Wednesday, November 30, 2005

3065 Listings in the Eastern Monmouth MLS

Last week the count was 3120. It seems like a lot of listings are getting pulled in time for the slow holiday selling season. I seriously doubt the decrease in listings is due to increased sales.

Tuesday, November 29, 2005

Head Fake

The Commerce Department released new home sales for the month of October and the results were a lot better than what housing bears and many economists were looking for.

There seem to be lots of opinions as to why results were so strong, especially after the weakness in existing home sales yesterday. My own theory is that home builders offered major upgrades, rebates and incentives in the period to move their inventory. Moreover, I think the incentives would not show up in the sales price that is reported but will eventually show up in fourth quarter earnings as a reduction in the builder’s gross margin.

For example, I would guess that a home builder will list to sell a $350,000 house and offer an upgraded kitchen with a value of $15,000 instead of just reducing the sales price to $335,000. By doing this, the comparables still look strong.

“The Commerce Department reported that new home sales rose by 13 percent in October to a record 1.424 million annual rate, apparently contradicting other signs that the U.S. housing market may be coming off the boil.
Wall Street economists had expected to see sales slow to a 1.20 million pace from the 1.22 million rate in September.

But the report also showed that home prices were not rising at quite the same pace -- up 1.6 percent -- and the number of homes still on the market reached a record 496,000.

"The demand for new housing surged, likely because rising mortgage rates motivated some potential homebuyers to accelerate their buying decisions," said Steven Wood, economist at Insight Economics in Danville, California.

However, Wood noted that inventories of unsold new homes were also climbing.
"Moreover, despite the huge increase in sales, home price momentum has slowed as home builders are beginning to use discounts to motivate buyers," he said.”


Treasuries and Real Estate Data

The way that the treasury market reacts to the housing data that comes out leads me to believe that the bubble will deflate over a long period (18 to 24 months) rather than pop in one or two specific periods in the near term. If you watch the treasury bond market you'll notice that it (prices) rallies on negative housing news and falls on positive housing news. This is because the market belives that if the housing market is defalting, then the Fed will stop increasing interest rates. Conversely, the market believes that if the housing bubble keeps inflating, then the Fed will keep raing interest rates.

The cycle feeds on itself though. Fed raises rates, housing bubble deflates a little. The Fed, happy that housing is deflating, does not raise rates causing mortage rates to fall and housing demand to increase agin. Repeat.

Monday, November 28, 2005

Today’s Wall Street Journal

This is from today's WSJ. Although you need a subscription to read the whole article, you'll notice that the Northeast had the biggest drop in sales compared to the other parts of the country.

Soft Landing?


There now appears to be little question that the homes market is slowing down. The National Association of Realtors reported Monday that sales of existing homes fell 2.7% in October to a seasonally adjusted annual rate of 7.09 million. The decline might have been even steeper were it not for residents displaced by Hurricanes Katrina and Rita relocating to nearby cities. Sales surged 83% in Baton Rouge, La., by 32% in Mobile, Ala., and by 14% in Houston. But even amid those eye-popping local numbers, sales in the South were down 1.8%, and weakness was experienced in housing markets nationwide; sales fell 7.4% in the Northeast, 1.9% in the Midwest and 1.2% in the West.

Slower demand meant more homes were left with for-sale signs still planted firmly on the front lawn: the inventory of homes on the market rose to a 4.9 months' supply in October, from September's 4.6 months' supply. Meanwhile, the median sales price rose 16.6% on an annual basis to $218,000. That was the biggest increase since a 17.2% jump in July 1979. "Supply clearly is outstripping demand as homeowners try to take advantage of record high prices in many regional markets," economists at Nomura Securities International wrote in a note to clients.

More (Registration required.)

Jackson Developments

The Asbury Park Press has an article today about development in Jackson. I have seen a lot of Jackson and Howell lately and those towns are certainly not as rural as they used to be. Howell and Jackson seem to have a lot of new, classic “MacMansion” style homes that are probably pretty cheap relative to the same type of house in Holmdel, Manalapan or Marlboro. I would guess that the people buying MacMansions in Jackson are 1.) People who don’t realize that driving to Jackson from Hoboken on a Saturday morning to look at houses (an hour and a half drive) is not the same as driving the same route on a Tuesday night in all kinds of commuter traffic (a three hour drive), and 2.) People who live in Ocean, or Eatontown or other towns closer to the beach who cashed out of their home, and who work locally, and want a bigger place further south and further west, without leaving the state.

