Go Fixed. No Variable. Wait No, Fixed.

Today’s Wall Street Journal had an article about banks that are now encouraging home owners to refinance their variable rate loans with new fixed rate loans. Just last year these banks were telling customers how great variable rate mortgages are and how getting one is a no lose situation. Now, apparently the banks are telling the same people that variable rate mortgages are not all that great a fixed rate mortgages are the only way to go.


By RUTH SIMON
Staff Reporter of THE WALL STREET JOURNAL
January 31, 2006; Page D1

Hoping to ride a new wave of profits as the mortgage boom winds down, lenders have changed course and are targeting borrowers with adjustable-rate mortgages and encouraging them to refinance into fixed-rate loans.

Many lenders have been pushing adjustable-rate loans as a way for borrowers to keep their monthly payments down, stretch their budgets to afford a bigger house and use their home equity to get cash. Now, with short-term interest rates having moved up much faster than long-term rates, lenders are rediscovering the marketing appeal of fixed-rate mortgages. Currently, a 30-year-fixed rate loan carries a 6.27% rate, according to HSH Associates, while a one-year ARM, which adjusts annually, has a 5.39% rate.

Lenders such as SunTrust Banks Inc., J.P. Morgan Chase & Co. and U.S. Bancorp are using statement inserts and direct-mail solicitations to encourage borrowers with adjustables to consider switching to a fixed-rate mortgage.

More…(subscription required)

More Homes for Howell

From today's Asbury Park Press

BY BOB JORDAN
FREEHOLD BUREAU
A state Superior Court judge in Freehold issued a ruling clearing the way for 497 homes to be built on Route 33, and said Howell officials erred in trying to block the development planned by a company owned by developers Anthony Spalliero and Terry Sherman.

Township officials contended Spalliero — who according to a federal indictment paid tens of thousands of dollars in bribes in another town — and Sherman made political contributions to influence the 2002 approval of their $21 million Colts Neck Crossing proposal.

Officials said they will either ask the judge, Robert A. Coogan, to reconsider or take the case to an appeals court.

Howell Township Attorney Thomas Gannon noted that there were no filings to the court from the Monmouth County Prosecutor's Office, which is still investigating the case.
"The court acknowledged that there was no direct filings to the court from the prosecutor. That might have changed his determination, or it might not have," Gannon said.

The influx of homes will change the character of the area, said Joan Miller, whose Colts Neck Road home faces the tract.

Full story…

Hoboken Open Houses 1/29/06

Hoboken had lots of open houses today despite the miserable weather. Here is the corner of Newark and Washington streets. 

Interesting Toll Brothers Advertisement

Did I say Toll Brothers advertisement? I meant NY Times article.

Snip...

At the Hudson Tea complex, perhaps the most upscale residential address in a community where the competition seems to swell with each passing month, there were eight children in residence when the buildings were first fully rented two years ago.

Now, according to Toll Brothers' City Living division, which recently converted the two existing Hudson Tea buildings to condominiums, there are more than 100 children living in 528 apartments.

"We've installed a special children's room," said Thomas R. Mulvey, president of the City Living Group. The unit was established last year by Toll Brothers, which was formerly known for its single-family homes in suburban locales. "There is a big screen that plays only children's DVD's, and an indoor jungle gym for wintertime, when the outdoor play areas get too chilly."

Full Story....

Meanwhile, in Other Parts of Jersey

Obvious Headlines

"North Carolina tobacco farmer says smoking is good for you..."
"NJ Governor to raise taxes..."
"Realtor Predicts 15% appreciation next year..."

I wish the reporter would have asked someone else besides a real estate broker about how the market is doing. Attention Mr. Reporter, if the market is taking a dive, do you think the largest Realtor in Morris County is going to tell you the truth?

Snip...

Recently, Baris referred a client to a broker in Princeton.

The client was hoping --"with all the bubble-bubble-bubble talk"-- to "find a steal," a cream puff selling cheaply. No go. The market is strong, he said.

"The inventory still isn't plentiful, and with a limited supply and strong demand, the market continues to be robust," Baris said.

His brokerage firm is one of the largest in northern New Jersey.

Among real-estate professionals, the consensus is that if interest rates reach 7.5 percent, "That will definitely put on the brakes," Baris said.

More...

Condos Prices Propped up by Investors

If the housing bubble was blown up, in part, by investors, then the condo market seems likely to fall earlier and harder than the single family market.


[Sunday, January 29, 2006

Condominium prices see-saw more than house prices because investors — those who buy expecting a profit — occupy a "significantly higher" chunk of the condo market than they do in the single-family home market, a real estate expert said this week in Palm Beach.

Investors — as opposed to buyers who intend to live in a unit — are what drives perceptions about a real estate "bubble," said Steven Kirkpatrick, senior vice president of U.S. Trust, who spoke to several dozen guests at the firm's island offices. He manages its Special Assets Group, which includes real estate, oil and natural gas, and closely held entities such as the Gardiner Island Trust.

"There is some froth in the market, but there is no bubble. The marketplace is very healthy, and it's working, but a slowdown is upon us, and we should look for modest corrections," Kirkpatrick said.]

More...

Selling Now and Renting

This article is from Gannett via the Asbury Park Press. In the Jersey Shore area I have seen lots of single family house for rent and the rental prices look like bargains next to the cost to own.

"Kurt Nishimura is taking a calculated ride on the nation's real estate wave. He sold his home in the Willo neighborhood of Phoenix, believing its value has topped out, and is renting an apartment for a year, hoping to buy something after the wave has crested.

Nishimura is not alone.

A few people are cashing in, some for good, others to sit it out for a while, hoping to beat the market. They're betting on a crash, on the belief that the market will soon cool, and there will be bargains for the picking.

The idea: Get your money out near the top and, if you're near retirement, keep it; if you're not, wait until the market drops to get back in.

