In a bid to crack down on rising abuse by loan officers in the New Jersey mortgage marketing field, a state senator has unveiled a proposal to make sure the Garden State’s 42,000-plus mortgage solicitors receive mandatory training, criminal background checks and licensing exams.
In an echo of the savings-and-loan industry collapse of the 1980s, a growing number of lawmakers and consumer groups are calling for measures to bail out New Jersey mortgage holders who are at risk of losing their homes in foreclosure.
The New Jersey mortgage market is in trouble.
That’s according to a report released Wednesday revealing that four Central New Jersey counties combined to be among the top 50 metro areas with the highest foreclosure rates in the country.
After months of little activity, home shoppers, lured by lower prices, are emerging from the shadows of the New Jersey housing market.
They are back searching for homes, making calls to real estate offices and showing up at open houses. And ultimately, they are buying again, leading to two months of increased sales and starting a trend that real estate experts hope will continue for the rest of 2007.
“The correction is over and the market has begun to recover,” said Jeffrey Otteau, president of The Otteau Valuation Group, in East Brunswick.
So what’s happening in the market? It started with a drop in home prices at the Jersey Shore.
In Monmouth County, the median price fell to $416,750 in the fourth quarter of 2006 from $445,000 in the fourth fiscal quarter of 2005, a 6.34 percent decline, said Otteau.
In Ocean County, the median price dropped to $320,000 in the fourth quarter of 2006 from $340,000 a year earlier, a 5.9 percent decline. The figures include new home prices.
Meanwhile, home sales in December and January increased, the first two-month period in some time in which the number of sales were higher than the period a year earlier, Otteau said.
In January, home sales rose 18 percent in Monmouth County and 11 percent in Ocean County over the same month a year earlier, as new buyers flocked to more affordable New Jersey mortgage financing.
Price drops made homes more affordable for first-time home buyers, bringing them into the market “rather strongly,” Otteau said.
“This is marketwide,” he said. “We are seeing it in Hoboken and Jersey City in the condominium market; we are seeing it in Monmouth and Ocean… in the single-family home market. We are seeing it everywhere.”
It’s a change from last year, when higher home prices, heated by years of heavy demand, reached a point where they became unaffordable for many first-time mortgage applicants.
First-time buyers are the catalyst for the real estate market. The homes they buy allow sellers to upgrade to larger homes. At the top of the ladder, seniors sell their homes and move to age-restricted communities.
The increased activity at the lower end of the housing market will continue for the entire year, Otteau forecasts.
“We are looking for 2007 to be a stronger and better version of 2006 for the entire year, with the strengths being in the lower two-thirds of the price spectrum,” he said.
The market will improve as more first-time buyers purchase homes, he said.
Prices have now hit a level where some sellers are starting to see multiple offers on a home. But unlike two years ago, when bidding wars forced prices up, negotiations are occurring below asking price.
That’s unlikely to change. Bidding wars with increasing prices would make homes unaffordable again, especially for those already stretched thin to afford their first home mortgage.
Until last fall, home buyers were looking but not buying. But as mortgage rates tumbled, interest increased from October through December.
“Now they really are buying,” a local real estate agent said. “They are signing contracts and making offers. They have a threshold, though, and they are not going to overpay.”
Spotswood resident Andrea Higley looked at houses for about three months before buying in Lacey. She expects to close at the end of the month.
She had made offers on two other houses. One seller found a buyer who would pay more. The other wanted her to close on the deal sooner.
“They gave it to someone else who could do the closing earlier,” Higley said.
The third house was priced at $299,000, and the seller accepted Higley’s offer of $275,000.
Jim Joeriman, manager of Prudential Zack Shore Properties’ office in Lacey, said 60 percent of the contracts in his office over the past six months are for homes under $275,000.
“The agents are very busy,” he said. “There are a lot more inquiries than we have had over the whole winter.”
SOURCE: Asbury Park Press
John and Susan Scerbo of Northern New Jersey put their five-bedroom house on the market more than a year ago. It’s still for sale, even after the couple cut the asking price from $695,000 to $649,000.
