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Superstorm Sandy slams New Jersey's struggling housing market

Superstorm hits sector already battered by rise in foreclosures and falling prices

PUBLISHED : Wednesday, 07 November, 2012, 12:00am
UPDATED : Wednesday, 07 November, 2012, 3:16am

Cody Buck rebuilt his home in Sayreville, New Jersey, after Hurricane Irene knocked it down last year. A week ago, Buck showed New Jersey Governor Chris Christie how superstorm Sandy had destroyed the house again.

"I think, governor, we need to level the whole neighbourhood, give everybody a cheque 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 on October 29 was the latest blow to homeowners in New Jersey, where foreclosures continued to rise and real estate prices fall after most of the US housing market began to recover last year. The Atlantic storm claimed 24 lives in New Jersey and tens of thousands of people to shelters. By Monday, more than 756,000 customers were still without power in the state.

"New Jersey was a laggard before the storm even came along and the storm won't help," Sam Khater, deputy chief economist for CoreLogic, a real-estate information service, said from his office in Tysons Corner in the state of Virginia.

New Jersey ranked second behind Florida in September among states with the highest inventories of homes facing foreclosure, CoreLogic said On November 1, In the Garden State, 7.3 per cent 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 US rate dropped 0.2 percentage point, CoreLogic said. In the 12 months to August, home prices fell 1.4 per cent in New Jersey, while across the US they rose 4.6 per cent, Irvine, California-based CoreLogic said on October 2.

New Jersey law, which requires judicial review of all foreclosures, had delayed a recovery by prolonging the time it took lenders to repossess homes, Khater said. Arizona and California, where foreclosures soared four years ago when people were unable to repay subprime loans, had worked through much of their backlog, he said.

The effects of the US recession, more than lax lending standards, prompted New Jersey's surge of delinquent mortgages, he said. The state's unemployment rate was 9.8 per cent in September, a 0.4 percentage point rise from a year earlier, according to the Bureau of Labour Statistics.

Only Nevada, Rhode Island and California had higher jobless rates. Nationally it was 7.8 per cent in September, down from 9 per cent a year earlier and a three-year low.

An estimated 75,300 homes valued at US$22.6 billion along the New Jersey coast were in Sandy's path, an October 29 CoreLogic report said. That included more than 20,000 properties worth US$4.8 billion in the Atlantic City area, where Sandy destroyed part of the boardwalk and amusement rides.

The 200 kilometres of beaches known as the Jersey Shore are the backbone of a tourism industry that, at US$38 billion, is the state's third largest. Last year, 67.8 million people visited, the Travel and Tourism Division in Trenton said.

Jenni "JWoww" Farley, a cast member of the MTV reality series Jersey Shore, was among those whose homes were damaged. "It like hurts the heart a lot," Farley said in an October 30 appearance on the Tonight Show with Jay Leno. "It's really kind of devastating," she said.

Casinos in Atlantic City, which claims title to America's first oceanside boardwalk and is the second-largest US gaming centre, have been central to Christie's economic revival strategy since he took office in January 2010.

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 Company. 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 US$14.5 billion on new levees after Hurricane Katrina overwhelmed the area's storm defences in 2005.

Storms also force stricter building codes, which raised property values, said Don Epley, director of the Centre for Real Estate Studies at the University of South Alabama in Mobile.

"Some of the locals joke that we need a good hurricane every few years," Epley said by phone. "It cleans out the old stuff."

In Hoboken, across the Hudson River from New York City, National Guard troops evacuated thousands of people from homes inundated since Sandy pushed a surge of water as high as four metres ashore on November 1. About 25 per cent of residents in Hoboken, the birthplace of Frank Sinatra, work in finance, insurance or real estate, according to Census data.

Flooding forced Toll Brothers, the largest US luxury-home builder, 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.

Reis, a real estate research firm, gave a preliminary estimate of US$30 billion to US$40 billion in total damage from Sandy. The New York-based company costed reconstruction efforts at US$25 billion to US$30 billion. That would result in a US$10 billion to US$15 billion economic loss, Reis said.