But the move is risky, akin to day trading, according to financial and real estate experts. You could win big or lose big."

More...

New Home Sales Better than Expected

New home sales, which were released this morning, were better than expected. Although the numbers were supposedly good, I don’t think that they are as confounding, in the context of the bear case, as some people think. In light of the weak existing home sales numbers from a few days ago, and the fact that new home sales median price declined 3.4%, it would seem to me that the homebuilders were only able to move their houses by dropping prices. Existing home sellers who want to sell are eventually going to figure out the same thing, that if you want to sell your house, you have to lower the price.

“Jan. 27 (Bloomberg) -- Sales of new U.S. homes unexpectedly increased in December, capping a fifth straight record year for the industry and suggesting job and income growth are keeping the housing market from withering.
Purchases rose 2.9 percent to a 1.269 million annual rate from November's revised 1.233 million pace, the Commerce Department said today in Washington. A record 1.282 million new homes were sold in 2005, and the median selling price in December of $221,800 was down 3.4 percent from a year earlier.”

More…

From the NY Post

At this time of the day, this article from the Post is pretty old for hardcore bubble followers like me. However, the hard copy edition probably made for interesting reading for lots of commuters heading back home to the Shore on the Jersey Coast line tonight.

"January 26, 2006 -- It's not the end of the world — just the first signs that the housing bubble is beginning to deflate.

That's the verdict economists delivered yesterday on the data that show an unexpectedly steep slump in the sales of existing homes in December — despite a decline in mortgage lending rates that might have helped cushion such a decline.

The National Association of Realtors reported sales of previously owned homes slid 5.7 percent in December over November levels, with about 6.6 million properties changing hands compared to 7 million in November 2005.

The market had been..."

More... Registration Required

Condo Cancellations in Vegas

This story was linked from Drudge this morning. It should get lots of attention.


"Now that several high rollers in the Las Vegas condo-hotel game, with properties linked to the likes of Michael Jordan and Ivana Trump, are either folding or selling their holdings, a growing number of players are losing their taste for big bets on high-rise residential real estate development.

Over the past two years, as high-rise fever spread across town, prices for the luxury apartments ballooned, fetching as much as $500 to $1,000 a square foot—or up to $1.5 million for a one-bedroom— at the peak. Buyers, mostly interested in flipping them for quick profits, eagerly anted up five-figure down payments, while developers planned more than 70 luxury towers holding a total of about 43,000 units on or near the Strip and downtown. But the intense competition for the city's limited supply of contractors sent construction costs skyrocketing 30% last year, just as lending policies tightened, interest rates climbed and sales started to slow."

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Eastern Monmouth MLS at 2975

Last week the count was 2924. Since January 4, the number of homes on the eastern Monmouth MLS has increased 5.4%.

Wall Street Worried About Housing

The 5.7% decline in existing home sales reported by the NAR was pretty well covered by the other blogs today so I won’t make too many comments. However, I do think it is worth mentioning that the reaction by Wall Street to the data this morning was interesting. The broader stock market seemed to not be able to digest the numbers this morning almost as if they were too big to swallow. I think the Street might have reached a new outlook, which is that that the latest numbers are indicative of a sharper downward trend in housing prices and activity than had been expected and therefore a recession or economic slowdown is more probable.


No Link

NEW YORK (Dow Jones)--Stocks zigzagged in and out of the red as investors weighed a steep decline in oil prices, two blockbuster mergers, more earnings reports and a report that raised concerns about the strength of the housing market.
The market wobbled after the National Association of Realtors said existing home sales fell 5.7% to a 6.6 million annual rate in December, a slightly steeper decline than the 6.9 million rate Wall Street expected. Stocks soon steadied after a report showed a build in inventories of distillate fuels, including heating oil used to warm many homes in the Northeast U.S.

Treasuries Were Especially Ugly Today

Given the poor housing numbers that came out today, you would think that treasuries might have rallied or at least stayed the same, instead, prices dropped big time. (The reasoning behind treasuries rallying on a day house data underperforms is because many believe, including myself, that the Fed is specifically trying to deflate the housing bubble by raising interest rates and won't stop raising rates until it is succesful. Today's housing data would suggest that the Fed plan is working and therefore furture interest rate increases will not be needed as much.) However, according to this wire report;

No Link

NEW YORK (Dow Jones)--U.S. Treasury prices slumped Wednesday, rocked by a
poorly received two-year note sale amid investor concern over next week's
meeting of the Federal Reserve and forthcoming supply in February.
In late trade the 10-year note was yielding around 4.48%, up from a session
low of 4.41%. The maturity broke the shackles of the 4.32%-4.46% range that
had previously sufficed for January. Banks and hedge funds dominated selling
flows amid hefty volumes said traders.
Treasurys opened for New York trading under pressure and that steadily
intensified, receiving a fresh bearish infusion when dealers were left holding
much of the $22 billion two-year notes sold by Treasury.

Existing Home Sales Out Tomorrow

Here is the description from Yahoo.

"The name speaks for itself - this report provides a measure of the level of sales of existing home sales. The report is considered a decent indicator of activity in the housing sector."

Wall Streeters Spending Bonuses Like its 1999

At least according to this article.

I bet a few extremely high end houses in Rumson get picked up in the next few weeks by hedge fund bonuses, however, I doubt that there is enough Wall Street money to prop up house price at the Shore, on Long Island, up in North Jersey, and all the other place where Wall Streeters live. Inventories are growing quickly and we have at least a month until the alledged seasonally strong spring selling season begins.

"WALL Streeters, flush with $29 billion in record annual bonuses, are pouring their money into real estate.

Bankers, brokers and traders are paying outright in cash or making large down-payments for Manhattan apartments and second homes in the Hamptons, the summer playground for the wealthy.

They are also buying Ferraris, luxury travel and jewellery.

Never mind signs the New York real estate market may finally have reached the top. Wall Streeters are ignoring talk of a bubble and going shopping for luxury condos and apartments."