Friday, November 25, 2005

A Henry Hudson House

One of my favorite areas in Monmouth County is the highlands area, which includes the towns of Highlands, Atlantic Highlands, Locust, and Navesink. There is a house in that area that I particularly like that has been for sale since last March. Last March, when I saw its price and description, it actually seemed to me to be a relatively decent deal. However, as the bubble talk started to heat up in the spring, and through the summer, I became more convinced that buying a house now in the highland area would be the equivalent of throwing cash into Raritan Bay. What is even better though, is that the house is still listed and the asking price has been reduced by about 13%. Nevertheless, even though I think the house is very nice and the asking price is lower now than it was 6 months ago, I'm even less tempted to make an offer now than I was last April since I have become more convinced prices have a lot further to fall this coming spring.

Jackson and Howell FSBO

As many of you know, I post the number of houses that are listed for sale on the MLS for eastern Monmouth County every Wednesday. The MLS system doesn't usually doesn't show houses that are being sold by the owner (FSBO), so the actual number of houses for sale in anyone are is larger than what the MLS system indicates.

Driving around the Howell and Jackson area the past few days, I noticed lots of FSBO and "assist to sell" property signs along the roads. I would guess that these towns, since they are realtively cheap compared to towns closer to the ocean, have seen more speculator interest. Moreover, I would guess that the large number of "for sale" signs (both Realtor and FSBO) that I saw down there this weekend is indicative of speculators trying to bail out before the market turns really ugly in the Spring of 2006.

For Sale, Beach Front Property in Freehold

"Nov 17, 2005 6:46 am US/Eastern
(1010 WINS) PRINCETON, N.J. Rising seas caused by global warming and other factors will likely have dire consequences for New Jersey.

A report released yesterday by Princeton University says the rising seas will submerge sections of the state's highly developed coastline by the end of the century."



Wednesday, November 23, 2005

Listings at 3120, Down from 3141 Last Week

The number of listings on the Eastern Monmouth MLS dropped slightly for the first time since probably around August. I wonder if listings are being pulled ahead of seasonally slow holiday periods. I’m pretty sure that I have seen some information that shows December is one of the slowest periods of the year for listing and looking at houses, which makes sense.

Tuesday, November 22, 2005

Contact Me Via E-Mail

I realize that the registartion process for this blog can be cumbersome at times. (That's because I get lots of comment spam.) In any event, if you would like to submit a story or have a comment and would like to stay anonymous (or not), and you don't want to use the comments section, you can always send it to my e-mail at

Ferry Service in Trouble

One of the attractions of Monmouth County is the ferry service to NYC from the Bayshore. The ferry operators are having a problem making any money and it looks like more fare hikes are coming.


"That announcement came as another operator, New York Water Taxi, continued suspension of its service across the East River, at least through the weekend, because of a shortage of boats. A third company, SeaStreak, began searching for a buyer for its high-speed commuter operation based in Monmouth County, N.J., SeaStreak's parent company, Sea Containers Ltd., says it will lose almost $3 million this year.

On Monday, Water Taxi took over the service SeaStreak had been providing between South Amboy, N.J., and Lower Manhattan, using its two larger boats and one leased ferry. But it immediately raised the price of a 40-trip ticket by almost 20 percent, and ridership declined by 40 percent."


How Mortgage REITs Work

The housing bubble expanded because of easy access to mortgages. Many of the companies that have provided the mortgages are mortgage REITs. Over the past few months, a number of mortgage REITs have been forced to cut their dividends suggesting that their cash flows are not what they were earlier in the year.


[Annaly makes money on the difference between its cost of funds and the yield on its mortgage securities, which is generally higher. It invests in both fixed-rate mortgages, which follow long-term interest rates, and adjustable-rate mortgages, which follow short-term rates, though with a lag.

Since June 2004, the Federal Reserve has raised the federal funds rate 10 times. That has caused a sharp rise in short-term rates, raising Annaly's cost of funds. Usually, when short-term rates rise, long-term rates also rise, although not as quickly. This time around, long-term rates have actually dipped since the Fed began raising rates, resulting in a yield curve that is nearly flat.

That has narrowed the gap between Annaly's cost of funds and the yield on its mortgage securities, and thus its profit. Because REITs pay out 90 percent of their earnings, it has been forced to slash its dividend.

