Blogging Will Be Slow

I will be on vacation next week, therefore blogging will probably be pretty slow.

If you have any comments or observations, please leave them here for now.

Auctions for Houses that Won't Sell

From Today's WSJ

"Brian Michaud just picked up a little something for 40% off -- a brand-new, two-bedroom condominium in Fish Creek, Wis., with a private elevator and harbor views. His method: He bought it at auction. Though the condo was new, its developer decided he wanted to sell quickly, so he put it on the block last month.

Mr. Michaud had been watching the condo since construction started, but figured last year's $1.25 million asking price was beyond his budget. But when it went on the block, Mr. Michaud and his brother snapped it up for $740,000 -- less, even, than comparable units without water views have sold for nearby. "It was a great deal," he says."

Full article..

Another Report from NYC

From today's NY Post

August 24, 2006 -- In New York, the switch is on.

The slowing housing market has driven the nation's condo developers - even those in the once-sizzling local New York-area market - to pitch their buildings to renters as more and more apartments go unsold.

New York's housing trends are mirroring the rest of the nation, where both rental rates and construction of multi-family buildings are rising.

Full article...

From Soft Landing to Hard Landing

Last year at about this time the operative word was "normalized", as in "this real estate expert thinks a more normalized real estate market will materialize next year and prices will only increase 5% per year."

Starting this past March or April, the operative word from economists and experts became "soft landing", as in, "real estate will probably experience a soft landing in 2007."

Over about the past two weeks though, soon after the major home builders finished reporting earnings, the words "hard landing" started to become more common in the press.


This article is from the Wall Street Journal.

"HERNDON, Va. -- For years, real-estate brokers and home builders promised that the soaring property market eventually would glide to a soft landing. These optimists predicted that home prices, which had more than doubled in parts of the country between 2000 and 2005, would continue to rise, but at a more normal pace of 5% or 6% a year.

It isn't working out that way. The rapid deterioration of the market over the past 12 months has caught many homeowners and builders off guard. Some are being forced to cut prices far below what their homes could have fetched a year ago. It's too early to say how hard the landing will be, but at a minimum it will be bumpy for many people who need to sell homes. And the economy as a whole, buoyed in recent years by the housing frenzy, could suffer."


Full article...

4707 House on MLS for Eastern Monmouth

Last week there were 4621 homes on the MLS for Eastern Monmouth County. Considering August is supposed a seasonally slow month for real estate sales, I'm surprised so many people have decided to list their houses this late in the summer.

Internet Vs. Housing

Here is the full story behind the graphic, which is from Marketwatch.com.

Update from NYC

The NYC market, like most markets, has cooled considerably since last year. Someone pointed out recently that during the last housing downturn, many NYC families became trapped in their 2 bedroom condos because prices declined too much, forcing a much longer stay in the City than was originally planned. The “trapping” arises when a newly married couple decides to invest in a two bedroom with plans to sell three or four years later when junior eventually arrives. Back in the late 80’s and early 90’s though, when junior finally did arrive, the co-op “investors” were already underwater making the move to Chatham or Shrewsbury very expensive or impossible. At least in this decade though, NYC is much safer than it was in the late 80’s so trapped co-op owners might not be as desperate to escape when the first kid arrives.


From Today's NY Post - Snip…

["We have a classic stand-off between buyers and sellers in New York," said Miller Samuel CEO Jonathan Miller. "Housing inventory is at the highest level since the late 1980s and demand has cooled off."

In the second quarter of last year, it took 102 days to shift a unit on average. By the second quarter of 2006 this had soared to 144 days.]

Full article…

Wildwood Update

I'm more familiar with Monmouth and Northern Ocean County compared to the "Philadelphia" part of the Jersey Shore further south. Here is an update from Wildwood though.

snip...

[Rising interest rates, overvalued real estate and inventory excess has exacerbated the problem.

"The market has died in the last several months," Esher said. "People are afraid of a recession. They're afraid for inflation. The (Federal Reserve) counters by raising interest rates. And sales are down."

Some 2,000 units are for sale, according to Bruce Smith, president of the Greater Wildwood Hotel & Motel Association.]

More...