More...

“Rent to Own” Means “House Won’t Sell”

Someone said on the comments section of another blog that when you see an ad that says “rent to own” or “rent to buy”, that means that the owner can’t sell the house at the price that they want and that they are waiting for the pricing environment to improve.

As you are driving around Monmouth County, try to notice the number of “For Rent” signs in towns that normally do not have rentals. I have counted about four in Little Silver in the past month. Although at least four rentals in Little Silver may not sound like a lot, I believe it is about four more than usual and might indicate that some people are having a tougher selling these properties that they probably meant to flip.

Consumer Spending to Dry Up

I'm usually not a doom and gloomer regarding the broader economy, but I'm starting to think that for at least the past 2 years, consumer spending has been mostly fueled by the housing boom. Anecdotally, I see lots of people barely making $100k that are spending like they make $300k because they have managed to extract equity from their house. When house prices fall, and the equity is no longer their to extract, I think a lot of people are going to be on some pretty tight budgets and there won't be as many shopping trips to the Grove as there used to be.

This is from the Financial Times

snip...

[Mr Morris says a “bubble zone” has been created where house prices are overvalued by 35-40 per cent, equivalent to $6,000bn. Although this bubble could take time to deflate, Mr Morris warns that “the consequences of a punctured housing bubble could be traumatic”. Even a soft landing of zero house price growth, he says, will dry up the mortgage equity withdrawal that has fuelled consumer purchasing. Consumer spending makes up two-thirds of the US economy.

“There are already signs of softening in the new homes market in the US if you look at prices and the number of sales. That is going to hit discretionary spending,” says David Bowers, chief global investment strategist at Merrill Lynch.

It is widely believed that the “wealth effect” created by the housing boom has been the driver behind consumer spending. If the UK is anything to go by, a stagnation in the US housing market will be followed by a sharp decline in consumer spending.]

Full article...

Daily News Interview with Foreclosure Expert

Snip…

[Q: How did New York City fare in foreclosures last year?
A: In December, for the first time in nine months, the city had a lower foreclosure rate than the other largest cities in America — Los Angeles, Chicago, Philadelphia and Dallas-Fort Worth.In that time, the number of foreclosures in the city increased by 7.5%.

Q: What does the rise in foreclosures predict about New York City housing prices in the year to come?
A: They don't predict — foreclosures aren't leading indicators, or lagging indicators, either. They're confirming indicators.]

More…

The Otteau Group Reports

Today's NY Times article, which I commented on below this morning, made mention of The Otteau Group. I went to their website and saw that they put some slightly informative reports together about real estate in NJ, including specific towns up and down the shore. Here is the report about Monmouth County. If you get a chance check out the reports, some of the graphs are interesting.

Boomers Moving to the Shore

This NY Times article quotes experts who say baby-boomers are moving to the Jersey Shore and will continue to do so. I'm going to guess that the NJ Shore will lose more boomers to NC, Arizona, Florida and other cheap warm states than the area gains over the next 20 years.


Snip...


[The empty-nester baby boomer influx into Monmouth County - at the northern end of the Jersey Shore - has already had a major impact, according to brokers and real estate specialists.

The Otteau Group Report, which keeps tabs on trends in the statewide real estate market for brokers, suggested recently that baby boomer home purchases will keep fueling high-volume sales and ever-higher home prices there for the decade to come.

The senior population in Cape May County has traditionally been weighted toward the older end of the spectrum. About 20 percent of its households include people age 65 or above, compared with 12 percent for the state as a whole, according to current census statistics.

In certain pockets of the area, the clustering of elderly people is even more intense. The city of Cape May, for example, has 4,034 people - and 47 percent of its households are occupied by people age 65 or older, while just 19 percent of households include people under age 18.

But Jeffrey Otteau of the Otteau Group predicts the baby boomer effect will cause shifts in these numbers as the "active adults" infiltrate the cape as they have other desirable senior lifestyle sites.]

Full article...

"It's aTown Full of Losers"

The NY Times has a good story about people leaving NJ because it is so expensive. A couple of months ago I visted Charlotte NC and met about 3 families in one development who were all from New Jersey. In short, they all left the Garden State for Charlotte because you can get much more house for much less money. I also heard that people from our area are selling the NJ house and moving to Charlotte and taking jobs in the Gap or Target. Apparently they made enough money selling their NJ house that they can take low paying jobs and still live pretty comfortably with the Charlotte house totally paid for.

Snip...

"A quest for affordable housing is driving an increasing number of young people, families and empty nesters from the New York suburbs to destinations near and far, a review of migration data by The New York Times shows.

Mr. Joubert is part of one of the fastest-growing segments of the population, those who have made the exodus to central Florida. Nearly 10,000 taxpayers from the northern suburbs of New Jersey followed that path in 2004, a 66 percent increase over 1996. But the new émigrés from New Jersey are also including destinations in gentrifying neighborhoods in Hudson County and New York City, exurban communities in Pennsylvania and upstate New York, and boomtowns throughout the Sun Belt."

Full article...

Rumson House Under Contract

This house in Rumson has been on the MLS since about last April until this week. I noticed it was off the MLS so I drove by it and saw that it had an "under contract" sign. It looks like it is finally being sold. Back when the house was first listed, the owners were asking $940 thousand. The last asking price was $749.9. It will be interesting to see what the final sales price was.

For future reference. The address of this house is 80 Waterman Ave. in Rumson.

Mayor Bloomberg Warns of Bubble

"NEW YORK, Jan 20 (Reuters) - New York City Mayor Michael Bloomberg on Friday said the real estate market was slowing "dramatically" and only a "miracle" could stop soaring mortgage rates from eating into housing prices.

Consumers are definitely feeling the pinch of higher mortgage lending rates and are not quite as eager to snap up a new home especially at time when house prices in the Big Apple are near record-highs, the Republican mayor said in his weekly radio show.

