Parsing MLS Data

I had heard that the new construction along Ocean Avenue in Long Branch, which is called The Bluffs and Grand Resort, was bought up by a lot of "investors." Since most of these new condos and townhouses were completed in 2004 and 2005 its hard not to imagine that many buyers of these places would be looking to make a quick buck and try to sell ASAP. I don't know what the motivations of the buyers of these places were, or are, however, it looks to me that many more people are trying to sell than would be expected.

In order to figure out what a normal sales rate is on a per town basis, I looked up the number of houses that are for sale on the MLS for Little Silver (64 houses for sale), Rumson (115) and Fair Haven (66). I also looked at the 2000 census figures to see how many houses were in each town and came up with 2288 for Little Silver, 2610 for Rumson and 2037 for Fair Haven. Given this data, 2.8% of the houses in Little Silver are for sale, 4.4% for Rumson, and 3.2% for Fair Haven.

According to the Grand Resorts and Bluffs website, there are 179 and 104 units in each development, respectively. I counted all the units listed for sale in the MLS for Grand Resorts and came up with 20 and for the Bluffs I counted 12. The percent of units for sale out of all units was 11.2% for the Grand Resorts and 11.5% for the Bluffs. I believe that the higher percentage of units for sale at the Resorts and Bluffs compared to the other towns is indicative of greater investor activity compared to other places. This is not necessarily bad. However, as many others have pointed out, investors might be inclined to sell a property faster than someone who buys a place to actually live in because the investor is only concerned with maximizing profits or minimizing losses.

New Home Sales Fell in January

Lower Existing Home Sales

I don't think that mortgage rates have to be higher relative to where they are now to cause people to stop buying houses. Rates are low today by historical standards and we are seeing a meaningful decrease in sales anyway. It looks like prices keep going up on a year-over-year basis, but are flat sequentially. By the summer we should start to see the first negative year-over-year price comparisons.



From today's Wall Street Journal (subscription required)

New-home sales fell in January and the number of unsold homes on the market rose to nearly a 10-year high, signaling continued cooling in the housing market.

The Census Bureau said sales of new single-family homes dropped 5% last month to an annual rate of 1.23 million units, the slowest pace in a year. Slower sales and rising inventories pushed the number of unsold homes up 2.5% in January to 528,000, a 5.2-month supply. That is the highest level of unsold new homes on the market in nearly a decade.

Many economists were surprised by the January decline, having anticipated that unseasonably warm weather last month would boost sales, much as it had stimulated big jumps in housing starts, retail sales and construction. Instead, sales in the Northeast, South and Midwest all dropped more than 10% from December, overshadowing an 11.3% rise in the West. Rising interest rates and lower levels of mortgage applications in recent weeks have further darkened the outlook.

More (Subscription required)

An Obvious Observation – Prices are all Over the Place

How did people look to buy houses in the old days before the Internet? I like to look at the houses on the MLS and see where prices are at for specific towns. Since I have been looking at various houses on the MLS for about a year, I think I’m getting pretty good at looking at house, and its price, and knowing the town, and making a split second decision if it’s over valued. There is nothing scientific about looking for interesting houses and making a quick decision, as to whether to read on further, it’s just a necessity given all the houses that are for sale and all the houses that are priced too high. If the picture and the price and the town don’t match, then just skip to the next listing.

Given the number of listings, and the pictures that accompany them, I think I’m observing a scattershot approach to pricing on the part of owners. In essence, many people do not seem to know what price to list their house at so they try any price. This is evident when you see two nearly identical houses in the same town and there is 20% difference between asking prices. I realize that at any point any house could have a ton of unobservable upgrades, which would justify a 20% difference; however, some houses that have high asking prices are clearly out-of-whack with the other houses in the neighborhood.

I could be imagining large price differences and maybe I’m just biased because I follow the real estate market more now than I used to. However, I think that housing market prices are behaving similarly to stock prices at an inflection point, therefore giving me some comfort that my anecdotal information is not just reflecting my biases and preferences.

If you follow stock prices, you’ll notice that absent news or rumors, prices between the bid and ask usually remain constant throughout the day and close together. For example, the bid and ask spread may consistently be 10 cents. On days when market making news occurs, especially negative news, the spread widens within seconds of the news as some sellers try to get out immediately at the last price before the news, and more anxious sellers head for the exit at any price. In some cases it seems that the market just hangs in mid-air with the bid and ask price so far apart no trades get done. This is what my perception of the housing market is currently doing, only much more slowly. It is behaving like a stock that just got hit with negative news. Some houses are being priced lower and the owners are getting out, but most house owners though are still trying to get their “pre-negative news” price and are holding out for more information or a bounce. Meanwhile, the number of trades that get done are actually down.

Existing Home Sales Out Tomorrow

Existing home sales for January will be release tomorrow at 10:00 AM. According to the WSJ, the consensus estimate is for a 1.5% increase,compared to -5.7% in December.

Back to Working at the Dealership

If there is a direct correlation between how much "comment section" spam and e-mail spam I get from mortgage brokers, and their apparent lack of business, then I would guess half the mortgage brokers in the country will be looking to get there old job back at the Buick dealership or A&P by the end of the year.


