The Housing ‘Party Is Over’ In New Jersey
A pair of reports provide a rare look at the New Jersey situation. “When interest rates fell in April, sales surged ahead at a record pace through August, when the industry hit a wall, said Jeffrey G. Otteau, president of an appraising and consultant company from East Brunswick. Otteau attributed the stagnation to a decline in affordability and a loss of purchasing power.”
“2005 also ended with inventory up 41 percent in the final four months to go along with a 15 percent differential in sales compared to the first eight months. ‘That has set the tone for 2006,’ he said. Sales are down 12 percent from the pace set last year. And inventory is up 65 percent. Buyers are waiting to see if there really is a bubble, Otteau said.”
“‘71 percent of the population expect a price collapse in the next 12 months. That won’t happen. But the fear of that drummed into the public has buyers worried. They have no sense of urgency,’ he said.”
“The once-sizzling New Jersey real estate market is showing signs of going flat, according to an expert who presented his findings Thursday at the Atlantic Builders Convention. It appears to be shifting from a buyers’ market to a sellers’ market, with home listings outnumbering home sales by 2-to-1 in the first quarter of this year, said Jeffrey Otteau.”
“‘The clear message to sellers is that the party is over,’ Otteau said after the talk to a standing-room only crowd of builders. ‘The days of increasing asking and selling prices have passed.’”
“‘We aren’t looking at a market that is going to crash,’ he told the builders. ‘We are absolutely looking at a market that is going to adjust.’ He said a glut of homes for sale might limit the appreciation of property.”
“He said the slowdown is most dramatic in the luxury home market and in Cape May County, the state’s most concentrated second-home market. But there are signs buyers are taking a ‘wait-and-see’ attitude throughout the state, he said.”
“The average number of Bergen County home sales dropped by 11 percent compared with the first quarter of last year, and the average number of listings increased 84 percent. In Passaic County, the number of sales dropped 15 percent, and listings were up 65 percent.”
“Statewide, the average number of sales dropped by 12 percent and the average number of listings jumped by 65 percent in the first quarter.”
“Otteau said that builders should be more disciplined in the prices they pay for land. He attributed the slowdown to several factors; Investors, who made up more than a quarter of buyers in 2005, have largely dropped out of the market..People are nervous because they’ve heard a lot of talk of a housing bubble and the possibility of a collapse.”
It is interesting when appraisers use the word glut at a homebuilders conference. Maybe some locals can let us know more about where the second home ‘concentrations’ are:
‘He said the slowdown is most dramatic in the luxury home market and in Cape May County, the state’s most concentrated second-home market.
Shore points - mostly summer vacation homes.
Vacation homes in NJ are primarily along the shore (beach for you paisans not from Joisey).
It seems that Otteau’s tune is changing. Earlier this year he said he expected a spring rebound. A month later he said the spring season would start later than usual. Now?
The spring boom fizzled out in Jersey.
grim
Northern NJ Real Estate Bubble
“People are nervous because they’ve heard a lot of talk of a housing bubble and the possibility of a collapse”.
And besides the talk, they are witnessing first hand an explosion of inventory. Still burnt from the dotcom crash, buyers would be out of their minds not to be increasingly cautious. The cycle has turned and now it’s feeding on itself. In other words, the reason they’ve heard all the talk of a bubble is because there is a bubble.
NJ prices are headed down.
Totally agree. But really, I wonder what people actually expected to happen. When you have the mentality that prices only go up, is there a point where someone ‘investing’ in real estate says to themselves, “Gee, something is off here?” Did people actually think prices could keep rising at double digit paces? That a home worth 250 K in 2002 could be worth almost a million by 2010? Sadly, I think a lot did.
The problem is that everyone thinks they are smarter than the next person. While most half-way intelligent people know that prices won’t rise like crazy forever, they either believe that:
1) prices will just plateau, at which time they can sell at their leisure and reap the profits (uninformed investor…”it will stop going up at some point, but RE never goes down…worst that happens is that I break even”) or;
2) they know there is a bubble, but believe they can outsmart the next person and get out in time (Pseudo-smart investor “I know there is a bubble, but I can spot it coming. I’m going to ride this thing for as long as I can and jump out at the top”).
collapse?!?
we are talking real estate not, stocks. Bernanke did not talk about a collapse yesterday. ok maybe on the shore prices will drop sharply.
http://www.dcbubble.blogspot.com
How would you describe the 1990s RE bust, where properties dropped in value 25-40%? Those weren’t stocks either.