"That REIT is a fairly transparent view into what is happening in hedge funds sitting on a lot of fixed-rate assets financed with short-term assets," says Jim Fowler, director of research with JMP Securities. "You are going to see significant issues in any type of company that has this type of trade on."]


Monday, November 21, 2005

Hoboken No Sale

I had a chance to wander around Hoboken this weekend and noticed tons of open house signs along Washington Street that pointed to apartments on the “Presidents” streets further west. Weichert was particularly aggressive with their signs and balloons.

From what I have seen and from what I have heard, inventories of one and two bedroom apartments are building rapidly in the western half of Hoboken, which is less desirable than the eastern half of Hoboken. The obvious slowdown in condo sales in parts of Hoboken is not a good sign for the more bucolic suburbs of the Jersey Shore, western Jersey (i.e. Chatham) or points north (i.e. Tenafly) since the buyers of single family houses in those areas are often the sellers of starter type condos in Hoboken, NYC and Jersey City. Hoboken is a feeder town for the more traditional suburban towns. As families grow, the two bedroom condo bought a few years ago starts to get pretty cramped and suddenly the daily hour-and-ten minute commute to NYC from a Marlboro McMansion becomes unavoidable (instead of the 20 minute commute from Hoboken). In my opinion, this cycle, which has persisted since at least the late 80s, when Jersey City and Hoboken finally became habitable, could be slowing as the overall housing market cools. As I have said before in this space, if you can’t sell the two bedroom condo on Jefferson Street in Hoboken, then you can’t buy the three bedroom ranch on Jefferson Street in Middletown.

(FYI - The "President streets" of Hoboken are located west of Willow. Back in the day, this was generally a no-go area when looking for a place to rent fresh out of college. Although the president streets are no longer as dangerous as they used to be, they are still kind of far from the Path, the ferry or regular bus service.)

Giant Hang-Over

This is a great article by Peter Schiff called With Real Estate, This Time it Really is Different. If any of your friends and/or relatives need convincing why the real estate bubble is bursting, then this is a good article to send them.


"The housing mania, like all manias that have preceded it, is finally coming to a long overdue end. Time tested principles of prudent mortgage lending will inevitability return, and houses will once again be regarded merely as places to live. However, the country will be a lot poorer as a result of the unprecedented dissipation of wealth and accumulation of consumer and mortgage debt which occurred during the bubble years. Before real estate prices can return to normal levels, they will first have to get dirt cheep. It has been a wild party, but in the end all that will remain is a giant hang-over."

Full article

Sunday, November 20, 2005

The Economy and Housing

From todays NY Times.


"Asha Bangalore, an economist at Northern Trust in Chicago, tallied figures from the Bureau of Labor Statistics for sectors like construction, building material and garden supply stores. She found that from November 2001 to October 2005, housing and real estate accounted for a whopping 36 percent of private-sector payroll job growth. "In four years, 2.3 million private-sector jobs were created in the U.S., and 836,000 were related to the housing sector," she said.

Given everything else happening in the corporate world, the housing sector was the ideal place to have an investment boom. Building, selling, decorating and renovating homes is labor intensive. And unlike much investment in the broader manufacturing sector, the money pouring into the housing industry creates demand for American labor. Yes, some housing materials come from overseas. But virtually all the labor associated with housing - the roofers, the investment bankers who securitize mortgages into bonds, the clerks at Home Depot - is based in the United States."


Good Luck Asbury Park

I hope Asbury Park doesn't get stuck with a whole bunch of half built condos and buildings like they seem to every decade or so. Since it looks like the bubble is bursting as we speak, I can't help but think that some parts of Asbury Park won't suffer.

"ASBURY PARK — Westminster Communities has sold 20 percent of the 91 town homes, condominium flats and duplexes now being constructed in its first building, called the St. James, next to Wesley Lake.

The company opened its new sales and design center at 600 Cookman Ave. downtown Nov. 4 but the center is open only by appointment to potential buyers from a waiting list of some 1,500 people Westminster is contacting.

There is no date yet when the sales center for the Wesley Grove project will be open to the public, a company spokesperson said last week. Prices of the homes in the St. James range from the mid-$400,000s to the low $900,000s.

As Westminster developed its project in Asbury the past two years, its president, Sam Gershwin, said that the lakeside location close to the ocean and the new downtown shops and restaurants would be a strong marketing point."