NEW YORK (Reuters) - A major transition is underway in the U.S. mortgage lending industry, with consolidations and lay-offs at the forefront as companies try to deal with waning demand for home loans.

This shift is expected to pick up steam in 2006 if the housing market, as widely expected, cools off from its record-breaking five-year run.

"There are some very important signals emerging in that we have seen some pretty good companies go on the block for sale or have been sold recently, which is a clear sign that consolidation is seriously underway," said Douglas Duncan, chief economist at the Mortgage Bankers Association, an industry trade group.

More...

New Blog Shows POS Houses

This blog has been around for a few weeks or months now. Sorry I haven't linked to it yet. It shows some of the crappiest houses that are for sale in New Jersey. If you are wondering what POS means, visit the site.

www.centraljerseyposhouse.blogspot.com/

Jersey Shore Storms

I found this web page that shows some of the destruction along Long Beach Island, New Jersey during the winter storm of 1992. I thought it was kind of interesting in light of the current controversy regarding whether sand should be pumped on to the beaches down there, or not.

I also found this picture of Sea Bright. Up until the mid-90s, this is what most of the beach in Sea Bright looked like. I can't tell exactly where this picture was taken, but if I had to guess, I would say its probably about where McLoones is located. This picture of Ocean Avenue in Monmouth Beach is pretty cool as it shows the waves coming over the wall during a storm.

Here is a overhead photo of north Sea Bright, New Jersey showing the beach before sand was pumped onto it and after. The bridge you see is the Highlands Bridge (Rte.36).

Eastern Monmouth MLS Through 2/22/06

As of Feb. 22, there were 3229 homes for sale on the MLS for the eastern section of Monmouth County.

Hawaii Prices Peak

It looks like the market peaked in Hawaii. Hawaii is not quite the same market as the Jersey Shore, but I would imagine some of the same dynamics were at work in the run up in prices there, as here.

"Alicia and Jon Sturnick of 'Ewa Beach dropped the asking price on their Ocean Pointe house by $15,000 and are starting to get the uneasy feeling that they missed the peak of O'ahu's latest housing boom.

"If we had put it on the market earlier, we would have definitely sold it already," Alicia Sturnick said. "I knew the market would slow down but I didn't know it would happen so soon."

Last month, they lowered their asking price from $590,000 to $575,000, which positioned it well below January's median sale price of $615,000 for a single-family home."

More...

Realtor Blames the Media

This is an excerpt from a letter in a California paper. The person doing the complaining is a Realtor. Go figure, I wonder how many properties he is trying to unload.

"THE HYPER real estate market couldn't last forever and on its own is slowing to a "normal" market.

This year is expected to have about 5 percent fewer sales and appreciation will still go up from 5 percent to 10 percent. This will be a welcome return to an "average" year where prices still increase and home ownership still makes sense.

However, the media have been exaggerating and that scares buyers into renting.

While every winter slows down in sales volume, media articles scream "slowing down" without explaining context."

More....

Family Net Worth Falls

According to the Federal Reserve, family net worth fell between 2001 and 2004. Housing bubble watchers and experts will find this interesting because house prices went up dramatically during the three year period. This of course leads to the question, where did all the equity go? It looks like the equity was borrowed against in the form of home equity lines. For example, if the value of the house increased from $500,000 to $800,000, the typical owner borrowed against the increase in value. Instead of having a $450,000 mortgage, the owner now has a $750,000 mortgage. The equity extraction must have bought a lot of granite counter tops,


“WASHINGTON -- Growth in U.S. family wealth slowed to a crawl from 2001 to 2004 and stock ownership fell, according to a Federal Reserve report released Thursday.

Median net worth, the difference between household assets and liabilities, rose 1.5 percent, to $93,100, down from a 10.3 percent gain from 1998 to 2001. Net worth fell for the bottom 40 percent of U.S. families, according to the survey of 4,000 households, which the Fed conducts every three years.”

More…

A Conspiracy Theory

I try to limit posts that support conspiracy theories about the housing bubble or stories and anecdotes that require the reader don their aluminum hats; lest the CIA or Masons read our minds. I’m not a believer in a Fed-led Plunge Protection Team that buys Toll Brothers stocks when it gaps down too much on the open; nor do I believe the new bankruptcy laws enacted last fall are a precursor to debtor’s prisons run by our new Chinese leaders.

However, I did start thinking about the “stickiness” of housing prices in the face of rising inventories and why we haven’t yet seen a convincing move to the downside. Yesterday I commented that some of the stickiness might be due to too many inexperienced Realtors who grab a listing without regard as to whether the house will sell at such an unbelievably high price. After reading this story though, I think there might be another, more nefarious reason why asking prices remain higher than they should be.

This story from Florida reveals that condo projects down there are being cancelled. Interestingly, in my view, one of the “investors” in a cancelled condo project is also a real estate agent. Further down in the article is another real estate agent who is also an investor in another condo project. This story and others like it leads me to believe that many of the “investors” and flippers in various condo projects throughout the country are also real estate agents. Now comes the conspiracy part.

