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New Jersey Real Estate Report
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James Bednar (aka Grim)
Keeping a watchful eye on our small part of the largest asset bubble in history
The worst of Fannie Mae's regulatory troubles may be behind it, but one longtime skeptic of the mortgage giant thinks it could face bigger problems from trouble in the U.S. housing market.
Gilchrist Berg, founder of $2 billion Jacksonville, Fla.-based hedge-fund firm Water Street Capital, said in a recent letter to investors that Fannie Mae could lose $22 billion to $29 billion if, as he expects, the housing bubble bursts and foreclosures increase.
"We are not sure the folks running the show fully embrace the risk of declining house prices," Berg wrote in the letter, a copy of which was obtained by MarketWatch. If the housing market continues to decline "a major portion of Fannie Mae's value could be wiped out." He declined to comment for this story.
Fannie Mae spokesman Alfred King said the company protects itself from housing-market volatility in many ways, including maintaining a geographically diverse book of business and focusing on mortgages that have a high percentage of equity in them.
Fannie has traditionally specialized in higher-quality, fixed-rate mortgages, which are less vulnerable to interest-rate fluctuations and volatility in the housing market.
But the company has been investing more in subprime MBS in recent years. Subprime loans are sold to home buyers who fail to meet the strictest lending standards, so this area of the mortgage market is expected to be hit harder by any housing downturn.
Fannie and Freddie bought 25.2% of the record $272.81 billion in subprime MBS sold in the first half of 2006, according to Inside Mortgage Finance Publications, a Bethesda, Md.-based publisher that covers the home loan industry.
In 2005, Fannie and Freddie purchased 35.3% of all subprime MBS, the publication estimated. The year before, the two purchased almost 44% of all subprime MBS sold.
Given those recent moves, Berg said it's not implausible that 15% of Fannie's mortgage exposure is subprime.
If a housing slowdown causes subprime foreclosure loss rates to rise to between 6% and 8%, Fannie could lose $22 billion to $29 billion, Berg estimated in his letter.
That's more than half of the roughly $40 billion in capital that Fannie had at the end of March, according to Ofheo.
Reacting to what they perceive as increasing consumer uncertainty regarding the market for new single-family homes, builders tempered their views on current and expected sales activity in the Wells Fargo/National Association of Home Builders Housing Market Index (HMI) for August, released today. The HMI declined seven points to 32, its lowest level since February of 1991. This was the seventh consecutive month in which builder confidence, as measured by the index, has fallen.
“Two big factors are coloring builders’ perceptions of the market right now – rising sales cancellations and substantial growth in inventories of both new and existing homes,” said NAHB Chief Economist David Seiders. “These factors are largely the result of an increasing number of potential buyers adopting a ‘wait-and-see’ attitude because of uncertainty about where the housing market is headed, and record-high energy costs also appear to be weighing on housing demand. We’re also seeing an anticipated withdrawal of investors/speculators from the market, following a major influx in 2004-2005.”
All three component indexes declined in August. The component gauging current single-family home sales fell seven points to 36, while the component gauging sales expectations in the next six months and the component gauging traffic of prospective buyers both fell six points, to 40 and 21, respectively.
Regionally, the HMI recorded a three-point decline to 34 in the Northeast, a five-point decline to 15 in the Midwest, a nine-point decline to 41 in the South and a 10-point decline to 42 in the West.
The confidence of U.S. home builders fell for the eighth straight month in September, dropping to the lowest level since February 1991, the National Association of Home Builders said Monday. The NAHB/Wells Fargo housing market index dropped by three points in September to 30 from a revised 33 in August, indicating that most builders think the housing market is poor. Economists expected the index to fall to 31. A year ago, the index was at 65. A reading of 50 would indicate builder sentiment was balanced between good and poor. (This is an update to correct how many months in a row the index has fallen.)
Use of several types of nontraditional mortgages has increased among home buyers, according to a Wall Street Journal Online/Harris Interactive personal-finance poll.
The survey found increased usage of three of four types of nontraditional mortgages, which can be riskier for consumers than standard fixed-rate or adjustable-rate mortgages. The survey examined the mortgages used by people who had bought a home within the past three years.
The online poll of 2,790 adults found that 9% of recent home buyers obtained a payment option mortgage, compared with 4% in a survey conducted last year. These loans, also known as option ARMs, give borrowers as many as four payment choices each month, including a minimum payment set once a year, an interest-only payment, and what would be the standard payment on a 15-year or 30-year mortgage.
So-called piggyback mortgages, which combine a standard first mortgage with a home-equity loan or line of credit, were used by 12% of home buyers in the latest survey, up from 10% last year. And the share of home buyers using miss-a-payment mortgages edged up one percentage point to 3%. These loans let borrowers skip as many as two mortgage payments a year and 10 payments over the life of the loan with no impact on credit rating.
The overall use of interest-only mortgages fell to 14% in the latest poll from 17% last year. For homebuyers ages 18-34, though, the percentage rose to 23% this year from 16%, the poll showed.
At the same time, 15% of those who own homes said they had obtained a home-equity loan recently. Just over half of those said the purpose of the loan was to make home improvements, while 38% said it was to pay off credit-card debt and 11% said it was to help finance the purchase of a second home.
Of the 7% of Americans who said they currently own a second home, 40% said they bought it for use on weekends and vacations, according to the poll. Eighteen percent said they use their second home for rental income, while 17% said the second home was an investment and 15% said they would use the home in retirement.
Nancy and Brian Christopherson are asking $389,900 for their eight-room Colonial Revival home in Westford, Massachusetts, featuring a new kitchen with maple cabinets. Even at that price, they'll lose $14,100.
Monthly price reductions since they listed it in May for $429,900 have lured no offers for the house, bought for $369,000 in 2004. ``It's getting scary,'' says Nancy Christopherson.
The sharpest slowdown in U.S. home-price growth in three decades is trapping owners with mortgages they can't afford, pushing unsold homes to a record 4.42 million and gutting profits for builders such as Lennar Corp. and Toll Brothers Inc. The U.S. median home price next year may fall for the first time since the Great Depression, says Gabriel Stein, chief international economist with Lombard Street Research in London.
Economists such as Nobel laureate Joseph Stiglitz warn that the reduced sales may push the world's largest economy into recession, and concern is mounting over economic growth in Europe and Canada. The Federal Reserve will reduce its U.S. benchmark lending rate, says Jan Hatzius, chief U.S. economist with Goldman Sachs Group Inc. Last month, the central bank ended a two-year streak of 17 increases that pushed the rate to 5.25 percent, citing cooling home sales.
