Much has been made recently of the government’s renewed efforts to spark the housing market from its dismal slide, however we fear there are yet more unintended consequences lurking just around the corner. The various ideas being posited for a broad REO-to-rental program is one of these steps as BofA points out in accommodating the dramatic shift from ownership to renting (with 4.2mm new renters and 1.2mm fewer homeowners since the end of 2006). Of course removing foreclosures from the for-sale market reduces competition for voluntary sellers – which should help to support prices for non-distressed homes but here is where the crux of the unintended consequence lies.

We have a squatter epidemic. There are millions of ‘homeowners’ currently living mortgage-payment-free (by choice) who will soon be forced (as the foreclosure process ramps up post-settlement) to pay rent (since they will not qualify for a mortgage). This will have the double whammy effect of reducing overall discretionary consumption spending (as rent is greater than ‘free’ – unless the cardboard box is preferable) and driving inflationary forces into rental costs (something we are already seeing). Of course these are the much larger second-order effects and we will only be told of the primary benefits of clearing foreclosure inventory, but at the margin (along with gas prices) the household will have less discretionary iPad-buying ammunition as opposed to more.

Since the end of 2006 there are 4.2 million more renters and 1.2 million fewer homeowners…

Distressed property prices continue to turn down (and re-accelerate) as the foreclosure pipeline starts to unclog…

Cheryl
Huber a popular Ocean City, N.J., real estate agent

By BECKY BATCHA
Philadelphia
Daily News

batchab@phillynews.com215-854-5757

Cheryl Huber drives the top-of-the line BMW 750
(“the big one,” she says) that you’d expect from the empress of Ocean City
real estate. She carries the Versace Couture bag. Her cellphone is on the
ring-always setting that comes with the territory.

Her blond bob went on hiatus following chemo for
ovarian cancer. (The surgery put her out of commission for all of six days.)
But under a thick crop of survivor’s frizz, she’s still the same Hurricane
Cheryl that she’s always been, a force of nature in Jersey
shore real estate for 27 years now, with $15 million in sales this year.
“So far,” she noted.

Huber’s clients at Prudential Fox & Roach range
from O.C.’s most celebrated shorebirds – most recently Gay and Nan Talese – to
the scrapers-by who have been saving their pennies for a fixer-up shack on the
wrong side of the West Avenue thoroughfare.

“This weekend, I was out showing properties
under $200,000,” Huber said early this month. “I just listed one for
$1.2 million.”

Given the free-fall in real-estate values since the
beach bubble of 2005, could this finally be the summer for Philadelphia‘s non-zillionaires to
re-entertain their daydreams of owning a little place down the Shore?

Bottom line: Unless you’ve got millions, don’t
bother fantasizing about oceanfront property. But if you’re willing to settle
for the deed to a motel room, you can get into the Ocean City
real-estate market for under $100,000.

If you’re dreaming the typical Ocean City
shore-house dream, maybe a little cottage with a canvas awning out front or a
sunny floor-through condo a couple of blocks from the beach, you’re dreaming in
$400,000-plus land (down from $600,000-plus before the bubble popped).

Some of what’s now on the market at common OC price
points:

UNDER $250,000: You can pick from several former
hotels and motels that went condo during the bubble years, including the
Hampton-Inn-ish Biscayne Suites near the boardwalk (roughly $200,000 a unit)
and the Crossings Condo-Tel, a throwback motel near a power station (as low as
$65,000). Both have pools.

$400,000 to $600,000: Alas, even post-bubble, this
is the price range for the quintessential O.C. shore house: a floor-through
condo on a popular street like Asbury
Avenue that’s a block or two from the beach (the
better to attract renters when you’re not there).

On the bright side: “Those properties were
maybe 25 percent to 30 percent higher back in 2005,” Huber said.

PRICE IS NO OBJECT, BABY: Properties with a wall of
windows overlooking the ocean start about $1.5 million for an oceanfront
floor-through condo. It’s a view you could definitely get used to if you had
the cashola to burn.

The priciest oceanfront home in Ocean City
is listed at $4.9 million. To go with the view, you get a single-family manse
with 5 bedrooms, 3 baths, an attached 2-car garage, walk-in closets, a
fireplace and central air.

Actually, you probably won’t get it. But it’s nice
to dream.

By Jeff Reeves, editor for InvestorPlace.com

Now could be the best time in history to buy a home. Presuming, of course, you have the money and the credit to do so.

The average rate on a 30-year fixed mortgage hit record lows last week, down to 4.01%, according to Freddie Mac. The Federal Reserve’s recent “Operation Twist,” which was designed to do just this, appears to be doing the trick.

There are a lot of reasons to consider buying a home right now. The big savings on interest is just one of them — the difference between a 4% rate and a 5.5% rate on a $200,000 home loan is just shy of $200 in monthly payments and can save a homeowner more than $60,000 in interest payments across the life of the loan.

Another motivating factor could be the fact that rents remain sky-high in the U.S. right now, and in many markets it’s actually cheaper to buy a home than rent a two-bedroom apartment.

While housing might not be at a “true” bottom just yet, there are many signs it is nearing one in many markets. Housing prices rose from June to July in 17 of 20 cities tracked by the Standard & Poor’s/Case Shiller home price index. It marked the fourth straight month of rises in most U.S. cities.