“We got caught in a tough market,” said John Scerbo. “Buyers are slow to act, and there’s enough inventory out there that they can take their time looking.”
The overheated 1999-2005 housing market cooled quickly in 2006, and real estate experts expect property home price gains and sales to remain slow in 2007, both nationally and in northern New Jersey.
“A lot happened during the boom, and we have some paying back to do yet,” said David Seiders, chief economist with the National Association of Realtors.
In North Jersey, house prices are expected to be flat or down slightly - around 3 percent or less - in 2007. But even with the downturn in prices and sales volume, 2007 is likely to be a historically solid year - not quite as big as the record-breaking years we’ve seen recently, both nationally and in New Jersey.
“The perennial demand for housing in the New York area really insulates the market from any major correction,” said Sean Maher, an economist with Moody’s Economy.com. “In addition, prices moved up so quickly during the boom years that most homeowners are still sitting on big gains.”
With New Jersey mortgage costs more than many buyers can handle, Karl Kern of Kern & Rogers Realty Inc. and Mark DeLuca of Mark DeLuca Realtors in Teaneck both say prices in the Bergen County area dropped about 5 percent in 2006. Both said another drop of 3 percent or so is possible in ‘07.
Tough as the softer prices may be on sellers, they come as welcome news for buyers.
Bob Walters, chief economist for Quicken Loans, predicts that prices will remain soft for 2007 and 2008. Kern has a similar view. After 2007, Kern predicts the bear market will become an “inchworm” New Jersey housing market, with prices inching forward slowly.
“I think it’s the nature of the cycle of real estate that we’re not going to have a boom again for a long time,” Kern said.
The housing slowdown has also had a big impact in the construction market, where activity is at the lowest level since mid-2000. Reflecting home builder pessimism is Hovnanian Enterprises Inc. of Red Bank, the state’s largest home builder, which was forced to cut prices in many of its communities in 2006 and dropped two major proposed projects.
The company has been forced to scale back construction in the face of a wave of contract cancellations by prospective buyers, many of whom can’t sell their current homes. As a result of these cancellations, contracts dropped by more than a third in its fiscal fourth quarter.
In another sign of trouble, a dropoff in demand for home mortgage loans meant Kara Homes of East Brunswick filed for bankruptcy last fall.
The condo market has been especially hard hit, according to the National Association of Home Builders. In a recent survey, half of condo developers reported that they had cut their prices - typically by 5-7 percent - to boost sales.
For all the pain of the downturn, there are some underlying fundamentals that tend to shore up demand for housing. These factors suggest that this downturn won’t be as deep as the housing decline of 1980, which was caused by high mortgage rates, or the slump of 1989-90, caused by a recession.
For one thing, rates of conventional home loans are expected to remain in the 6-6.5 percent range, a historically low level. And the economy is growing, with unemployment below 5 percent.
But economists expect a slow housing market - which has fed economic growth for several years - to be a drag on the U.S. economy this year for the following reasons:
SOURCE: NorthJersey.com
This just in:
Now is the time to apply for a home loan in the Garden State.
Why? The number of homes contracted for sale in December moved into positive territory for the first time since August 2005, according to a new report released by the Otteau Valuation Group, an East Brunswick, N.J., firm that tracks the New Jersey housing market.
In December, contract sales activity ran 2 percent higher than December 2005, “providing solid evidence that home buyers are begin ning to re-enter the housing market in response to lower home prices and continued low mortgage interest rates,” Otteau said.
The Newark Star Ledger quotes Otteau as describing “the most positive sign for the New Jersey housing market in more than a year.”
The housing market’s performance in December marks the first time in 16 months the housing market experienced a higher volume of monthly sales activity than the prior year.
Still, not all is well on the housing front.
While New Jersey mortgage costs remain low, another key indicator of market strength is the Unsold Inventory Index, which measures how many months it would take to sell the existing inventory of active listings at the present sales pace.
That figure in New Jersey currently stands at a 10.6 months, as compared with 7.8 months one year ago, which far exceeds the balance point at which home prices will rise.