``The housing slowdown will be a large drag on economic activity,'' Hatzius says. ``The Fed will cut rates to 4 percent next year as the housing downturn starts to push up the unemployment rate.''
``For the next couple of months, we're probably looking at between zero to a five percent drop in prices,'' Lereah says. ``The only way for home sales to come back, and for inventories to start to diminish, is for sellers to start to bring prices down.''
Not all homeowners are willing to accept less. Roxy Allen, 54, listed her four-bedroom house in Littleton, Colorado, for sale in May. She dropped the price once to $339,900 from $352,000 and has refused to go lower. She hasn't received a single offer.
``The Realtor wants you to just make a deal with somebody and sell it for cheap,'' Allen says. ``Why would I sell my house for less and buy one for more?''
Some sellers across the U.S. must reduce their expectations, even those who don't move. Edward Brown, 47, a Florida real estate investor, says he's financially overextended and needs to sell a three-bedroom house in Cape Coral, Florida. He's asking $579,000 -- $20,000 less than he paid for the property a year ago.
``No one expected the market to drop so quickly,'' he says. ``There are a lot of people like me who are caught in a pickle.''
The housing boom would never have lasted as long as it did if mortgage lenders had to worry about being paid back in full. But instead of relying on borrowers to repay, most lenders quickly sell the loans, generating cash to make more mortgages.
For the past few years, the most voracious loan buyers have been private investment banks, followed by government-sponsored housing agencies, like Fannie Mae. The buyers carve up the loans into mortgage-backed securities — complex i.o.u.’s with various terms, yields and levels of risk. They then sell the securities to investors the world over, at breathtaking profit. The investors earn relatively high returns as homeowners repay their mortgages.
The process has encouraged homeownership and created wealth. But there is a downside, too, which demands attention.
As the boom thundered on, the pool of available credit grew larger than the pool of creditworthy borrowers, resulting in an explosion of risky mortgages with features like no money down, interest-only payments and super-low teaser rates. Investors — including mutual funds, pension funds, hedge funds, insurance companies and foreign central banks, to name a few — currently hold $2 trillion in mortgage-backed securities from investment banks, triple the amount from three years ago. Investors also own $4 trillion in mortgage-backed securities from government-sponsored agencies.
In a market so vast and dynamic, everyone knows that if mortgage defaults should rise, damage could reverberate throughout the financial system. So far, defaults have inched up. But many homeowners are at a dangerous juncture. Interest rates on adjustable mortgages are rising as home values are weakening, precluding for many the chance to refinance. Economists calculate that $750 billion of outstanding mortgage debt is now at measurable risk of default — about 7 percent of the total.
They are jumping ship or receiving the pink slip. America's real estate agents and mortgage lenders, that is.
Now that the glory days of the most recent U.S. housing market are over, its deterioration is taking a toll on employees who profited from its record-breaking five-year run.
With home sales slumping and loan demand diminishing, layoff announcements and resignations have become increasingly common, evidence that the sector's slump is broad.
Carmen Cook, a veteran real estate broker, saw the writing on the wall and decided to retire earlier this year.
"The market changed and my job became more difficult," she said. "I was working just as hard and the income wasn't coming in."
"All the brokers are hustling right now, but the income is not coming in the way they are accustomed to," she said.
The mortgage lending industry has not fared much better, with layoff announcements totaling 8,513 during the same period, a rise of over 70 percent year-over-year, according to data provided by the company.
So what happens when you put a sacred cow, a third rail and an 800-pound gorilla all on a table?
So far, not much.
Nearly two months into lawmakers' efforts to curb property taxes by tackling some of New Jersey's most politically charged and expensive elements of government -- Gov. Jon S. Corzine lumped together those metaphors in a July speech to lawmakers --committee hearings have mostly resulted in dry, academic discussions that often outline what cannot be done rather than what money-saving options exist.
Some critics are frustrated at the pace of progress on the long-standing issue, but with another two months left until the Democrats' self-imposed deadline to propose their solutions, legislative leaders said last week that they are laying the foundation for reform by closely studying the complex issues involved and expect their plans to take shape over the next month -- even if the hearings might be putting people to sleep, said state Senate President Richard J. Codey, D-Essex.
William Dressel Jr., executive director of the New Jersey State League of Municipalities and one of the most vocal advocates for property tax reform, said lawmakers are learning firsthand how difficult the subject is, and he has doubts that they will have meaningful solutions in place by Nov. 15.
"There is no easy solution to dealing with a very complex problem," Dressel said. "I think they realize that there is not going to be a broad-based meaningful property tax relief served to them on a silver tray."
If there's any doubt in your mind that the local real estate market has slowed, ask a seller.
“It seems like people are coming and looking, but nobody's making an offer,” said Terri Kiriakidi, who has been trying to sell her mother's Warminster house since June.
Or a real estate agent.
“I've never seen anything like this in my life,” said Herman Petrecca, a real estate agent with ReMax Associates in Warminster. “I've got a bunch of properties sitting on the market.”
Supporting these anecdotal assessments are cold, hard numbers, mined from the Multiple Listing Service used by real estate agents to track and record home sales and provided by Prudential, Fox & Roach Realtors.
Those numbers — all from the 43 municipalities of Central and Upper Bucks and Eastern Montgomery counties — show that it took 86 percent longer to sell a house in August than it did one year ago. They show that the number of homes sold in August, 521, was off 25 percent from a year ago. And they show that the local inventory of homes for sale hit an all-time high in August of 3,565, almost double December 2004's level of 1,814.
The numbers also show the area's median home-sales price hit an all-time high of $325,000 in August. But that median price was only 1.6 percent higher than the price in August 2005, one of the smallest year-over-year increases in recent memory and well below the year-over-year price increases homeowners enjoyed at the height of the boom. In May 2005, for instance, the area's median home price rose 17 percent from the previous May.
Many descriptive phrases are used to describe the area's current housing market. But all spell one word: slowdown.
TO hear some people in the real estate industry tell it, one of the biggest problems with the housing market is what is being said about it in the news media.
Agents and industry executives say reporters, editors and news anchors are making a cooling market sound worse than it is. While the number of sales may have dropped from 2005 (which was a record-setting year, the end of a five-year run) and more homes stay on the market longer, real estate professionals note that sale prices in much of the country are still higher than they were a year ago.