Saturday, November 19, 2005

Almost Time for ARMs to Adjust


"The Mortgage Bankers Association estimates that some $330 billion worth of ARMs will adjust in 2006 and $1 trillion worth will reset by the end of 2007.

Since the average ARM loan is about $300,000, according to Freddie Mac, a trillion dollars probably represents more than 3 million homeowners who will face bigger bills in the next two years.

If you took out an 3/1 ARM for $300,000 back in late 2002, your initial interest rate was probably around 5 percent and your monthly payment has been about $1,610."


Don't Buy a House Now

Wait till Spring at the earliest to buy your house if you really have to make a purchase.


[No one knows for sure if we've reached the top of the real estate market, but a growing numbers of experts, like Bankrate's Senior Financial Analyst Greg McBride, are warning home buyers not to overextend themselves when looking for a new home.

"If you're buying a home now, you need to look at it from the standpoint of building that equity cushion. So if prices don't cooperate when it comes time to sell, you're not stuck owing money at the closing table."

McBride cautions one way to fall into a financial trap is with the popular interest-only loans - your money goes only to interest, not to principal. These loans enable buyers to pay a monthly mortgage they otherwise couldn't afford. But, what happens if the market falls?

Say you purchase a home for $600,000 dollars with a no down-payment, interest-only loan for the first 3 years and your mortgage is $2,500 a month -- after 3 years, you'll still owe $600,000, because you've paid only interest and no principal.

But, the loan now converts to a conventional loan and your monthly payment jumps to 41-26 dollars. To make matters worse, if the housing market drops and your home's value declines to $500,000, you would have lost $100,000 dollars in equity.]


Friday, November 18, 2005

Long Island Update from Newsday


["The illusion is gone that prices will just keep going up forever," said Robert Campbell, professor of real estate and finance at Hofstra University.

Last week the Multiple Listing Service of Long Island reported that Nassau County's median home price was $485,000 in October, up 7.1 percent from the same time last year. Three years ago the median price had risen 24 percent above the previous year.

Suffolk's median price in October was $390,000 in October, a rise of 8.6 percent in a year. Queens prices appear stronger, rising 19.2 percent from October 2004 to October 2005, now standing at a median $459,000.

In addition, the supply of homes for sale has risen markedly in the past year: 18 percent in Nassau, 20.6 percent in Suffolk and 26.5 percent in Queens.]


Flattening Prices in NJ

This was in yesterday's Asbury Park Press. The article mentions people from NJ moving to the Carolinas. As I posted earlier in the week, I visted NC over the weekend and met a number of people who moved from NY and NJ to NC because the taxes are lower and the houses are bigger and cheaper.


"But the demand is also determined by people's ability to afford the mortgage and property tax payments — something that will be hindered by slowly rising mortgage rates and salaries and wages that have failed to keep pace with the cost of living for many working families.

In the end, prices reflect what people are willing to pay for a product or service. The demand will fall if a comparable product can be had for less somewhere else. New Jersey's challenge is to keep homeowners from turning to Pennsylvania, Delaware, the Carolinas and elsewhere for a place to live.

The flattening prices in New Jersey may be another sign that the state is pricing itself out of the market. It's a reality officials in Trenton and in every municipality in the state must begin to confront."


Thursday, November 17, 2005

Housing's End?

Today's on-line version of the Wall Street Journal had this to say about the housing market (sorry no link.)

Housing's End?


The sawing and hammering of new-home construction in the U.S. quieted significantly in October, convincing many economists that a long-running housing boom is finally waning.

Housing starts dropped 5.6% last month, the Commerce Department said, though the annualized rate of home construction stayed at an historically high level of more than two million units. Still, it was the biggest one-month drop since March, and building permits, a leading indicator of construction activity, sank 6.7%, the sharpest decline in more than six years. The report follows a chain of evidence, in anecdotes and in hard numbers, hinting that some of the froth is finally coming out of the housing market. As 30-year mortgage rates have risen sharply, to nearly two-year highs, mortgage applications have slowed down. New home prices have fallen, the backlog of unsold homes has grown in several markets as houses have taken longer to sell, and the rental market has shown signs of new life. Not surprisingly, home builders have lost confidence lately, according to surveys, and today's report was evidence that they are cooling their nail guns.

Also, here is a reaction posted in the Journal from a Merril Lynch economist.

