The Housing Bubble

The Record reports from New Jersey. “The Vistas, a condominium near Paterson’s Great Falls, opened in December 2008, but it has quickly become an uninhabited magnet for vandals. The 10-unit condominium building was supposed to be the first of 12 such structures to be built at a cost of about $36 million along the edge of the cliffs when it opened in December 2008. They were billed as affordable housing for professionals who worked and lived near the city. With grants for first-time homebuyers, the units sold in the low $200,000 range.”

“A video made when the building first went on the market showed the mayor touring one of the units, bouncing on a bed and pointing out the window. ‘We really kicked it up a notch with a lifestyle, a pool and a fitness center,’ Jose ‘Joey’ Torres said at the opening ceremony. ‘I want one of these.’”

“But the pool and fitness center never got built and only four of the units were occupied, recalled Paul Aiello, one of the people who moved in. ‘I didn’t want to stay there anymore,’ said Aiello, a Belleville high school biology teacher who lived at the Vistas from June 2009 to June 2010.”

“Aiello, he has moved to Jersey City, where he spent about $60,000 more for a house, but found a place where he feels safe. ‘I have a neighborhood where I’m not afraid to walk around in,’ he said. ‘Once you walked out of the gates at The Vistas, you were scared.’”

The Press of Atlantic City. “On Sunday, 26 waterfront residences at Lower Township’s Grand at Diamond Beach brought in nearly $15 million at auction. The residences, which bidders could walk through prior to the auction, all featured private verandas and ranged from 1,822 square feet to more than 2,235 square feet. Most had summer 2010 list prices set between $700,000 and $900,000 but sold between $500,000 and $600,000.”

“Company officials said the auction helps determine the true value of the homes and recalculates prices that have that have fluctuated because of supply-and-demand issues in the nation’s housing market following the recession. ‘There is disequilibrium in the South Jersey market, particularly in the luxury sector,’ Accelerated Marketing Partners East Coast CEO Jon Gollinger said in a statement. ‘The Grand at Diamond Beach auction is a great opportunity for buyers to purchase into one of the most high-end quality properties on the eastern seaboard at price points that were previously unavailable.’”

The New York Times on New Jersey. “The soft real estate market has hit this northwest corner of the state particularly hard. In late June, there were 434 homes for sale here, 114 of which were condominiums or hotel condo units. The median price for a single-family home is $229,900, according to the Garden State Multiple Listing Service. Mark and Julie Bush were able to take advantage of those dropping prices by waiting it out to buy their new-construction four-bedroom, two-and-a-half-bath house on 3.2 acres.”

“Mark Bush was most recently living in a condo here with his wife and two children. For a year and a half, he said he had been keeping his eye on a new house with great views of the mountains. ‘Contracts had fallen through and I saw the price keep dropping every couple of months,’ said Mr. Bush. In January, the Bushes moved into their new house, paying $355,000 for a house originally listed at $499,900.”

“The real estate slump has had the effect of bringing in a new wave of second-home buyers and investors to the 1,500 condominiums at Mountain Creek. Among the beneficiaries were Milo Chan and Winnie Donahue, who closed last month on a furnished three-bedroom town house in the Black Creek Sanctuary area, paying $170,000 for a unit that sold for $524,950 in 2004, according to Carol Williams, an agent at Prudential Gross & Jansen Highlands Realty.”

“While they weren’t actively looking to buy a second home, Ms. Donahue said the price, and the fact that it was furnished, made the deal irresistible. ‘We wanted something turnkey, but this was ridiculous,’ said Ms. Donahue.”

The Star Ledger in New Jersey. “If you can’t rein in spending, it doesn’t matter how much money you earn. Mark, 63, and Melissa, 59, have learned that the hard way. They owe more than they own, and despite an annual income of about $200,000, they can’t seem to stay current with their bills. Mark says they’d like to get current and stay current with their two mortgages, pay off more than $335,000 in student loans they took for their three grown children and pay off their credit card obligations.”

