Sandy Batters New Jersey’s Struggling Housing Market
Cody Buck rebuilt his home in Sayreville, New Jersey, after Hurricane Irene knocked it down last year. Yesterday, Buck showed New Jersey Governor Chris Christie how superstorm Sandy destroyed the house again.
“I think, governor, we need to level the whole neighborhood, give everybody a check and get out of here,” Buck said, according to a pool report by journalists covering Christie’s tour of the hurricane-racked state.
Sandy’s brutal arrival Oct. 29 was the latest blow to homeowners in New Jersey, where foreclosures continued to rise and real estate prices to fall after most of the U.S. housing market began to recover last year. The Atlantic storm claimed eight lives in New Jersey and drove 6,329 people to shelters. About 2.05 million residences and businesses, more than half of those in the state, were still without power at 2 p.m., according to the U.S. Energy Department.
“New Jersey was a laggard before the storm even came along and the storm won’t help,” Sam Khater, deputy chief economist for CoreLogic Inc., a real-estate information service, said from his office in Tysons Corner, Virginia.
New Jersey ranked second behind Florida in September among states with the highest inventories of homes facing foreclosure, CoreLogic reported yesterday. In the Garden State, 7.3 percent of homes with a mortgage were seriously delinquent or facing repossession, compared with 3.3 percent nationally.
The New Jersey inventory was up 0.9 percentage points from a year earlier, the second-highest increase behind Maryland, while the U.S. rate dropped 0.2 percentage point, according to CoreLogic. In the 12 months through August, home prices fell 1.4 percent in New Jersey while across the U.S. they rose 4.6 percent, Irvine, California-based CoreLogic reported Oct. 2.
New Jersey law, which requires judicial review of all foreclosures, has delayed a recovery by prolonging the time it takes lenders to repossess homes, Khater said. Arizona and California, where foreclosures soared four years ago when people were unable to repay subprime loans, have worked through much of their backlog, he said.
The effects of the U.S. recession, more than lax lending standards, prompted New Jersey’s surge of delinquent mortgages, he said. The state’s unemployment rate was 9.8 percent in September, a 0.4 percentage point rise from a year earlier, according to the Bureau of Labor Statistics.
Only Nevada, Rhode Island and California had higher jobless rates. Nationally it was 7.8 percent in September, down from 9 percent a year earlier and a three-year low.
An estimated 75,300 homes valued at $22.6 billion along the New Jersey coast were in Sandy’s path, according to an Oct. 29 CoreLogic report. That included more than 20,000 properties worth $4.8 billion in the Atlantic City area, where Sandy destroyed part of the boardwalk and amusement rides.
The 127 miles of beaches known as the Jersey Shore are the backbone of a tourism industry that, at $38 billion, is New Jersey’s third largest. Last year, 67.8 million people visited, according to the Travel and Tourism Division in Trenton.
Jenni “JWoww” Farley, a cast member of the MTV reality series “Jersey Shore,” was among those whose homes were damaged by Sandy.
“It like hurts the heart a lot,” Farley said during an Oct. 30 appearance on the “Tonight Show with Jay Leno.” “It’s really kind of devastating.”
Casinos in Atlantic City, which claims title to America’s first oceanside boardwalk and is the second-largest U.S. gaming center, have been central to Christie’s economic revival strategy since he took office in January 2010. President Barack Obama, a Democrat, joined the Republican governor in Atlantic City, where they took a helicopter to tour storm damage.
Atlantic City destinations such as Caesars, the Trump Taj Mahal and the Showboat probably were spared significant damage because of a project this year to fortify the beach and build dunes, said Frank Branagan, a superintendent with Agate Construction Co. The boardwalk outside those casinos was intact.
“You sacrifice your dunes to save your city,” he said.
Infrastructure projects can give a shot in the arm to disaster zones, such as New Orleans, where the Army Corps of Engineers spent $14.5 billion on new levees after Hurricane Katrina overwhelmed the area’s storm defenses in 2005.
Storms also force stricter building codes, which raise property values, said Don Epley, director of the Center for Real Estate Studies at the University of South Alabama in Mobile.
“Some of the locals here joke that we need a good hurricane every few years,” Epley said in a telephone interview. “It cleans out the old stuff.”
In Hoboken, across the Hudson River from New York City, National Guard troops evacuated thousands of people yesterday from homes inundated since Sandy pushed a surge of water as high as 13 feet (4 meters) ashore. About 25 percent of residents in Hoboken, the birthplace of Frank Sinatra, work in finance, insurance or real estate, according to Census data.
Flooding forced Toll Brothers Inc. (TOL), the largest U.S. luxury homebuilder, to halt construction on the third building at its Maxwell Place development in Hoboken, said Martin Connor, chief financial officer of the Horsham, Pennsylvania-based builder.
“We’re certainly focused on the challenges that the residents of Hoboken and our buildings are facing,” he said. Work on the building will resume as soon as possible, he said.
Toll, which generates half its business in the region between Washington and Boston, fell 2.4 percent yesterday, the biggest drop of the 11-member Standard & Poor’s 1500 Homebuilding index in the first day of trading after Sandy closed U.S. markets for two days.
Eqecat Inc., a provider of catastrophic risk models, doubled its previous damage estimate to as much as $50 billion in total property losses, with $10 billion to $20 billion of that covered by insurance, the company said today.
Reis Inc. (REIS), a real estate research firm, gave a preliminary estimate of $30 billion to $40 billion in total damage from Sandy. The New York-based company valued reconstruction efforts at $25 billion to $30 billion in its Oct. 30 calculation. That would result in a $10 billion to $15 billion economic loss, Reis said.
Storms with the force of Sandy have the power to reshape real estate for years, Eqecat President Bill Keogh said yesterday in a telephone interview from his vacation home in Litchfield, Connecticut, where he sought refuge after the power went out in his Hackensack, New Jersey, office. Damaged homes owned by delinquent borrowers may cause lingering blight if neither the owner nor the lender has resources for repairs, he said.
“It could also improve the value of some homes,” Keogh said. “The house that used to be two blocks from the water is now on the beach.”
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