A Credit Crunch is Coming

Wall Street is loosing its appetite for sub-prime, no doc loans and other exotic types of mortgages. When the mortgage companies loose the ability to sell the riskier mortgages to investors, they will stop offering these types of loans to certain home buyers. It looks like sub-prime lenders are scaling back these knds of loans already.


["NEW YORK (AP) -- Some mortgage lenders are feeling the heat from Wall Street to tighten their lending standards and cut their exposure to riskier loans.

The force at work is the increasing demand from investment banks for lenders to buy back the loans due to borrowers' failure to make their first few payments on those loans. Such "early payment defaults" so far have largely been limited to nonprime mortgages made to borrowers who pay higher rates than those qualifying for standard loans due to their weak credit or inadequate documentation."]

Full article...

Toll Brothers Reports Tomorrow

It's always interesting to get Bob Toll's outlook on the real estate market. The BOA analyst quoted below thinks Toll is going to miss earnings and guide lower.

Toll has a few projects in progress in New Jersey. I like following his the company's Hoboken projects because he has said that demand there remains healthy. Given all of the inventory coming on line in Hoboken, Jerset City, Weehawken and Edgewater, I think that it is going to take a long time before all of the inventory up there is aborbed.

Snip...

[Banc of America Securities analyst Daniel Oppenheim in a research note said he expects Toll to report fiscal third-quarter earnings of 96 cents a share, or 8 cents below the consensus estimate, due to expected land write-downs that could exceed $20 million.

Oppenheim is also looking for Toll to release its profit forecast for 2007. The analyst predicted Toll "will offer a wide range for 2007 guidance given the weak orders in fiscal 2006 countered by hope for improvement in orders in 2007" and said he wouldn't be surprised if the estimate calls for a 20% to 50% drop from the year earlier.

He expects Toll to lower its 2006 outlook from $4.69 to $5.16 a share and closer to his $4.20 estimate, which is 5% below Wall Street estimates.]

Full article...

Sales Way Down in North Jersey

Grim over at the Northern NJ Real Estate Bubble Blog has some recent sales data. July was not a good month for sales, though few readers of his blog and others should be surprised.


July
Average Sales (2003-2005): 3495
2005 Sales: 3338
2006 Sales: 2428
(Down 27.3% Year Over Year)

I Wouldn't Get Excited About Lower 10 Year Yields

The yield on the 10 year note has been back under the 5% range for about a week now. A few real estate bulls here and elsewhere are encouraged by the drop in yields and seem to think that the decline will encourage more home buying again as mortgage rates, which are often pegged to the 10 year yield, also trend lower.

Unfortuneately, the lower yield on the long bond is a signal that the market expects economic growth to slow in the coming months. This is the conundrum of the housing bull. If economic growth continues at a pace that encourages inflation, the Fed is forced to raise interest rates to limit growth and hopefully inflation. If the Fed is succesful though, job growth declines, or job cuts increase, and aggregate consumer spending (and house purchases) declines. The housing bubble was started when the Fed provided too much liquidity and it is ending with the Fed taking the excess liquidity away.

"There is a major housing slowdown,"

From today's Asbury Park Press

[For the first time in a decade, home prices in the region that includes the Shore have declined, although the drop in second-quarter prices was slight, the National Association of Realtors reported Tuesday.

The median sales price for an existing home in the region that encompasses Monmouth, Ocean, Somerset and Middlesex counties was $393,600 in the second quarter, down 0.1 percent from $394,100 in the second quarter of 2005, according to the association. The median means that half the homes in the area sold for more and half for less.

It's the first time that the association has seen a percentage decrease since prices in the region fell from $148,600 to $148,500 from 1993 to 1994. They have climbed ever since.

"There is a major housing slowdown," said James W. Hughes, dean of Rutgers University's Edward J. Bloustein School of Planning and Public Policy. "It is surprising that prices have behaved as well as they have."]

Full article...

4621 Homes on Eastern Monmouth MLS

Last week there were 4559 homes.

Regarding the "conversation" in the previous two posts. I don't want to have to moderate them so try to stay at least marginally on subject. If you are going to insult someone personally, try to add an anecdote or factoid about real estate at the Shore or in NJ, whether positive or negative, in the text of the insult.

Roach Sees a Slowdown

I know, he has been talking doom and gloom for years.

Snip..