Therefore, while recent market improvements may signal the end of the housing decline, the high days on market figures suggest we should not interpret this as a return to higher prices.
The conclusion:
“Keep in mind that these improvements have been fueled primarily by lower home prices suggesting that realistic pricing remains key to successful home marketing,” he said.
Nearly 30 percent fewer properties were bought and sold in Cape May County, New Jersey, last year compared with 2005, confirming a definite cooling in a previously hot housing market.
According to the Press of Atlantic City, more than 8,300 properties changed hands in 2006, a surprising drop of about 3,500 from the prior year.
“The market has made an adjustment. Our business reflects the ebb and flow of the real estate market,” said Cape May County Clerk Rita Marie Fulginiti, whose office released the annual totals Thursday.
Cape May County is not necessarily indicative of the rest of the Garden State. This particular segment of the New Jersey housing market is dominated by people who do not live in the county full time.
As the housing market slows down, people have more opportunity to wait and see what housing prices do, said Dr. Richard Perniciaro, director of Atlantic Cape Community College’s Center for Regional Business Research.
“Right now, you have people waiting to see what happens to prices. A lot of it is a wait-and-see market, more so than Atlantic County, where more people are coming here for jobs, so they have to move,” he said.
In Cape May County’s market of second-homes and retirement houses, people have more flexibility about when they want to buy, and aren’t necessarily as dependent upon the latest New Jersey mortgage rate fluctuations.
“It’s natural that it has such large swings, because people don’t have to go at a certain period of time,” he said.
From 2000-2005, the number of residences in Cape May County increased 7.7 percent — or twice the state average, according to the U.S. Census, as people flocked to the state’s southernmost tip, often using second mortgages to secure vacation properties.
But Cape May County, unlike other southern New Jersey counties, saw a 3 percent population decrease in that time period. That data, experts said, provided further confirmation of second home ownership and a trend of baby boomers seeking homes and age-restricted houses in Cape May County.
As the number of home mortgage loans increase, the year-round population doesn’t follow suit. doesn’t In 2004 and 2005, the county reached the high points for the number of properties to change hands, 11,961 and 11,814, respectively.
Despite fewer property transfers in 2006, the taxable value of land is higher than ever. In October, Cape May County showed that the value of taxable land rose 26.5 percent to almost $40 billion.
If nothing else, 2006 will be remembered as the year the New Jersey housing market came back down to earth after five years of record growth.
According to the Asbury Park Press, local home prices, which nearly doubled in the first half of the decade, rose more modestly in ‘06 and, in at least one quarter, declined.
Homes that would have been snared in a matter of weeks a year earlier, sat on the market for months. Realtors and home builders alike struggled to attract buyers, who sensed that things were turning in their favor and were oftentimes content to sit on the sidelines.
And then in October, in the most graphic example of how quickly the market had declined, Kara Homes Inc., one of the state and region’s largest home builders, went into bankruptcy, seeking protection from creditors who were owed $270 million in loans, bills and back wages.
Among the creditors were about 300 customers, each of whom had made a hefty down payment on their home in the recent past, and now wondered if they would ever move in or recoup their deposit.
Economist James Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University, summed up the shifting market this way:
“The psychology changed dramatically from “I have to get on board the housing train before it leaves the station’ to ‘Am I going to be a peak-of-market buyer and is the market way, way overpriced?’ We switched from that fear or greed of not being able to participate in the boom to fear that the market is going to slide downward.”
The change in housing costs was evident in the numbers:
The median sales price for an existing home in the region that includes Monmouth and Ocean counties rose 9 percent in the first quarter, fell 0.1 percent in the second quarter before increasing 7.3 percent in the third. Those were down considerably from double-digit increases in the previous five years.
Economists pointed to rising New Jersey mortgage rates earlier in the year and said that personal income levels had not kept pace with the increases in home prices.
The number of unsold homes on the market increased in Monmouth and Ocean counties. In the third quarter, 6,919 homes were up for sale in Monmouth County, up 51 percent from the 4,594 on the market in the same period in 2005. In Ocean County, 6,870 homes were on the market, up 53 percent from the 4,499 on the market in the third quarter in ‘05.
