The following table contains closed residential real estate transactions in Branchburg for the first calendar quarter of 2008 (January 1 to March 31). However, unlike the inaccurate information promulgated by most agents and media sources, the “DOM” (Days on Market) column indicates the sum of days-on-market accrued through serial listings of the same home (it is a common agent “trick” to withdraw and re-list a home, in order to create the public impression of a “fresh” home that has seen fewer days on market). In addition, the “OLP” (Original List Price) column reflects the list price of each home at the time it was first offered for sale.

Note that there were only twelve closed transactions for the entire quarter. Even in 2007, most single months produced more closed sales. There is no more graphic indicator available of the accelerating sales slowdown in the local market.

Sales statistics posted at Branchblog will always be cross-checked to provide the most accurate and unbiased housing market snapshot possible.

Please direct specific inquiries to Chip Hughes at (908) 334-2329 or chip.hughes@att.net. Better yet, leave a comment!

All information is deemed accurate, but not guaranteed, and is provided courtesy of Garden State Multiple Listing System:

AVERAGES: 199 Days-on-Market; SALE PRICE: 89% of original list price. 

Sorry for the scarcity of recent posts; I’ve been busy with a couple of charitable projects that should be finishing up later in May. Until then, I’ll try to excerpt the best of the real estate and financial press coverage of the accelerating decline in housing and mortgages.

Following is from Scott Goldstein, NJBIZ, April 28, 2008. Not a pretty picture…and the 1929 comparisons/analogies don’t help:

When it comes to creating private-sector jobs, New Jersey was a laggard in 2007 as compared with neighboring states and the rest of the country, according to a Rutgers University report released last week. Authors of the report say the state’s job growth will not improve this year while the nation enters a “deep recession” and a financial crisis that will be “arguably the worst since the Great Depression.”
New Jersey gained just 3,700 private-sector jobs last year, an increase of only 0.1 percent over 2006. That was significantly lower than the increases in New York and Pennsylvania, which saw private-sector employment gains of 1.2 percent and 0.6 percent respectively, according to the study.

“In terms of job growth, New Jersey fell significantly behind its economic peer states in 2007. The state has lost its role as regional economic dynamo,” says the report, which was titled “Reversal of Economic Fortune” and co-authored by James W. Hughes, dean of the Edward J. Bloustein School of Public Policy at Rutgers, and economist Joseph J. Seneca.

Overall, New Jersey ranked 41st among the states in percentage of private-sector job growth last year, according to the Rutgers report. That was unchanged from 2006. New York ranked 17th, up from 28th in 2006, while Pennsylvania ranked 29th, up from 34th.

The Garden State may have suffered recession-related layoffs earlier than its neighbors because Wall Street job cuts hit back offices in North Jersey first, Hughes said in an interview. He says the state lost 7,900 financial sector jobs in 2007, mostly in the second half of the year.

The entire Northeast will likely falter in 2008, the study says. New Jersey lost 10,500 private-sector jobs in the first quarter of 2008, according to the state Department of Labor and Workforce Development. “That’s a reflection of the national downturn,” says Hughes.

He says the pharmaceutical and biotech sector accounts for about 41,000 jobs in New Jersey, while financial businesses ranging from banks to Wall Street brokerages account for 269,000 jobs in the Garden State. The importance of these sectors to New Jersey puts the state at particularly high risk of layoffs, says Hughes. “We are going to get hit hard,” he says.

Behind the national recession are factors including the bursting housing bubble, the subprime mortgage crisis, growing turmoil in the credit markets and soaring energy and commodity costs, according to the report.

Hughes says New Jersey and the Northeast are feeling a backlash from the lending boom that lasted from 2001 through 2006—a period when “we had cheap global credit, lending standards disappeared, there were record Wall Street profits and great job growth.”

There’s little that Gov. Jon S. Corzine and the rest of state government can do to ease the pain of the recession, adds Hughes. “They are prisoners of forces that may have built up over a 10-year period,” he says.

The following is not an endorsement of any party or specific Presidential candidate. Still, it’s nice to see some candidate make a statement on the current housing mess that at least mentions basic personal and corporate responsibility. This issue has been- and will be- demagogued to death in the coming months. Pandering to the masses and to fat, lazy bankers is not going to solve the current meltdown of credit and real estate markets.