Richard A. Smith, vice chairman and president of the Realogy Corporation, the nation’s largest residential real estate broker, said there was a “constant flood of media that is so negative” that it was discouraging many potential buyers and sellers.
“Nobody wants to be foolish in this kind of market,” he said. “No one wants to sell too low or buy too high.”
Robert J. Shiller, the Yale economist and author of “Irrational Exuberance,” said the news media played an important role in molding public opinion as markets both rise and fall. But he said he generally approved of the skeptical tone of many news reports about both the real estate boom and subsequent downturn. “The media has been pretty on top of this story, that this might be a psychological event,” he said.
THERE is an Aesop fable about a man — Greek, of course — who sees a swallow fluttering about on an unusually warm winter day. Leaping to the conclusion that summer has arrived, the man sells his only coat to buy himself a good time.
Some economists say you merely need to replace the Greek with an American, and the coat with a house or condominium to understand the force powering the American economy during the recent housing boom.
In this updated version of the fable, Americans were intoxicated by the leaps in the value of their real estate. Assuming the good times were here to stay, they were unable to resist temptation, impulsively calling the mortgage broker to get another loan to pay for the plasma TV set, the Caribbean vacation and the three-burner barbecue grill.
Between the third quarter of 2005 and the first quarter of this year, home equity withdrawals were running at an annual rate of more than $850 billion, according to the Federal Reserve, and amounted to about 9 percent of disposable personal income. The personal savings rate declined into negative territory last year for the first time since 1933. And the economy surged.
In Aesop’s world, winter set in again, the swallow died and the coatless man blamed the bird for his misfortune: “By appearing before the springtime you have not only killed yourself,” he moaned, “but you have wrought my destruction, too.”
The boarded-up factories where John B. Stetson and his family built a thriving hat manufacturing business in Orange's Valley section may be transformed into lofts and retail space for artists.
That's the goal for the Stetson family's long-abandoned No Name Hat Factory complex, off Mitchell and South Jefferson streets. It is at the northern end of what used to be Orange's hat manufacturing district.
The Orange City Council recently made a deal with developers to breathe new residential and retail life into that site as well as into two adjacent properties: the one-time Monroe Calculating Co. and the Harvard Press building.
The initial redevelopment plan calls for the creation of 100 residential and retail spaces where artists will live and work, Morrissy said.
"There will be artist live-work lofts, artist retail spaces, artist studios, and art program spaces," Morrissy said. "The project will include a new pedestrian entrance to the Valley, along the east branch of the Rahway River, and another 350 condominium units, in either the old industrial buildings, or new buildings."
Another 900 residential units are proposed for the township.
At its Wednesday meeting, the planning board will review an application calling for constructing the homes and a shopping center on 168 acres of farmland that borders School House and Randolph roads. The application, submitted by Summerfields at Franklin, includes plans to construct single-family dwellings, semiattached homes, a clubhouse and a retail center.
As proposed, except for 150 single-family homes, the balance of the community would be age-restricted. One out of every nine units built would be set aside for low to moderate-income housing.
Part of the township's Council on Affordable Housing obligation would be met through two proposed three-story buildings of 50 units each that would be reserved for low- to moderate-income housing.
The project is estimated to take 10 to 12 years to complete. The site is nearby the Canal Walk development and is slated to have more than 1,300 age-restricted units.
A host of local officials yesterday kicked off the sales of 19 condos on the 600 block of Bergen Avenue in Jersey City, hailing it as a sign of increasing investments in areas of the city other than the Gold Coast.
The family team of Santomauro General Contracting turned two four-story row homes into 19 condominium units.
Proponents of a 196-unit condominium and town-house complex proposed off Palisade Avenue say it would bring tax revenue to the township and raise property values in the surrounding neighborhood.
The Park View development would be built on the site of an old soap factory adjoining Herrick Park. "There are no downsides" to the $92 million complex, said Frank DeVito, lawyer for the developer, Holuba Realty.
Residents in Teaneck and neighboring Bogota view the proposal through a decidedly different lens.
"This is a high-density development in a single-family neighborhood," said Mark Gold of Van Buren Avenue, just up the street from the proposed development. "It's completely inconsistent with the character of the neighborhood."
Sometime after Mel and Hildy Warren agreed to buy a new home in the Four Seasons retirement community in Manalapan about a year-and-a-half ago, they were surprised to find out that a couple also moving there had actually sold their old home right away and moved into an apartment while waiting for their new house to be built.
"Everybody laughed," Hildy Warren said. "We all wondered why they'd sell so soon. It turned out they were right."
The real estate market has changed a lot in the past year. The number of available homes is up and the days when sellers could stick a "for sale" sign on the lawn and name their price are gone, at least for now.
"Prices from last year are not what they are this year," said Iris Lurie, broker/owner of Century 21 Mack-Morris Iris Lurie in Marlboro.
"We listed it higher, thinking that was the correct price," Hildy Warren said. "The market was telling us differently."
Over the course of three months, they reduced their initial asking price, which they declined to reveal, in steps. "We weren't getting any offers and we got concerned," Hildy Warren said.
Finally, they cut it to about 10 percent below the initial price. That very day, they received and accepted an offer. They will close on the deal this month.
"We took a lot less than we thought we were going to get," Hildy Warren said. "Buyers are getting very good deals. If we had sold six months earlier, we would have gotten more."
The result is sellers are learning to recognize that conditions have changed. "They're slowly accepting it," Appleby said. "No one likes to think they missed the peak of the market."
The result is sellers must be a bit more humble in their asking prices, if they want their homes to sell, Appleby said. They must also put more effort into "curb appeal," sprucing up the home inside and out to make it stand out.
For the first time in nine years, Nassau County's closed median home prices dropped over the last year, leaving experts to wonder whether the housing market's downturn could be more significant - and longer-lasting - than first thought.
Adding fuel to the debate, median prices for homes under contract fell in both Nassau and Suffolk counties last month, according to data released Friday by the Long Island Multiple Listing Service. Nassau County's median home price stood at $495,000, 1 percent below last year's median of $500,000. It's a minor dip, to be sure, but it's still relatively early in the market's shift, sources said.
"This is the turn that we've been waiting for for a long time," said Pearl Kamer, the chief economist of the Long Island Association. "This is only the beginning of the downward cycle and only the beginning of the unwinding of the housing bubble. The price declines could continue for a long time."
