Silly Valley

From the Star Ledger:

Assembly speaker-elect: We can make N.J. the new Silicon Valley

They all came from the same place — the transistors that powered radio to the digital cellular that powers our smartphones, fiber optics to LCD technology, groundbreaking computer programming language to the now ever-present barcoding.

Surely these historic technological breakthroughs came from Silicon Valley, right?

No.

They were all born right here in New Jersey.

That legacy of innovation and invention should be resulting in an economy that is helping lead the nation in job creation and economic growth. But despite being the place where numerous advanced technologies were created, New Jersey has more work to do to meet the challenges and opportunities of the global marketplace.

If we’re to bolster and strengthen New Jersey’s middle class, we must foster the creation of high-quality jobs that can sustain a knowledge-based economy thriving on innovation and entrepreneurship. If we’re to build a stronger economy that benefits everyone, New Jersey must capitalize on its competitive advantage through initiatives that support the state’s world-class academic institutes and science and technology industries.

That’s why finding new and innovative ways to help working middle-class New Jerseyans and to grow our economy will be a top priority when I have the honor of becoming the next New Jersey General Assembly speaker in January.

I will establish a new standing committee — the Science, Innovation and Technology Committee — that will create and advance legislation designed to put New Jersey at the forefront of emerging industries. We will utilize our universities, high schools and business leaders to harness innovative thought. We will strengthen relationships between industrial and academic research. We will find ways to transfer academic research to the marketplace, all while encouraging entrepreneurship and new enterprises in science and new technology.

Posted in Demographics, Economics, New Development, New Jersey Real Estate | 43 Comments

On the bright side, it’ll be so affordable nobody will want to leave

From the Philly Inquirer:

‘It’s going to make it more expensive to live here’: Why N.J., Pa. might face housing blow under GOP tax bill

Usually, Tom Bracken said, he would do cartwheels over a plan to cut corporate taxes.

Instead, this week the president of the New Jersey Chamber of Commerce blasted the Republican tax plan now nearing the finish line, saying it would harm property values in the Garden State and discourage quality workers from moving there.

“It’s going to make it more expensive to live here,” Bracken said on a media call.

He and other critics, including the New Jersey Business and Industry Association — which also said the plan “will negatively impact property values” — worry about the plan’s ripple effects on housing due to proposed limitations on valuable deductions for mortgage interest and state and local taxes. Those changes, critics argue, could also squeeze local governments that rely on local taxes to fund schools and services.

“New Jersey’s going to feel this pretty significantly,” said Dave Jones, a tax and real estate expert at Temple’s Fox School of Business.

Kevin Gillen, an economist at the Lindy Institute at Drexel University, said homeowners in South Jersey would be more affected than those in Pennsylvania. The Jersey Shore, in particular, could take a hit because the property-tax deduction could be eliminated for second homes, and the Shore has some of the most expensive houses in the region.

“I don’t think it will affect homeownership so much as it will affect home prices,” he said. “You’re not willing to pay as much for a home as you would otherwise.”

Democrats and Realtors said alarm bells should still sound in suburbs outside Philadelphia, where home prices and property taxes can also be high.

“If you have a home in a middle- or upper-middle-class area [around] Philadelphia right now, under this GOP tax plan, you’re at risk of seeing a drop in your home value,” said Rep. Brendan Boyle (D., Pa.), whose district is split between Northeast Philadelphia and suburban Montgomery County.

Jamie Ridge, president of the Suburban Realtors Alliance, which represents Realtors from Montgomery, Chester, Bucks, and Delaware Counties, said his members “are extremely concerned.”

“Most of the time when you’re trying to determine what a family can afford, the mortgage interest deduction and state and local property taxes and state and local income taxes all play into that,” Ridge said.

Posted in Demographics, Economics, New Jersey Real Estate, Philly, Politics | 95 Comments

Where’s our pork?

From the NYT:

On Tax Bill, It’s Trump vs. His Hometown

When President Trump returned to his hometown on Saturday for a day of fund-raisers, his third and final check-collecting stop was the Park Avenue home of Stephen A. Schwarzman, where the crowd included some of Mr. Trump’s old New York friends and real estate colleagues.

Some in the group, including Mr. Schwarzman, a founder of the private equity Blackstone Group, have been among those pushing the Trump administration to change the Republican tax package that is making its way through Congress — in particular to save the ability to deduct state and local taxes from federal returns.

