New Source of Home Sellers

The growing angst in Trenton is about to create an unforeseen group of property sellers, joining the ranks of financial services employees. Figure 1 attached.

Another Slap For Political Intervention In Markets

The Commerce Department said sales dropped a record 32.7 percent to a 300,000 unit annual rate, the lowest level since record keeping started in 1963, The fall unwound two months of gains inspired by a government tax credit. Enough said!

If this is east of Manhattan, what about...

Another picture says a thousand words. Queens is on the eastern front to the big city. Income and savings demographics are very similar to those of Hoboken where the population is tiny and more sensitive to economic changes in comparison.
The western frontage onto Manhattan has more dire municipal and state consequences, so there is no good ending in store for Hoboken.

The Back End of the Bubble

The FBI is preparing to arrest hundreds of people across the country as early as next week for offenses including:
- encouraging borrowers to falsify income on mortgage applications
- misleading home owners about foreclosure rescue programs
- inflating home appraisals.

The FBI is scheduled to release its 2009 mortgage report on June 17.

Let's see if any of Hoboken's finest transactions have brought any notoriety to the party.

FICO Survey: Credit Supply Unlikely to Meet Consumer Demand

FICO Survey Indicates Credit Supply Unlikely to Meet Consumer Demand

The survey, conducted in March 2010 found that while bankers generally expected consumers to pursue more new credit as well as spend more against their existing credit lines, most lenders are likely to keep a close eye on risk management.

Of the 127 bank risk professionals surveyed, 92 percent said they don’t expect to see an easing of lending standards in this quarter, 95 percent expected interest rates for consumer credit to stay at current levels or move higher, and 83 percent expected the average credit limit for new credit cards to be lower than in the past.

Why is this especially important in a property market like Hoboken and the new "core" category?
Because there is a total mismatch between local annual incomes (typically around $100,000) and property prices (current median around $750,000).

Single family homes which are typically $1 million+ are completely out of this realm.

Cash buyers are the only qualifiers in such a mispriced situation, but that makes them the next hit from depreciation regardless.

Hoboken's adjustments in price are not yet reflecting the mispricings of the past despite adjustments already underway in Manhattan. The bottom line: prices are simply declining at a slower pace over what will be a longer and more protracted time --> another 20% over the next four years.

Which ONE Of These Buys Hoboken Real Estate?

One in every 10 Americans missed a mortgage payment in the first quarter of this year, a new record.
One in 10 Americans' credit-card usage is being written off, also a new record.
One in six Americans are either unemployed or underemployed.
Over four in 10 of those jobless Americans have been out of work for at least six months and there are five unemployed workers competing for every job opening.
One in four Americans with a mortgage have negative equity in their homes.
One in eight Americans feel the current government policy is actually helping the economy.

Only one in 50 Americans plan to buy a home in the next six months.

Yes, It's Still A House Of Cards

The trend has barely budged, so this is getting repetitious.

Nationally, mortgage purchase applications plummet:
The Refinance Index increased 14.5 percent from the previous week and the seasonally adjusted Purchase Index decreased 27.1 percent from one week earlier. This is the lowest Purchase Index observed in the survey since May of 1997. The unadjusted Purchase Index decreased 27.0 percent compared with the previous week and was 24.1 percent lower than the same week one year ago.

Purchase applications plummeted 27 percent last week and have declined almost 20 percent over the past month, despite relatively low interest rates. The data continue to suggest that the tax credit pulled sales into April at the expense of the remainder of the spring buying season. In fact, this drop occurred even as rates on 30-year fixed-rate mortgages continued to fall, and at 4.83 percent are at their lowest level since November 2009. Refinance borrowers did react to these lower rates, with refi applications up almost 15 percent, hitting their highest level in nine weeks.

What this means is that there is very little holding this market up. The tax credit has stolen future sales which will result in a serious drop in sales. More disturbing is that this is happening as mortgage rates are 4.83%, or historically very low.

There is a lot of data to suggest that the shadow inventory, homes that are in or close to default, will continue to depress home prices, especially without the tax credit. The MBA also reported that mortgage delinquencies increased to a seasonally adjusted rate of 10.06 percent of all loans outstanding as of the end of the first quarter of 2010, an increase of 59 basis points from the fourth quarter of 2009, and up 94 basis points from one year ago .

The percentage of loans in the foreclosure process at the end of the first quarter was 4.63 percent, an increase of five basis points from the fourth quarter of 2009 and 78 basis points from one year ago. This represents another record high.