N.J. housing report's hint of hope
Friday, June 06, 2008
BY SAM ALI
Star-Ledger Staff
Could the tide finally be
turning?
Two new snapshots of the New
Jersey housing market seem to suggest the worst of the decline
may be over.
A report by East
Brunswick-based research firm Otteau Valuation Group shows April
home sales increased from the March level -- the first time that
has happened since 2005 -- in what may be a sign market has
bottomed out.
At the same time, a report
released by the Mortgage Bankers Association yesterday showed
although home foreclosures and late payments continued to set
records across the country during the first three months of the
year, fewer New Jerseyans were falling behind on their mortgages
and losing their homes.
"It will be a couple of more
months before we can say for sure if the housing correction has
ended and the market is in recovery mode, but there are a
growing number of indicators which suggest the housing market is
no longer worsening," said Jeffrey Otteau, president of the
Otteau Valuation Group.
In April, New Jersey sales
contract activity grew for the fourth consecutive month, and
recorded a 9.3 percent jump above the March level, Otteau said.
By comparison, sales activity declined from March to April in
both 2006 and 2007, he said.
Another positive development:
The pile of unsold homes for sale is not rising as fast as it
once was.
From March to April, inventory
of unsold homes increased 4.5 percent, which Otteau said is less
than normal for the month of April. Year over year, the
inventory of unsold homes inched up 1.8 percent, from 69,888
homes to 71,193 homes for sale.
In June 2005, that figure stood
at only 39,000 homes.
A key indicator of market
strength is something called 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. It now
stands at it's lowest level of the year, reflecting a 10 month
supply, Otteau said.
By comparison, the index stood
at 12.7 months in January, 11.0 in February and 10.5 in March.
Historically, a 5.5-month supply of unsold inventory has been
considered a "stable" market.
The report released by the
Mortgage Bankers Association also seemed to suggest that the
rate of foreclosures and delinquencies may be settling down a
bit in New Jersey.
According to that report, the
delinquency rate for mortgage loans on residential properties in
New Jersey actually fell to 4.87 percent at the end of the first
quarter of 2008, a decrease of 0.52 percentage points. The
delinquency rate excludes loans in the process of foreclosure.
The percentage of loans in New
Jersey in the foreclosure process at the end of the first
quarter rose to 2.31 percent, compared to 1.89 percent in the
fourth quarter of 2007. But the number is still below the state
record set in the early 1990s, when New Jersey had the highest
rate of mortgage foreclosures in the country.
Back in 1992, New Jersey led
the nation with nearly 2.44 percent of all its residential
mortgages in foreclosure, according to the MBA. At the time, the
state was in the throes of an economic recession, and a flurry
of overbuilding had produced a glut of homes for sale.
Today, the state ranks 29th in
the nation in terms of delinquencies and 14th in terms of
foreclosure, the MBA said.
On a national level, the
inventory of homes in foreclosure increased to 2.47 percent, and
the delinquency rate -- loans with one or more payments overdue
-- grew to 6.35 percent. The numbers are the highest since 1979,
the Washington-based trade group said.
California, Florida, Nevada and
Arizona accounted for 89 percent of the total increase in new
home foreclosures.
In New Jersey, a growing list
of positive factors -- increased housing affordability due to
lower home prices, low mortgage interest rates and massive
pent-up demand due to reduced purchase activity -- all bode well
for the real estate market.
"To keep things in the proper
perspective, however, it is clear that the housing market
remains in the grip of a dramatic correction and will not see
rising prices until unsold inventory levels have been reduced
significantly," Otteau said. "Until then, home prices will
likely drift slightly lower, although at a slower pace than the
past 2 years.
"But a bottom to the housing
downturn may be forming, which would be a first step towards
recovery."
Sam Ali may be reached at
sali@starledger.com.