That’s to say nothing of the case-by-case bargains to be had. Here are two personal stories that show the opportunities to be had in this housing market:

I live in the Washington, D.C., area and purchased a short-sale home in 2009. Although three months of back-and-forth with the bank drove my wife and me crazy, we finally closed on the property just hours before a foreclosure auction — after which my Realtor asked if I wanted to immediately re-list my home with him for about 30% more than we had just paid. I had purchased the property for a growing family and good schools, so I politely declined. But the message was clear: If you suffer through a painful distressed property purchase, you get a hefty discount for your trouble.

On the other side of the coin, my brother purchased a newly constructed home in Roanoke, Va., as his wife attended medical school at Virginia Tech. Seemed like a good idea at the time — but now he’s 40% upside down on his house and renting it for barely enough to cover the mortgage. Unfortunately, he now lives six hours away, so it’s no picnic to manage his rental. My brother recently decided he has enough stress in his life so he will list the house at slightly below market rate just to get rid of it — even if it’s going to cost him big-time. Very bad for him, but some lucky southwest Virginia family is going to get a nearly brand-new home for a heck of a deal.

I’m sure many of you have your own story to tell about the housing market. Share it with me (see below) or better yet, post it in our comments section so everyone can read and weigh in.

There are plenty of other bank-owned homes or desperate sellers that folks can pursue, with deals akin to the two listed above. But the million-dollar question, of course, is whether prospective homeowners can get a loan — and if they can, whether they want one.

After the mortgage meltdown, banks have wisely tightened lending standards . That’s as it should be, but it understandably shuts many folks out of the market. Other people have good credit but don’t have the necessary savings for higher down payments some lenders now require. That’s to say nothing of folks who perhaps could sign up for a new home but are just too uncertain about their job or retirement.

Whatever the reasons, it all adds up to a decided lack of demand in the housing market. Many factors have created great deals right now, but those factors also might just be too daunting for many to overcome right now.

I remain convinced that I made the right choice in buying my home — not because it was an “investment,” but because it’s in one of the best public school systems in the country and I now have two beautiful daughters who wouldn’t fit very comfortably in an apartment. And by the way, that two-bedroom apartment rented for only about $100 less a month than my current mortgage. Buying a home was the right thing for my family, and for my finances.

And perhaps that’s the biggest lesson of all: The best reason to buy a house is because it will become your home — not a path to profits.

Posted: Sunday, October 9, 2011

By KEVIN POST, Business Editor Press of Atlantic City

The new home market still looks grim for homebuilders, but pretty good for potential buyers: Houses haven’t been this affordable in decades.

Even so, local homebuilders are starting to feel a bit expansive, planning new developments in the area and extending their territories again.

U.S. households, with a median income of $64,200, could afford 73 percent of the new and existing houses on the market in the second quarter.

That’s slightly down from the 75 percent affordability in the first quarter, the highest ever recorded by the National Association of Home Builders.

Locally, affordability was nearly as good.

In the Atlantic City/Hammonton area, 66 percent of houses were affordable to families earning the median $71,100 income for the area.

In Vineland/Millville/Bridgeton, 65 percent of houses were within reach of the median income of $62,400.

The exception to this record affordability was Ocean City, where the data is skewed because houses priced for second- and vacation-home buyers living elsewhere are often out of reach to local household incomes.

This made Ocean City the least affordable of the 220 metro areas surveyed by the NAHB, with only 41 percent of its houses affordable with the local median income of $70,100 a year. While that income is nearly the same as in Atlantic County, the median home price there was $203,000. In Ocean City, resort homes pushed the price to $360,000 in the NAHB survey.

Halliday-Leonard kept to its stronger hometown market of Ocean City as the downturn hit, having built houses from Hammonton to Cape May for 33 years. Now, it’s reaching out again.

“The last five to eight years, we concentrated on Ocean City,” said co-owner Scott Halliday, also of Ocean City. “Now, we’re starting to look elsewhere too. I’m heading to Avalon now for a possible job.”

Tim Schaeffer Communities – which avoided most of the damage of the market collapse and finally sold off the last of its 123 homes at Pine Crest in Egg Harbor Township – also is making plans for an improving new-home market.

After recently starting construction on the 14-unit Walden Commons in Hammonton, the firm is preparing to build a model and sell six homes off Zion Road in Egg Harbor Township, said the Haddonfield firm’s president, Jason Schaeffer.

“We’re also planning to start a project in early 2012 in Vineland. That’s about 180 single-family homes in a development called Menantico Estates,” he said.

Joel Naroff, president of Naroff Economic Advisors, said the shore and New Jersey markets may do a bit better than elsewhere in the year ahead.

“Some of the shore areas have done reasonably well, and that’s pretty good. That’s an area less affected by distressed homes,” Naroff said. “To some extent, the upscale homebuilders have a greater chance.”

Statewide, although there are “a fair number” of short sales and foreclosures, “they’re more sprinkled around, so we’re likely to see more of a recovery in the New Jersey housing market,” he said.

