or two, with 15 bidders vying for desirable properties, he says.

But even some hot regions — Los Angeles, San Diego, Chicago, Las Vegas — are seeing houses stay on the market longer, with prices not rising as rapidly as before.”]

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Freddie Mac Revises Forecast

Freddie Mac Revises Forecast

“Freddie Mac, in an updated economic forecast released Thursday, predicted house prices, which soared by 11% last year, will increase by 7.9% this year. That's up from an earlier projection of a 7.7% rise for 2005. Next year, home prices should grow by 6.8%.”

Wednesday, July 06, 2005

Like the Nasdaq in 2000, Only Worse

“As the “debate” over the existence of a housing bubble intensifies, both sides are likely to be proven wrong when it comes to predictions for housing declines should the bubble burst. Most bubble advocates believe that rather than collapsing, housing prices will either rise more slowly, fall slightly, or simply stop going up, thereby allowing stagnant incomes to catch up with surging prices. However, a closer look at the facts reveals it is far more likely to burst with as big a bang as did the NASDAQ five years ago.”

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When All the Crappy Neighborhoods in NYC are Bid Up

When all of the crappy neighborhoods in NYC have been bid up, you can always try to invest your cash in Philadelphia’s slums.

“AT 8 A.M. on a recent Saturday, 40 people boarded a chartered bus leaving mid-town Manhattan in search of financial independence on the mean streets of Philadelphia.

Their mission was to buy relatively cheap Philly properties that will provide positive cash flow as rentals or that can be quickly resold for profit.

Many of these economic freedom riders are New Yorkers, but at least one hails from Australia and another drove all the way from Chicago. Both came especially for the day trip arranged by New York City Cash Flow.”

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Paper of Record Editorial

The NY Times’ lead editorial today concerns the risky mortgages that are helping to fuel the housing bubble. In general, I think the NY Times, the Wall Street Journal and the Washington Post have doing a good job of keeping people informed about the bubble. On the other hand, as has been pointed out, there are a lot of people out there who have no clue as to what is going on because they don’t pay attention to the news.

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“What makes this boom particularly unnerving is that it owes much of its longevity to the explosion in the number of risky mortgages. Many borrowers are likely to be pinched, if not creamed, when interest rates rise or housing cools, leaving them unable to make payments, refinance on favorable terms or sell at a profit. Lenders may be even more vulnerable than borrowers, which may mean an economywide disruption if - or when - housing prices stagnate or decline.”

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New Book About Asbury Park

This new book about Asbury Park looks pretty interesting. I’m glad that Asbury Park seems to finally be turning around with all of the new development there. Hopefully the current housing bubble doesn’t force the developers that are there now to abandon projects before completion.

“For years, the decaying community of Asbury Park, N.J., has fascinated Upper Nyack writer Daniel Wolff.

Tomorrow marks the official release of the book on Asbury Park that Wolff has spent the past five years writing as a dual examination of American urban growth and a tribute to Bruce Springsteen.

"It's about not only its history but how it reflects the national history," Wolff said. The New Jersey resort town rose from an ideal, grew and crashed during the late 1920s and early 1930s like the stock market, went through urban renewal and race riots and now is aiming for economic regrowth with a privately financed waterfront development.”

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Everyone is Doing It.

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1. Everyone is doing it. When a lot of amateurs, with no particular expertise, are blindly putting every cent they have into something, that is the time not to put money into whatever they are doing. People who don't know a two-by-four (a piece of lumber) from a granite counter top are borrowing and erecting $2 Million dollar spec houses.

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Tuesday, July 05, 2005

More UK Housing News

If the UK housing market is hitting a soft patch, then the US probably will too.

"Housebuilder George Wimpey has warned that its profits will be cut by a "considerable softening" in the UK housing market.

Wimpey said profits for the six months to 3 July would be "well below" the record levels enjoyed at the same time last year, with UK sales down 17.5%."

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What Could Happen Here.

Concerns are starting to mount in the UK that the softer house prices there are leading to reduced consumer demand for other goods.

"Some of Britain's most senior business leaders are calling for an urgent cut in interest rates, putting pressure on the Bank of England ahead of the latest meeting of the monetary policy committee, which begins on Wednesday.

Sir Digby Jones, CBI director-general, will tell a business audience in Merseyside that new figures showing the worst year-on-year retail sales decline in 22 years, growing corporate concern over weak profits and signs of housing market decline make this the ideal time for a rate cut."