Richard LeFrak, a developer and longtime friend of Mr. Trump’s who has been among those lobbying, asked about what changes the president wanted to see.

“LeFrak always has a question,” Mr. Trump mocked.

Mr. Trump was vague in his response, giving some in the room the impression he was open to their concerns. Others were less certain. And Mr. Trump concluded by poking fun at his wealthy supporters’ complaints. “You guys seem to be doing O.K.,” he said dryly.

While Mr. Trump has tried to sell the tax package as a giant tax break for all Americans, a different story is unfolding in New York and other high-tax, mostly Democratic states. The mayor of New York City, Bill de Blasio, has estimated that there could be tax increases for as many as 700,000 residents if the legislation is approved. Nearly half of households in surrounding suburban counties itemize their deductions — and stand to lose valuable write-offs of state and local taxes on their federal returns.

The fact that Mr. Trump’s tax package would economically hamper his hometown is unusual.

It is almost unimaginable that President George W. Bush would have championed a bill that would have harmed Texas relative to other states, or for President Barack Obama to have embraced legislation that took a particular bite out of his birth state, Hawaii, or adopted hometown, Chicago.

“It’s hard to think of a president whose signature legislation will fall, in a very negative way, on people in his home state,” said Julian E. Zelizer, a presidential historian and professor of history at Princeton. “Usually you bring back the pork.”

Posted in NYC, Politics | 93 Comments

Great time to buy a house … again

From Bloomberg:

Housing Market’s Comeback Is Poised to Accelerate

Housing was the epicenter of the last recession. From the peak in 2005 to the end of the contraction in mid-2009, U.S. residential investment declined at an unprecedented rate of about 20 percent a year. In normal business cycles, sectors that overshoot to the downside tend to rebound sharply. Given the significant oversupply of homes and tightening of credit, housing enjoyed no such recovery. Residential investment was essentially flat for almost two years after the recession ended. Since then, a slow recovery has been underway and we suspect the housing market will pick up in the year ahead.

Although residential investment has been expanding since 2011, recent growth has been sluggish, rising just 1.1 percent over the last year, compared with about 7 percent in the two previous years. Some of this weakness can be attributed to a housing market in transition: Owner-occupied real estate is recovering as renter-occupied real estate is declining. Also, multi-family construction is ebbing as single-family building picks up. With inventories tight, home resales appear to have flattened out as new home sales take a greater share. In other words, conditions in the U.S. housing market are normalizing. That’s a good thing.

There are good reasons to expect residential investment to pick up after sluggish growth this year.

Consumer attitudes are strong, supporting housing demand. It helps that general economic conditions have improved. According to the latest University of Michigan Survey, more people say now is a good time to buy a home because of “prosperous times.” This is a notable difference from the bubble period of 2005-06 and suggests a recovery built on firmer ground.

More respondents say now is a good time to buy a home because “prices won’t come down” and because it’s a “good investment.” Price expectations matter. The improvement in household buying attitudes, helps keep user costs low. In a standard user cost of housing model, the expected value of the home offsets maintenance costs such as mortgage interest and property taxes and depreciation. No one wants to finance an asset class they believe will go down in value. Thus, it is welcome that consumers see housing as a solid investment once again.

Posted in Demographics, Economics, Housing Recovery, National Real Estate | 82 Comments

Sorry about your home prices

From the NY Times:

How New Yorkers Would Lose Under the Republican Tax Bill

The tax bill approved by the Senate is many things, offering a huge tax cut for corporations, lower rates for the wealthy, and a big victory for Republicans and the White House.

It is also an economic dagger aimed at high-tax, high-cost and generally Democratic-leaning areas — most notably New York City and its neighbors.

The bill, if enacted into law, could send home prices tumbling 10 percent or more in parts of the New York area, according to one economic analysis. It could increase the regional tax burden, complicating companies’ efforts to attract skilled workers. It could make it harder for state and local governments to pay for upgrades to the transit system and other infrastructure. And it could force cuts in federal programs that help immigrants, the elderly and other low-income residents afford the region’s high cost of living.

Most significantly, the bill would eliminate the deduction for state and local income taxes, and would cap the deduction for property taxes at $10,000.