What if some of these Realtor/investors are more interested in getting out of their investments with a profit (or a small loss) than they are in making sure the listings that they represent are priced accordingly? Imagine a situation where a Realtor owns in a building where they also represent sellers. If both the Realtor and the seller are trying to dump their properties at the same time, would it be that strange if the Realtor was not aggressive with the seller they represent to try to get them to lower their price. I don’t think it would be that strange.

Realtor/Legislator Tries to Block Records

The Asbury Park Press has an editorial today that describes the efforts of a legislator from Essex County, who also happens to be a real estate broker, to enact legislation that would block the public’s access to county tax records.

The editorial makes some good points about why access to these records is important and why the legislation should be blocked. I would add that I think that the efforts of Senator Rice are designed to help protect the real estate broker industry from competition making his proposal especially repugnant. Presumably, a home owner who wants to sell his or her own property, without using a broker, would not have access to this information and would not be able to compare neighborhood house prices in order to determine an appropriate price for their own house. Similarly, prospective home buyers would not be able to see what price homes are trading at in a particular area through Internet sites like zillow.com or yahoo.com, unless they called a broker.

Senator Ronald Rice is an idiot. Tell him yourself at (973) 371-5665.

“Sen. Ronald Rice, D-Essex, a real estate broker, is pushing a bill that would exempt property record cards, maintained by local tax assessors, from the definition of a government record. That means the public would no longer be able to access the cards through an Open Public Records Act request. Yet Rice's bill would give real estate professionals, such as himself, open access.

It's a self-serving piece of legislation that would benefit Rice and those in his profession, but be detrimental to everyone else. And the damage it would do to OPRA should prompt other legislators to demand that the bill be stopped in its tracks. Any effort to restrict public access to government records should be vigorously opposed.”

More…

3229 Homes for Sale on the MLS

This week there was 3229 home for sale of the MLS for eastern Monmouth County compared to 3189 last week, which is an increase of 1.4%. In a few more weeks we should be in the thick of the “busy” spring selling season. I don’t think this spring is going to be as busy as the last one if asking prices are not adjusted down. Given the build in inventory we are seeing, there is absolutely no reason why buyers can’t be choosy when looking for a new home.

Atlantic City Bubble

There is some conflicting information in this report about the real estate market in and around Atlantic City. It seems that prices are down in some areas by as much as 10%, but are still going higher in other areas.


“With home prices throughout Atlantic County continuing to pull in high double-digit appreciations, a financial data and services group is labeling the area “extremely overvalued.”

The House Prices in America, Third Quarter 2005 report by National City Bank and Global Insight puts the Atlantic City Metro area at No. 13 on the list of most overvalued housing markets. The area is nearly 60 percent costlier than it should be, the study suggests.”

More…

The Rumson House Remains Unsold

This Rumson house was listed on the MLS since about last April until this January 22. I noticed in January it was off the MLS so I drove by it and saw that it had an "under contract" sign. It looked, at the time, that it was finally being sold. Now, a reader has pointed out that the property is back on the MLS.

Back in April 2005 when the house was first listed, the owners were asking $940 thousand. The last asking price in January 2006 was $749.9 and now it is back on the MLS listed at $749.9 again. It looks like the sale did not close and the owners are going to try again.

MLS ID#: 10038427

New Asbury Park Press Blog

The Asbury Park Press has some sort of new Editor’s Blog on its 1996 style website. As you would expect, it’s as almost devoid of interesting content as the regular front page, or the Sunday Impact section, or the Business section, etc. Even still, the blog does have a small post about the local market that some of you might want to comment on, if only to inform the APP that there is more to the local real estate market than the ad revenue generated from the telephone-book-sized, free-standing-insert advertisement printed up for Weichert each week.

Below is a snippet from the blog. The author has a “hunch” the market will stay strong. I have seen some pretty good data it won’t.
Snip…

“Median prices in the fourth quarter fell slightly in Monmouth and Ocean from the previous quarter, but that's not particularly unusual. My hunch is the market will stay strong in central and north Jersey unless interest rates jump markedly, which seems unlikely. As long as the demand far outstrips the supply, which has been the case in New Jersey for at least five years, prices should hold or rise. If the stock market keep showing signs of life, that should make for an even stronger housing market.”

More…

Sticky Prices

As many of you have noticed, inventories are rising at the Shore and other areas of the country as well. Not surprisingly, the high inventories reflect, in large part, the refusal of owners to reduce asking prices – simple economics 101 type stuff.

Some one on another blog pointed out that some inexperienced Realtors might be responsible for the lack of asking price downward movement. The argument goes something like this, and it makes sense to me. The housing boom created a huge number of Realtors in the past three years, and as a result there is a huge pool of inexperienced agents out there. This huge pool of late comers is now looking for listings to sell and will essentially take on any listing out there, even if the owner wants to list the property at a ridiculously high price. At another time in the past, when there weren’t so many Realtors to choose from, an experienced Realtor would have likely refused to represent a seller if the listing price was so high that getting a transaction done would be nearly impossible.

Lack of Blogging Explained

Sometime over the weekend, Blogger, the platform that I use, shut down this blog in order to try to eliminate what are known as spam blogs. As a result, I could not publish any new content. Since you are reading this, the Blogger overlords have apparently determined my blog is not spam.

What Areas Will Crack First?