"While one month does not make a trend, forward-looking indicators were not that encouraging, in our opinion. Building permits were weak across the board as well, falling by nearly 7%, with declines in both singles and multis and most regions across the country. Backlogs tapered as well. Yesterday's homebuilders' sentiment index for November suggested that demand may be faltering as the index hit an 18-month low and prospective buyer traffic waned. The purchase component of the MBA index has recovered so far in November but is barely above the October average."

-- David Rosenberg, Merrill Lynch

Let the Layoffs Begin

Ameriquest is a major sub-prime lender and it looks like business is slowing down.

[ACC Capital Holdings, the Orange-based parent of Ameriquest Mortgage Corp., is laying off about 10 percent of its staff, or about 1,500 people nationwide, company officials said today.

"The mortgage industry is entering a challenging phase of rising interest rates," ACC Capital said in a statement. "In response to these changing market conditions, the ACC Capital Holdings family of companies is reducing its current workforce by approximately 10 percent. In cyclical industries such as mortgage lending, periodic workforce reductions are not uncommon."]


Wednesday, November 16, 2005

Reader Susmission - MLS for Beach Haven (08008)

It looks like a lot of houses are for sale for the zip code 08008, which is Beach Haven, NJ.

Date # of MLS Listings
08/15/05 481
08/22/05 496
08/29/05 505
09/06/05 533
09/12/05 567
09/26/05 592
10/03/05 621
10/10/05 635
10/17/05 641
10/24/05 646
10/31/05 656
11/07/05 657
11/14/05 660

Eastern Monmouth MLS up to 3141

The number of houses that are listed for sale on the Eastern Monmouth MLS keeps growing. Last week the count was 3118 and now its up to 3141. Since June 3rd, the number of houses for sale has increased by 516 or 19.7%.

As the Market Turns

The Asbury Park Press finally got around to covering the housing bubble today and published a pretty decent article describing what readers of this blog already know, that the real estate market at the shore has peaked. Some of the anecdotal quotes in the article are insightful and seem to confirm that house selling activity and prices have stalled.

[Home prices continued to increase in the third quarter in the region that includes Monmouth and Ocean counties, but there are signs that rising mortgage rates and other factors are cooling off what has been a sizzling housing market, real estate and mortgage brokers say.

The median price of an existing single-family home increased by 13.6 percent for the quarter, to $389,900, compared with a year earlier in Monmouth, Ocean, Middlesex and Somerset counties, the National Association of Realtors reported Tuesday. (The median is the point at which half the homes sold for more and half for less.)

While the double-digit increase is well above the inflation rate, it is down from the second quarter, when the median price in the region increased by 22.8 percent compared with a year earlier.

"The market has turned," said Drew Anlas, sales manager at Select Mortgage Corp. in Brick. "Things are stabilizing."]

Here is the e-mail of the reporter who wrote the story if anyone wants to ask him if he plans on doing any other stories.

Stupid Rationalization

The article in the Asbury Park Press today about home prices contained this gem.

“One fact that insulates much of Monmouth and Ocean counties against a significant drop in home prices is the limited supply of houses available, because there are few if any large pockets of land east of the Garden State Parkway on which to build, Anlas said.”

As we have seen from the numerous articles posted on this blog and others, house prices in every part of the country apparently can’t go down to far, according to some realtor, because it is insulated by some attribute totally unique to that particular area. In Westchester County, prices won’t fall because of the proximity to New York City. In Washington DC it’s heavy spending by the government. In San Diego it’s the weather. In Las Vegas it’s because the government controls the surrounding desert.

The “reason” the Shore is safe is one of the dumbest I have seen yet. No area is safe if people can’t afford to real estate there. When mortgage rates go from 5.50% to 6.25%, fewer people can afford the Shore and prices have to come down to clear the excess supply. Now that there almost 500 extra homes for sale in Eastern Monmouth compared to this past July, the only way those houses are going to be sold is if prices are reduced.

Important Index Moves Lower

[WASHINGTON (MarketWatch) -- Sentiment among U.S. homebuilders plunged in November to the lowest level seen in 30 months, the National Association of Home Builders said Wednesday.

The housing market index declined from 68 to 60 in November, indicating a weaker but still healthy market. The index peaked at 72 in June.

It was the biggest one-month drop since October 2001.

A reading over 50 indicates a plurality of builders say that market conditions are good.