America’s slowdown represents an important transition in the sources of economic growth, away from the vigorous wealth creation of asset bubbles – first equities, then housing – and back towards more subdued labour income generation. The delayed impact of higher interest rates is also taking a toll. Even though the Federal Reserve has put its two-year monetary tightening campaign on hold, there is a risk it has already gone too far. The confluence of higher energy prices, rising debt-servicing burdens, and negative personal saving rates reinforces the possibility of a pullback in discretionary US consumption and GDP growth.

Full article...

...Ans Some Brokers Charge 6% Because?

This last paragragh is from an article in the Asbury Park Press. I thought the advice from Realtor Diane Turton was classic. No wonder why inventories are so high, when you have Realtors dispensing this kind of advice to try to sell homes.

Snip...

[Besides pricing and marketing, presentation also makes a difference.

Cut the yard's grass, mulch the flower beds and paint the house to make it shine.

"You have to make your home stand out," said Diane Turton, owner of Diane Turton, Realtors.

Turton suggests making sure the inside of the home, including the closets, is clean and clutter-free.

"Put an apple pie in the oven. Have fresh flowers in the house as well," Turton said.]

Full article...

4559 Houses on Eastern Monmouth MLS

Last week the count 4567. Its the middle of August so it should not be much of a surprise to see inventory levels flatten out or decline. I bet we see an upturn in the fall and then another decrease in inventory around the holidays.

I Guess Sales are Slow for Toll

A Hoboken Realtor who has her own blog had these recent comments about a major Toll Brothers condo project being constructed along the Hoboken waterfront. Reading her posting, it looks like sales have slowed down from earlier this year.

"When they first started, there was a waiting list and a phone lottery to be able to purchase a condo. They did not cooperate with brokers. This was for the first phase. Eventually they opened it up to other realtors, and as of recently, they are even listing available units on the Hudson County MLS. And today, I received an e-mail from Toll Brothers encouraging me as well as other realtors to sell units in this complex."

Here is the entire post.

Priced Out

A reader sent this Bloomberg article our way. Teachers, cops and other civil servants are having a hard time affording living in the areas that they work down in Florida. I'm sure the same applies at the Shore. In fact, I bet the huge population growth of Ocean County over the past 10 years or so is because Monmouth County became unaffordable for so many.

Aug. 7 (Bloomberg) -- Beth Ireland gave up after spending a year looking for a $300,000 house in Naples, Florida. She quit her job as a nurse manager and moved to Pittsburgh.

``It's nuts,'' said Ireland, 54, who left in June. ``When all is said and done, we can't afford to live in Naples.''

Naples, on the Gulf of Mexico in southwestern Florida, boasts more than 130 art galleries, posh hotels and private jet service, according to its tourism Web site. Jobs are plentiful -- but home prices average almost $500,000.

Locals call Naples the ``bubble city,'' with home prices that have surged 140 percent since 2001. It's the most overvalued housing market in the country, driven by an influx of retirees and second-home buyers, according to a June report by National City Corp. and Global Insight economists.

Teachers, nurses, paralegals and other middle-income workers are pursuing housing -- and jobs -- elsewhere. That's making it tough for employers, which are giving big raises and housing subsidies and still finding it difficult to hire or keep staff.

More...

Too Many Realtors Equal Sticky Prices

Some on this blog and many on others have commented that they have not seen a decrease in prices in New Jersey even though the number of transactions is clearly down. Although it looks like median prices are at best flat throughout the state, I think that if you were to look at prices on a same-house basis, you would see that prices are down at least 5% across the state, if not more. In addition, in high condo markets like Hoboken and Jersey City, I think prices are down at least 10%.

Even still, the price declines so far do not seem to be too severe. Part of the reason for the sticky prices is because too many new inexperienced Realtors entered the market in the past five years. It is my belief that the excess number of Realtors has allowed sellers to essentially “shop” for what they want to hear. The Realtor that suggests the highest asking price is going to be the one that gets the listing, whether they can actually sell the house at that price or not. By next spring, hopefully a sufficient number of Realtors will have exited the market leaving more experienced and rational Realtors to talk asking prices down in order to generate commission checks for themselves.

I'll Take the Price Cut

This is a good article from MSNBC. I'm not interested in concessions. I want a price cut.