I think that by the Summer, we will have plenty of evidence that the housing market is not going to make the soft landing that Fed Chairman Bernanke is looking for, or, on the other extreme, the flaming crash landing that former Fed Chairman Paul Volker is looking for. The landing, in my opinion, will be hard enough to seriously injure a few people but probably soft enough not to kill anyone.

At the national level, the housing bubble experts have pointed out that some cities lead the way in appreciating prices and that these cities are leading the way on the downside. San Diego is usually mentioned as the most likely city to collapse first, along with Miami, Las Vegas, and sometimes Boston.

At the Jersey Shore, I think that there are a few areas that will fall earlier, and probably harder, than other areas and therefore will be an early indicator for the rest of the Shore. In addition, aside from specific geographic regions, I think some market segments in the Shore might show signs of weakening before certain other areas do.

The towns along Long Beach Island will probably be some of the first, if they haven’t already, to experience falling prices. Not too many people live on LBI year round, so I think that when people are feeling nervous, they will look to sell the second home in Beach Haven before they sell the primary residence in Basking Ridge. Also, I would not be surprised if many of the homes there are un-rentable at prices that would be sufficient to cover the mortgage, especially if the house was bought sometime over the past four years. Finally, if you read the Asbury Park Press occasionally like I do, you’ll notice that there is a big fight as to whether property owners on LBI will allow a sand replenishment project. If the sand is not pumped on to the beach (at taxpayer expense) I’m not sure I would be a buyer of LBI property at even 25% of current prices.

The condos and town houses along Ocean Avenue in Long Branch that were built on property seized by the city look like good candidates for a correction. A few weeks ago I did a rough count of the number properties for sale at the The Bluffs and came up with about 17 out of I think 130 units for sale, not including FSBO. It is my understanding that many of these condos and townhouses were bought by real estate agents in the area in the hopes of making a quick buck from a quick flip. Given that the flip trade has been over since at least the summer of 2005, I would expect some of these units to start to trade below the original purchase prices. In addition, I bet many of these condos were sold as second homes for people and that second homes are the last thing anyone needs in a collapsing real estate market.

Speculative mansions probably seemed like a good idea in the summer of 2004. Rumson seems to have a pretty decent inventory of mansions built on spec. for sale. Along Rumson road, and along some of the side streets, old large houses were torn down and new bigger ones were put in there place. In many cases, these tear downs and build ups were done with a specific buyer in mind, like Queen Latifah (she owns one of these on Rumson Road.) However, I think in a few cases, the mansions were built without a particular buyer in mind. (The MLS says there are 35 houses in Rumson with an asking price above $3 million.)

I think that spec mansion builders will start to cut prices in order to unload what they have built because they can’t carry a $3 million house for very long. These mansion spec builders are mostly smaller private contractors rather than large publicly traded homebuilders (Toll, Hovnanian), and probably do not have the financial resources to hold onto a $3 million mansion too long, waiting for the right buyer, the way Toll Brothers can carry entire developments waiting for the right buyers. Therefore, while spec properties built and carried by national homebuilders might eventually fall in price, spec mansions built by Monmouth County general contractors might fall in price sooner.

3189 Houses on the Eastern Monmouth MLS this Week

Last week the count was 3168.

The number of listings on the MLS for eastern Monmouth County, New Jersey increased again. The inventories keep growing in our area and all over the country as house prices become more unaffordable with the rise in interest rates. A sort of “panic listing” seems to have set in but it does not look like “panic selling” has set in yet, as prices still remain high and I doubt many people actually need, as opposed to want, to sell yet. I think that inventories are going to grow over the next few weeks and then maybe level off for a month or two. I’m guessing that by mid-Summer, the first of the “need to sell” owners will start to panic after watching their house languish all Spring, and they will start cutting prices to an extent that will be noticeable.

Flippers are Leaving the Market

Conglomerate Cendant Corp. reported financial results this morning and said that they expect a soft landing for the real estate market.

NEW YORK (Dow Jones)--Cendant Corp. (CD) Chief Executive Henry Silverman says the real estate market continues to be strong through most of the country and results at its real estate business should improve during the second half of 2006.
"We continue to expect a soft landing for the real estate market in 2006," Silverman said on a conference call Tuesday to discuss the company's fourth-quarter results.
Cendant's real estate brands include ERA, Coldwell Banker and Century 21. The New England, California and Florida markets are the hardest hit, not surprisingly, because those where much of the housing market speculation has been reported, the executive said. December default rates - the number of unclosed contracts - spiked 30%, he added, as house flippers departed the market.

Wire story, sorry no link.

Rates are Going Higher

For about two weeks, maybe in late January or early February, the conventional Wall Street wisdom was that the Federal Reserve was going to stop raising interest rates after the next 25 bps. increase, or only raise them another 25 bps. after that, but then quit. The sentiment has changed though and now many believe that at least two rate 25 bps. increases are likely, if not more than that.

“In a swift reversal, financial markets have decided that short-term U.S. interest rates may not be near the top of the current rate-tightening cycle.

One way to watch the ebb and flow of traders' sentiment about short-term interest rates is to track global demand for U.S. dollars.

In January, belief that the Federal Reserve was near the end of its campaign to raise rates pushed the dollar lower.

