Shelter or Burden?

http://seekingalpha.com/article/131754-on-the-burden-of-home-ownership?source=email

Author Tim Iacono underlines the debate that is slowly turning toward the "mis-marketing" of home ownership.

It began in Washington as a tool for your friendly local RE broker. But like the financial services business, property ownership in your portfolio is akin to "buy and hold" in stocks.

And we all know that outcome!

As Goes Manhattan, More So Hoboken!

* While sales have picked up a bit in some suffering housing markets in the West, creating a glimmer of hope that home prices nationwide may be approaching a bottom, the Manhattan real estate market has just begun a steep slide. It parallels the decline in New York’s financial services industry, and housing analysts say it may continue long after other markets heal.
* Apartment prices have once more become the talk of the town in Manhattan, but this time the talk is of uncertainty and falling numbers. While brokers say they are seeing more activity lately, especially from first-time buyers taking advantage of lower interest rates, housing analysts are predicting a prolonged slump in prices and sales that could last as long as four or five years.
* In this year’s first quarter, sales of co-ops and condominiums in Manhattan plunged nearly 60 percent from the first quarter of 2008. Average co-op prices fell as much as 24 percent in the same period, according to various market reports released last week.
* Condo prices have held up so far, but only because buyers who went into contract long before the downturn were closing on newly completed condominium buildings. But now few new contracts are being signed on unfinished condominiums, and some buyers have been renegotiating contracts or are trying to back out of them. Co-ops and condos make up 98 percent of the residential properties for sale in Manhattan.
* The stress is most severe at the high end of the market. There are 350 apartments and town houses for sale in Manhattan with asking prices of more than $10 million, and inventory has been growing. It would take about six years at the current sales rate to absorb all those listings.
* Manhattan was spared some of the housing problems the rest of the country faced during this downturn. The mortgage foreclosure rate in Manhattan remains low even today. While thousands of condos were built here, most were bought by homeowners, not speculators, as was common in Miami and other oversaturated markets. But Manhattan housing prices were driven higher by record earnings and bonuses on Wall Street, and they fell hard when the music stopped last fall.
* The quick fall in prices is shown in the experience of Abigail Disney, a philanthropist and documentary filmmaker, who a year ago put her sprawling 17-room co-op on West End Avenue on the market for $13.5 million. After a series of price cuts, Ms. Disney has finally found buyers for the property, for just under $7.5 million, a 46 percent discount from her initial asking price. But to make a deal she agreed to restore the walls and convert it back into two apartments and sell it to two buyers.
* Jonathan J. Miller, an appraiser who prepares quarterly reports on Manhattan, said the market could continue to fall through this year and next, especially if credit remained tight for most buyers. After that, he said, it could take several more years to work through the excess inventory.
* The housing recovery will also depend on the state of the economy, which many forecasters say will take a disproportionate toll on New York City before the recession ends. In New York, the financial industry accounts for more than 30 percent of all wages, and at least some of the wages of half of all very high income households, according to the New York City comptroller’s office. While employment fell nationwide last year, the number of jobs actually grew in New York City until September. Since then, the city lost nearly 85,000 jobs through January, and the comptroller’s office has forecast a loss of 121,000 jobs in 2009 and another 83,000 in 2010.
* In the late 1980s, a surge in condominium construction in New York created a glut of condo apartments. Prices peaked in 1989, declined steeply in 1991, bottomed out in 1993 and stabilized in 1995 and 1996. (so 6-7 years... as I stated in my piece Wednesday - which is typical for a regional bust)
* Shaun Osher, the chief executive of Core Group Marketing, said he had begun to see more activity this spring, but at much lower prices, with luxury apartment prices off as much as 40 percent.

In 2 years, a bottom in housing will be very different than a V-shaped rebound. People buying anything outside of a foreclosure right now or in markets that are already down 50%+ are akin to those rushing into NASDAQ stocks in 2001 - after "unheard of drops" and "rock bottom prices". Housing is far less liquid than stock in Cisco Systems!

The Cost of Owning Remains Too High

While Hoboken real estate is feeling the effects of Wall Street's downturn, there are bigger concerns lingering in the credit structure and individual ability to borrow or even maintain current debt payments.

More U.S. consumers are falling behind on their mortgages, an indication that the housing market has yet to hit bottom, a top credit bureau executive told Reuters.

Dann Adams, president of U.S. Information Systems for Equifax Inc, reported that 7 percent of homeowners with mortgages were at least 30 days late on their loans in February, an increase of more than 50 percent from a year earlier.

Affordability is a marketing gimmick and its statistical usefulness has long passed. Beware the "this is a good time to buy" line from your neighborhood real estate professional. They have no knowledge or training in credit structures since the government has always promoted home ownership through tax policies and other unaffordable incentives.

Classic Effects of Non-Contingency Contracts

By now, many of you have commented and queried about the down-payment situations that buyers are finding themselves with. This is a classic situation that homebuilders have planned for - despite a perceived "hot" market - and buyers have not thought out.