That wouldn’t matter to the more than two-thirds of households nationwide that take the standard deduction, which would be nearly doubled under the bill. But in the New York area, high state and local taxes change the equation. In Manhattan and wealthy suburban counties, close to half of households itemize their deductions, and many could see an immediate tax increase.

“We’re worried and we’re wondering what are we going to tell our kids,” said Cynthia Metcalf, who lives with her husband and the youngest of their four children in Mount Kisco, an affluent commuter town. “I just feel like it’s an attack deliberately set against people from the Northeast or from other blue states.”

Ms. Metcalf, who teaches history at Westchester Community College, said she had tried to use TurboTax software to estimate how their tax returns would be affected. Currently, they can deduct the more than $20,000 a year they pay in school and town taxes, and the 7 percent of their income that goes to state taxes. Losing those deductions means the family could wind up paying considerably more, Ms. Metcalf said.

That prospect has the Metcalfs rethinking their financial future. Ms. Metcalf said she dreaded the prospect of telling her youngest child, Genevieve, a high school senior, that the college of her choice was beyond their means. And she said she and her husband might have to accelerate plans to relocate once all their children have left home. Then again, she added, selling their home could become more difficult.

“Now I’m starting to think, who’s going to want to buy our house here in New York?” Ms. Metcalf said. “The whole game has shifted.”

The most immediate threat could be to the region’s housing market. The tax bill would eliminate or make less valuable the tax breaks that encourage homeownership. That would probably have a minor impact on home prices nationally, but potentially a big one in the New York area, with its expensive homes and high property taxes.

An analysis of the Senate bill by Moody’s Analytics concluded that home prices in Manhattan could fall nearly 10 percent in the coming years because of the bill. Some New York and New Jersey suburbs could be even more vulnerable because property-tax rates are higher there and prices are still recovering from the bursting of the housing bubble.

Posted in New Jersey Real Estate, NYC, Politics | 262 Comments

MacArthur a hero for NJ, or not?

From the Washington Post:

The GOP’s $10,000 cap on property tax deductions and how it affects one congressional district

“According to data direct from the IRS, allowing property tax deductions up to $10,000 — which I fought for and won — will cover nearly every taxpayer in the Third Congressional District.”
— Rep. Tom MacArthur (R-N.J.), in an opinion article, Nov. 18, 2017

A key feature of the House and Senate tax bills is ending the deduction for local and state taxes, which has been a feature of the U.S. tax code dating back to the Civil War. Republican leaders have argued that the low-tax states are subsidizing the high-tax states because the taxpayers in those states can’t deduct as much from their taxes. Indeed, six states — California, New York, New Jersey, Illinois, Texas and Pennsylvania — claim more than half of the value of all state and local tax deductions nationwide, according to IRS data. In the tax trade, the deduction is known as the SALT deduction.

But this had been a problem for Republican lawmakers from those states, as it means that at least some of their constituents might face higher taxes. During deliberations in the House, MacArthur won a compromise that would allow as much as $10,000 in property taxes to continue to be deducted. (A similar provision was added to the Senate version in the flurry of last-minute bargaining.) In an opinion article — which also favorably mentioned The Fact Checker — he argued that he managed to get a deal that “will cover nearly every taxpayer” in his district.

We decided to take a ground-level look at how he justifies this statement.

The Facts

The 3rd Congressional District is in the south-central portion of New Jersey, covering most of Burlington County and portions of Ocean County. The median household income is $68,300.

MacArthur was initially opposed to the GOP plan when it called for eliminating the deduction for all state and local taxes, arguing for an exemption for property taxes. He made the case that while income taxes are based on how much you make, property increases in value beyond a person’s control. (A retiree may have lived in a house for many years, for instance.) According to the Tax Foundation, New Jersey has the highest per capita property tax of any state.

Since 1996, New Jersey has capped the deduction for property taxes at $10,000, so the House bill would be in line with that concept. MacArthur was the only GOP lawmaker from New Jersey to support the tax bill, with the others decrying the impact on taxpayers in New Jersey who itemize deductions.

According to MacArthur’s staff, IRS data show that there are 360,000 taxpayers in the 3rd district, of whom 210,000 take the standard deduction or do not take a deduction for the property tax. That means that about 42 percent of taxpayers itemize, which is higher than the 30 percent for all U.S. taxpayers.

Two other big deductions — for mortgages and charitable contributions — would still be allowed, though the House would reduce the size of new mortgages that can be covered from $1 million to $500,000. (The Senate bill makes no reduction.)

