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Sunday, April 3, 2011

Why Housing Is Going To Zero: Bergen County Special

Northern New Jersey suburbs are seeing growing levels of homes left vacant, according to this report from the Bergen Record.

As Crime, Politics and Policy has chronicled for two years, there are many factors supporting a prolonged downward trend in home prices.

Vacancy levels indicate that homeowners are unable to rent these homes -- that is, at the desired rent level -- or in some cases, represent abandoned homes that often are in some stage of foreclosure.

Continued delays in the processing of foreclosures through both the banks' back offices and then the legal system, the likelihood of substantially higher interest rates, the additional likelihood of increased restrictions on mortgage financing including but not limited to the requirements for down payments of at least one-fifth of the purchase price, and a continuing economic stagnation which promises to slowly deteriorate many homeowners' financial wherewithal to resist selling -- all of these factors should contribute to a growing supply of homes, at all price levels, in northern New Jersey suburbs and, naturally, in many other areas around New York City and across the nation.

Of course, arbitrary and unfair principal reductions being granted to the least financially worthy of the homeowner-borrower class will only encourage more strategic defaults, particularly among the most well-to-do who are the most "economically rational" and most likely to be "ahead of the curve" in terms of sensing and responding to economic trends (i.e., dropping home prices).

Eric Dixon is a New York lawyer, strategic analyst and political consultant who analyzes the residential real estate market.  Mr. Dixon is a 1994 graduate of Yale Law School and has been practicing law for 17 years. 

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