The latest figures on new-home sales suggest that recovery hasn’t begun. The Census Bureau said sales of new single-family homes were down 2 percent in August from the prior month, but still up 6 percent from the same month a year ago.

Houses are more affordable than they’ve been in a decade.

Jersey Shore Waterfront Home

By Pat Mertz Esswein, Associate Editor

From Kiplinger’s Personal Finance magazine, October 2011

1. Prices have nearly hit bottom.

In most areas, most of the excess has finally been wrung out of the market. But if you’re buying a first home or looking to trade up, there’s no need to rush. Although prices may fall some more — blame foreclosures still working their way through the system and tighter credit — they won’t fall by much. Fiserv Case-Shiller, which tracks home prices, forecasts that the median price nationwide will ratchet down for about six more months, then stay flat for three or four years.

In most of the cities where home values experienced a double dip after the expiration of the home buyer’s tax credit in mid 2010, median prices won’t fall below their 2009 or 2010 lows, says David Stiff, Fiserv’s chief economist. These cities include San Francisco, San Jose, San Diego and Washington, D.C. But in cities with lingering oversupply of homes for sale, Fiserv forecasts a decline of 10% or more in the median home price (for the year ending March 31, 2012). These cities include Riverside–San Bernardino, Cal.; Las Vegas; and Miami.

2. Houses are affordable again.

Homes haven’t been this affordable since 1991. Economists often define affordability as the ratio of median home price to median family income. According to Fiserv Case-Shiller, the U.S. ratio now stands at 2.6 — down from a peak of 4.1 in mid 2005 and just under the long-term average of 2.8. Of course, some areas continue to defy affordability. In California’s coastal cities and the New York metro area, the ratio is 5 or more. Average mortgage payments are another way to look at affordability. Since the housing market’s peak in 2006, the average principal-and-interest payment in the U.S. has fallen from $1,063 to $645.

Renters considering the jump to homeownership may be encouraged by the price-rent ratio, or the median home price divided by the median annual rent. In 2005, the national median home price had inflated to nearly 21 times the median annual rent, according to Marcus & Millichap, a commercial real estate brokerage company in Encino, Cal. Since the bust, the ratio has deflated to 14, less than the historical average of 15. During the same period, the difference between the median monthly mortgage payment and median monthly rent fell from $745 nationally to $102. Marcus & Millichap expects rental vacancy rates to hit pre­recession levels this year, allowing landlords to raise rents by an average of 3.5%.

3. Mortgage rates won’t go any lower.

For the past couple of years, interest rates have hovered at levels last seen when the veterans came home from the Korean War. According to HSH.com, which tracks mortgage rates, at the beginning of August the national average 30-year fixed rate was 4.5%. FHA loans, which require only a 3.5% down payment, had a 4.3% rate. Adjustable-rate mortgages are even cheaper, and even rates for jumbo mortgages have hit lows not seen since the 1980s.

Freddie Mac forecasts a 30-year fixed rate of 5% by year-end and 6% by late 2012. Standard & Poor’s downgrade of the U.S. credit rating won’t have an immediate effect on rates because of the weak economy. But credit is tighter, and you’ll need a credit score of 740 or more and a down payment of at least 25% to nab the lowest rates. If you fall short of that, you’ll pay interest-rate risk premiums if the bank plans to sell your loan to Fannie Mae or Freddie Mac. For example, lenders must charge an extra 0.25 point if a borrower has a 740 credit score but puts down less than 25% (but at least 20%).

4. It’s a buyer’s market.

Demand is low; supply is high. In early summer, the National Association of Realtors reported that sales of existing homes (single-family houses and condos) fell by 9% from the year before. NAR also reported 9.5 months’ supply of homes. That’s how long it would take to sell all the homes on the market at the current pace of sales, and it strongly favors buyers. (Four to six months’ supply is considered balanced between buyer and seller.)

With so much selection, you’ll find more properties in good school districts or near your job, or homes that offer added value, such as a mother-in-law suite, says Thomas Popik, research director with the Campbell surveys of real estate professionals. You’ll spend less time shopping and competing against other bidders. And you don’t have to waste time with sellers who set unrealistic prices (although they’re still out there).

One caveat: If you’re searching among entry-level homes, which had more extreme price declines than upper-end houses did over the past year, you may face stiff competition from investors. They typically pay cash, which makes them attractive to sellers who want to close the deal fast. However, says Popik, you may find opportunities in homes that were bought and fixed up by investors, who intended to flip them but have had difficulty making a sale.

5. You may find a distressed property.

Bank-owned foreclosures (or REOs, for “real estate owned” properties) sell for an average discount of 35% off the per-square-foot price of conventional homes for sale, according to RealtyTrac. In the first half of 2011, lenders owned about 870,000 REOs but listed only about one-fifth of them for sale, concentrated in such high-foreclosure states as Arizona, California, Florida, Michigan, Nevada and Ohio; even with the slowdown in the foreclosure pipeline due to legal-processing issues and new supply exceeds sales. Find more on buying foreclosures.