MacArthur’s staff says that these are conservative estimates, but essentially 93.3 percent of taxpayers in the district would be covered by the $10,000 property tax cap. That figure, they say, justifies the use of the phrase “nearly every taxpayer” in the opinion article. But it also means that 24,000 taxpayers — or 16 percent of the people who itemize — in his district are not covered by the cap.

Sounds good but, alas, it’s not quite so simple.

Under the House bill, the standard deduction would be doubled to $24,400 for couples and $12,200 for individuals. In many cases, these amounts would be higher than what people currently itemize, so it would become more advantageous to take the standard deduction.

In other words, the $10,000 cap would then become meaningless to them, because they would need substantial mortgage interest or charitable contributions to get above the thresholds for the standard deduction. (The House bill would eliminate other deductions, such as for high medical expenses.) According to an estimate by the Institute on Taxation and Economic Policy, which has a microsimulation tax model and has been critical of the tax proposals, about 60 percent of New Jersey taxpayers would no longer claim the property tax deduction.

In theory, for many taxpayers the loss of deductions would not matter if the standard deduction is larger than what people would have claimed with itemized deductions. But the tax bills would also eliminate dependent and personal exemptions worth $4,050 each. Instead, a child tax credit would be expanded, to $1,600, and there would be a new $300 family credit, but these would phase out at income levels of $115,000 for single parents and $230,000 for married parents. Single tax filers would lose their exemptions but of course would not get a child or family credit.

MacArthur thus is highlighting the impact of the property tax deduction in isolation without considering the interaction with other aspects of the tax bill. An analysis of the Senate tax bill by the New York Times, focusing on the impact on the middle class, found that people who pay a lot in state and local taxes (more than $4,400) have a greater chance of experiencing a tax increase.

Posted in New Jersey Real Estate, Politics, Property Taxes | 142 Comments

Otteau Report November

From Otteau Group:

MarketNEWS November Edition

After home sales were basically unchanged during the month of September, New Jersey experienced a 9% increase in purchase contracts in October. Considering the 4% increase one year ago in October of 2016, home sales have increased at a compounded rate of 14% over the past 2 years. This latest gain was the highest number of purchase contracts recorded in the month of October over the past 12 years, signaling rising homeownership demand. Overall, home sales have increased in New Jersey by 5% year-to-date.

While the number of home sales has increased across all price ranges this year, the largest gain has occurred for luxury homes priced over $2.5-Million, rising by 15%, while homes priced under $600,000 have seen the smallest increases. It’s important to note that home sales in excess of $2.5-Million are increasing for the first time in more than a decade. The improvement has however been primarily concentrated in towns with direct rail service to Manhattan.

Shifting to the supply side of the equation, the supply of homes being offered for sale remains constricted, which is limiting choices for home buyers. The number of homes being offered for sale today in New Jersey has fallen to the fewest of the past 12 years, having declined by 5,000 over the past year. This is also about 33,000 (-46%) fewer homes on the market compared to the cyclical high in 2011. Today’s unsold inventory equates to 4.3 months of sales (non-seasonally adjusted), which is lower than one year ago, when it was 5.2 months.

Currently, all of New Jersey’s 21 counties have less than 8.0 months of supply, which is a balance point for home prices. Essex and Middlesex Counties have the strongest market conditions in the state with just 3.0 months of supply, followed by Union, Hudson, Monmouth, Passaic, Mercer and Morris Counties, which all have 4.0 months of supply or less. The counties with the largest amount of unsold inventory (6 months or greater) are concentrated in the southern portion of the state including Cape May (6.7), Cumberland (7.2), Salem (7.3) and Atlantic (7.4), however, these counties have shown significant improvement and are beginning to exhibit strengthening conditions.

Demand for rental apartments continues to expand in NJ with statewide occupancy rates being among the highest in the US. Statewide vacancy increased slightly to 3.5% (10 basis points). Nationally, the average vacancy rate also increased by 10 basis points to 4.5%. Still, the statewide and national vacancy rates remain well below their 2010 peak with vacancy rates having fallen by 170 bp and 350 bp, respectively.