"The real estate market is slowing down dramatically and we're going to have a problem down the road," Bloomberg said."

more...

What Housing Shortage?

Lots of places to live in San Diego.


"It has become almost universally accepted over the past few years that San Diego is experiencing a severe housing shortage. The presumed housing shortage -- or when the occasion calls for slightly more drama, "housing crisis" -- has served as the a priori basis for untold articles, analyses and conversations regarding San Diego real estate.

Even your mother's folksy platitude that "they're not making any more land" has made a rousing comeback.

But the fact is that there is no housing shortage in San Diego, and there never was."

Full article....

“Evidence of US Housing Slowdown Continues to Mount.”

The Dow Jones News Wire (no link) carried an item today titled “Evidence of US Housing Slowdown Continues to Mount.” Residential construction activity is slowing and so is the number of building permits being issued. Although these numbers would seem to lend credence to the bear theory that air is leaking out of the housing bubble, I would personally rather see these types of numbers go up every month so that the housing supply keeps growing causing prices to eventually take a steeper downward trajectory.

Snip…

“Data released by the Commerce Department Thursday showed that housing starts, a key measure of new residential construction activity, dropped 8.9% to an annual rate of 1.933 million units in December. The drop was twice the decline analysts had expected and the biggest since March of last year.

Building permits issued in December dropped by 4.4% to a 2.068 million annual rate, also greater that the anticipated decline.

"Housing affordability has eroded significantly due to sky-high house prices and, to a lesser extent, higher mortgage rates," analysts at BCA, an independent research firm, said in a report.

BCA said the cooling in U.S. housing activity should coincide with a slowdown in consumer spending.

The weaker housing starts follows on the heels of data released Wednesday showing that the National Association of Home Builders' index for sales of new, single-family homes remained unchanged in January after falling to a 2.5-year low in December. A figure above 50 means the number of builders who see good sales outnumbers those who see bad sales.”

End Snip…

Contractors Beware

Since house prices have risen so much so quickly over the past few years, it probably shouldn’t be much of a surprise that home remodeling has become such a huge business. If the price of your house is up 100% in five years, then it would seem like a prudent economic decision to borrow some of the value of the house and invest in a new kitchen (with granite counter tops no less) if you did not want to necessarily sell the house and move to a new one (with a kitchen with granite countertops). According to the WSJ, plenty of people did this in 2003 and 2004 but this type of activity slowed down in 2005. It will be interesting to see what happens to the home remodeling industry and all of those unresponsive contractors in 2006.

This article reminded me of all the complaints I have heard about contractors over the past few years. It seems like everyone I know who decided to put more than $2000 into fixing up their house had a bad experience with a contractor. I’m looking forward to a day in the not too distant future when contractors aren’t so busy that they can return a phone call within three days of calling or showing up for work on the day they said they would be there.


From Today’s Wall Street Journal (No Link)

“After years of high prices and work backlogs in the $150 billion home remodeling market, a slowdown in business is pushing some contractors to offer perks and discounts to their clients for the first time in ages.

This month, S.R. Crowley Contractors, a Lewiston, Maine-based firm, began offering a 10% total discount on all jobs. The president of Harmony Kitchen & Bath, outside Ann Arbor, Mich., now makes himself available to meet clients on evenings and weekends. Recently, Bachmann Construction, in Madison, Wis., started giving clients free schematic drawings and more detailed estimates -- services that normally costs up to $2,000.

The incentives reflect a recent slowdown in spending on home remodeling. Spending rose just 4.3% in 2005 compared with 2004 levels, which increased nearly 20% from 2003, according to estimates from Harvard University's Joint Center for Housing Studies. The center expects growth to stay in the single digits for 2006 as well. The most recent data from the U.S. Commerce Department is even starker: Spending was actually down 4.1% in November from the month before.”

House Sales Down All Over

Although we have yet to see a meaningful decline in home prices, different parts of the country are experiencing a slowdown in the number of houses that are sold. In short, the houses are just sitting there unsold and inventories are growing.


"La Jolla,CA----December home sales in Southern California fell to their lowest level in four years as price increases eased back another notch, a real estate information service reported.

A total of 28,952 new and resale homes were sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was up 4.8 percent from 27,637 in November, and down 4.5 percent from 30,317 for December last year, according to DataQuick Information Systems."

More...

MLS is at 2924 this Week.

Last week the there were 2877 house listed for the Eastern Monmouth MLS. As expected listings started heading up again after the holidays.

A Fine Line

The Fed has a difficult task ahead of it. It has to try to let the air out of the housing bubble, and at the same time not allow the broader economy to slide into a recession.

snip...

[Goldman Sachs analysts note housing busts were "a standard feature" of all U.S. economic downturns from the 1960s on.

The president of the New York Fed Bank, Timothy Geithner, said in a speech last week fluctuations in asset prices may loom larger in Fed thinking than previously.

"The behavior of asset prices will play an important role in the formulation of monetary policy going forward, perhaps a more important role than in the past," he said.

Fed officials have always said they do not target asset prices directly, but they do respond if a stock market crash or deflating housing bubble damages the entire economy.]

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Remember the Stock Market?

People used to invest their extra money in companies instead of granite counter tops and viking ranges.

snip...

[Yet evidence suggests the housing market is slowing. Sales of existing homes are expected to fall 4.4 percent in 2006 after years of record sales, while new construction is expected to drop 6.6 percent, according to the National Association of Realtors. And the median price of a home is expected to climb 5.1 percent this year -- a solid increase, but small compared to the ones real estate investors have enjoyed of late.

"Baby boomers are turning 60, and they're working to build up those nest eggs for retirement. For some that are running behind, that means putting at least some of that nest egg into more aggressive investments," said David Kelly, senior economic adviser at Putnam Investments in Boston.]

more...