Which is expected. For him to say “we’re going to have a collapse” in ANYTHING would be reckless, as well as a self-fulfilling prophecy.
well maybe prices declined by 25% to 40% in some, your market. not mine. I owned a studio in DC back then. bought at $55K dropped to $50K. a drop yes, but a collapse no way.
Despite all the Broker Bravado, the Hamptons real estate scene is finally beginning to show signs of unravelling. According to Suffolk Research Service, Inc. a division of Office Management Systems Corp which specializes in software products for Real Estate professionals, their review of market data demonstrates “the market is showing weakness”. For example, the median price from 2005 is already down 5.02 % in Southampton. The report acknowledges the market is driven by wannabee celebrity worshippers and is worth reading just for that sort of nonsense.
http://www.suffolkresearch.com/report.pdf
Ahhh, RE prices are down in South Hampton. Residents there were seen jumping out of windows, into their swimming pools.
Southampton
sow ham ton
I hope not drained swimming pools.
In some of the wannabee neighborhoods where $150,000 ranches of 10 years ago are now selling for $800,000, the wannabees will find their illegal alien housecleaners and lawn service people moving in next door - 30 in a house.That almost can’t not happen in some of those neighborhoods as prices dip. Then they will really collapse in such places.
“‘71 percent of the population expect a price collapse in the next 12 months. That won’t happen. But the fear of that drummed into the public has buyers worried. They have no sense of urgency,’ he said.”
“That won’t happen.”
Wow, he’s so sure of that he doesn’t have to qualify that statement.
I think if 71% believe it to be true, then the belief will be self-fulfilling. Much the same as a widespread belief in appreciation lead to the bubble in the first place.
Everyone in the universe is seeing the light, and the best he can come up with is ‘pay no atention to the man behind the curtain’.
A shill is a shill. I can only wonder how much property he owns, and that is the reason he believes in fairies.
OT…
Levitt warns on first-quarter loss
By John Spence, MarketWatch
Last Update: 2:15 PM ET Apr 28, 2006
BOSTON (MarketWatch) — Levitt Corp. on Friday said preliminary home-building revenue for the first quarter was flat from the year-ago period and warned it expects to post a loss for the first quarter.
http://www.marketwatch.com/News/Story/Story.aspx?siteid=mktw&guid=%7BF49418E7%2D2473%2D43C5%2DAD2F%2DE27DC16142F7%7D&
More builder news today… A lot of downgrades…
A.G. Edwards rethinks homebuilder ratings
As markets and orders slow, broker downgrades Toll, Pulte and others
By John Spence, MarketWatch
Last Update: 3:19 PM ET Apr 28, 2006
http://www.marketwatch.com/News/Story/Story.aspx?guid=%7BBB75C964%2DA5EF%2D4DDC%2D919B%2D8C3BEF2F669B%7D&siteid=mktw
Nevermind - Per Sean Hannity there is no housing bubble since new homes were up “a whopping 13% last month”.
Sean Hannity (HandJobbity) is truly a freak of nature. CrispnCole, you’re the second person who told me HandJobbity was trumping up real estate yesterday on his circus-like talk show. I’m willing to wager he knows as much about “whats good for the country” as he does real estate.
People like him are frightening.
He also looks a lot like the icon for Bob’s Big Boy restaurants. Coincidence? Maybe not. Both are served to the public with lots of grease and hot air.
Bwahhaaa
Perhaps so, but being part of Faux News means he’s more likely than not to know which way the administration wants to handle the bubble burst.
Time to move (further) away from the USD.
Looks like his buddy LimpBaugh was busted again. Lets three divorces, three arrests for illegal drug use, constant insults and venow spewed all day long and packaged neatly as a CONSERVATIVE.
For youse guys not from Joysey. A starter condo or townhouse in suburbia (1 hour at least from NYC) nowadays goes for around 220 to 250k, is at least 20 years old with a theoretical live span of 30 to 40 yrs and will cost you $600 a month in HOA and prop taxes for the pleasure of owning. Also you will most likely have a minimum commute of 1 hour each way.
And NJ is notoriuos for emminent domain use.
Anyone know what’s happening with South Jersey (Moorestown/Cherry Hill/Mount Laurel)? I wanted to buy here last year but got spooked and decided to wait. Home prices have doubled here in 5 years, but rents have gone way up as well and there aren’t many for-sale signs. I’ve been hearing for months that there’s “no bubble in South Jersey”. If that’s true then why didn’t salaries double along with home prices?