It's all a gamble!

Quote:

Another example of home ownership for the first home buyer being out of reach and investors for the rental market making little or no profits.

The tip of people pulling out of the property market and going for blue chip shares is looking to be possibly correct.

Area home sales plunge; Paterson among hardest hit

Monday, November 5, 2007
ASSOCIATED PRESS

Home sales in urban parts of New Jersey, hit hard by the subprime mortgage lending crisis, are reported to have fallen significantly, with Paterson experiencing one of the greatest drops.

The number of urban home sales dropped 34 percent during the first six months of the year as compared to the same time period in 2006, according to a report by the Star-Ledger on Sunday.

"Every upswing has a downswing," said James Hughes, dean of the Rutgers University, Edward J. Bloustein School of Planning and Public Policy. "And we're in the downswing."

Home sales in East Orange dropped 59 percent, 57 percent in Paterson, 41 percent in Elizabeth and 37 percent in Newark, according to the report.

Experts said that urban areas were hit particularly hard by the subprime mortgage crisis since many home purchases there in recent years were paid for with subprime loans.

The newspaper based its analysis on home sales figures that are reported to the state.

The median sale price for a home was $335,000 across the state. That was $5,000 more than in 2006.

James Bednar, a residential real estate agent from Clifton who runs the blog New Jersey Real Estate Report, said it may be difficult to pinpoint all the reasons why Paterson and some other cities have seen such a huge drop-off in home sales. Changes in the mortgage market, the affordability of homes and the desirability of certain areas are all possible factors in the decline seen in the housing market.

"No areas have been spared," Bednar said. "During the boom, there was lots of hope that Paterson would gentrify and see the rebirth that Jersey City and Hoboken saw, but that sort of rebirth never really manifested itself in Paterson."

To spur the market, officials should look to fostering redevelopment to attract new and younger buyers looking for an urban market, he added.

Matthew Penney, a sales associate at Wayne-based Preakness Realty, said that while he believed the 57 percent decline in home sales reported by the Star-Ledger to be too high for Paterson, the changes in the lending industry may explain the drop-off.

Penney said that in urban areas such as Paterson and Elizabeth, many residents are on fixed incomes and have lower credit scores, and they are not able qualify for the loans they would have a year ago.

"The lending restrictions have constrained the people with lower credit scores," he said.

Mary Ann Sgobba, the head of the Passaic Board of Realtors, said part of the problem was also the high number of properties on the market.

"We have a lot of inventory," she said. "There are not too many people who are buying. You do have people who are looking, but they are wondering whether (the prices) are going to go lower. They are not ready to commit."

Sgobba said that while part of the slowdown in sales is due to the subprime mortgage meltdown, part of it has to do with the high appreciation in housing prices in the past five years, with prices out of the reach of many potential home buyers. While a person could get a starter home for about $350,000 in the area five years ago, that home has increased to about $450,000, she said.

"When you add to that the increases in taxes and homeowner's insurance, there are a limited amount of buyers who can afford that house," Sgobba said.

Staff writer Denisa R. Superville contributed to this report.

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