Yet, Suffolk County saw a 1 percent dip in its median price for homes under contract year-over-year, while Nassau County's under-contract drop was 3 percent. Inventory in both counties is approaching record levels, achieved in 1990.
A 755-foot residential tower called the "Metropolitan" is being proposed for land just south of the Newport Mall, at the site of where a Pep Boys Automotive store is currently located.
If it gets its city approvals, the structure at Sixth and Washington streets would be the second largest building in New Jersey. The largest building is already in Jersey City: the Goldman Sachs building at 30 Hudson St. stands at 791 feet.
Within a 10-block radius, there are several condo towers either under construction or that have been approved for construction, including: the 55-story Trump Plaza Jersey City on Washington Blvd. and Bay Street; the 33-story Athena on the corner of Washington Boulevard and Second Street; and the proposed San Remo I, San Remo, and Monaco condo towers located off Washington Boulevard behind the Doubletree Hotel.
The Metropolitan, when completed, will have 809 condominium units, 809 parking spaces on seven floors, and 12,445 square feet of retail space.
The tower is one of several that may be built in that 18-acre shopping area currently anchored by a Shop Rite supermarket and BJ's Wholesale Club. But those shopping stores will still remain.
Jersey City attorney Francis Schiller, representing the developers, said the Metropolitan project would be the first phase of a larger development project that would span over 20 years, with retail always having a presence in the plaza. Schiller said there will be a meeting with the city's Planning Department to create a master plan specifically for the plaza.
What prompted G&S Investors to look at a residential component? Lehne said the decision was based on them seeing the continuing development in Jersey City.
Schiller said there is no height restriction in the area, which is governed by the Hudson Exchange Redevelopment Plan. The height of this building, Schiller said, would provide "great view corridors" of the New York Skyline to the east and the Watchung Mountains to the west.
Home builders have a new trick to try to sell you a new home: They will help you get rid of your old one.
Faced with falling sales, some builders are helping would-be buyers spruce up their current home by bringing in professionals who advise them on what furniture to get rid of and tell them whether they should rip off the wallpaper. Others are offering to make payments on the buyer's old mortgage (or the new one) in an effort to close the deal.
There is also renewed interest in so-called buyback programs: The builder, or a broker, agrees to buy your current home, for a preset price, if it turns out that you can't sell it.
The offers are coming both from local builders and national firms. For instance, Pulte Homes Inc. recently started pairing its customers with professional "stagers" who sweep in and do things like remove window coverings and touch up the paint, and covering up to $2,000 of the cost of the service. The program is available in about a dozen markets, including Detroit, Indianapolis, Sacramento, Calif., Tampa, Fla., and Washington, D.C.
In Phoenix, Lennar Corp.'s U.S. Home division is offering a program in which customers who sell their homes through Coldwell Banker pay 3% instead of 6% commission on the sale of their current home. (To make up for that, Coldwell Banker is paid a 3% commission for the sale of the new home.) In Detroit, Toll Brothers Inc. will make principal and interest payments of up to $2,500 a month on a buyer's new mortgage for the first six months, or give the buyer a credit equal to that amount at closing.
"Everyone is trying to be creative," says Larry August of Pacific Pride Communities, a central California builder. With so many homes on the market, selling an existing home is a "huge obstacle for anyone looking to purchase a new home." In some cases, Pacific Pride is making mortgage payments on customers' old homes for as long as six months.
In the Northeast, K. Hovnanian Homes, a unit of Hovnanian Enterprises Inc., often pays to have a customer's existing home appraised (a move also designed to ensure that the property goes on the market at a realistic price). In some cases, the company will also arrange for the customer to get a lower mortgage rate, pay brokerage commissions on the sale of the existing property or pick up several months of mortgage payments.
The C. H. Huestis House, a 22-room shingle-style Queen Anne Victorian once threatened with demolition, is a step closer to designation as a local historic landmark.
Montclair's council voted unanimously Tuesday night to introduce an ordinance to designate the Duryea Road estate as historic, clearing the way for a Sept. 26 public hearing to give landmark status to a private residence for the first time.
In August, Montclair's planning board recommended the designation.
"The board recognizes the significance of this 1888 dwelling and agrees with the Historic Preservation Commission that it should receive landmark status," Karen Kadus, the town's director of planning and development, said in a letter announcing the decision.
The estate was first nominated amid fears that a developer intended to tear down the estate and erect two houses. The owner, Jim Van Note, is now expected to restore the estate, but the nomination -- the first the HPC has ever initiated on its own -- nevertheless invoked a 180-day moratorium against any demolition.
The market is suddenly assuming that since energy prices are declining and mortgage rates are drifting down, consumer spending will pick up and the housing industry decline will end. In our view this outcome is highly unlikely. Our negative outlook for consumer spending is based far more on the end of the housing boom than it is on high oil prices. In turn, it now evident that housing is already undergoing a hard landing that can’t be cured by a downturn in mortgage rates, and that the situation is likely to worsen. Here are some facts to consider.
Ø 32.6% of new mortgages and home equity loans in 2005 were interest only, up from 0.6% in 2000
Ø 43% of first-time home buyers in 2005 put no money down.
Ø 15.2% of 2005 home buyers owe at least 10% more than their home is worth.
Ø 10% of all home owners have no equity in their homes
Ø $2.7 trillion in loans will adjust to higher rates in 2006 and 2007.
Ø 70% of borrowers who took out pay-option ARMS in the past year have loan balances larger than their initial loan.
Ø Homeowners face higher payments as mortgages are reset. Generally, monthly payments rise between $200 and $500 depending on the size of the mortgage.
Ø According to Reality Trac, August foreclosures were up 23% over July and 53% over a year ago.
Ø The number of homes for sale is at record highs, and inventories are 59% higher than a year earlier.
Ø New home sales are down 22% and existing home sales down 11%.
Ø The NASB housing market index has recorded an all-time decline.
Ø The housing affordability index is at a 15-year low.
Ø The house price-to-income (rents) ratio is off the charts. According to HSBC, in 18 states accounting for over 40% of national home values, the price-to-income ratio is 3.6 standard deviations above the mean.
Ø The OFHEO index of house prices deflated by the consumption price deflator has soared to a record high of 350 from 250 in 2001. From 1976 to 1996 it never was above 220.
Ø According to the NAR the year-to year prices of existing homes are now flat. A short time ago they were rising at a yearly rate of 16%.
Ø Nationally, home prices have not declined on a year-to-year basis since 1933. Recently, however, prices have been dropping in the North East, West and Mid-West.