The situation in this article is very common but I believe that the government's efforts to fix the housing crisis will begin to encompass issues like this as well.

If I were Toll Brothers, I would prepare for some compromise in the coming months. Good lawyers are finding ways to bring these contracts to "more acceptable" closure.

Up In Smoke: The Deposit Vanishes
New York Times
March 20, 2009
http://www.nytimes.com/2009/03/22/realestate/22cov.html?_r=1&hp=&pagewanted=all

New Jersey’s Unemployed Reach Record Numbers

New York Times:
March 25, 2009, 5:15 pm

New Jersey’s Unemployed Reach Record Numbers

By Patrick McGeehan

The rising tide of unemployment that has been sweeping across the country has officially reached the New York suburbs. For the first time in this recession, New Jersey’s unemployment rate has surpassed the national rate, the state’s Department of Labor and Workforce Development reported on Wednesday. New Jersey’s jobless rate jumped to 8.2 percent in February, from 7.3 percent in January. The national rate was 8.1 percent in February.

There now are more unemployed people in New Jersey — about 370,000 — than at any time since the state began keeping records in 1976, the department’s data show. The number of employed residents with jobs — 4.14 million — was the fewest since mid-2004.

“The troubled national economy continues to pose difficulties for many states including New Jersey,” said state Labor Commissioner David J. Socolow.

New Jersey lost more than 30,000 jobs in the first two months of 2009, including almost 20,000 in February, according to the report. The state’s unemployment rate has risen for 13 consecutive months.

Professional and business services accounted for more than half of last month’s losses, about 10,000 jobs, and has shed 42,700 jobs in the last year, the report said. The only sector of New Jersey’s economy that did not lose jobs was education and health services, which gained 13, 600.

The 12-month leap in the unemployment rate was the biggest ever. The state’s unemployment rate had never risen or fallen by more than 3 percentage points in any 12-month period in at least 30 years.

New York state, where the unemployment rate was 7 percent in January, is scheduled to release February figures for the state and New York City on Thursday.

Contingency Clause - No Longer Only Way Out

According to the following excerpt from the web site of a regional law firm, buyers are being offered many possibilities to rescind their contracts and salvage their deposits. It seems that a new cottage industry is about to be born surrounding the opportunistic timing of developers' management of project completion.

While this has been a topic of much pain for locked-in buyers to close, a number of loopholes have been found to fight back - even long after the closing!

"Purchaser Rights

Your deposit may be refundable or your transaction may be rescindable.

You might be asking yourself: How exactly can No-Condo.com attorneys get me out of my condominium purchase?

If you have not yet closed on your purchase, your deposit may be refundable. Additionally, if you have already closed on your purchase, your transaction may be rescindable.

The short answer is that there are many federal and state consumer protection laws which entitle real estate purchasers to particular disclosure rights from developers. If developers fail to provide purchasers with particular disclosure documents or information, a purchaser may be able to get out of their purchase agreement. These laws apply to new construction condominium and other real estate purchases with condominiums being the easiest to evaluate.

The long answer is that the Interstate Land Sales Full Disclosure Act (sometimes to referred to as ILSA or the Interstate Land Sales Act) affords purchasers many disclosure rights and/or completion date rights, which if not granted to purchasers have been interpreted favorably by court decisions to afford purchasers the ability to get out of their purchase agreements. These rights apply to deposit refunds before closing and the right to rescind the purchase and get your money back after closing.

For example, if a condominium includes more than 99 residential units and the developer has not registered with HUD or has not obligated itself to complete your unit within two years from the date you signed a contract, you can cancel the contract and get a refund of your deposit. These rights extend to up to three years after purchase. Even if the developer has attempted to comply, the exacting requirements are often misapplied allowing for you to cancel your purchase or for post-closing rescission rights. Additionally, depending on your location, there are numerous state laws which must be complied with, that can also enable a purchaser to get their deposit back.

Contact No-Condo.com to find out if you have a case."

Read on...
http://no-condo.com

The Next Hoboken RE Shoe To Drop - Starts With a "W"

It has become abundantly clear that our first poster child Maxwell Place locked in abstractly high pricing due to the timing of its construction and closing dates. The result is a (barely) half-constructed development and its associated amenities.

The accelerating credit crisis and employment fears will have an even greater impact on a loftier bubble atop the W Hoboken Hotel. The portion attributed to private residences are beginning to emerge on listings as resellers contemplate their odds of remaining above water during the oncoming onslaught.

The marketing of these units has been kept very opaque so as not to drive any present contracts into contemplating walkaway strategies. But the writing is on the wall. And walkaway strategies are beginning to break traditional bounds.

As closings come due, the percentage of unsigned obligations will put a strain on what is one of the riskier RE projects in Hoboken history. How the developers, their partners and associated financiers handle these circumstances will prove to be a valuable lesson in marketing and crisis management. This site will track and reveal the same level of cost analysis already revealed in the MP situation.

Stay tuned... after all, it's a matter of cost - per square foot that is!