Short sales, or homes sold with lenders’ permission for less than their owners owe on their mortgages, have also grown in number. Lenders have become more amenable to them as they seek to avoid the often huge losses associated with foreclosures, says Rick Sharga, of RealtyTrac. Short sales offer buyers less of a bargain than REOs, but the homes tend to be in better condition. Banks may still take two to six months to sign off on a short sale, so patience is imperative.

6. Homeownership is still attractive.

A home is the biggest purchase most people ever make. But deciding whether and what to buy isn’t purely a financial decision, says Chris Herbert, research director at Harvard’s Joint Center for Housing Studies. When you own a home, you can control your living environment and security, upgrade and change your home as you see fit, and create a sense of rootedness in your community.

You can offset some of the cost of homeownership by deducting mortgage interest. But don’t mistake a home for an investment, at least not in the short run. “If your goal is to jump in and get a return of 6% annually, that’s a bad idea,” says Fiserv’s Stiff, given the forecast for weak price appreciation. Instead, you need to commit to owning the home for at least five to seven years to ride out any further price declines and recoup your down payment and transaction costs. If you think that you might need a bigger home before that time to accommodate a growing family or that you might have to move to another area for your job, don’t buy unless you’re willing to become a long-distance landlord.

Shop carefully, and be patient. Exclusive buyer’s agent Michael Crowley of Spokane, Wash., tells buyers it may take three to four months to find the right house. “We can be in a hurry, or we can be particular, but we can’t be both,” he says.

GAY TALESE  never learned to swim and only occasionally ventures onto the beach. The wind makes it impossible for him to read the newspaper and, he said, during a recent visit to his second home in Ocean City, N.J., “I’m not going to sit on the sand swatting flies.”

Yet for the last 40 years, Mr. Talese, a writer, and his wife, Nan, a Manhattan book editor, have spent weekends and summers there, in the town where he was born, tucked into a rambling red-shingled Victorian they own that sits just one block from the ocean.

Unlike the Hamptons or Litchfield, Conn., where many of the couple’s Manhattan friends seek refuge, Ocean City has long been a getaway for middle-class Philadelphians.

SECOND-HOME TOWN Nan and Gay Talese at their 1902 house in Ocean City, N.J., where Mr. Talese was born

The Taleses like it because it’s the antithesis of the Manhattan literary whirl. So, don’t ask for a whole-wheat roll at the hoagie shop, or a chic mixed drink when you’re dining out. Ocean City has been dry since its beginnings as a Methodist retreat in 1879. Night life? Choose between the kiddie rides on the boardwalk or star-gazing on the beach.

“It’s a great contrast to New York,” said Mr. Talese, who is 75, as he conducted a tour around town, pointing out the building on Asbury Avenue where his mother owned a dress shop, his father ran a tailoring business and the family lived in an upstairs apartment.

Large parts of many of his books, including “The Kingdom and the Power”; “Thy Neighbor’s Wife”; “Unto the Sons,” a family reminiscence that’s largely set in Ocean City; and his latest, “A Writer’s Life,” were written in the third-floor office of his Ocean City Victorian.

“Nobody bothers me here,” he said. “I much prefer it in winter. It’s empty, and you can see the sky. It’s light, and cheerful.”

Built in 1902, the house sits on a tree-lined street in one of the resort town’s most desirable neighborhoods, the Gardens. As in most houses of its kind at the shore, the first floor is raised above street level to take advantage of sea breezes, with a wraparound porch, white wicker furniture and a green-and-white-striped awning. Although the original view from the front porch favored dunes stretching all the way to the Atlantic, by the time the Taleses arrived there were already houses across the street. Five years ago, those were torn down and replaced by town houses, which still did nothing to revive the old sea view.

If you squint, though, you can still see a bit of ocean from a wide window seat in the second-floor master bedroom. Mrs. Talese, who is publisher of Nan A. Talese/Doubleday books (her writers include Margaret Atwood and Ian McEwan), likes to read there in the afternoons after her morning swim and some weeding in the garden. “It’s marvelous with the sun on your skin,” she said.

The house has seven bedrooms, four on the second floor and three on the third, one of which is Mr. Talese’s office. The three bathrooms on the second and third floors contain original claw-foot tubs, each painted to coordinate with the wall color.

Their purchase of the house came about almost by accident. The couple rented it for the summer in 1967 when their older daughter, Pamela, was a toddler, and their younger daughter, Catherine, was a newborn. They were planning to rent it again the next summer when they discovered that another family was considering buying it to live in year-round.

“I said to Gay, ‘Buy it,’ ” Mrs. Talese recalled. They were renting an apartment in an Upper East Side brownstone, a building they would buy many years later, and had little money to spare. But it didn’t deter her. “It was on the spur of the moment,” she said. “He’s cautious. He wants to be unfettered. But I like real estate.”

It turned out to be a wise investment. The house cost $32,000, including the adjoining lot. Mr. Talese said he recently had offers of $1 million to $1.4 million.

Although the two considered buying a place in the Hamptons or Connecticut in the 1970s to be able to spend more time with friends, they decided it would be too much like their social life in New York.

“It’s a place to be away,” Mrs. Talese said. “When we come down, we just stay at home.”

One of the first major changes they made was to winterize the house so Mr. Talese could write there year-round. A deck was added on the back, and bookshelves were added to in the dining and living rooms. And a pantry wall in the kitchen was demolished to open up the space.