McCain Rejects Broad U.S. Aid on Mortgages

By LARRY ROHTER and EDMUND L. ANDREWS
The New York Times; published: March 26, 2008

SANTA ANA, Calif. — Drawing a sharp distinction between himself and the two Democratic presidential candidates, Senator John McCain of Arizona warned Tuesday against vigorous government action to solve the deepening mortgage crisis and the market turmoil it has caused, saying that “it is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers.”

http://www.nytimes.com/2008/03/26/us/politics/26mortgage.html?_r=1&oref=slogin

From The Home News Tribune, Sunday, March 2. Talk about “voting with your feet”:

JAMES W. HUGHES and JOSEPH J. SENECA

Alan Greenspan, former chairman of the Federal Reserve Board, often scrutinized obscure data sources for insightful clues on the state of the U.S. economy. Translating this approach to New Jersey, it is useful to look at household movement/shipment data provided by United Van Lines and Mayflower Transit in order to supplement formal interstate migration data as measured by the U.S. Bureau of the Census.

Census statistics show that the numbers of households and individuals leaving New Jersey for the rest of the United States have increased in recent years, although our total population continued to grow because of births and net immigration from abroad. Between 2000 and 2007, approximately 377,000 more people moved out of New Jersey to the rest of the country than moved into New Jersey from the rest of the country. We ranked fourth among the 50 states and the District of Columbia in net migration losses during this seven-year period.

Despite these losses, our total population growth, when also accounting for births, deaths, and international immigration, totaled 272,000 people between 2000 and 2007, although most of the growth accrued in the earlier years of this period.

Data from two moving companies provide “on the ground” snapshot certifications of the more comprehensive Census Bureau data. First is the annual interstate “migration study” of United Van Lines, the nation’s largest carrier. Its report tracks the states where its customers moved from and moved to. New Jersey was the third-ranking “high outbound” state in the survey. Of the total United Van Lines’ interstate movements that took place in New Jersey in 2007, 61 percent were outbound compared to 39 percent inbound.

The Garden State ranked third in outbound percentage behind economically challenged Michigan (67.8 percent outbound), which ranked No. 1. Michigan has been devastated by a collapsing industrial/automobile economy. We also trailed weather-challenged North Dakota (67.2 percent outbound). Second-ranking North Dakota has the lowest average annual temperature (42.2 degrees) in the lower 48 states. In contrast, New Jersey’s weather has been mild and free of extremes, and its economy had been growing modestly, yet the outflow continued apace.

Confirming this general pattern of high outbound movements from New Jersey is the 2007 Mayflower Transit Customer Relocation Study, a second set of household movement data. In 2007, Mayflower Transit found that 59.9 percent of its New Jersey moves were outbound, just below the 61 percent outbound share of United Van Lines. Thus, the two companies’ data on New Jersey migration are highly consistent not only with each other, but also with the Census Bureau migration estimates.

In addition, according to the United Van Lines study, North Carolina was the No. 1 “high inbound” state; 61.6 percent of its household goods movements were inbound, a reflection of its growing “demographic might.” In 2000, New Jersey’s resident population (8.4 million persons) was approximately 400,000 persons larger than North Carolina’s (8 million persons). By 2007, North Carolina’s resident population (9.1 million persons) was approximately 400,000 persons larger than New Jersey’s (8.7 million persons). This represents a swing of 800,000 people in the two states’ relative position in a brief seven-year period, a remarkable demographic shift.

In any case, the two moving companies have a good customer in New Jersey, although they have to keep shipping empty moving vans into the state in order to move New Jerseyans out. This is just the opposite of the growing stacks of empty cargo containers in the Port Newark area, where far more cargo containers with goods flow into New Jersey than flow out. Thus, our cargo movements have an interesting lack of symmetry with our household goods movements.

James W. Hughes is dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University. Joseph J. Seneca is a university professor at the Bloustein School.

The Kool-Aid Brigade wants you to know that prices have stabilized. They may have…but not in this universe. Check out the handful of truly scary graphs (courtesy of James Bednar, at the excellent NJ Real Estate Report) at this permalink (you may need to copy & paste in your address bar):

http://njrereport.com/index.php/2008/02/06/north-jersey-january-residential-sales/

This is chilling stuff. We appear to be well on the way toward record-high inventories, married to a record-low sales pace. Is this an environment in which prices will stabilize?