Eastern Monmouth Home Inventory June '05 to Jan. '06

 
 

The inventory of houses grew steadily from mid-summer to about mid-November. Once the holidays hit though, inventory levels trended down. However, it looks like inventories are going up again since the start of the year. As of today, the count was 2890, which is up from 2877 on Wednesday January 11.

"Swinging in Buyers' Favor" in Hawaii

"A cool front has wafted westward to Hawaii's housing market, where declining home sales and higher inventories are keeping a lid on prices in a rarefied part of the country where appreciation exceeded 30 percent last summer.

Although home values on the island state remain relatively high by historical standards -- comforting news for the many Californians who own property there -- the market appears to be swinging in buyers' favor after a half-decade run-up."

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The Coasts are Not Affordable

From the Detroit Free Press

"If you live in the Midwest or South, chances are you own a home.

If you reside in the Northeast or far West, the odds are greater that the dream of homeownership might remain just that, a dream.

Data from the U.S. Census would suggest the culprit is historically high home prices and flat median incomes compared to the more affordable interior portions of the country.

An economic boom after World War II fueled a steady climb in overall homeownership rates from 55% in 1950 to a near all-time high of 69.1% in 2004."

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Selling Your House in a Slow Market

How about lowering the asking price.

NEW YORK (CNNMoney.com) - Sellers are having a harder time getting good prices for their homes. Even in the hottest markets, getting top dollar is a challenge when you don't have 20 buyers battling it out in a bidding war.

Owners can take some effective -- yet inexpensive -- measures to make their property more desirable, and valuable.

Debra Gould, owner of Six Elements, a home-staging consultant in Toronto, consults with clients whose homes are not selling and supercharges their appeal. Her job, she says, and the job of anyone selling their home, is to make "as many people as possible fall in love with a house."

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Asbury Condos Will be Up in Time for Crash

As much as I would like to see Asbury become livable, I can't help but think it is jinxed, and that the latest efforts to rebuild the waterfront are too late. I'm guessing that a lot of people buying condos in Asbury are speculators and will head for the nearest exit when it becomes more clear to them that we are now on the downside of the nationwide housing boom.


Snip...

["For 30 years, we had a lot of apathy about Asbury Park," Sanders said. "But we decided to keep our nose to the grindstone and just keep going with one vision. This is it."

The to-be-constructed condos — in buildings with names like Barcelona, Monterrey and Seville — are selling for around $600,000 up to $2 million for a luxury penthouse. Lower priced units, at around $400,000, have already sold, said Peter Engle, a spokesman for Paramount. Engle declined to cite the total cost of the construction.

The developer sold 80 percent of the 157 units in the eight-story Barcelona, four-story Seville and eight-story Monterrey buildings in 55 business days. Those prices started in the mid-$400,000s and go to more than $1 million.]

Full article...

Listings Are Fixed

The Eastern Monmouth MLS looks to be working again. The count is now 2879, which is a big jump from 2822 on Wednesday January 4th.

"Don't Listen to Your Realtor"

This is a good article that was posted on Prudentbear.com

Snip...

"In 2006, we are already seeing signs of a slowdown in the housing market. In recent weeks, home loan applications have fallen to a 3 ½ year low. I believe that most everyone who could take advantage of the low interest rates and exotic mortgages have already done so. The continual rise in interest rates will undoubtedly price new home buyers out of the market. Even with an interest only loan or an adjustable rate mortgage, higher interest rates will most clearly mean higher mortgage payments. Given the fact that your average American consumer has negative savings and that the average income is not rising sharply, I see a sharp decline in the demand for new home sales in 2006."

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Toll Customers are Taking Their Time

It looks like Toll is seeing a slowdown in demand. I like to think that some of the slowdow is due to all of the real estate blogs out there. Toll is certainly busy in New Jersey and Pennsylvania. Here is a link to a list of Toll projects in both states.


NEW YORK (AP) -- Toll Brothers Inc., one of the nation's top luxury builders, said Friday it is seeing a slowdown in contracts for new homes, as people take more time to make buying decisions.

"Beginning in the fourth quarter of fiscal 2005 and continuing into the first quarter of fiscal 2006, we have experienced a slowdown in new contracts signed," Toll Brothers said in its annual 10-K report for 2005.

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More Homes for Monmouth County

Although I would rather see less development in Monmouth County than more, I generally don't support government efforts to restrict the use of private property. If I was smart enough to buy 60 acres along the Parkway 30 or 40 years ago, I would not be happy if the town restricted my ability to sell that property to whomever would pay me the most for it.

Still, I would prefer to see more open space and fewer office parks, age restricted communities and Kara Home developments, in Monmouth County. Given all of the development in Monmouth and Ocean over the past 20 years, I am starting to think that this area might start to look like Staten Island, parts of Queens and parts of Long Islan does now (crowded), in another 10 or 20 years.


[TINTON FALLS — It's better than it could have been, but that's about the best anyone is saying about the impact of a 168-home development under construction at the former Laurino Farm site at Hance and Sycamore avenues.

It could have been an office park, dumping 1,000 cars onto local roads twice a day. It could have been a larger neighborhood with more homes and more cars exaggerating already clogged local roads.

But what it will become — an age-restricted, upscale town house development in the center of the borough's most congested section — doesn't please neighbors, either.

"I'm really questioning how I'm going to get out of my driveway," said Noelle Walls, a Sycamore Avenue resident whose property is near the site of the new neighborhood. "They (the administration) should have made more of an effort to acquire it as open space."]

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Interesting Hoboken Listing

I know Hoboken is not the Shore, but I like to watch what is going on there because I believe many Hoboken condo sellers are eventual Jersey Shore home buyers. Today, while perusing craigslist I came across this listing.