Mr. Talese’s third-floor office is set up so that he rarely has to leave. There is a bed that he sleeps in when he’s in Ocean City alone; an ancient IBM Selectric with a grimy plastic cover; and a five-year-old Power Macintosh, which is not connected to the Internet. (Mr. Talese does not engage in e-mail and prefers to hand-deliver his manuscripts to his editors). To reduce the glare from a skylight, Mr. Talese has put together a plastic foam canopy that swoops over his U-shaped desk like a sail on a blustery day. Mrs. Talese calls it “the suspension bridge.”

His summer routine is to write in the morning, play tennis in the afternoon, then maybe watch a game on the 36-inch Sony Trinitron with DirecTV service that he has set up in his office. His tastes run from the Yankees to Japanese skiing.

At the other end of the hall is a room that doubles as a home gym (Mr. Talese lifts weights, and Mrs. Talese uses a videotape for Pilates) and a guest room for visiting writers. The novelist William Kennedy and Mr. Talese’s cousin, Nick Pileggi, are among those who have stayed and worked there for extended periods.

The house is strictly a kick-off-your-shoes-and-stay-awhile place, even though Mr. Talese continues his habit of dressing formally — even in the heat of summer.

“There’s nothing spiffy about this place,” Mr. Talese said one 90-degree day earlier this summer, looking natty in a long-sleeve, pink linen shirt with contrasting white collar, cufflinks, tan pants, a yellow-and-green neck scarf, white belt and brown shoes. Outdoors, he covered his silver hair with a straw fedora and, by early evening when the sun had lost its edge, slipped on a beige jacket with a yellow silk handkerchief tucked in the pocket.

Memories are what seem to count most in the Taleses’ Ocean City home. In the living room, the surface of an old baby grand piano with yellowing keys that once belonged to Mr. Talese’s parents is crowded with family photos and pictures of him with his writing peers — John Irving, Kurt Vonnegut, William Styron, Norman Mailer, Joseph Heller. In one baby photo, the Taleses’ daughter Catherine, now a photo editor in New York, sits on the lap of the legendary Random House editor Bennett Cerf.

Journalist pals, like the late David Halberstam, have always been frequent guests. Pamela Talese remembers her father and his writing cronies lined up on the front porch in their chairs in the mornings, each with his own copy of The New York Times.

Growing up, the Talese children remember old-fashioned summers of swimming, biking and baseball games in the yard. But they also had chores. Each morning they would buy their father a glazed doughnut, leave it outside his office door, then return at 11 a.m. with a plate of poached eggs. After reserving a tennis court for her father in the afternoon, Pamela would bring him a hoagie sandwich and half a beer at 3 p.m. while he watched a ballgame on TV. “Then he would go back and write,” she said.

Although the Talese children have long been on their own, they say they still love visiting the Ocean City house. Once there, they fall into the old routine — padding around in bare feet and taking daily dips in the ocean with their mother, who’s an avid swimmer. On a rare day, they might even catch a glimpse of their father on the beach in a long-sleeve shirt, straw hat, neck scarf and swim trunks, struggling with a newspaper and swatting flies.

Because of the manner in which the law was written, the sale of single family homes from individual sellers was made subject to the requirements, resulting in home purchasers having to file paperwork and provide ten days notice to the Division of Taxation for every real estate transaction, or else risk being held liable by the State for the seller’s delinquent taxes. Under A-2748, the sale by individual sellers of any dwelling unit, primarily one- and two- family homes, will no longer be subject to the bulk sales notification requirements.

BILL SIGNED:

A-2748/S-2313 (Diegnan, Schaer, Lampitt, Conners/Van Drew, T. Kean) – Exempts sales of certain homes and seasonal rentals from the bulk sale notification requirements

By JOEL LANDAU Staff Writer press of Atlantic City

Local real estate agents report a strong summer rental season, which they say is an indication of both a rebounding economy and interest in the Jersey Shore.

The agents also hope that renewed interest in rentals could translate into more people buying a vacation home.

Ron Giordano, president of Atlantic Beach Realty in Stone Harbor, said rentals were up

7 percent among the 150 units his firm has for the season.

But the number of rentals among the lower-end, less-expensive properties actually went down. It was the higher-end properties that had higher occupancy rates this summer, he said.

“The higher-end people doubled their money in the stock market,”prior to late summer’s market swoon, he said.

Giordano’s office tried new initiatives this year, such as posting pictures of rentals on its website.

Joe Wilhelm, of Ocean City Realty, said the rental market got busier as the season moved along.

“The three weeks from July 30 to Aug. 20, it was impossible to find a rental for most people,” he said. “As the year started, more and more calls were placed to find a rental.”

Overall, Wilhelm said, rentals in his office were up 34 percent from the previous year.

Wilhelm said the majority of his clients were from Pennsylvania, New Jersey, New York and Delaware. With gas prices nearing $4 a gallon, they did not want to travel further south — even rental prices are lower.

“They could get places for cheaper in North Carolina, but they would have to drive longer,” he said. “We had a busy year. People did not want to travel as far as they used to. So they are coming to the Jersey Shore.”