All three components of the NAHB index fell in November: current sales of single family homes fell from 74 to 66, expected sales fell from 73 to 64 and buyers' traffic fell from 51 to 46.]


Tuesday, November 15, 2005

Jerseyites are Moving to Charlotte NC

This weekend I took a trip to Charlotte, North Carolina and I found out that this is where people move to when they sell there house in Brooklyn, or Bergen County or the Northeast in general. The houses that you can buy in the Charlotte area for $450,000 would easily cost $1.3 million in Rumson or about $900,000 further west in Marlboro or Freehold Township. Apparently, a lot of people from New York and New Jersey have realized this and have moved down there as I met four people in my friend’s brand new development who have made that trade. Not only do you get more for the money in Charlotte, property taxes are probably only about 20% of what they are here.

This migration of north easterners to the south east is one of the reasons that property prices can not go up indefinitely here at the Shore, or any other bubble areas. Eventually, the prospect of outsized profits causes owners to sell. More importantly, a simple un-affordability forces buyers to look elsewhere, and Charlotte, North Carolina looks like as good a place as any.

Wall Street Journal Hammers Away

Today’s Wall Street Journal had and extensive article on its front page entitled, Housing Market Shows Signs of Cooling. To read the article you need to have a subscription to the Journal, but here are some excerpts:


["The [house-buying] frenzy is over," says Steve Murray, president of Real Trends, Littleton, Colo. Mr. Murray says it may take six to eight months before sellers accept that the market has softened and reduce their asking prices. He said some of the brokers surveyed were surprised at how rapidly the market seemed to be cooling in recent weeks.

"We believe the market has peaked," says Doug Duncan, chief economist of the Mortgage Bankers Association. Because of brisk sales earlier this year, he expects sales of new and previously occupied homes to reach a record 8.3 million in 2005, up 4% from 2004. But he believes sales will decline 3.5% next year, ending a four-year streak of record-setting totals.]


[Others fear that the slowdown will be more painful, particularly in areas where prices have soared the most. In a report issued earlier this month, analysts at the New York office of Swiss bank UBS AG said the current upswing in home prices has now matched the unusual surge seen in the aftermath of World War II. Because price increases have been unusually swift and prolonged, the report said, "the odds of a soft landing seem smaller than if the cycle had peaked earlier."

In Westchester County, N.Y., just north of New York City, Greg Rand, managing partner of Prudential Rand Realty in White Plains, says he expects prices to fall by around 3% next year.]

Friday, November 11, 2005

That's Gotta Hurt - Already Underwater & its Only Nov.

Do not buy a house before blogging. From the Washington Post.

"Lynn Edmonds and his wife, Sebnem, could barely wait to sign on the dotted line back in May when they committed themselves to pay $796,000 for a three-floor townhouse under construction in Alexandria's Cameron Station.

But since May, the sales prices for the development have fallen -- and units like the one the Edmonds bought are now being sold for $699,900. The Edmonds are facing the prospect of a $100,000 loss in value before they even walk through the front door."


Manhattan Prices Might be Softening

The NY Times says that the high end of the real estate market in Manhattan is finally softening. Time to sell the house in LBI.


"With close to 16,000 units being built in Manhattan alone this year and next, and another 23,700 planned, according to Yale Robbins, a real estate publishing company in New York, there is much to choose from, especially at the high end, where a disproportionate amount of building is going on."


Thursday, November 10, 2005

Hedge the House


"The Chicago Mercantile Exchange, a financial marketplace dealing in the value of everything from interest rates and foreign currencies to pork bellies, has committed to offer trading next year in a category many consumers take personally: U.S. home prices.

Housing-price futures, based on the median home price in each of 10 U.S. cities, aren't being tailored for individual homeowners. But they may provide some protection for mortgage companies, home builders and anyone else with a large stake in residential real estate if housing values slide — while giving other investors a way into a lucrative market."


NYC Weakness in October

From the NY Post - Annoying registration required for the entire article.

"November 10, 2005 -- Has the Manhattan residential real-estate bubble finally burst?

Apartment prices continued a downward trajectory in October on the heels of a disappointing third-quarter report, according to the latest monthly figures by Halstead Property.

Median and average apartment prices fell 4.2 percent and 8.4 percent, respectively, from the end of September, and a whopping 15.9 percent and 18.3 percent since June, says the report. It attributes the continuing downswing primarily to "a lack of closed sales at the high end of the market [that] kept the average sale price down in October..."