Date: 2006-01-08, 9:14AM EST


Maxwell Place........The Most Sought After Complex in Town....
Wait!! It's not even built yet ??
Yes, How smart you are..
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Email your time needs, name & tel. and IF you meet my tenant criteria you'll be hearing from me shortly to Reserve your Unit....
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For those not familiar with the Hoboken real estate market, the Maxwell Place condos are a new development by Toll Brothers. In short, Toll is building roughly three approximately 12 story condos on the sight of the old Maxwell Coffee House Plant that is located right on the Hudson River in Hoboken.

These condos are supposed to be some of the more sought after properties on the Jersey side of the Hudson and 2 bedroom apartments start in the $700k range or more. When the first stage of the condos were "released" to the public earlier in 2005, the demand was apparently so great that it was nearly impossible to get through to the sales office, or so I heard. In any event, it is certainly interesting to see that some one managed to get the rights to buy 7 to 10 units (out of about 80 in one building) and plans to rent them.

If this craigslist ad is authentic, it makes me wonder if much of the apparent hyper-demand last year was caused by speculators, rather than people looking to settle down in Hoboken.

The Eastern Monmouth MLS is Broke

This morning the count was 2877 compared to 2822 last week. However, tonight the count is down to 2465. This has happened before and I think it is due to some maintenance issues that the data base occasionally goes through.

Negative Savings

The Jersey Shore is generally affluent. Moreover, there is, and always has been, even before the bubble, a certain level of conspicuous consumption that probably makes keeping up with the proverbial “Joneses” a challenge for those who care to. Even though I believe many people can afford to live comfortably in the area, I can’t help but think that some people are trying too desperately to keep up with the Joneses and have leveraged themselves too liberally with the equity in their houses. This article from the Dallas Morning News describes why drawing equity from the house makes one feel richer.

“Have the soaring home prices of the last several years made America stronger? On balance, have they improved Americans' financial security?

You'd think so. It's hard to complain when most people's biggest financial asset is rising in value year after year.

But a rise in value is not the same as a growing asset – not when you're withdrawing that increased value and spending it.

2005 was a year for the record books – record-high housing starts and home sales as the housing bubble peaked; record-high levels of consumer debt (the Federal Reserve will report the November figure today); and record-high levels of home-equity withdrawals in the form of cash-out mortgage refinancings.

Equity withdrawals haven't just burned through a key financial cushion for Americans. Studies show that the average person borrows more after running through the check from the mortgage company. Insulting debt gets added to financial injury because this easy cash makes the holder feel richer.

There was just such a wealth effect in the late 1990s, too, thanks to soaring stock prices. The sad thing is, many of those people got hurt because they watched that paper wealth rise and then fall. They didn't extract their profits. “

More…

Monmouth Beach’s Disappearing Beach

On Sunday morning, starting at the north end of Sea Bright, I took a ride down Ocean Avenue and drove all the way to Belmar. Although I didn’t make many direct housing related observations on my ride, I did notice that the beach in Monmouth Beach is smaller now than it was this past summer. The jetty at “Little Monmouth” beach club is no longer surrounded by dry sand but now sticks out into the Atlantic, just like in the ‘80s and before. (If you look at this satellite photo from google that was taken a few years ago, you can barely see the tip of the jetty. Now when you go down there, you can see that the jetty is only half-way covered with sand and the rest is surrounded by sea.)

As is typical this time of year, winter storms have washed away a lot of sand and as a result the ocean has gotten considerably closer to the sea wall. Ideally, for beach front (or near beach front) home owners, the sand will wash back in the spring and summer and the buffer between the ocean and the houses will increase. More likely though, only some of the sand will wash back and while the size of the beach will be bigger in the summer compared to right now, it will still be comparatively smaller than it was last summer, and the summer before that.

If you have only had experience with north Monmouth County beaches over the past 5 to 10 years, you might think that the current size of the beaches is the norm, or even smaller than norm and that the beaches will eventually get bigger. This is not the case though, as the beaches are actually considerably larger than normal due to beach replenishment projects in the 90s. Assuming no more beach replenishment projects in the future, the size of the beaches will eventually shrink to the point where the ocean is right up against the sea wall along many stretches of Ocean Avenue causing parts of the road to flood even during relatively small storms or when ocean swells are running high.

Given the history of flooding and Atlantic Ocean encroachment in Monmouth Beach and Sea Bright in the relatively recent past, I think there could be real estate repercussions in the future. Anyone who bought in Sea Bright or Monmouth Beach in the past 10 years, without any awareness of what the Atlantic has done to those towns in the past, when the beach buffer was much smaller than it is now, might be in for an eventual rude awakening. At the very least, even if there is no actual property damage from storms, house values could be impacted negatively by the disappearance of a key amenity of the area, specifically the actual sand on the beach.

The new houses on the Tradewinds’ property are a good example of what could happen in 5 to 15 years in the absence of additional sand replenishment projects. Although these new luxury mansions look solidly built and are probably high enough to keep from getting flooded, one of the main selling points is the 30 second walk to the beach. Whether the owners of those houses know it or not, that beach is only temporary and it might be hard to justify today’s prices for those houses 5 years from now when the beach is non-existent.

Condo Glut in Westchester

There seemed to be a lot of stories about condo gluts over the weekend. This NY Times article does a good job describing the market in White Plains, NY. This leads to another question. Why would anyone want to live in a condo tower in the suburbs? To me, if I am going to live in the ‘burbs, then I am doing so because I don’t want to be on top of my neighbors, with the trade off being a crappy commute to NYC. Conversely, I’ll live in a tower style condo in NYC for an easy commute, with the trade off of having very close neighbors. Living in a condo tower in the burbs is the worst of both living in the city and the suburbs in that the commute to the city sucks and the neighbors are too close.


“Mrs. Gramolini's condominium is in contract. She would not reveal the sale price, although she indicated it was below her asking price. "Because I got in at the ground floor, I'm not taking a loss," she said. "It just didn't work out as well as I had hoped."