Ø Sales incentives are now estimated at 3% to 7% of selling prices.
New Jersey's school construction program needs an infusion of $3.25 billion to address a backlog of projects built up over the past two years during an overhaul of the program, a task force analyzing the school building program told Gov. Jon Corzine yesterday.
Lawmakers did not embrace the call for new funding.
"The first problem we have to face is changing the inflating cost of property taxes," said Senate President Richard Codey (D-Essex) "After that, we can focus in on this."
Jersey City's 2007 municipal operating budget is $148 million - an increase of $13 million over last year's $135 million figure, according to city officials.
The Jersey City City Council voted Wednesday night unanimously and without comment to introduce the budget, even though Jersey City Business Administrator Brian O'Reilly said it includes a $9 million shortfall.
Last year, the city closed a $25 million shortfall in the 2005-2006 budget by raising property taxes 18 percent - increasing property taxes from $19.30 per $1,000 of assessed valuation to $22.85 per $1,000.
O'Reilly said he is hopeful of finding additional revenues to forestall another tax increase.
In a move that would significantly change how property taxes are collected in New Jersey, state lawmakers Thursday debated whether the state should move away from having each town collect property taxes.
An interfaith group that seeks to resolve inequality in New Jersey communities and a Minnesota law professor suggested that the state shift to regional property taxation, which they argued could help most homeowners and end competition for commercial development.
"It creates a community of interest," Myron Orfield, an associate law professor at the University of Minnesota, told a special committee considering New Jersey property tax changes as he detailed how the Minneapolis-St. Paul area has used regional property taxation for 25 years.
Assemblyman John Burzichelli, the committee co-chairman, said he found the testimony "very interesting," but didn't know if the idea would work in New Jersey.
"The issue is very engaging," said Burzichelli, D-Gloucester.
Yesterday, a group of them sitting on a committee considering changes in the state's tax structure, spent time listening to a recommendation that the property tax be collected by the state on a regional basis rather than by each municipality.
This approach, according to its proponents, would reduce property taxes for a majority of towns — meaning, of course, that it would increase property taxes for a minority.
And that shift, ostensibly, would correct some of the inequities in the way the tax is levied now.
The concept of a statewide property tax has been raised in New Jersey before, and it has gotten a rude reception from the public and from many folks who depend on the public for votes.
Those in government can't avoid that reality just because it's perceived to be politically unpopular.
But a statewide property tax is not the answer.
The Joint Legislative Committee on Public Employee Benefits Reform will hold a public hearing Tuesday in Clifton on the potential for cost savings in pensions and health benefits provided to government workers.
The bipartisan panel is one of four commissioned by the Legislature to study ways to rein in property tax increases. Others are focusing on consolidation of local government services and public-school funding reform.
"We have spent more than a month gathering information from various experts and professionals from across the country," said Assemblywoman Nellie Pou, D-Passaic, a co-chairperson of the joint committee. "Now New Jersey taxpayers and residents will have the opportunity to air their ideas and opinions on pensions and benefits reform."
Michael Knapp was eager to be the first person in his family to buy a home, but first he had to make a few concessions.
He settled for a townhouse, because he couldn't find a single-family home for less than $200,000 that didn't require a complete overhaul. He extended part of his mortgage from 30 years to 40 years. He needed roommates to help pay the mortgage, and so recruited his girlfriend, Trish Maas, and his friend, Jason Reineke, to join him.
"I could probably afford it on my own," Knapp, 24, said of the $187,000 townhouse in Brick. "But I wouldn't know where my next gallon of milk would be coming from."
After a run-up in prices, first-time home buyers in Monmouth and Ocean counties are encountering major financial hurdles in their bid to own a home. Their incomes, for example, haven't kept up with escalating home prices.
It's forced hopeful home buyers such as Knapp to lower their expectations and take greater financial risks. And even then they have to worry about their finances once they get into the home, experts said.
"It is really, really tough," said Drew Anlas, senior vice president of Select Mortgage Corp. in Brick. As a rule of thumb, buyers take three to three-and-a-half times their annual income to figure out how much they can afford. "If you're making $60,000 a year, that's $180,000 to $210,000. What's out there for $180,000 to $210,000?"
These days, not much. During the second quarter of 2006, the median price of a home in New Jersey was $373,900 and the average 30-year fixed-rate mortgage was 6.5 percent. That means the monthly payment on a median-price home, including principal and interest, was $1,891, according to the National Association of Realtors.
To afford that, the association said, families need to make $90,768 a year. The median family income in New Jersey during that time: $81,309.
He turned to a townhouse instead and began the process of getting financing. He had no savings and no equity built up from a previous house, so he signed for an unconventional loan to make his initial payments manageable.
He borrowed 80 percent of the purchase price and will pay only the interest for three years, after which the principal will be included and the monthly payment will climb. He borrowed 20 percent of the purchase price with a 40-year payout, instead of the traditional 30 years.
The hope is that prices will continue to rise, interest rates will remain reasonable and Knapp can refinance under more favorable conditions.
By any measure, things are getting tougher for American homeowners.
Online foreclosure-data service RealtyTrac of Irvine, Calif., said yesterday 115,292 properties nationwide entered some stage of foreclosure last month, a rise of 24% from July and nearly a 53% increase from a year earlier.
Also yesterday, Foreclosure.com of Boca Raton, Fla., which also tracks foreclosures nationwide, said new residential foreclosures fell by 6.7% in August from July to 26,255 nationwide. The company's figures, however, show that foreclosures are up 7.3% compared to August 2005.
The divergent results can be explained by the way each company counts foreclosed properties. RealtyTrac data includes properties in the early stages of a foreclosure proceeding, even before the bank actually owns those properties. About 60% of these get remedied or the properties are sold before they get to the auction stage, said Rick Sharga, vice president of marketing for RealtyTrac.
A spokesman for Foreclosure.com said it only reports properties officially foreclosed and in the hands of the banks.
The trend is supported by data collected by the Mortgage Bankers Association, which reports the number of U.S. households late on mortgage payments fell slightly in the second quarter, but that a modest rise in delinquency and foreclosures is expected going forward.
The delinquency rate for residential mortgages was 4.39% in the April-June period, down from 4.41% in the previous three months, the MBA said in a survey that included 42.5 million loans. Home mortgages in foreclosure made up 0.99% of total mortgages at the end of the quarter, up from 0.98% three months earlier.
"With home-price appreciation continuing to decelerate," he said, August's "increase could be the beginning of an upward shift in the foreclosures market."