It amounted to an 11-month supply of houses in both counties. At the same time last year, the market only boasted a five-month supply. Meanwhile, the number of homes sales fell…
Many home builders felt the sting of the slowdown in the housing market. Some buyers, unable to sell their current houses, canceled their contracts on homes or demanded price reductions or incentives before they would make a commitment on a home mortgage loan.
Builders felt the heat. When it filed for Chapter 11, Kara Homes of East Brunswick also blamed the housing slowdown, saying it ran out of cash needed to keep building new homes.
The bankruptcy filing has left prospective Kara home buyers, some of whom had put down tens of thousands of dollars as earnest money deposits, in limbo.
Myriad woes in the New Jersey housing market were not the only big business stories in 2006, but they were among the most debated - and certainly among the most interest to Garden State residents.
The New Jersey housing market has seen better days.
With that in mind, members of the ERA NJ Broker’s Council, recently talked to the Home News Tribune about positive features in the current market, along with the value of using a full-service real estate professional.
First and foremost, the council advises that working with a full-service real estate company can make a significant difference for home buyers and sellers ; they can take advantage of the knowledge, corporate support and vast array of marketing and financing products available from full-service mortgage brokers.
The council pointed out that well-located, professionally developed and accurately priced properties are still finding a willing market among home buyers and sellers. They caution that people who wait for prices to drop even further before applying for a New Jersey mortgage could be making a costly error.
Mortgage interest rates actually have been falling and are near their lowest level in half a year, making them barely a percentage point above 40-year lows. Lower interest rates should make lower prices affordable to a wider range of potential buyers. Some Wall Street analysts say this could become an even more important factor if mortgage rates continue to drop in the coming months.
Remember: Using the resources available from a full-service mortgage company can help guide home buyers and sellers through the current real estate market. To further support its clients’ mortgage needs, these brokerages offer their own help desks, own where finance specialists - including former loan counselors, underwriters, processors, closers and quality controllers - are available for consultation.
The products are designed to help a wide range of buyers with unique financing needs, from loans designed especially for first-time home buyers to options for clients who recently had a bankruptcy.
KeyCorp has split Champion Mortgage in two, selling $2.5 billion in loans to a subsidiary of HSBC Finance Corp., and agreeing to sell the loan origination part of the business to an investment group.
Champion, a New Jersey mortgage company, employs about 600 people, and a majority of them work in Parsippany fielding loan queries, applications and customer service calls.
It is unclear exactly what the impact of the sale of the provider of non-traditional mortgage loans will be on employees. KeyCorp said in a statement it would pay an unspecified amount in severance.
Arslanian said the company buying the loan origination business, Fortress Investment Group of New York, is expected to hire “a significant number” of Champion’s personnel, which could include people who provide the servicing for existing loans that have been sold to HSBC.
Fortress would not comment Friday, and it was unclear if the 25-year old Champion Mortgage brand would survive. Fortress is a manager of private equity, hedge funds and other investments, and it employs former U.S. Sen. and V.P. candidate John Edwards as a senior adviser.
HSBC spokeswoman Kate Durham said HSBC — which owns the HFC and Beneficial home mortgage company — is acquiring only the loan contracts and the customer relationships, not Champion staff. But HSBC will take over the responsibility of collecting payments and responding to customer questions and concerns.
Champion, which makes conventional mortgage and home equity loans in 26 states, contributed $20 million to KeyCorp’s earnings through September, on $89 million in revenue. However, sub-prime loan delinquencies have been on the rise throughout the industry, and Ohio-based KeyCorp, which has a large network of banks, primarily in the Midwest, said it wants to focus more exclusively on community banking.
KeyCorp, which first announced its intentions to sell Champion in August, said deal-related charges include $164 million due to a write-off of goodwill related to the 1997 acquisition of Champion. Charges also will include $25 million to $30 million in 2007 on the Fortress deal, for severance pay, lease obligations and asset write-offs.