Mr. Durante put two condos on the market: a penthouse he occupied in another section of downtown White Plains and his Trump condo. The occupied unit sold quickly. He said he would move into his unsold Trump condo.

"Not just in White Plains, but all over Westchester, the condo market has softened," Mr. Durante said. "It's especially true in White Plains," because another high-end residential project is nearing completion, "and people have a lot to chose from," he added.

Of 125 apartments on which buyers have already closed at Trump Tower at City Center, about one-third returned to the market shortly after their closings. Some people describe the surfeit of condos on the market in White Plains as a glut.”

More…

Any Shore Real Estate Observations this Weekend?

Did anyone get to go to any open houses this weekend? If so, post your stories here.

Quarterly NY Times Suburban Angst Article

Seemingly as a public service, the NY Times publishes an occasional article about why Manhattan is so wonderful and why the 'burbs are cultural wastelands with bad restaurants. Apparently, according to the article, the suburbs are so bad that a few people are moving back to Manhattan after a brief stint in West Orange or Westchester. Here is the Times most recent public service effort.

Even though the article made me cringe at some points -wealthy people complaining about wealthy people problems tends to do that to me - the article does have some good points.

Snip...

"You go to these little towns and they are very charming and sweet and have all these cute little shops," said Brian Lover, who put his West Orange, N.J., house back on the market just three months after moving there. "But I think when you live in these areas full time, those neighborhood shops aren't so cute. And those neighborhood restaurants that look so great, you know how bad they really are."

Mr. Lover, 42, a vice president at the Corcoran Group, and his wife, Kristina Rinaldi, 41, an interior decorator, decided to give up their one-bedroom rental on West 55th Street when they had a daughter, Tallulah. They wanted to live in Montclair, N.J., a popular magnet for exurbanites. Outmatched in bidding wars, they expanded their search to neighboring West Orange. There they became besotted by "an old English Tudor with a slate roof, character, an acre and a half of land," said Mr. Lover, who worked as a fashion advertising director for Esquire magazine at the time.

In July 2001 they bought the house for $480,000; it came with a tinge of unreality. "Every day when I came home, I would say to myself, 'I really am a king and this is a castle, and who do I think I am?' "

Full article...

A Glut of Houses on Long Island

Inventories on Long Island are growing substantially. LI is probably a lot like the NJ Shore market since manypeople who live in both areas commute to the city. Also, both areas are on the Ocean and have some tourist type towns. In the absence of decent media coverage about the Jersey Shore real estate market (ahem.. Asbury Park Press) the Long Island market is probably worth watching.

Snip...


[The latest data released Friday from the Long Island Multiple Listing Service shows there were 14,679 Long Island residential listings last month, compared with 9,423 in December 2004. There were 6,522 listings in Queens, compared with 3,975 in December 2004."It's a glut of housing right now," said Martin Cantor, the chief economist of Sustainable Long Island, an area advocacy group. "And if interest rates go up, the glut will continue."Nonetheless, prices across the area continued their upward march, rising by 10.3 percent over the year in Nassau County, to a median price of $482,000, and 10.5 percent in Suffolk County, to a median price of $400,000. "I think you're seeing the turn of the housing market," said Pearl Kamer, the chief economist of the Long Island Association, one of the region's largest business groups. "And I think you'll see much more of the turn by spring."]

More...

"West" Belmar Houses Still For Sale

A few weeks ago, before Christmas, I went to go look at two open houses in "West" Belmar, which is actually part of Wall Township. Today I managed to swing by those two houses and saw that they were both for sale. What is interesting about one of the houses though is the high level of confidence the realtor had at the time that her house was going to sell very quickly. In fact, when I spoke with her in mid-December, she said that she believed the house would be sold within the week. Nevertheless, she was wrong.

Pending Home Sales Down in November

I like the quote from the JP Morgan Chase economist. ``The housing market frenzy that enticed potential homebuyers to rush into purchases before prices moved still higher has now apparently broken.''

You almost get the feeling that the run-up in house prices in 2004 and 2005 was partially due to the fear of getting priced out of a house forever. Hopefully the Chase economist is correct.

Snip…

[Rising home prices and 30-year mortgage rates that climbed from a month earlier may have put homes out of reach of some buyers in November. Home affordability dropped to a 14-year low in the third quarter, and economists expect house sales to decline this year after setting a record in 2005.

``The extended boom in home sales appears to have run its course,'' in 2006, said Robert Mellman, an economist at JPMorgan Chase Bank in New York, before the report. ``The housing market frenzy that enticed potential homebuyers to rush into purchases before prices moved still higher has now apparently broken.''

Pending homes sales were forecast to fall 1 percent, the median prediction in a Bloomberg News survey of seven economists, from an originally reported 123.8. Estimates ranged from a decline of 0.5 percent to 1.5 percent. The index averaged 125.3 in the first 10 months of last year, compared with 120 in the same period of 2004. Its base value of 100 represents the 2001 average.]

More from Bloomberg...

The Credit Bubble

Many economists think that the housing bubble is the result of easy money, which in turn is due to the low interest rates and lax lending standards. This article from Business Week shows that mortgage applications are trending downward, which may be a signal that housing demand is cooling.

Snip…

“Not convinced? The proof is in the paperwork. Applications for purchase mortgages in early November fell below their 2004 level for the first time in six months -- after a 5% drop from September to October, according to the Mortgage Bankers Assn. (MBA). By late December, applications had plunged to June, 2002 levels. The MBA expects mortgage originations to fall by 18.6% in 2006.

Even the industry's boosters are getting nervous. "There's no doubt that we're transitioning to a more challenging environment," says Richard H. Wohl, CEO at IndyMac Mortgage Bank in Pasadena, Calif. Lenders' earnings have already begun to fall. "Profitability in the industry is down, and over time that will take its toll," says Doug Duncan, chief economist at the MBA.”

more...