NAR, TMac and the Kool-Aid Brigade have sounded the “all clear”.  “Prices have stabilized, mortgage rates are low…it’s a great time to buy” is the mantra.  Too bad that all the mortgage lenders are bleeding out and would rather hold on to their cash than lend it: 

From The Wall Street Journal, Page A3, Tuesday, February 5, 2008:

Credit Tightens, Demand Falls
By KELLY EVANS and DAVID ENRICH

Banks are tightening lending standards for businesses and consumers — even beyond real-estate loans — and companies’ demand for credit has weakened, a new Federal Reserve survey of senior bank-loan officers shows.

The January survey offers the hardest evidence yet that the credit crunch is spreading. Although banks also reported some tightening of lending requirements on credit cards and other consumer loans, commercial and industrial loans have been the most severely affected.

One-third of the U.S. banks and about two-thirds of the foreign banks responding told the Fed they had tightened lending standards on commercial and industrial loans during the three months ended Jan. 31. About half the banks said they have widened the spread between their cost of funds and what they are charging borrowers.

“Bankers are becoming more cautious,” said Keith Leggett, economist at the American Bankers Association in Washington, “but also borrowers are getting more cautious.”
…
“The downturn in housing markets is having a ripple effect into the commercial real-estate market,” said the ABA’s Mr. Leggett. “It’s going to create some challenges for community banks,” he added, especially in parts of the country where real-estate prices have plunged the fastest.

With bad loans piling up on banks’ balance sheets, some lenders are finding themselves strained for capital. As a result, banks — especially community lenders with big portfolios of commercial real-estate loans — are balking at making new loans, even to clients with solid credit histories, said Jerry Blanchard, a partner in the financial-institutions practice at law firm Powell Goldstein LLP in Atlanta.
…
On the consumer side, about 55% of the banks said they had tightened lending standards for mortgages and about 60% said they had done so on home-equity lines.

Nice of these guys to finally figure it out. Of course, they didn’t come to this realization until they had almost bled themselves dry of cash. Better to learn late than never:

From Market Watch, January 30, 2008:

Executives at Centex Corp. Wednesday said the builder is lowering home prices to reflect the new reality in the shaken U.S. mortgage market. The company wants to “attract the right kind of buyers, those who can afford the mortgage and the payment,” said Cathy Smith, chief financial officer, during a conference call. “Essential to selling homes is finding the right price where buyers can qualify for a mortgage. The average selling price will continue to decline … in the near term, reflecting our aggressive response to the tighter credit standards,” the CFO said. “We need to get back to pricing that is reflective of value,” said Centex Chief Executive Tim Eller during the call. “It’s also important to do that for financing reasons because right now what people can qualify for is generally a Fannie Mae, a Freddie Mac or increasingly only FHA, so it’s important to have a price that reflects the values that attract the customers that can qualify for those mortgages.”

Wonder how The King of Real Estate would spin this.  Even the hopeful statistic of December’s inventory being 16% lower than in August is erroneous; inventory always declines from Labor Day through New Year’s, and the 16% drop in 2007 is exactly the same percentage drop as in 2006!  From the “Bible” of New Jersey real estate statistical analysis, The Otteau Report, dated January 25, 2008:

HOME SALES DECLINE FURTHER AT YEAR END

The pace of home sales in New Jersey declined further in December providing compelling evidence that the housing market recession has not yet reached bottom. In December, Contract-Sales activity declined 24% below the November pace and was 31% less than in December 2006. When considered against the backdrop of high Unsold Inventory levels and a looming economic recession, it appears certain that existing-home prices will continue their decline into 2008. As a result, strategies of ‘waiting until Spring’ are ill conceived as overpricing inevitably leads to extended marketing times and lower prevailing market price levels. Best-Practices for a weakening housing market is to price ‘ahead of the decline curve’ to shorten marketing time and capture a higher selling price before prices drift even lower. From the new construction persepective however, many home builders have already embraced this strategy with Right Pricing! that reflects the current market realities. For the next segment on our Right Pricing! Strategy, register to attend our 2008 Spring Workshop Series next month.