Recent strength in the dollar against major currencies indicates that traders now are betting on higher U.S. rates.”

Full Article

Great Local Market Conditions Info.

The Realty Times is a website for Realtors that has a section that allows Realtors to post what local market conditions are like. In general, this information is useless as the market condition descriptions are not supported by any hard data.

However, this local Realtor (Joyce Carter) has posted some worthwhile and interesting information about the real estate market in Monmouth County, and in a few individual towns, including Rumson and Sea Bright.

In short, and as suspected, sales are down and inventory is up across Monmouth County.

Here is some of the data that was posted for Rumson:

Q4 2004 Listing Supply:...........................................58
Q4 2004 Projected Absorption (in months):..................9

Q4 2005 Listing Supply:...........................................98
Q4 2005 Projected Absorption (in Months):................14

To see the full information go to this link for:
Rumson
Middletown
Sea Bright
Monmouth County
Atlantic Highlands

The Realtor (Joyce Carter) who provided this info. on Realty Times, an otherwise useless website, deserves to commended for making this useful information available.

Interest Rates are Only Half the Story

From the Street.com

"What if an interest increase is harnessed to a generation-long downsizing of baby boomers?"

snip...

"Unfortunately, most of the coverage about where the real estate market stands, and which way it will fall, has centered on interest rates as the sole cause of the long, national dream of incredibly rising home values. But telling the story only through the eyes of interest rates is only a half measure.

The interest rate explanation dovetails nicely with Alan Greenspan victory-lap coverage. Plus, no 40- or 50-something reporter wants to ponder his own future in an assisted living facility. But there is another big issue at play."

Full article...

Slowdown in Baltimore

[Area home sales ease; city yet to reach peak

Prices still rising with more houses on the market

By June Arney

sun reporter

Originally published February 11, 2006

With each passing month, there is mounting evidence of a mild if uneven slowdown in the regional real estate market, with the number of homes on the market rising steadily as prices and sales slip further from their summer peaks.

Prices in the region peaked in July, and January's average sales price of $291,337 was 6.4 percent below that level, according to data from Metropolitan Regional Information Systems Inc., a Rockville company that tracks sales through the multiple listing service. About 2 1/2 times as many homes were listed for sale in the region last month as a year earlier, and sales ran 15 percent or more behind year-earlier levels in most areas.]

Full story....

This Would Probably not be Good for Shore Property Values

I think the prospect of drilling is far fetched and Pallone and Menedez are reaching for anything to get their names in the paper by making such a big deal out of it.

[BELMAR — U.S. Sen. Robert Menendez and Rep. Frank J. Pallone Jr., both D-N.J., vowed Friday to fight a new Bush administration proposal for oil and gas drilling off the coast of Virginia, a move they said could place New Jersey's beaches several hundred miles to the north at risk.

The legislators, joined by environmentalists at the Taylor Pavilion on the boardwalk, said they will work with their West Coast legislative colleagues to make the current moratorium on drilling exploration a permanent one.

"For five years, this administration has looked to drill anywhere they can put an oil rig, and now they are heading straight for the Jersey Shore," Menendez said. "If this (Virginia) plan goes forward, the president and his friends will be back next year to drill in another area, and it could be right off the beaches of Belmar. That's an unacceptable threat."]

More...

An Original Essay from the Northern NJ Real Estate Bubble

Home Prices Do Fall

A Look At The Collapse Of The 1980's Real Estate Bubble

Through The Eyes Of The New York Times

by

James Bednar

Northern New Jersey Real Estate Bubble Blog

http://nnjbubble.blogspot.com

"Home prices never go down," is a quote often heard spoken by real estate agents. It isn't true. Real estate bubbles do exist and they do burst. The after effects of a real estate bubble burst are felt for years afterwards.

Thanks to the online search capability of the New York Times, I was able to compile a list of articles that appeared in the New York Times during the real estate bubble from 1981 to 1988 and then from the resultant crash, from 1989 onwards.

All the readers that have seen the preliminary compilation gave the same remark, "It's like deja-vu."

Read the Entire Essay

Condos For Sale

The Wall Street Journal has and extensive article today about the glut of condos in the market in Atlanta, Minneapolis, San Diego, Boston and Sarasota. Basically, the article says that there is a glut of condo inventory in these cities, with some being worse than others. This is what the article said about Sarasota Florida.

[IN A SNAPSHOT: An overbuilt downtown condo market is leading to incentives such as deals on beach-club memberships.

The downtown market has been on a tear since the Ritz-Carlton, which included 50 residences atop the hotel, was completed in 2001. More than a dozen condo projects have been built since then in this city of 55,000, and there are as many units under construction now as have been completed over the past six years. Plus, about 273 condos are on the market.

That's almost triple the amount of condos on the market here a year ago, according to real-estate firm Michael Saunders & Co. And more continue to be announced, including Marquee on the Bay, a 16-story tower with 12 units starting at 4,750 square feet for $3 million, and the Grande Sarasotan, with 144 condominium units priced from $1 million to $3 million.

"Where are the people going to come from?" says broker Barbara Ackerman, who predicts the median condo price in downtown will drop a "minimum of 10%" this year.