Wilhelm said he is optimistic for next year’s market.

“I think this will be good for next year too,” he said. “People really enjoy coming to the shore. They did it as kids and want to keep the tradition going with their kids.”

Local real estate professionals also used the summer rental season as a way to secure future home sales.

Chris Hegel, sales associate of Weichert Realtors in Brigantine, handled rentals this summer as an opportunity to make more contacts.

About 80 percent of the agency’s 200 homes were rented this season, but the newer and higher-end homes were closer to 100 percent.

“I think it went great,” he said. “All in all, our office did very well with our units.”

People were still reluctant to step up and buy, but they were more curious this year than they have been in the past, Hegel said.

“They see a lot of inventory and affordability. Two working people can afford a second home again,” he said. “I did not have a lot of sales from rentals, but contacts have been established. I feel it will translate in a couple of transactions in the next year.”

Giordano was enthused by the strong rental market but nonetheless is waiting to spend money on marketing until the economy improves.

“The economy has to change itself,” he said. “It doesn’t make sense to advertise for homes when no one is buying. When the economy moves around, you start advertising and make money. Then you save your nuts like a squirrel.”

By JOEL LANDAU Press of A.C. Staff Writer

OCEAN CITY — There is mounting evidence the housing market in Ocean City is stabilizing, but still has a little ways to go.

Joe Wilhelm of Ocean City Realty recently sold this home on Coral Lane in Ocean City for $1,076,000 after having it on the market for 26 days.‘I think there are more buyers in the market,’ he says.

Tax Assessor Joe Elliott believes the housing numbers in the city have begun to stabilize after steadily dipping each of the past three years. Though he warns there may still be some dips in prices, he said the city is in a position to move forward.

“That market has stabilized,” he said. “It’s clearly evidence that we have seen the worst.”

Elliott said he is tracking home sales this year and is seeing more sell at price levels from before the market slowdown — especially for homes $650,000 and under.

Homes for $650,000 and less sold at about a

2 percent drop of their assessed values each of the past three years, he said. High-price property ranging between $2 million and $5 million — which is mostly ocean and bayfront — declined 6 percent a year each of the past three years, he said.

The higher-end homes may still be decreasing in value because they’re not as active a market, he said.

But the number of sales is increasing,  Elliott said.

For sales at $99,000 or more, there were 666 recorded in 2009. In 2010, there were 683 sales, and through June 30 there were 378, which projects to 756 for the entire year, Elliott said.

“There is good evidence of stabilization in Ocean City,” he said. “I don’t think everyone can say that, but we can.”

Joe Wilhelm, a Realtor for Ocean City Realty, has seen an influx of buyers in the market during the past six months.

He recently sold a house on Coral Lane near the bay for $1,076,000. The house was on the market for only 26 days, and he showed it the first day it was listed, he said.

“I think there are more buyers in the market,” he said. “The interest rates are so low, people are deciding to put their money into real estate and not the stock market.”

The city had the busiest July in years, and more high-end homes on the bay and beach are selling, he said.

Wilhelm said 90 properties sold last month compared with 57 sales in July 2010.

“When it’s priced right most of it will sell. You hear the market is so bad right now, but in Ocean City and surrounding towns the buyers are starting to come back in,” he said. “It’s still not the levels of 2004 and 2005, but it’s definitely improving. It feels great to see the market starting to change.”

But there is still some work to be done.

Jeff Quintin, salesman for Prudential Fox & Roach in Ocean City, said the still-ample number of available homes in the market is keeping the prices low.

“We are nowhere near the place where we would have an upward swing,” he said. “It’s leveled out to a point, but there’s still a tremendous amount of inventory.”

There are still about 1,000 properties in the city for sale, which is only a few dozen less than the amount of properties listed for sale last July, he said.

“If nothing new comes on the market, it would take 20 months to sell everything,” he said. “We have to clean out the inventory in the marketplace. It has declined over the years, which has been great, but we still have a ways to go. Overall the market has been getting better each and every year. It will still be a while before we see an upswing.”

Jersey Shore Opportunities

This blog post for September 10, 2011 was to a question posed to me the other day asking is this a good time to buy a shore property? Let’s start out with some background by saying I worked with my first real estate company in Atlantic City in the spring of 1985. During that time the market at The Jersey Shore was showing signs of topping out and starting to rollover. The Atlantic City real estate market was being fueled by the massive speculation of gambling and was still on a tear because casinos and investors were still buying the dream. Also in this time period new high rise condos were being brought to market by some out of the area real estate developers that were probably late to the party but were in no position to back out at that point. With major marketing dollars and plenty of effort four residential high rise developments with approximately 1400 condominium apartments were sold and closed from January 1985 until July of 1988. The impact of these properties that entered the market was extraordinary bad. First most of these properties were sold in a vacuum meaning that the prices weren’t really the market they were the prices the developers asked for and got because of the hype. Many of the buyers were from New York or Northern New Jersey and didn’t get sticker shock like their friends from the south in Philadelphia. With the onslaught of closings about 20 to 25% of those properties were put back on the market which by then became a non market.

