New York Times Article

Spring in a Cold Climate
( New Jersey Real Estate )

New York Times
By ANTOINETTE MARTIN
May 11, 2008

THE only way to know when the residential real estate market has ?hit bottom? will be with a look in the rear-view mirror, according to Jeffrey G. Otteau, the New Jersey-based real estate analyst.

?It will appear from the shadows, months after it actually occurred,? when sales have picked up for several consecutive months, said Mr. Otteau, whose East Brunswick company, the Otteau Valuation Group, studies sales-contract data that it compiles from almost all of the state and provides monthly to subscribing brokers.

But the latest statewide numbers ? from March ? do make one thing absolutely clear: The turning point has not yet been reached.

?The clear signal,? despite a 9 percent increase in the number of sales in March over February, ?is that the housing market has further to fall,? Mr. Otteau said in the newest report.

Home sales were down 27 percent from the previous March, which continued a pattern for 2008. They are running well behind 2007, which was itself a year of declining sales volume and dropping prices.

?It?s spring,? Mr. Otteau added in an interview. ?The numbers always go up during the spring selling season, but you?re still talking about contract sales that are the weakest in recent history.?

The reports do not show shifts in average sales prices on a monthly basis. But given the sluggish sales pace, Mr. Otteau said prices would certainly continue to decline throughout the spring and summer.

The report noted one ?positive? development: The inventory of unsold houses, which grew to history-making size last year, is still growing in many places ? but not nearly as rapidly. In some communities, it is actually shrinking.

In the small Essex County town of Glen Ridge, for example, there was an average of 48 unsold homes per month during 2007. (A house is counted as unsold if it sits on the market for 30 days or more.) For the first three months of 2008, the average number is 33 homes.

There is now a three-month supply of homes for sale in Glen Ridge, according to Mr. Otteau?s statistics. That is to say, if buyers were to keep signing contracts at the same rates they are now, and no additional homes were listed during the next three months, all those homes currently for sale would have been bought.

Statewide, the housing market had a 10.5-month supply of homes for sale in March. That is down from an 11-month supply in February.

The picture in the town of Maplewood, also in Essex County, appears to be fairly typical of the broad trends: Each year since the residential market peaked in 2004, the average number of houses listed per month has grown, while the average number of signed contracts has dwindled. The average number of houses sitting on the market for a month or more in Maplewood rose from 59 homes in 2004 to 139 homes for the first three months of 2008.

In counties where sales are monitored, Otteau analysts also calculate something called the ?supply and demand ratio? for each town. A high ratio of sales to inventory indicates a healthy marketplace, and a lower ratio means supply is outstripping demand. Maplewood?s ratio slid from 76 percent in 2004 to 37 percent for the first quarter of 2008.

Three years into this market malaise, there is no specific type of community that remains entirely immune, Mr. Otteau said. The latest statistics point toward deteriorating conditions even in downtown redevelopment areas that have attracted thousands of young professionals and empty nesters in recent years.

In Hoboken ? the state?s pre-eminent example of transformation from tenement grit to condo glitz ? the newest numbers hint at a downturn after a solid decade of robust growth: the supply and demand ratio has sunk to 43 percent, from 78 percent last year. There were 507 unsold homes on the market, a seven-month supply. And the average number of sales per month was down to 70, from 115 last year.

?Until pretty recently,? Mr. Otteau explained, ?Hoboken was running counter to the rest of the market, mostly because of ?overflow? demand from New York.? He was referring to buyers who were fleeing higher apartment prices in Manhattan for relative bargains across the river.

Now, though, various factors have kicked in to abet a slowdown: tighter mortgage-lending standards; growing buyer unease over the continuing decline in home values; and the prospect of Wall Street cuts of 36,000 jobs, according to federal Labor Department projections.

Even though Hoboken?s market remains healthy over all, ?it?s now starting to run with the pack? in terms of how prevailing problems affect residential sales, Mr. Otteau said.

Certainly, there are exceptions and standouts in any given market situation, he said ? and certainly, there are brokers who are more than willing to counter his cold, hard numbers with their own impromptu reports of warming trends this spring.

Among the latest good-news flashes from real estate marketers and sales agents are these:

A grand beachfront house in Mantoloking in Ocean County sold for a local-record price of $7.4 million, after three months on the market.

At the Mandalay on the Hudson condo tower in Jersey City, 16 contracts were signed from March 1 to April 25.

And in Hanover, at an age-restricted town home complex called Viera, where no sales had occurred during winter and early spring, four contracts were signed in late April.

But the graph of contract-sales activity that accompanies Mr. Otteau?s latest report tells a different story. In the three previous years, the line had climbed sharply to a peak in March; this year, the peak is more of a molehill.

He summed up his advice to brokers this way: ?Expect the spring selling season to be late and brief, with only a modest increase in sales activity, and prices continuing to drift downward.?