Continuing economic growth and Millennials buying their 1st home has boosted the homeownership rate in New Jersey over the past 2 quarters from 62.2% to 65.4%, which is now 150 basis points higherthan the national rate. Still, the homeownership rate in the state has declined from 71.3% in 2005.Q1 to 63.8% in 2017.Q2, equating to an 8% drop, which is the same as the national trend. The homeownership decline over this period has created 194,000 additional renters in New Jersey.

Posted in Demographics, Economics, New Jersey Real Estate | 222 Comments

One step closer

From CNBC:

Senate GOP clears another hurdle on the way to tax reform vote

The Senate moved Wednesday to start debate on the Republican tax bill, a key step toward a vote this week to dramatically change the American tax system.

The 52-48 party line vote to proceed starts up to 20 hours of frenzied debate on the tax plan. Following that period, lawmakers will vote on a series of proposed changes.

The Senate is expected to then take a final vote on the bill by Friday. Republicans could make major changes to the proposal before the vote.

Every Republican who had expressed doubts about the bill voted to move to debate. However, it does not mean they will necessarily support a revised, final plan.

The biggest shift could be adding a “trigger” mechanism that would raise taxes if U.S. economic growth doesn’t generate as much revenue as expected from the tax overhaul. The tool, designed to appease senators concerned about deficits, has sparked resistance from several GOP senators. Most of those lawmakers have suggested their opposition to the trigger will not make them vote against the bill.

Other tweaks to appease skeptical senators reportedly include increasing the tax deduction for pass-through businesses. They could also add in limited state and local tax deductions, which are entirely scrapped under the current Senate proposal.

Some GOP senators who only days ago appeared reluctant to support the bill voted to advance it. Lawmakers had expressed skepticism about issues including deficits generated by tax cuts, the bill’s treatment of pass-through businesses and its effective repeal of Obamacare’s individual mandate.

Republicans, with 52 seats in the Senate, can only lose two votes and still pass the plan with the simple majority required under special budget rules. That assumes all Democrats and independents, as expected, vote against the plan.

GOP Senate leaders appear confident that they have the votes to approve it

If the chamber passes its bill, lawmakers will have to reconcile their plan with separate legislation passed by the House. The chambers will have to decide on how to handle multiple key differences, including the treatment of popular state and local tax deductions.

Posted in National Real Estate, New Jersey Real Estate, Politics, Property Taxes | 100 Comments

So what happens to New Jersey?

From ROI NJ:

Murphy’s plans, GOP’s ideas could hasten migration from N.J.

While raising the minimum wage and increasing the millionaires tax are two goals for Gov.-elect Phil Murphy, two Republican tax bills currently making their way through the federal legislative branch propose slashing corporate and certain other business taxes.

How will this pan out for New Jersey?

Possibly with greater outmigration than the state has already seen, according to one tax expert.

“The theory is that, by reducing the amount that businesses and business owners have to pay, in the form of income tax, it leaves more money to be paid in the form of wages and investing in their business,” said Jordan Amin, a tax partner at EisnerAmper.

“Investing in the business doesn’t just mean capital investments in the business, but in people and wages. Hopefully, that will trickle down.”

Especially for larger businesses.

“Whether that’s invested or paid out to investors in dividends, that remains to be seen,” Amin said.

“I think where some of these provisions that are affecting New Jersey harder than some other states — like the repeal of the state and local tax deductions — the incoming governor wants to increase the highest income tax rate in the state, currently 9 percent, to 10.75 percent, and I think that that may meet some opposition, now that some of the state taxes are not going to be deductible at the federal level. And we have all read about people supposedly fleeing New Jersey for other low-tax or no-tax jurisdictions, such as Florida. I think that there is some concern (the tax) … could cause a greater migration outward.”

An ultrasimplified list of the winners and losers might look something like this (based on ROI-NJ interviews and national reports):

Winners: Foreign and multinationals; corporations; passive investors (real estate); small businesses (to a degree); oil companies; and beer, wine and liquor.

Losers: Construction; small legal or tax or medical practices; hospitals; health insurers; universities.

Real estate is especially interesting for New Jersey, where there is no shortage, according to WithumSmith+Brown tax partner Tony Nitti.

“If you own residential rental property or commercial rental property, not only would the income be subject to a property rate of 25 percent, but you will also get these shortened depreciation lives now,” he said.

With changes to the total years of depreciation of commercial real estate from the current nearly 40 years to 25 years, which results in a reduction in tax bills, “the real estate industry, real estate investors in general, benefit under either bill,” Nitti said.