January is typically a slow month here, but this year there were six condos that resold, down from 14 in January 2005, according to Michael Saunders & Co. It's no longer uncommon for sellers to offer hard-to-get golf and beach-club memberships, which can cost as much as $75,000 apiece. Bert and Jane Kummel, retirees who put their three-bedroom condo on the market for $2.4 million at Thanksgiving, have thrown in $1,000 worth of opera tickets as a lure. But to no avail, says Mrs. Kummel: "It's a great marketing idea, but people just aren't buying like they were."]

Unscrupulous Mortgage Brokers

Snip…

[The number of unscrupulous brokers offering "junk mortgages" has multiplied with the housing boom and advent of Internet financing in the past five years, said David Levine of Mortgage Loan Request, a mortgage information service.

Their advertisements "are designed to hit consumers where they are most susceptible, their wallet."

They are often successful, because many consumers never see or understand the fine print -- often on the back of the flier -- that explains what a bad deal the mortgages can be, he said.
"The sleight of hand is that the low rate advertised is actually adjustable, and it can increase in as little as 30 days' time. You may be paying less every month, but your interest is not being paid up and your loan balance continues to accumulate at an alarming rate," he said.]

Full Article

A New Poll is Up

I would like to put up a more interesting poll than the one that is there now. If you have any suggestions for what would be a good poll question, leave your suggestion in the comment section or send an email to silvered.little@gmail.com.

Final Poll Results

I plan on putting up a new poll soon so I am taking down the old poll. I'm posting the results here so that we can check to see how close we came to estimating how far housing prices actually did fall.


The national median existing-home price for all housing types was $220K in Aug., up 15.8% from Aug. '04. What will the national median price be closest to on Sept. 30, 2006?

Answers Votes Percent
1. Down 30% to $154K. -163 -43%
2. Down 20% to $176K. -60 -16%
3. Down 10% to $198K. -86 -23%
4. No change -35 -9%
5. Up 10% to $242K. -24 -6%
6. Up 20% to $264K. -3 -1%
7. Up 30% to $286K. -4 -1%

Interesting Graph on Curbed

snip..

"In prior decades, listing inventory was generally predictable and consistent. Known as a two-hump camel, listing inventory tended to rise in the spring as sellers wanted to catch the most active market of the year, fell in the summer and then rose again in the fall for the second most active purchase season, falling again in the winter."



The graph is here.

3168 Listings on the Eastern Monmouth MLS

Last week the number of listings on the Eastern Monmouth MLS was 3126.

Inventories of houses are growing quickly all over the country. The Wall Street Journal had an article today showing the build up in inventory in 13 parts of the country. Washington DC had the highest one year increase in inventory from 7,047 last year to 17,561 currently, which is an increase of 149.2%. Year-over-year increases in other areas were:

Miami – up 98.3% to 18,299
Manhattan – up 86.9% to 9,130
Boston – up 67.4% to 9,375
NJ Suburbs of NYC – up 46.4% to 25,866

(The WSJ did not describe what suburbs make up NJ suburbs of NYC.)

Emigrant Savings Bank Deposit Rate is 4.25%.

Emigrant Savings Bank in NY been offering the most attractive deposit rates of any bank for about a year now. They have been raising rates along with the Fed and now pay 4.25%, which is a pretty solid return. If I had $100,000 to either invest in a house or in cash, I’m pretty sure I would take the 4.25% return rather than risk losing 25% to 35% in the housing market.

A Limit on the GSEs Portfolio Size Would be Good Start

Attempts by the White House to limit Freddie and Fannie's portfolio size was rejected by Congress last year. The two GSEs have had Congress in their pocket for years and neither the Repubs or Dems in Congress want any reform.

"WASHINGTON (Reuters) - The Bush administration on Monday said Congress should create a new regulator for Fannie Mae and Freddie Mac and direct it to cut the $1.4 trillion investment portfolios held by the mortgage finance giants.

In an analysis accompanying Bush's budget proposal, the White House reiterated its view that the portfolios of loans and securities held by the government-sponsored enterprises pose a risk to the broader financial system.

The administration said legislation to overhaul supervision of Fannie, Freddie and the Federal Home Loan Bank System should give a new regulator authority to assess not only safety and soundness concerns but also the "systemic risk" posed by the enterprises and their activities."

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Shore Housing Boom

Northjersey.com has a number of relevant articles today.

This article describes the housing boom along the Jersey Shore. Although I think most of the Shore is due for a housing price correction, a couple of areas look especially susceptible to a downturn in values. I think the LBI could fall pretty hard and fast since most of those houses are second homes or were purchased with the intention of renting them out over the summer. Second homes are going to be sold a lot more quickly than primary residences when the ARMs on those places reset at higher rates. Houses on LBI that were bought with the intention of collecting rent from summer vacationers, I have a feeling, are going to sold en masse starting this summer. Given some of the prices paid for houses in LBI in the past three years, it is hard to believe that a landlord could charge enough over a summer to cover the cost of a mortgage, let alone make a profit.

“LONG BRANCH -- The giant claw of the earth mover chomped at the whitewashed side of what used to be the Fountain Motel, opening a gaping hole.

Within hours on a late December morning, the Long Branch beachfront motel that had degenerated from an oasis for generations of summer tourists into a flophouse had been transformed into piles of cinder blocks, wires and pipes.