Inventory is Down Again – Eastern Monmouth MLS 2822

The number of listings of houses for sale declined steadily in the month of December as a result of delisting and expirations. As of today, there were 2822 houses listed on the MLS for Eastern Monmouth County down from 2899 last week.

NY Numbers Down

Today’s big housing bubble news came via a report showing a sharp decline in the number of co-ops and condos sold in NYC in the fourth quarter of 2005.

The repercussions of the slowdown in sales activity in NYC should be interesting for the Jersey Shore. As this blog has said in the past, most people have to first sell their Hoboken or NYC apartments first if the want to move down to Monmouth County as the size of their family grows.

From today’s WSJ

[Sale prices of condominiums and co-ops in Manhattan continued to rise last year, but there was a sizable decrease in the number of sales, according to reports by two of the city's largest real-estate brokers.

Corcoran Group reported the number of sales of Manhattan condos and co-ops dropped by about one-third from 2004 to 2005. Similarly, Prudential Douglas Elliman said sales slipped 27.2% in the fourth quarter compared with a year earlier.

While housing in Manhattan is unique because of the large number of wealthy buyers and barriers to new development -- especially the lack of available land -- the city is watched for possible trends that could emerge in other U.S. cities.

"What you are seeing is a pause, a holdback," says Jonathan Miller, president and chief executive officer of Miller Samuel, a real-estate appraisal firm based in New York that prepared the Prudential Douglas Elliman report. The decrease in the number of sales came as inventory returned to normal levels after being unusually low in recent years, Mr. Miller says.]

FSBO Cutting into Realtor Commissions

This is from today's NY Times. The article is about a couple of entrepreneurs from Wisconsin that started their own FSBO web site. I'm seeing lots of FSBO signs on lawns at the Jersey Shore. I wonder what the historical percentage of FSBO signs to Realtor signs is considered normal in New Jersey.

"MADISON, Wis. - Across the country, the National Association of Realtors and the 6 percent commission that most of its members charge to sell a house are under assault by government officials, consumer advocates, lawyers and ambitious entrepreneurs. But the most effective challenge so far emanates from a spare bedroom in the modest home here of Christie Miller."

Full article...

The Economy Depends on Housing

The Wall Street Journal has an article today that describes the economic outlook for 2006. The main takeaway from the article is that businesses will spend heavily in the year ahead and that consumers will be forced to reign in spending as the housing market falters.

I think that strength in the business sector is a positive for housing bears. If business spending grows at a healthy pace and keeps the broader economy chugging along, then I think the Fed. will feel empowered to continue to try to reduce the negative effect the housing bubble is having on the economy without the fear of plunging the economy into a recession.

“Strong spending by businesses should power the nation's economy to a fifth straight year of expansion in 2006, according to a survey of economists' forecasts, but a softening housing market is likely to slow the overall pace of growth.

For the past five years, real-estate wealth has supported the economy by providing consumers with cash to buy everything from designer kitchens to luxury vacations to new or second homes. Some economists believe that the boom has been responsible for creating more than one million American jobs since 2000.

But as home sales start to slow and the inventory of unsold homes climbs, many economists believe that home prices will rise more gradually, or even decline, delivering a jolt that causes consumers to rein in spending. That, in turn, may cause economic growth to slow.”

More (Subscription required)…

Boomers and New Jersey

The other day there was a brief news program that pointed out that the first baby boomer turned 60 on January 1, 2006. In addition the program pointed out that about 8,000 baby boomers will turn 60 for about the next 15 years. Many real estate bulls have tried to make the case that the current real estate boom is being fueled in part by boomers who are buying second homes in warm states as they approach retirement age. I don’t doubt that many people approaching retirement are heading for warmer climates, but I wonder what is in store for NJ and the rest of the North East. It would seem to me that many boomers that are buying in Florida are also selling, or will eventually sell their house, in Jersey and therefore the supply of houses in NJ will rise over the long term.

Housing and the Broader Economy

This article is from the Washington Post. I think what is important about this article and others is that it confirms that a concensus has been built among most economists that the housing bubble is the most significant risk to the economy.

Snip...

"That doesn't mean the economic outlook is all sunshine and sailboats. Economists see a slumping housing market to be the biggest risk for the economy in 2006, as interest rates rise and housing supply rises to meet -- and, increasingly, exceed -- demand. Just last week, the National Association of Realtors said that the number of homes on the market rose to its highest level in more than a year. The consensus of the economists surveyed was that the number of existing homes sold will drop 6 percent to 6.7 million, and that the number of houses builders start building and the number of new-home sales will also fall.

"Clearly the slowdown in housing will mean slower growth in the overall economy," said Nigel Gault, an economist at consulting firm Global Insight Inc. "The big question mark is how much damage there will be."

The answer may depend on just how much the steady growth in recent years has depended on housing. It would appear to be a lot. Economists at Wells Fargo & Co. analyzed job growth since 2001 and found that half of the nation's new jobs have been in fields tied to housing -- real estate agents, mortgage brokers, construction workers and the like. And booming housing prices appear to be a major factor in the rapid climb of Americans' spending in recent years, which many economists argue has been enabled by cash-out refinancings, home equity loans and a sense that they need not save because their homes made them worth so much on paper."

Full article

The Boom is Ending in Baltimore

I don't think Baltimore ever got as over heated as Vegas, San Diego, Miami or Boston, however, it looks like even there all of the easy money has already been made.


[(WJZ) Baltimore, MD As the new year arrives in Baltimore, there are clear signs the city's real estate market is changing.

In recent years, home sellers have benefited from an influx of homebuyers due to historically low interest rates and a steady real-estate market.

But now local brokers say the real estate boom is slowly receding.

"I wouldn't call it a buyers market-- I think it's more of a leveling off, " Realtor Shari Harris tells WJZ's Sharon Lee. "People that are purchasing now will probably see a slower..[market] growth rate than people who purchased these past two years saw."]

Full article