Snip...

[And those statistics may not tell the whole story. Sellers coast-to-coast are now making concessions that don't show up in the official sales price, like picking up the cost of repairs or paying buyers’ closing costs. Home builders are giving away valuable upgrades — everything from fancier kitchens to a free pool — to move new homes.

“So the the effective price is lower and probably already falling, but you don’t see that in the market price,” said Mark Zandi, chief economist at Moody's Economy.com. “I’m expecting 5 to 10 percent peak-to-trough declines in a third to maybe half of the nation's markets.”]

Full article

Report from the Hamptons

The Hamptons real estate market seems to have some similarities with the Jersey Shore market, so its worth pointing out that slows are sale out there too.

Driving around the Shore this area, and reading this article, I think it is becoming apparent that some Realtors and homebuilders have grossly overestimated the number of people that can afford to pay $3 million or more for a home in the greater metropolitan area. I don't doubt that plenty of people can afford expensive homes in NY, NJ, and CT, but I think the number is smaller than most people think. Ocean Avenue in Sea Bright and Monmouth Beach must have about 7 to 10 homes on it that are at least $3 million and they don't seem to be moving very quickly. Spring Lake and Sea Girt also seem to be filled with huge $3 million plus mansions but I don't think that much money exists in our area to absorb all the inventory.

"Aug. 4 (Bloomberg) -- New York's hottest summer spot for investment bankers and movie stars is cooling as mortgage rates climb. In a year of record Wall Street bonuses, home sales in the Hamptons fell 18 percent, signaling the end of a five-year boom.

A total of 1,727 homes were sold during 2006's first half in the Hamptons on the eastern tip of Long Island where billionaire investor Ronald Perelman and movie director Steven Spielberg own summer estates. That's down from 2,106 a year earlier, according to data compiled by Suffolk Research Service Inc., a property records company in Southampton, New York. The drop compares with a 4.3 percent slide nationwide"

More...

Bank Takes a Hit to Earnings on Dwek Loans

The comments from the Rutgers Professor are kind of interesting.

snip...

[Despite the improved financial performance, Vaccaro said the bank's net income would have been $733,000, or about 9 cents a share, if it didn't set aside money in case Dwek's loans go into default.

"They're unsecured in nature, and because they are associated with the entire Dwek issue, we thought it was appropriate to take a 25 percent reserve," Vaccaro said.

One expert said the unsecured loans were curious, particularly since Dwek probably had assets that he could have used as collateral. If the loans were secured, the bank, in the event of a default, would be able to recoup at least part of its money by selling the collateral.

"For me, an unsecured loan is a rare animal, especially when you are a developer and you have all these properties you can secure it with," said Paul Nadler, a retired banking professor from Rutgers University.]

Full article...

Mortgage Aps. Down

NEW YORK - Mortgage application volume fell to its lowest level in more than four years last week, the latest indication that the once red-hot real estate market is cooling down.

The Mortgage Bankers Association reported Wednesday that its market composite index, a gauge of mortgage loan application volume, fell to 527.6 last week, down 1.2 percent from the previous week's reading of 533.8. This is the lowest index reading since May 2002.

Full article...

Eastern Monmouth MLS 4567

Last week the count was 4560. Not much of an increase in inventory this week. I think a number of houses were de-listed at the end of July. It will be interesting to see if inventory grows in August since its probably not the ideal time of year to try and sell a house.

Bill Gross Explains

If you are under the delusion that a Fed pause will perk up the real estate market agian, read this article from Bill Gross.


Snip...

"But this cycle in particular has been dominated by the accelerating trend in housing prices – making consumers feel wealthier and able to borrow/spend more money than ordinarily is the case. And so it has been a particular focus of PIMCO (and the Fed as well) to concentrate on the fate of housing in order to forecast the future of the economy, inflation, and therefore the bond market. It’s not looking that good folks – housing that is. PIMCO’s on-the-ground analysts, who for nearly a year now have roamed the country with random real estate agents in search of local housing trend information, report that prices in many areas are actually declining which has significant implications for the economy, inflation, and interest rate trends. A just-released report by the National Association of Realtors confirms that nationwide the year-over-year housing price gains have virtually disappeared and seem to be heading into the red."

Full article...