Posted in Demographics, Economics, National Real Estate, Politics, Property Taxes | 76 Comments

Case Shiller Day

From HousingWire:

Case Shiller: Home prices rise at fastest pace since 2014

Home prices increased in September at their fastest pace in more than three years, according to the latest S&P CoreLogic Case-Shiller Indices released by S&P Dow Jones and CoreLogic.

The Case-Shiller National Home Price NSA Index, which covers all nine U.S. census divisions, showed over the last 12 months, home prices increased 6.2% nationally, the highest annual rate of increase since June 2014. This is up from August’s increase of 5.9%.

The 10-City Composite increased 5.7% in September, up from last month’s increase of 5.2% and, as the chart below shows, rising back to its winter 2007 level. Similarly, the 20-City Composite increased 6.2% from last year, up from August’s increase of 5.8%.

“Home prices continued to rise across the country with the S&P CoreLogic Case-Shiller National Index rising at the fastest annual rate since June 2014,” said David Blitzer, S&P Dow Jones Indices managing director and chairman of the Index Committee. “Home prices were higher in all 20 cities tracked by these indices compared to a year earlier; 16 cities saw annual price increases accelerate from last month.”

“Strength continues to be concentrated in the west with Seattle, Las Vegas, San Diego and Portland seeing the largest gains,” Blitzer said. “The smallest increases were in Atlanta, New York, Miami, Chicago and Washington. Eight cities have surpassed their pre-financial crisis peaks.”

Posted in Economics, National Real Estate | 84 Comments

Homeownership to rise?

From the Washington Examiner:

White House analysis: Tax bill will slightly decrease home prices, but boost homeownership

The tax legislation working its way through Congress would only slightly lower home values and could boost homeownership, according to a new analysis from the White House that addresses fears that the elimination of the mortgage interest deduction could create a large disincentive for homeowners.

The White House Council of Economic Advisers paper found that the House tax bill’s treatment of the mortgage deduction would result mostly in simplification. The number of people taking the simple standard deduction, rather than itemizing specific deductions, would increase from 74 percent to 92 percent, and the study said there would be a very small impact on home prices.

“We project that equilibrium housing prices will experience a muted reduction of less than 4 percent, while homeownership rates may rise modestly as a result of the current tax reform proposals before Congress,” the 13-page study concluded.

The White House analysis provides a response to housing industry groups, such as the National Association of Realtors, that oppose the GOP tax push and have warned that it could tank housing markets.

Posted in Economics, National Real Estate, Politics, Property Taxes | 87 Comments

If not the Millionaires, then who? (Hint, You.)

From the Star Ledger:

N.J.’s millionaires’ tax hike is losing support

By now, anyone paying attention can see that Republicans in Washington are out to screw New Jersey. We would pay higher taxes under their plan, even though we already subsidize the rest of the country.

But did you know that it could also derail plans to increase taxes on millionaires here in New Jersey? That’s a new twist, and another potent reason to resist this regressive GOP tax plan.

“We really have to take a step back,” says Senate President Steve Sweeney (D-Gloucester).

“It ought to give all of pause,” says Assemblyman Craig Coughlin (D-Middlesex), the incoming speaker.

This is a big deal. Because if New Jersey can’t raise taxes on millionaires, it can’t restore funding for schools, or fix the decrepit transit system, or ease the burden of property taxes.

It would be a $700 million kick in the teeth for the governor-elect, Phil Murphy, who has put this tax hike the core of his fiscal recovery plan.

So, why reconsider this tax hike now? Because New Jersey has one of the country’s most progressive income-taxes, with the top 1 percent providing about 40 percent of the revenue. We hit the rich hard, with the top rate of 8.97 percent.

And the Republican plans, in both the House and Senate, would eliminate the deduction for state income taxes. The impact would vary, but for a standard top earner that would translate into a hike of about 3.5 percent. A hike in the state millionaires tax would add nearly 2 percent more to the top rate.

Suddenly, the rich have a much stronger reason to leave New Jersey, and move to a state with lower income taxes.

Posted in Demographics, Economics, New Jersey Real Estate, Politics, Property Taxes | 25 Comments

Still truckin’

From CNBC:

US existing home sales increase more than expected

U.S. home sales increased more than expected in October as hurricane-related disruptions dissipated, but a chronic shortage of houses which is pushing prices beyond the reach of some first-time buyers remains an obstacle.