Shortly, they too were gone, leaving an open field on which several dozen shiny new condominiums each costing a half-million dollars or more will be built.

Such is the real estate market on the Jersey Shore. From Cape May to Sea Bright, construction is turning communities of vacation bungalows and rental units that sat idle for much of the year into mansions, condominiums and town houses.”

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Gold Coast New Jersey

According to this article the supply of condos coming on-line in Hudson County is huge. There is a real slowdown in condo sales in Jersey City and Hoboken, which is not good for the Shore area or commuter towns in north Jersey. As I have said before if the Hoboken condo does not get sold, the Holmdel split level does not get bought.

“Even in North Jersey's scorching real estate market, the condos along the Hudson River Gold Coast have stood out for their relentless pace of appreciation.
But as the 2006 spring buying season approaches, sellers from Fort Lee to Jersey City appear to be a bit more willing to negotiate. Realtors say condos are taking longer to sell as buyers have become a bit more cautious with mortgage rates trending upward and talk of a housing bubble growing louder.”

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Houses are Piling up in Florida

The inventory of unsold houses is piling up in Florida. The Jersey Shore doesn't seem to be as speculative as Florida. However, when people with loans underwritten by national banks like Wachovia or Wells Fargo start to default in Florida, those banks are going to raise mortage rates all over the country, including here in Jersey.


"Lee County's housing market is slowing after years of robust growth — and the worst may be yet to come as homes already being built flood the market.

That's the word from experts who keep an eye on the numbers, and the numbers lately are raising concerns.

Every day, more than 400 houses go on the market, but only about a hundred are sold, according to real estate broker Denny Grimes, owner of Denny Grimes & Co. About 300 owners per day are reducing their sales prices.

While prices haven't fallen much, unsold houses are piling up and "the inventory will get worse before it gets better," said Grimes, who tracks the residential market for the annual The News-Press Market Watch real estate symposium to be held later this month."

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Open House Observations 2/5/06

I drove through Belmar today and stopped by two open houses. Before I describe the open houses, I think it's important to point out that Belmar has a huge supply of houses for sale. There are for sale signs all over the place and it almost looks like people are trying to escape town. I drove through Avon to just to see if there were lots of houses for sale and I would guess that Avon had about a third the number of houses for sale that Belmar did.

I have a theory as to why Belmar has a huge inventory compared to the other nearby towns. I think that the crackdown on drinking and the effort by the mayor to make Belmar less of a party town has caused many people that rent houses to college kids to try to cash out.

In any event, there is lots of houses to choose from in Belmar and the Realtors that I spoke with were aware of that. They definately did not try to convince me that the current market was strong or a "sellers market", and seemed resigned to the fact that there was a ton of inventory up and down the coast. Both Realtors, in fact, said that many people are trying to sell now because prices are weakening.

The End of Sub-Prime Lending

Liquidity for real estate will dry up this year because:

-Sub-prime lending is not as profitable as it was (as per this article.)
-Regulators are curtailing risky loans.
-Interest rates are higher than they were in '04 and '05 and are going higher.
-Increased loan losses will cause banks to tighten lending standards.


Subprime real estate loan party is over in 2006
By Janis Mara, Inman News

As the housing market slows, the booming subprime real estate loan market — loans for people with less-than-stellar credit — is also slowing, observers say, despite a long runup.

"In general, there's been a subprime boom over the last two years," said Jeffrey DerGurahian, senior vice president of capital markets at Metrocities Mortgage, "but Wall Street is getting concerned about the risks in these loans.

"Right now the execution selling loans to Wall Street is not as attractive as it used to be. People are afraid of the credit risk going toward a slowing market," the senior vice president said.

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SF Bay Area Foreclosures ar Up.

Bad trends always seem to start in California.


[More Bay Area homeowners had serious trouble paying their mortgages and went into default as 2005 drew to a close -- evidence that a cooler housing market can hurt the financially strapped.

Lenders sent 2,292 ``notices of default'' to owners in the nine-county area in the last quarter of 2005, DataQuick Information Systems reported Thursday -- 11 percent more than a year earlier. The notices are the first step in the formal foreclosure process, and typically are sent when a homeowner has failed to make payments for three months or more.

Overall, the number of Bay Area default notices remains low. But defaults are likely to keep rising, according to the real estate information firm.

``From here on out the number will probably increase steadily,'' said DataQuick's John Karevoll, who compiled the data from public records. ``The main thing we need to remember is the numbers a half-year and year ago were just unnaturally low, as statistics go.'']

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Nice Employment Numbers Today

The unemployment rate dropped from 4.9% in December to 4.7% in January, which was better than expected. Additionally, non-farm payrolls were up more than expected. Although you would think that decreased unemployment would be a good thing for housing, it probably isn’t. This is because the better than expected numbers will give the Federal Reserve more reason to continue to jack up interest rates. The Fed is thinking to themselves, as long as we aren’t putting people out of work, we can afford to raise interest rates at least one, and maybe two or three more times, in order to cool off the over heated housing market.

Super Bowl Sunday Selling Season

According to some of the other blogs, real estate professionals say that the Spring house selling season starts after the Super Bowl. In that case, we should really see inventories start to build in the next few weeks, even more than they already have.