Foreclosure.com President and CEO Brad Geisen said while the company has continued to see fluctuations in month-to-month data, "as we near the end of the third quarter, most housing and economic indicators point to a sustained period of increased new foreclosure activity across the country."
A Superior Court jury decided Tuesday that a Weichert Co. real estate agent misrepresented the location of a Montville home and the school the buyers' son might attend, but said that the act did not cause the family a measurable loss.
The jury agreed with homeowners Theodore and Frances Vagias that the failure of real estate agent Gabrielle Dingle to use the "T-word"-- Towaco --when describing the location of the home, constituted an "affirmative misrepresentation" under the Consumer Fraud Act.
Dingle had testified that she was not aware until after the sale was completed that the home was in the Towaco section, and that she never specified which elementary school the child might attend.
The jury declined to rule that the misrepresentation they assigned to Dingle caused the Vagiases a substantive, measurable loss. If a loss had been determined, the Consumer Fraud Act calls for up to triple damages.
The Vagias' attorney Keith Harris told the jury in his closing that the loss suffered by the family was the 10 percent extra they paid for the home, as measured by a real estate appraiser he put on the stand, because they believed the home was in the Montville section of the township, and not Towaco. Harris placed the loss at $70,000.
Enough with condo conversions in Jersey City. Out-of-town developers are pushing good people, who were born and raised in Jersey City, out of their homes in order to bring in a new crop of people who want to live in high-rise apartments surrounded by cement and glass, and who do not care to have neighbors.
We have neighbors and friends. These developers have a lot of nerve calling our homes and neighborhoods "blighted" - simply because we do not have money to make our homes look like a fairytale gingerbread house, but they are clean and comfortable and more importantly, they are home to us.
Why do we have to be pushed out to make room for strangers?
Coming up with the money for a down payment on a new condominium may soon be as easy as charging it: American Express Co. is expected to announce today that it will allow some customers to use its cards to make condominium down payments.
For now, the service appears to be limited to a select few: luxury-condo buyers in Manhattan. American Express is rolling out the program with New York real-estate firm Moinian Group, for one of its properties currently under construction -- the Atelier condominium in Midtown Manhattan. Both companies say they plan to expand the service to other properties and partners.
For condo buyers, the deal will allow them to earn reward points or frequent-flier miles on big transactions, while extending the amount of time they have to meet the down-payment requirements and eliminating the hassle of getting certified checks. Buyers will earn one point for every dollar charged.
Bill Glenn, American Express's head of merchant business, says the move is part of the company's efforts to expand the ways its clients can use its cards. The companies didn't disclose the terms of the agreement, although Moinian will pay American Express a fee on each transaction. The condo buyer won't be charged an additional fee.
Siva Tayi, a potential Manhattan condo buyer from Houston, plans to charge the 10% down payment on a $1.2 million two-bedroom unit in Moinian's Atelier condo on his Platinum card. "I thought it was a good idea to use the [card] and gain the points," says Mr. Tayi, who runs an information-technology staffing and outsourcing company. Not only does it eliminate the hassle of writing a check or having to wire money, he says, but with the 120,000 points he expects to get -- combined with the 300,000 points he has already accumulated -- "I can probably make a trip to India."
The first stage, Denial, is similar to that observed in terminally ill patients. It is the first reaction of agents. They refuse to accept the diagnosis. They reject the data, no matter how carefully it is presented. While in the denial stage they will clutch at straws, often looking for second, third, and even fourth opinions. They will exaggerate the importance of even the slightest bit of good news.
After Denial comes Anger. Here there are important differences between real estate agents and terminally ill patients. The latter are inclined to be angry with God or some vague forces such as Fate. The anger of agents, however, tends to be directed toward some tangible being, such as the broker. It is the broker's fault that there are no good leads, no phone calls, etc.
The direction of anger will vary depending on the level of abstraction with which the agent is working. If it is the agent's personal lack of activity, then the broker is the likely target. However, if the agent really does perceive the problem to be larger, e.g. to be a local, regional, or even national phenomenon, then the agent may direct his anger to such entities as nay-sayers in the newspaper, economists, or even "the government."
After Anger comes the Bargaining stage. Here, the real estate agent is more like a terminally ill patient in that his bargaining is liable to be directed to some outer force (God, Fates, Forces of the Universe). This takes the form of, "If only something good will happen, I will do such and such." Those of us who have been around long enough to remember the early nineties will recall the Realtor's prayer, "Dear Lord, if you will give me just one more good market, I promise not to %&!* it all away the next time." That is bargaining.
Next, Depression is experienced. This is unlike the well-known inchoate clinical depression for which the sufferer cannot name a cause. The depression that characterizes the fourth stage is understood as a result of some reality. It is the depression experienced when one realizes that the days of big bucks are over, that it won't be possible to make the lease payments on that fancy car, that there won't be anymore $200 golf rounds, etc. It is depression with a focus.
Kubler-Ross observed a final fifth stage among terminally ill people, which she called Acceptance. But this should not be thought of as a happy or benign state. Rather, it is a giving up, a ceasing to struggle. It happens to real estate agents as well. Having recognized the reality of a dying market and after being depressed about the personal results thereof, the agent surrenders and stops struggling
Recently she's seen reasons for hope: Far more homes were showing up in their price range, and others she'd seen a year ago were being relisted at reduced asking prices. Melissa decided it was time to look around again, and last weekend she asked me to come along on a tour of open houses in her price range. My sister had a list of homes she'd found online, but I suggested we tour as many open houses as we could to get a feel for the market.
What we saw was bleak news for sellers in our region, but good news for buyers like Melissa and Joe: block after block of open-house signs. In fact, we were hard-pressed to find a street that didn't have at least one home for sale -- and many had more than one. What's more, most of the 20 or so homes we visited were vacant -- a sign that homeowners have moved on and are motivated to sell, or that speculators are looking to unload properties before prices go any lower. (Asked why one home was vacant, one agent said frankly: "This was a 'flip' that flopped.")
Though some of the agents we encountered continued to promote their "charming" homes as "a steal," a surprising number were more candid. "The owner way overpriced this home," said one. "I bet if you offered $30,000 less they'd jump at it." We believed her, because she was running the open house as a favor for another agent.
Another sign of a turning market: We saw very similar houses with prices all over the map -- ranging from the low $200,000s to $270,000. That's evidence that sellers aren't sure what houses are worth these days, with some reluctant to accept that market dynamics have changed.