The National Association of Realtors said on Tuesday that existing home sales rose 2.0 percent to a seasonally adjusted annual rate of 5.48 million units last month. September’s sales pace was revised down to 5.37 million units from the previously reported 5.39 million units.

Economists polled by Reuters had forecast home sales rising 0.7 percent to a 5.42 million-unit rate in October. The NAR said sales in Houston and Jacksonville, regions which bore the brunt of Hurricanes Harvey and Irma, had rebounded. Sales in South Florida, however, remained weak last month.

Sales in the South, which accounts for almost half of the existing homes sales market, increased 1.9 percent last month. There were also gains in sales in the Northeast, Midwest and West regions.

Existing home sales make up about 90 percent of U.S. home sales. They fell 0.9 percent on a year-on-year basis in October.

Home sales remained well below a 10-year-high 5.70 million-unit pace touched in March. Sales have been restrained by an acute shortage of properties, which is exerting upward pressure on house prices, and sidelining some first-time buyers.

Posted in Housing Recovery, National Real Estate | 25 Comments

Light Reading for Thanksgiving Morning

From ROI-NJ:

Smart Growth coalition offers Murphy blueprint for economy

For all the talk of attracting companies, the fact remains that the state has a land supply problem, especially in Northern New Jersey.

Consider this: If a manufacturer wanted to bring a few thousand jobs to the port district in northern New Jersey, state officials would not be able — today or anytime soon — to point the business to a single shovel-ready site or even a vacant existing structure. Worse yet, if the company required only a 1 million-square-foot building, it would still be hard pressed to find a shovel-ready site or existing vacant building within 25 miles of the Statue of Liberty.

“Progress has been made in a variety of areas, but much more needs to be done if our state’s economic engine is going to be fed by additional housing and commercial space,” the report states. “There is a scant amount of developable acreage remaining in places where people actually want to work and reside.

“What’s left to feed the engine are the challenging (read: cost-prohibitive) redevelopment sites in our suburban downtowns and urban central business districts, along waterfronts, on brownfields and around and above transit hubs.

“Redevelopment is New Jersey’s best viable long-term growth vehicle. The state must embrace redevelopment and help bridge its unique added costs, while also permitting (not obstructing) responsible greenfield development throughout the planning areas of New Jersey.”

The state’s economy is in a perilous position, the group states.

LOCAL LAND-USE LAW: Get with the times (and all other states)

Inside the recommendation

A serious effort must be made to make the local land-use process more predictable and to identify and implement amendments to the municipal land use law, or MLUL, that lead to greater consistency in the entitlements process and a substantial reduction in the cost and time expended in pursuit of development approvals.

Local land-use bodies must adapt to the realities of modern life. Parking ratios of yesteryear have less relevance in a society trending towards ride-sharing (Lyft/Uber), car-sharing (ZipCar) and autonomous vehicles. Many of today’s mixed-use concepts were simply not contemplated in the traditional lists of permitted uses. There is no better example than “retail” uses; if brick-and-mortar stores in our state are going to be able to successfully compete with e-commerce, local land-use ordinances must allow “omnichannel” uses (curbside deliveries, showrooming, extra-large storage areas for customer pickups and returns, etc.) and hybrid uses (arcades and amusement areas within restaurants, grooming services and overnight facilities in pet stores, etc.).

The challenges become even more complicated for those undertaking transit-oriented development, or TOD. A persistent problem inhibiting TODs is the lack of coordination between NJ Transit and the municipalities in which train stations are located. Despite all the “transit friendly” talk in our state, there is simply no joint vision or strategy between NJ Transit and the train towns to promote, facilitate and implement TODs. This failure is impeding if not precluding what is arguably the most attractive potential source of smart growth development in our state, and must be addressed early in the next administration/legislative session.

Simply put, the state that limits the sale of merchandise on Sundays, restricts the sale of Teslas in malls, bans the issuance of customer coupons on gasoline and milk, concentrates the sale of alcoholic beverages in a select number of restaurants and the sale of package goods in an even more select number of grocery stores must get with the other 49 states.

The background

The “home rule” tax: Development in most of New Jersey begins before a local planning or zoning board; we are, after all, a “home rule” state. But it is time to consider the “tax” effect of home rule because underneath its express policy rationale — uniformity in the approval process — lies the reality: pursuing approvals and developing land in New Jersey is often a very different experience from one municipality to another. Every municipality has its own zoning ordinance and its own planning and zoning boards, establishes its own standards and fees and, to some extent, its own procedures.