It should be interesting to see how many open-houses there is this Sunday. In my opinion, holding an open house on Super Bowl Sunday would seem to smack of desperation; then again I’m a football fan, even if I could care less about the two teams that are playing.

If anyone gets a chance to stop by an open house this Sunday, quiz the realtor as to how local market conditions are.

Eastern Monmouth Weekly MLS Chart

Inventories of unsold homes in eastern Monmouth County are about to surpass the mid-November high.

The Public Pays to Protect Beach Houses

I have a difficult time finding much sympathy for these beach front owners who are losing the houses to the sea down in LBI. I don’t see why it is the responsibility of the municipality to protect the beach front property owner’s house from being swept away by the surf. Shouldn’t the property owner pay for his own sand instead of having the tax payers pick up the tab? Moreover, if the owner can’t afford to buy his own sand, then maybe he should move further inland.

Posted by the Asbury Park Press on 02/2/06

BY JOE ZEDALIS
MANAHAWKIN BUREAU
LONG BEACH TOWNSHIP — Two Ocean Boulevard homes, assessed at $2.1 million each, gave new meaning Wednesday to the phrase "waterfront property."

Wind-driven waves from a mild cold front Tuesday night and Wednesday morning swept sand from under the homes, leaving 6 feet of supporting bulkhead pilings exposed and 6-by-6 beams dangling 2 feet from the nearest solid ground.

Township Commissioner Robert Palmer said municipal officials approved an emergency appropriation of $150,000 to pay for sand to be trucked in to rebuild the 18- to 20-foot dunes that overnight were worn down to half their size, swept away by the ocean.

In the North Beach section, 20-foot dunes were also severely damaged, appearing sheared in half, Palmer said, though no homes were threatened.

This most recent case of erosion again focused attention on the multimillion-dollar beach replenishment and storm protection project that is pending in five of the six towns that share the island. The project is in jeopardy because many homeowners have refused to sign access and work easements needed to do the work. Long Beach Township needs approximately 600 easements. As of last week, the township had about 50.

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Local Realtor Sold to National Realtor

STAFF REPORT from the Asbury Park Press

Murphy Realty Preferred Homes, which has five real estate offices and 140 sales associates in Monmouth County, is joining Coldwell Banker Residential Brokerage.

Coldwell Banker Residential Brokerage in New Jersey and Rockland County, N.Y., said Wednesday that it has acquired the assets of GFM Realty Group Inc. and GFM Group Inc., which operates as Murphy Realty Preferred Homes.

Murphy has offices in Red Bank, Long Branch, Rumson, Middletown and Sea Girt. The agency will now operate under the banner of Coldwell Banker Residential Brokerage.

Interestingly, the Property Grunt has this to say about small Realtors in the ‘burbs last week.

“Personally, if I owned a brokerage firm in the burbs, I would find the biggest, fattest broker hog I could find and sell out so I can weather the storm when all hell breaks loose.”

Congratulations on selling out to a “hog” Mr. Murphy, before all hell breaks loose.

Wire Story - CA Foreclosure Stats

2:24 (Dow Jones) Foreclosure activity in California rose in the 4Q, as lenders sent out 14,999 default notices to California homeowners, up 19% from 12,606 in the 3Q and up 15.6% from 12,978 in the 4Q of 2004, says DataQuick Information Systems, a real estate information service. Defaults hit a low during the 3Q of 2004 at 12,145 default notices, and the high was in the 1Q of 1996 at 59,897. DataQuick's data go back to 1992. "Equity is now being created at a slower pace, and default activity is inevitably on the rise," says DataQuick president Marshall Prentice, in a press release. (DAR)

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Eastern Monmouth MLS Inventory up almost 5% in a Week

The number of houses for sale on the MLS for Eastern Monmouth County is at 3126 as of today, which is up from 2975 last Wednesday. I believe that this is the largest weekly increase that I have seen since I started keeping track in June of last year.

The increase in the amount of inventory would seem to support the broader surveys that were released today, including the Pending Home Sales Index, which was down 3% and the weekly mortgage applications index, which was down 5.1%.

CEO Blames Loan Rivals for Eroding Earnings

I thought this article from the LA Times was pretty informative. Basically, the CEO of Countrywide is blaming two other sub-prime lenders, Ameriquest and New Century, for writing risky loans in an effort to maintain profitability and market share. Eventually, many of these loans are going to go into default and the sub-prime lending industry is going to suffer.

[CEO Blames Loan Rivals for Eroding Earnings
By E. Scott Reckard, Times Staff Writer

Brutal competition in the shrinking home loan market has caused "irresponsible players" such as Ameriquest Capital Corp. and New Century Financial Corp. to spoil mortgage banking profits, the chairman of No. 1 home lender Countrywide Financial Corp. said Tuesday.

Announcing earnings that disappointed Wall Street, Countrywide founder Angelo R. Mozilo singled out the two Orange County-based competitors, blaming "the Ameriquests and New Centuries of the world" for pricing loans too low in a bid to retain market share as business slows.

"I've been doing this for 53 years, and I've never seen that situation sustained," Mozilo, 67, said during a conference call with securities analysts. "Eventually they gag on it."]


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