Article here...

Wednesday, November 09, 2005

Eastern Monmouth MLS up to 3118

Last week the count was 3097.

New Normal Long Island

Newsday reports that prices increases are starting to ease on Long Island. I always like to see stories about property prices on Long Island since I believe it is a good proxy for what is happening at the Jersey Shore. (I would like to also see articles in the Asbury Park Press about real estate at the Jersey Shore but I know that they have to devote most of their space to 3 day old Associated Press stories, Jason's Furniture ads and recycling tips.)

"Welcome to a new normal.

For the first time in the last five years, Long Island home prices are rising by less than 10 percent annually.

That's giving home sellers pause, because they can't expect huge jumps in values anymore, while buyers have some reason to rejoice, because they have more time and more choices.

Nassau County's median home price was $485,000 in October, just a 7.06 percent gain from the same time last year, according to the Long Island Board of Realtors' latest data. Suffolk County's median price was $390,000 in October, an 8.64 percent rise."


Treasuries Take a Breather

I was getting a little nervous over the past few days watching treasury bonds rally sending yields lower. Luckily, prices for treasury bonds started going down again today after a weak auction for new 5 year notes.

"NEW YORK, Nov 8 (Reuters) - U.S. Treasury debt prices extended early losses on Wednesday afternoon after a $13 billion auction of new five-year notes drew poor demand from indirect bidders, the second weak showing in as many days.

The notes were sold at a high yield of 4.525 percent, and drew bids 2.61 times per dollar of debt on offer, above the 2.51 average of the 10 previous five-year note auctions in 2005."


Tuesday, November 08, 2005

Unaffordable For You

NEW YORK (CNN/Money) - Although earnings have risen about 2.6 percent, housing is even less affordable for first-time buyers than it was a year ago, according to the latest findings from the National Association of Realtors.

The NAR found that the average price nationally for a starter home rose to $183,500 in the third quarter, up $23,500 in the past year.

With a 10 percent down payment and a mortgage rate of 5.83 percent (the average in the quarter), the monthly cost to finance the purchase of the average starter home would be $999 a month.


Toll Brothers Had Today's Big Bubble News

"Home builder stocks played like closely packed dominoes Tuesday, and when Toll Brothers Inc. pulled back on its 2006 home sales forecast, there went the neighborhood.

Scottsdale-based Meritage Homes Corp. (NYSE: MTH - News) shares dropped a little over 11 percent on the day, finishing down $7.38 to $58.27. Toll (NYSE: TOL - News), which builds luxury home communities in Valley and currently lists 15 single-family home communities, as well as Scottsdale condo and townhome projects, dropped nearly 14 percent, finishing up at a per-share price of $33.91, down $5.50."


Monday, November 07, 2005

Hoboken Slowdown

I spoke with a mortgage broker over the weekend who primarily works in Hoboken and Jersey City. He said that the market in Hoboken has slowed dramatically over about the past two months and that inventory is growing there pretty substantially. A slowdown in the number of sales in Hoboken is not good news for the Jersey Shore, since the people selling there are often married couples who have outgrown their starter condo with the birth of their first or second child and are looking for larger houses further south or west. In other words, if you can’t sell the Hoboken condo, then you can’t buy the Lincroft ranch.

That’s A Lot of Taxes


[This year, homeowners in Long Beach Township - which has the largest property-tax base on Long Beach Island - will pay $14.9 million in taxes to Southern Regional High School and send 126 students there, according to New Jersey Department of Education estimates. This works out to about $118,000 per child.

The situation is similar up and down the 18-mile island. Harvey Cedars homeowners will pay $2.4 million to Southern Regional but send 21 students to the high school - the equivalent of $115,293 per student.

In Barnegat Light, homeowners will pay $66,147 per student; in Surf City, $45,149; in Beach Haven, $40,253; and in Ship Bottom, $33,930.
In Stafford, though, homeowners will pay $7 million to Southern Regional and send 2,018 students - about $3,500 per child. New Jersey's average funding per pupil last school year was $11,106.

Long Beach Island is the "poster child for school-tax inequity," said Beach Haven Mayor Deb Whitcraft. "Just because somebody owns a lot that's worth a lot of money does not mean they are making ends meet."

"People with children or of child-bearing age have absolutely no reason" to stay on Long Beach Island, she said.