The unpredictability problem: Far from facilitating uniformity, home rule has given us a lack of predictability and consistency in the approval process. The reputation of home rule is well-known to corporate site selectors and developers across the country. Unlike other taxes, which are quantifiable, the home rule tax is the leading variable expense, in terms of outright dollars and wasted time, in far too many projects. Even those who have developed land in New Jersey for decades cannot realistically predict how long it will take to get through the entitlements process and how much will it cost.

SHORTAGE OF LAND: It takes a state to create space

Inside the recommendation

New Jersey needs a concerted effort at every level of government to assist the private sector in “making land.” In other words, the state needs to eliminate or reduce the hurdles inherent in remediating, assembling and entitling large-tract sites. For starters, land held by public and quasi-public agencies in strategically located areas should be freed up for redevelopment. Examples include salt domes and DPW maintenance yards along valuable roadways when comparable alternatives are available elsewhere.

Next, for such sites to be even more transformative, they must be combined with adjacent privately held properties, and intervening streets must be vacated to add contiguity and open up even more aggregation options.

Thus, unlocking the value of vacant or underutilized private property is essential to the making-land effort. One major impediment has been environmental contamination. Cleaning up sites is expensive; as a result, many landowners run a skeleton business just to avoid ISRA compliance that would be triggered by the cessation of operations. This has to change.

Government at all levels must proactively encourage these property owners to sell, through efforts that include the carrot of bonus values, remediation incentives and equal or better relocation options for active businesses, and the stick of forced cleanups where contaminants threaten the environment.

The background

Increase in demand: The need for warehouse, distribution, data center, logistics, research and development, and manufacturing space has increased significantly in the last 10 years. In the port district of northern New Jersey, we are experiencing the lowest vacancy rates in over 30 years; vacancy rates in other industrial submarkets around the state are also down significantly.

Few sites shovel-ready: There are only a handful of large-scale clean (remediated), assembled, entitled and otherwise shovel-ready sites remaining in the port district of northern New Jersey. The primary reason for the lack of sites is clear: Few redevelopers have the time, patience and risk tolerance to take on a land assemblage involving holdout property owners, eminent domain, environmental cleanup, multi-year permitting, etc.

Other options (states) available: Most redevelopers of large, complicated sites operate in multiple states where development on greenfields is still possible and where redevelopment is easier; in other words, they have choices on where to build. Not even incentives or the crazy rental numbers and selling prices in today’s market are enough to entice them into taking on these challenging, potentially career-killing projects.

Posted in Demographics, Economics, Employment, New Development, New Jersey Real Estate, Politics | 26 Comments

Why fight it? Go with the flow.

From the Record:

Minimum wage for Bergen County workers is now $15 an hour

Bergen County Executive Jim Tedesco gave thanks for county workers on Tuesday when he signed an executive order that raises the minimum wage for full-time employees to $15 an hour.

Tedesco, riding the progressive wave that swept Phil Murphy into office earlier this month, did his part to help the governor-elect deliver on one of his key campaign promises: to nearly double the minimum wage all around the state, which now stands at $8.44. The freeholder board planned to adopt the wage hike by resolution on Tuesday night, making Bergen County the first of New Jersey’s 21 counties to raise the minimum wage.

“Good people are essential to good government, and good managers understand that their employees need to be valued,” Tedesco said at a news conference, where he was flanked by freeholders, a county union leader, and an advocate for working families. “County employees who put in 40 hours or more every week, in service to their friends and neighbors throughout Bergen County, deserve and have earned a $15 minimum wage.”

The wage hike, which is retroactive to Sept. 1, immediately affects 129 blue-collar and white-collar workers scattered about county government. Some are office clerks, others are drivers, and still others work for the county road department and public works.

The county estimates that the wage hikes will cost $360,647 in the first year, which is less than 1 percent of the county’s $52.8 million budget. Tedesco said the minimum wage increases were part of two contracts that the county signed recently with locals 655 and 755 of the United Services Workers Union. Tedesco said there no plans to give the $15 wage to part-time county workers.

Posted in Economics, New Jersey Real Estate, Politics, Property Taxes | 86 Comments