“Mark and Melissa estimate their home is worth $575,000, and they have $478,000 of loans against it. But according to real estate price tracking website Zillow, the home is currently worth $465,000.”

“Despite the debt burden, the couple is still planning to spend more. ‘Repairs and improvements need to be made to our house over the next few years and, hopefully, the housing market will come back somewhat over that period,’ Mark says. ‘We plan to sell, downsize and pay off as much debt as we can at that time. Retirement cannot come until we get to an affordable living situation.’”

The Hartford Business Journal in Connecticut. “While most residential real estate continues to stumble in Connecticut, signs of life are echoing from the luxury home market as prospective buyers flush with cash are finding discounted home prices to their liking, spurring more deal flow, industry experts say. Brokers in Fairfield County — where the definition of luxury housing starts at $4 million — say they are seeing a similar uptick.”

“Prices for high-end homes are down anywhere from 10 percent to 30 percent or more, which is making prospective buyers who may have been skittish about the market a year or two ago willing to close on a deal today. And sellers are also coming to grips that the value of their home is not worth what it was before the housing crisis struck in 2007-2008.”

“In West Hartford, for example, a nine bedroom, 13,000-square-foot mansion at 112 Stoner Dr. recently sold for $2.725 million. In 2009, that luxury estate, which sits on 3.5 acres and has six full baths, was put on the market with an asking price of $5.9 million, more than double its eventual selling price. ‘You can see why a buyer would jump in and see good value in a deal like that,’ said RE/MAX Premier broker Lou Mira. . ‘A lot of these home prices have adjusted from the height of market.’”

The Eagle Tribune on New Hampshire. “Foreclosures fell in Rockingham County in the first half of the year, and were on track to do so statewide. But a county official who follows them is skeptical of the numbers and doesn’t see Southern New Hampshire emerging from housing troubles before the third quarter next year.”

“‘Heartbreaking’ is how Register of Deeds Cathy Stacey characterizes the number of foreclosure ads in the newspaper. ‘I’m from Salem and there are several properties in town that are vacant,’ Stacey said. ‘The banks just haven’t taken them yet. These properties are still depreciating — and depreciating the properties around them.’”

The Philadelphia Inquirer. “Prices have plummeted in Atlantic and Cape May Counties since the Shore real estate boom ended in 2006. Economist Kevin Gillen, VP at Econsult Corp. in Philadelphia, reckons the drop averaged 32 percent for a typical seashore house by the end of first quarter of 2011. For comparison, the Federal Housing Finance Agency says average home values have fallen 21 percent nationwide, 16 percent in Philadelphia, and 14 percent in New Jersey.”

“Economist Joel L. Naroff, who built a house at the Shore a few years back, said the rebound in the equity markets had meant more wealth to some buyers, ‘and they see prices as being quite reasonable and are snapping up properties.’ ‘It still seems to be a buyer’s market in most areas, though sellers seem to have decided what their bottom line is and are holding to it,’ Naroff said. ‘With few spec houses out there, if people don’t have to sell, they will not take any lowball offer. Thus, having a buyer’s market doesn’t mean people can make any offer.’”

“Realtor Allan Domb is a denizen of Center City and its high-rise condo buildings, but he not only has a getaway in Longport, he also owns several rental properties there, too. How would he recommend shopping for a Shore house? Choose a price range, he said, such as $500,000 to $550,000, and look at all the available listings between those parameters.”

“‘I would isolate five or 10 homes and make lower offers on each,’ Domb said. ‘If the first seller rejects the offer, just move on to the next, and to the next again, until someone finally accepts it.’ These days, ‘there is a small percentage of people who must sell, so if you offer $400,000 for a $500,000 listing and come back a week later and offer $425,000, they may take it,’ he said.”

“One group with which today’s Shore buyers are unlikely to be competing: investors. ‘The economics of the rent you will receive vs. the price you pay doesn’t make sense,’ Domb said.”