But Eric Stokes, a Barnegat Light resident, says Long Beach Island homeowners, many of them newer owners, use "nouveau riche math" when they discuss tax contributions per pupil instead of tax rates. They are wealthy second-home owners who want a tax break for their Shore property, or senior citizens who don't care about schools, he says.”]


An Observation

Over the past few weekends I have driven through lots of towns in eastern Monmouth County and I think I’m noticing a pattern as to where the inventory is building. To me, it looks like the houses that are going up for sale and that are sitting unsold longer are those that are located in areas that are only marginally attractive. What I mean by marginally attractive is areas of Monmouth County that are either “up and coming” or which have older construction. Put another way, if Rumson is an “A” town, Shrewsbury is a “B” town and Keansburg is a “D” town, then these areas would be “C” towns. This would include Atlantic Highlands, Most of Red Bank, and Long Branch north of route 36.

It looks to me that these areas might have experienced a little more buying for investment purposes, rather than living purposes. As a result of the type of buyer, there seem to be more houses for sale in these areas. In addition, there also seem to be more single family houses for rent in these “C” class towns.

As a service of this blog, name a town (and or town section) in Monmouth County and I’ll tell you if its an A, B, C, D, town.

Mortgage Demand Down

"WASHINGTON, Nov 7 (Reuters) - Demand for new mortgage loans from major U.S. banks declined in recent months, while lending standards were little changed, a Federal Reserve survey of bank officers released on Monday found.

"Almost one-fourth of domestic institutions reported a decline in demand" for mortgages used to purchase homes, the Fed said in summarizing findings from its quarterly senior loan officer survey.

The Fed said the drop in demand for new mortgages, which had risen in the prior three months, could reflect a falloff in mortgage refinancing activity, which some lenders might find difficult to separate from loans for home purchases."


Saturday, November 05, 2005

Biggest Bubble Ever


"• Overheated prices. Until 1995, housing prices largely kept pace with inflation. In the last nine years though, home prices on average have spiked 35 percent after adjusting for inflation. In some areas (mostly coastal cities) home prices have skyrocketed by incredibly higher margins than that. In San Diego County, for example, the median price of a home is now $472,000. (That means that half the homes sell above that price and half of them sell below it.) That represents an increase of 129 percent in just five years! Yet the county’s median income, at $52,000, has gone up only by about 11 percent during that time."


Wednesday, November 02, 2005

Eastern Monmouth MLS up to 3097

Last week the count was 3094. The mid-week high was up to 3122.

Tuesday, November 01, 2005

Remember the Hunt?

I saw a sign in North Jersey over the weekend advertising the hunt in Far Hills, which took place a few weeks ago. It reminded me of the Monmouth County Hunt that used to be held every October in Middletown. I would have to say, and I bet some others of a certain age would agree, that the Hunt was the single best social event in Monmouth County of the entire year. It was as anticpated to a 18 year old (and older) as Christmas is to a 6 year old. I hope the "hunt" grounds do not get developed, if they haven't already, and the hunt someday returns to Middletown.

If Prices Pause


"If we are seeing a pause in the remarkable series of price increases seen during the past few years, and if in some cases we are seeing actual declines, then the game changes. Millions of people who bought at or near full price may suddenly find that they own a property which is worth no more and perhaps less than what they paid.

This is not really much of a practical concern for those who stay put, but what about those who move? If you paid $500,000 for a home that is now worth $485,000 can you sell?"


"Congressman Saves $15 Million Beach Club"

The headline is supposed to be satirical.

These "beach repair" projects are almost the same as throwing money off of the sea wall with a west wind at your back and the only people that seem to benefit are those that own beach front property, like the local beach clubs. What makes the this project so irritating and elitist is that access to the beaches will still be severly restricted even though the repairs are made possible by the tax dollars of all NJ citizens. Note to congressman Palone, if people want to build on the beach, please do not use my hard earned money to protect their investment.

"Rep. Frank J. Pallone Jr., D-N.J., toured beaches in Sea Bright, Long Branch and Bradley Beach this morning, and said he expects $2 million to $3 million to repair beach erosion caused by last month's nor'easter.

The money is contained in a federal conference committee bill, which he expects to be passed soon. Pallone, who was joined by representatives of the state Department of Environmental Protection and Army Corps of Engineers, said work to replenish sand in Monmouth Beach, Long Branch and Spring Lake could start next summer.

Officials will survey the beaches in the spring to determine exact areas for replenishment."

Article Here