"They look at home-price comparisons from a year ago when there was far more demand than supply," says Pat Lashinsky, senior vice president of Emeryville, Calif., real-estate firm ZipRealty. Now that there's excess supply, he says, sellers need to be more willing to negotiate.
After our exhausting open-house blitz, Melissa asked for my thoughts. Though I'm too young to have experienced the 1980s real-estate market implosion, something told me that things are going to get a lot worse for sellers before they get better. To get an expert's take, I asked Robert J. Shiller, a Yale economics professor, for his insight on where the East Coast real-estate market may be headed.
"We don't know exactly what's going to happen because we've just experienced the biggest housing boom this country has ever seen," he says. In addition to homeowners struggling to sell existing homes, construction is at near-record levels: The last time this much inventory entered the market was 1950, when builders were building suburban homes for soldiers returning from war, he says.
Incoming Schools Superintendent LeRoy E. Seitz will not start until Oct. 2 but he is already the subject of an anonymous, "Saturday Night Live"-style spoof on the hugely popular YouTube Internet site.
Seitz' $192,000 annual salary and benefits are being lampooned in a fake TV ad that utilizes music and images from Bud Lite's iconic "Real Men of Genius" commercials.
Board president Robert Perlett, who had not seen the video, was not amused.
"I think that it's cowardly. It's also childish," Perlett said.
The producer, identified only as Parsippany Lampoon, did not return an e-mail sent Wednesday through the YouTube site. The video was posted on Tuesday.
It is unclear whether the same person is responsible for several other recent videos on YouTube mocking Lake Parsippany members, Council Vice President James Vigilante and others.
Lawmakers continued batting around ideas Wednesday about how to tackle two of the largest expenses that help drive the state's notoriously high property taxes — bureaucracy and worker benefits — though without concrete action.
One Democrat heading the committee examining public worker benefits promised "very significant" reforms after a briefing on the growing costs of public employee health coverage but was not specific.
Lawmakers are examining the costs of New Jersey's many levels of government and employee benefits as part of four committees searching for ways to reduce property taxes.
Beaver said the state could save nearly $500 million by requiring all state employees to pay 10 percent of their health care premiums, as was suggested in a December report by the Benefits Review Task Force appointed by then-Gov. Codey.
"I think ultimately we're going to be looking at some very, very significant reforms," Pou said.
Songwriter Woody Guthrie, who chronicled the injustices of the 1930s, wrote in "The Ballad of Pretty Boy Floyd": "Some will rob you with a six gun ... And some with a fountain pen ... And as through your life you travel ... You won't never see an outlaw drive a family from their home."
Those words embody the horror of eminent domain abuse. Under the guise of "economic redevelopment," politicians and their developer friends are stealing people's homes and businesses. These modern outlaws are armed with bogus "studies." Fast-talking politicians are promising communities riches, but they are abusing the law to enrich only themselves and their friends. Entire communities, from trailer-park residents in Bergen County to business owners in New Brunswick to families in Long Branch, are facing upheaval just so bankers and developers can make millions on property they have no right to own.
Politicians in Trenton are deaf to the pleas of people like the Halpers in Piscataway, who lost their farm, and Lou and Lil Anza lone, an 89-year-old couple in Long Branch who are losing the place they have called home for half a century.
In 70 years, apparently not much has changed in America.
-- Ed Mueller, New Brunswick
The writer's property in New Brunswick has been condemned.
Goodbye, Boardwalk. Hello, Broadway!
On Tuesday, Hasbro, the maker of Monopoly, revealed its latest version of its most popular board game – a more contemporary edition that abandons the Atlantic City streets featured on the game's board since 1935 in favor of more-recognizable landmarks from 22 cities across the country.
After an Internet vote that drew more than 3 million ballots from consumers, New York's Times Square earned the coveted Boardwalk spot and will cost – reflecting the changes since the game's first edition – a cool $4 million. (In a twist sure to roil some New Yorkers, Park Place has been replaced by Boston's Fenway Park.)
The inflated prices are one of several changes that Hasbro believes will make the new version more relevant to today's consumers. Players can go to jail, or perhaps a white-collar, minimum-security prison, for infractions such as insider trading.
Game pieces now include a box of McDonald's fries, a Motorola cellphone and a cup of Starbucks coffee (monopoly, indeed). Some of the classic pieces have given way to more modern interpretations: The Scottish terrier is now a Labradoodle. The open-cockpit race car becomes an environmentally friendly Toyota Prius. And a speedy jet replaces the plodding battleship. None of the companies paid for inclusion in the new edition, Hasbro officials said.
Not everyone was quite as excited about the changes, however. In Atlantic City, the Convention and Visitors Authority's executive director, Jeffrey Vasser, sent a letter this spring asking Hasbro to reconsider, and thousands of residents signed a protest petition. The game's use of Atlantic City points to the city's popularity in the 1930s, when it was sometimes called "The World's Playground."
On Tuesday, Vasser said assurances that the original game would survive, along with the new Community Chest card that gives out $1 million for winning at Atlantic City casinos, have muted the complaints; many residents, he said, had mistakenly believed the new game would replace the old one.
The game's predecessor was invented by Elizabeth Magie, Orbanes said, who intended it to warn against the excesses of unrestrained capitalism. Ironically, once a man named Charles Darrow popularized the game now known as Monopoly using Atlantic City properties, it became a celebration of materialism.
Housing prices are expected to continue to have a limited fall throughout 2006, according to testimony submitted by the National Association of Realtors at today's Senate Banking Committee hearing, titled the Housing Bubble and Its Implications for the Economy. In addition, NAR noted that the sellers' market is transitioning to a buyers' market, which can be healthy for some local economies.
"For the past five years, the housing market has been a steadfast leader in the U.S. economy," Thomas M. Stevens, president of NAR, told the Senate Subcommittee on Housing and Transportation and the Senate Subcommittee on Economic Policy. "After five years of outstanding growth, the housing market is undergoing a period of adjustment and becoming more and more of a balanced market between buyers and sellers," said Stevens.
Stevens said that with the falling demand and increased supply, home prices still realized slight appreciation though it was less than 1 percent, where over the past few years homes were appreciating at double-digit rates. "While recent developments raise concern, it is important to remember that the housing market varies significantly across the country," said Stevens. One-third of the country (by population) is still seeing rising home prices, including Alaska, New Mexico, Vermont and many states in the South, excluding Florida. States that experienced the greatest increases in home prices in recent years are experiencing significantly lower sales, such as Arizona, California, Florida, Nevada and Virginia.