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Educating the Clueless

Even though talk about a housing bubble has been rampant, I can't help but think that the actual number of people that a paying is pretty miniscule. As this story points out, only about a quarter of the people in a recent poll say that they have heard of a housing bubble.

"I guess the gang in question hadn't heard about the poll by the National Association of Realtors. The poll found that only 23% of respondents had heard of a housing bubble, and that lots of people didn't even understand the "bubble" part of the question.

I also have to wonder if your average economist knows of the recent data on homeowner equity, which stands at 56.3%, only a sliver above the lowest level on record."

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Monmouth County Foreclosures +5 from the previous week to 39. Posted by Picasa

Planes Over Point Pleasant

I was at the beach in Point Pleasant over the holiday and I noticed quite a few flying banners that were advertising some of the home builders. In particular, Kara Homes and Hovnanian seemed well represented. Also over the weekend, there was a lot of discussion about real estate at the barbecues I attended. The consensus view among "old-time" Shore residents is that everything is way too expensive. The new condo's in Long Branch seem to be especially laughable considering how much the properties taxes are ($10,000+/year) and how crappy the school systems (almost as bad as Asbury.)

The Austrailian Example

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"In the last two years, though, the Australian housing boom has come to a halt, in a move that many experts see as the first signs of the end to a housing bubble, not just in Australia, but also in the United States as well as several other rich countries around the world."

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Monday, July 04, 2005

If You Have 20 Minutes to Kill

I f you have 20 minutes to kill, read this extensive article.


"Looking at a recent magazine covers one is left with the impression that the whole...

... world is concerned about US real estate prices. This is borne out by the fact that if you go to Google and type in sex you get 78,000,000 hits. If you type in real estate you get 110,000,000 hits, which makes housing about 40% more interesting than sex. Is there a greater sign of a bubble? But if you type in housing bubble you get "only" 1,120,000, so there is not much worrying going on. While the above facts do not constitute a scientifically valid study, they make a fun launching point for this week's letter. Are we in fact in a housing bubble? How long will prices continue to go up? Will they start to fall, or even crash, and when? We explore all this and more."

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More Media Attention

["Will The Housing Bubble Burst?" asks New York's Daily News. "After the Housing Boom," says a Business Week cover story. "Some Economists Warn of Housing Bubble," says The Washington Post. A Time cover story has some experts warning of a bubble inflated by a "psychology of greed." "Are Home Prices Really So Crazy?" Money magazine asks in a 43-page section. The Economist's cover shows a brick, labeled "House Prices," plummeting to earth.]

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Friday, July 01, 2005

39 Foreclosures

The Monmouth County Sheriff listed 39 foreclosures this week. That is up 5 from last week.

It’s Pronounced “Aaah-von”; Soft A

If you want people to think you were born and raised on the shore (and maybe you don’t) knowing the correct way to pronounce Avon-by-the-sea is essential. The “A” is soft, as is apple or alimony, not hard like Avon the cosmetics company, or ape.

[The onslaught begins every Friday at New York Penn Station in the sticky, rush-hour mayhem. They come loaded with beach chairs, beer and surfboards.

"It's easy to spot the bennies," said Irene Fulton of Old Bridge, referring to the weekend tourists she has been sharing her Friday night commute with for 10 summers.
"They're messy, they're noisy, they put their feet up on the seats, and they nearly knock you over with all their luggage. They think this is the party train."]

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Prices Keep Going Up in NYC

Prices for co-ops and condos keep hitting new records and I bet that people cashing out of those properties in the city are putting some of that cash into Jersey shore real estate. At this point, NYC has got to be way too expensive for a family to live in if you are making less than $300k per year. On the other hand, when gas prices hit $7.00 a gallon, maybe those New Yorkers who stayed in the City will look pretty smart since they can walk everywhere.

“New Yorkers can worry all they want about the bursting of the real estate bubble - but it hasn't happened yet.Manhattan apartment prices rose to record highs in April through June - with the average sale topping $1.3 million, according to a study by appraiser Miller Samuel.

"Despite all the negative discussion about the housing boom, buyers are very aggressive," said the firm's CEO, Jonathan Miller, who prepared the study for residential brokerage Prudential Douglas Elliman.”

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