That short story was the Atlantic City story which had seen the amazing spikes from speculators and casino land grabbing. The casino stocks were flying and many people became multi-millionaires overnight. Let’s get back to the real world for a minute. Other parts of Atlantic County saw much growth from housing and indirect investment in the form of retail and commercial properties to keep up with the growth from the casino engine. Now sleepy Cape May County was feeling some growing pains from the exodus of some Atlantic County residents to Upper Township where the prices didn’t see the same increases and the taxes had not increased much either.

What happened to the other shore communities other than Atlantic City? Of course they went up, but not in the dramatic fashion as A.C. did.

So what happened to make one of the greatest advances in real estate prices fall? Probably to answer this question two fold, the first was greed. How fitting for the New York metro area and second is the easier answer. A market will eventually top out for what ever reason. There becomes a point in time when there is no one in the marketplace that will buy at those prices are there isn’t anyone left in the marketplace to buy. What happens next? It’s called a correction and it can last a long time or a short time depending on the increase of the advance and the longevity of the advance.

Historians have said that the end of the run up in the late 1980’s was from a few major events. First, the tax reform bill of 1986 which changed the status of rental investment properties that owners now either had passive or active income from their investment properties and then the stock market crash of 1987. These two events were the beginning of the end for the run up, on a financial front and then on a psychological front. This one-two punch put the economy and the real estate market in a correction that lasted until 1995 or 1996 depending on the regional economy.

Let’s go back and try to answer the question. When was the best time to buy shore real estate between 1987 and 1996? Let me point out the real estate market bottomed out 1992, 1993, 1994 which I call the muddy bottom. At that time buyers and sellers were trading deeds and the prices stayed generally fixed except the buyers that were buying the quality pieces made out much better in the long run. If you bought in 1991 did you not get a great price? If you bought in 1995 did you not get a great price?  All I can say in that if you bought in all five of those years you would have doubled or tripled the value of your investment.

Why did the real estate market just decide to go up then? Supply and demand is the usual factor. When the supply dips below the demand the prices will start to increase slowing because there is always addition supply waiting for the prices to increase. When do the prices really start to move? Now we go back to the opposite psychology, because when everyone is buying other people feel more comfortable to buy! Friends and family always try to keep up with the Smiths or Cohen’s.

Don’t many people say the market will never go as high as it did this time? Hell yeah. Most people have a memory problem and it starts as soon as times become comfortable. We hear the economy is better, we hear how wonderful the president is doing and we hear whatever we want to hear.

On a different concept when does the market finally go into hyper mode? This one took my much more time to figure out. Bingo! When the entire back inventory is cleared and the properties that were bought at the top of the market are either sold on the market or not returned the market is when the real estate marketplace has the opportunity to flow. Keep in mind timing, as the prices go up how much new inventory will be a drag on the markets. The quicker this happens the fewer properties will be out there since most of the buyers are holding for at least 3 to 5 years.

Now back to the story at hand. The Cape May County market from 1996 to 2000 was having a steady flow of buyers since the baby boomers were entering the resort second home market. I would say they were seeing a 5 or 6 percent increase year over year. Not bad right? The market was just plugging along until the first bump in the road and didn’t turn into a speed bump but a catalyst. The stock market had a nasty correction what was called the internet bubble. If you remember what happened, investors were back to buying stock in companies that never made money. Some people forget or it’s just a new generation of people that don’t know better. So what are people to do now? I got it! Let go back to buying bricks and sticks since they are way less volatile. Right? Well guess what happened next? Like it was yesterday, the World Trade Center came down on September 11, 2001. If you weren’t freaking out you must have been on the moon! For six months the whole country was in shock and many people had a new idea about life. Live for the day and enjoy the time you have with your family because we never know when life could be cut short. Seeing all of those young people in the twin towers and in the financial district it was so unspeakable and this brought on the next wave in my opinion.

One last flashback to 2003, I end up working as the President and general manager of The Landis Co., Realtors in Sea Isle City.  At the time I started having conversations with Jim Sofroney the Broker/ Owner of the firm who had been in the real estate business for 30 plus years. Our conversations were how to manage the risk for our clients since we managed 1000 rental properties and wanted to give the owners our best interpretation of the market twice a year. We were starting to feel a little concerned about the increase in prices already. By the end of the summer of 2003 the prices were holding and the inventory was not increasing and the economy was getting traction.

So where am I going with this story? If you aren’t familiar with the real estate market in Cape May County we have two strong buying seasons, the spring which would consist of February, March, April and May. Then our Fall season would be the end of August, September and October. When we hit the fall season of 2003 the prices were increasing at 1% to 2% per month. Everyone thought this was great, so we saw people that shouldn’t have been in the investor market or people were buying multiple properties at these scorching numbers. The prices were being driven up by the speculation from the builders and developers that were buying land and buildings to turn into townhouses and condos. The more buyers bought the more their friends and family wanted to buy. Human nature at its worst, the greed factor or the let’s keep up with the Jones’ syndrome was at work. We didn’t see this market not being able to digest the entire inventory until the fall of 2005 when things started to roll over. Prices didn’t go up or go down, so the premise was we were beginning to stabilize. That made sense since all we were doing was taking a breather from that frantic period. Right? No! Wrong the real estate markets were exhausted and the developers were still building which was putting even more pressure on the markets that the inventory was peaking out because many of the buyers were planning on flipping their property at the same time the builders were dropping their prices to meet the slowing market.