"Contrary to many reports, there is not a 'national housing bubble,'" said Stevens. "We were seeing home prices and mortgage debt servicing cost-to-income ratios increase to unhealthy levels in some housing markets, which precipitate an adjustment." Also contributing to the cooling housing market is an increase in mortgage rates of nearly one point, speculative investors pulling back and first-time buyers being priced out of the market.
Adjustments to the housing market are not unique and can often times be necessary, said Stevens. In addition to the rapid appreciation of years past, the rise in mortgage rates affects a homebuyer's ability to finance and purchase a home. "Pressure is being felt in the housing market due to rising mortgage rates," said Stevens. "With rising interest rates, homebuyers have become exhausted financially which explains why sales have tumbled in higher-priced regions of the country."
NAR forecasts a drop in home sales of around 8 percent in 2006, followed by another 2 percent decline in 2007. These numbers are based on the stabilizing of mortgage rates and modest expansion of the economy. Also predicted is that home price growth will be minimal-less than 3 percent in 2006 and 2007. However, NAR warns that a significant shift in interest rates or a change in the economy would change this forecast. NAR notes that a soft landing is possible under the right circumstances and affordable mortgage financing is an important component in achieving this.
"Because the housing market strongly supports the economy and drives consumer spending, it is imperative that the Congress adopt policies that encourage homeownership and make purchasing a home obtainable for the millions of families who desire to own a home of their own. NAR stands ready to work with Congress to continue to open the door to the American dream of homeownership," said Stevens.
In 2005, the housing sector directly contributed more than $2 trillion to the national economy, accounting for 16.2 percent of the economic activity, according to testimony by the National Association of Realtors.
New Jersey's economy didn't add enough jobs in August to keep up with the number of people entering the work force, the state's Department of Labor and Workforce Development reported Tuesday.
The Garden State added 400 jobs, but its unemployment rate rose to 5.4 percent from 5.1 percent in July. That made for tough odds for workers seeking new jobs.
"More (difficult) than I thought initially," said Peter Burnett, 42, a retail manager from Carteret, who was at a job fair at the PNC Bank Arts Center in Holmdel on Tuesday looking for a job that would pay more. "I gave myself four months (to find a job), and it's been nine months."
The report was the latest evidence that New Jersey's economy isn't keeping pace with that of the rest of the country. The United States added 128,000 jobs in August and had a nationwide unemployment rate of 4.7 percent compared with 4.8 percent in July. Because New Jersey represents about 3 percent of the nation's employment, it should have gained 3,840 jobs.
A continued rise in inventories of unsold homes in August is likely to put more downward pressure on home prices in parts of the U.S.
Inventories of homes in 18 large metropolitan areas across the country expanded by 4.7% in August from a month earlier, according to data compiled by ZipRealty Inc., a real-estate brokerage firm based in Emeryville, Calif. The data are based on single-family homes and condos included in local multiple-listing services of homes for sale.
The biggest increases -- 16% in the Dallas area and 13% in Seattle -- came in markets that have been relatively strong recently. A sharp rise in inventories in those areas is likely to help restrain price increases. Other sizable increases came in Orlando, Fla. (8%), San Francisco (6.1%) and Miami (5.6%).
Home sales have plunged over the past year in many areas where prices had soared over the preceding five years, notably in California, Florida, Arizona, Massachusetts and the Washington, D.C., area. Many potential buyers are waiting for prices to come down further. The persistent weakness in these markets has prompted many housing experts to say prices will have to decline more to revive sales.
Ivy Zelman, a housing analyst at Credit Suisse Group in Cleveland, estimates that prices of newly built homes in San Diego, Sacramento, Calif., Phoenix, northern Virginia and southwest Florida already are down as much as 10% to 15% from a year ago. That estimate includes "concessions" from builders, such as upgraded kitchens or help with closing costs, which are disguised price cuts. But Ms. Zelman still sees more price declines ahead. "We believe that the housing market is still in the early innings of a hard landing that will likely take several years to develop," she says.
They are described as the "first suburbs," towns that sprang up along the borders of New Jersey's cities in the past century and a half.
They include West Orange, Caldwell, East Orange, Maplewood, Rahway, Franklin, Parsippany and over 90 others. Half of the state's population lives in these towns or in the neighboring cities.
Most are fully developed and tax-stressed. Their school systems are financially strained, their housing, roads and sewers are aging, their business districts fading and their population is becoming increasingly diverse racially and economically.
What they do not have, in the view of people who want to see these towns prosper, is one voice. A voice that can shout for the attention of the state and federal government and business.
"For decades, the state has concentrated on developing rural and exurban areas and on redevelopment in urban areas," said Michelle Loxton, an OPEN Society spokeswoman. "Comparable public sector reinvestment has not been focused on older developed communities."
He said first suburbs cannot dig themselves out or stop the cycle of decline once it begins.
"They simply do not receive the attention the center cities have justifiably deserved in this country for sometime," Puentes said. "They do deserve attention because they do need assistance."
Among the towns that are either joining the coalition or have been asked to consider it are: Belleville, Bloomfield, Glen Ridge, Maplewood, Montclair, Nutley, South Orange, West Caldwell, Highland Park, Spotswood, Clark, Cranford, Fanwood, Garwood, Kenilworth, Plainfield, Roselle, Roselle Park, Scotch Plains, Springfield, Hamilton, Hightstown, Hopewell Borough and Pennington.
South Jersey is one of the best places in America to relocate -- but not retire, according to a study by the Retirement Solutions Foundation.
Based on a healthy job market, relatively affordable housing and good quality of life, the area ranked third, behind Phoenix and Orlando, Fla. Three of the six areas on the list are in Florida. Madison, Wis., rounds out the picks.
The rankings were based on statistics from the National Association of Realtors, the Places Rated Almanac and the Milken Institute, a California-based economic think tank.
Jane White, president of the Morris County-based foundation, said people who live in the six markets will do well to sell their homes when they stop working and move somewhere less expensive.
"These aren't places to retire -- they're places you live and work now so you'll have a market for your home when you're ready to retire," she said.
"Housing has been appreciating at a good pace yet but isn't overpriced," she said. "But a lot of people won't be staying here when they retire because of the taxes."
Hamilton plans to travel to France and then likely to Charlotte, N.C., when she retires.
"People can use the equity they have in their homes and wind up with a good quality of life," she said.