Despite the ongoing market decline, some bright spots are emerging. Unsold Inventory declined for the fourth consecutive month and now stands 16% lower than in August, reflecting 12,000 fewer homes on the market. Also encouraging is that mortgage interest rates continue their descent providing a boost to home buyers’ purchasing power and helping to close the housing affordability gap in New Jersey. According to Freddie Mac’s latest Primary Mortgage Market Survey® (PMMS®), the 30-year fixed-rate mortgage averaged 5.48 percent for the week ending January 24, 2008, down from 5.69 percent the prior week and 6.25 percent last year at this time. The last time mortgage rates were lower was March 25, 2004, a time when home buying activity was at a frenzied pace. Another positive factor is yesterday’s announcement that President Bush and House leaders have agreed on an economic stimulus package that would allow Fannie Mae and Freddie Mac to raise the limit on the loans they purchase from $417,000 to $625,500. Similarly the FHA limit would be increased from $362,000 to $725,000. The effect of such increases would be to expand the pool of money for borrowers of so-called Jumbo Mortgages thus increasing liquidity and reducing interest rates for these loans in the process.

The take-away from all of these developments is that while the market has further to fall, the bottom point is getting closer. Home buyers should take notice of these developments as 2008 presents an unusual combination of being in the ‘driver’s seat’ of price negotiations at a time of record low interest rates. Those who wait too long will eventually find this opportunity window closed when higher interest rates and firmer pricing returns to the market.

Nice to start the New Year with some sunshiny optimism, courtesy of our local King of Real Estate:

“Going into 2008 mine may not be the only optimistic voice you hear, the majority opinion is that we have passed the worst of it. The National Association of Realtors is predicting a slight increase in existing home sales for 2008. While the market may not bounce back to what it was a couple of years ago, things are not expected to get any worse.”

Well, the 10th largest bank in the US, National City, just closed its wholesale lending division today and cut its shareholder dividend by 50%. Other lenders, such as Countrywide, are discontinuing stated-income and low-downpayment programs on an almost daily basis. So…where are all the buyers going to come from that will sustain the market at its current levels?

There’s no more funny money available out there, and no more buyers will enter this market until prices take another radical dip lower. It’s not about rates anymore; it’s about affordability. And, NJ housing will need to drop another 20-25% in price- across the board- before we’ll see any significant uptick in sales.

Sellers in the current environment deserve some straight talk about what’s going on right now. And, what’s transpiring amounts to the beginning of the biggest real estate crash in American history. A seller’s best opportunity right now may be to get things done ASAP, thereby cashing out as much equity as possible, before things get worse. “The worst has passed”??? This thing hasn’t really even started yet. Every real estate boom in US history has been followed by a bust of equal proportion. That means a local market which ran up 100% from 2001-06 will retrace 50%. To date, we’ve only shaved maybe 15-20% off the highs of that market.

Of course, making a statement like the one I’ve made above doesn’t get you on MSNBC or get you invited to be a guest speaker to groups of real estate agents. However, consider that The King of Real Estate relies on a statement made by the National Association of Realtors to bolster his case. That’d be nice…except for the little problem NAR has with the accuracy of its predictions and its credibility. In 2007, NAR issued 12 (yep, one for every month) monthly housing reports, which were then followed by 12 monthly revisions of its forecast and outlook. That’s right: for the calendar year 2007, NAR batted .000. Of course, NAR finished off its stellar ‘07 by predicting a slight increase in existing home sales in ‘08. Amazingly, NAR’s new Chief Economist, Lawrence Yun (who, in mid-’07, replaced the totally discredited David Lereah) seems to have developed a projection algorithm based entirely upon hope and wish, as no statistical evidence exists to back his assertion.

I’m not down on the long-term ownership of real estate. I do not- as I have been accused- hate my own profession. There are narrow opportunities for both buyers and sellers in the current environment, and I do believe that falling prices will act as a purge that will ultimately strengthen the market by forcing a return to fundamentals in both financing and pricing of the asset class. 

The following table contains closed residential real estate transactions in Branchburg for October and November, 2007. However, unlike the inaccurate information promulgated by most agents and media sources, the “DOM” (Days on Market) column indicates the sum of days-on-market accrued through serial listings of the same home (it is a common agent “trick” to withdraw and re-list a home, in order to create the public impression of a “fresh” home that has seen fewer days on market). In addition, the “OLP” (Original List Price) column reflects the list price of each home at the time it was first offered for sale.

Sales statistics posted at Branchblog will always be cross-checked to provide the most accurate and unbiased housing market snapshot possible.

Please direct specific inquiries to Chip Hughes at (908) 334-2329 or chip.hughes@att.net. Better yet, leave a comment!

All information is deemed accurate, but not guaranteed, and is provided courtesy of Garden State Multiple Listing System:

AVERAGES: 153 Days-on-Market; SALE PRICE: 92% of original list price.