It became apparent that the real estate markets when the land costs dropped 35 to 40%. The most improved part of the market became the worst place to be. The lot costs probably came back to a reasonable price point but the actual condos and townhouses haven’t dropped that much. Over the last five to six years we watched the prices drift anywhere from 25% to 50% from the ultimate time depending on the town or property type which you might be researching.

Prices were drifting lower at a snail pace until the bad boys of the banking community decided to do lots of bad thing. Well let us say did. Knowingly selling bond portfolios of loans that were to have little or no equity to Main St and sell them as CMO’s (Collateralize Mortgage Obligations). Boy doesn’t that sound warm and fuzzy sitting in your brokerage portfolio? Guess what the executives decided to they owned a bunch of this stuff themselves and tried to figure out a way to cover their bet with derivatives (a financial product like an option to play the other side of the bonds). Well who do you call to help with this mess since this is a new fangled problem? Let’s drag the insurance companies in since they understand derivatives and insurance programs. They will come up with a solution so they thought. The first big insurance company that took a hit was AIG. AIG was probably the biggest insurance company at the time and now running as a few smaller companies. This brought on one of the worst financial crisis ever to hit the United States. The Financial bailout of 2009 was also the biggest blunder since the following year the banks and financial firms that we bailed out had the largest profits in history.

As the prices kept falling and more and more property owners were underwater by 2009 and 2010 it seemed that a lot of the investors were throwing in the towel after getting professional advice from either lawyers or accountants.

The outcome from the professionals was three basic ideas; hold the property for as long as you can. Rent it out, use it, sell it were their choices on scenario one. Then the tough stuff the lawyers would be involved with. If you can sell the property at a price less than the amount you owe the bank we can get you out of the property with out you losing the property in foreclosure. Its easy to do because the banks don’t want to the real estate back and it will even be a longer time before they get it back and if the markets drop further, lets do the deal now and move on to the next one. Back in the early 1990’s most professionals called this a “cram down”. It was a verb since it was being crammed down the banks thought. Today the term is a Short Sale. Aw, isn’t that nice? Since the bank is letting property owners do these they aren’t the victim they are getting what they want. Less bank owned properties and much less legal fees make it a win-win for both parties. The last is the do nothing and enjoy the property and when the bank finally takes the house just get there before and get your personal items out. This process could take anywhere from six months to 18 months depending on the financial ability of the owner and the type of property.

Let’s fast forward back to today September 10, 2011 the day before the tenth anniversary of 9.11.2001. For some reason we are still not comfortable with the local real estate market. We still not have a crystal ball and we are only past history to project the next one or two years out. Why do we even care? I’m not really sure but my blog essay is to show you that history does repeat itself and that where we are today is must closer to the bottom then we are to the top.

Let’s explore these simple questions that people like you might be asking;

Is this a good time to upgrade into a larger Jersey Shore property? Yes. The first question I would ask is how much equity do you have in your current property? The difference between the realistic values of the property and any loan or debt amount attached to the property would be your equity amount. This has nothing to do with any profit or loss you might have experienced. Either way we are looking at a snapshot of today to decide our next move. Psychologically no one likes to take less on an investment but that is irrelevant in deciding to upgrade into a bigger or better property. In the long run the objective is to leverage to down market to your advantage by buying the more expensive property now. On a percentage basic if all things were equal the dollar lose would be substantially more on the larger property than the small property.

As long as you have 20% for your new down payment from funds from the old property or new funds the transition is a go. This is how people with money have been upgrading all the way to the beachfronts or bay fronts. You can’t imagine how many people have asked me “how did those people buy on the beach?” In most cases it was their second or third property at the beach. If you have additional questions about this awesome timing opportunities please email me or call to discuss.

Is this a good time to invest in a Jersey Shore home? Yes is the answer. If you are like most people who are trying to catch the bottom of this cycle well we are in it right now. I would consider being within a 10% margin of the top or the bottom as a good reference point. Why do I say that? No one has a crystal ball from what I been told. Then all we can do is our very best to identify the bottom. First of all I like to call this next two years as the muddy bottom. Properties will come up and be sold at similar prices in the period of time. This is where an experienced real estate broker will come in handy. What was the first thing you were told about real estate? The three most important components to buying real estate are location, location and location. Then I heard the experts say buy the smallest home in the best neighborhood. So my final word of advice when buying in the soft market is do not let the price be your guide. Still buy the best piece of property you can comfortably afford and jump in enjoy The Jersey Shore with your family and friends because that’s what me and my fellow Realtors are really selling. This is the greatest opportunity to enjoy the nature and the shore lifestyle for you and the most important people in your life.

So go out there and don’t get caught up in the greed of vacation property ownership and do what millions of people have done for generations. Live The Jersey Shore lifestyle. Namaste ~ Ian

Ian Lazarus

Broker Associate

Team Leader – The Lazarus Team

The Landis Co., Realtors

4201 Landis Avenue

Sea Isle City, NJ 08243

609.457.0258

ian.lazarus@mygo2realtor.com

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