Home sales in northern New Jersey slowed down this year, but prices remain buoyant.
Home sales statewide declined 17 percent during the first half of 2006 and inventory rose 70 percent, according to a widely followed market report from Jeffrey Otteau, president of the Otteau Appraisal Group.
Sales dropped and inventory rose by double-digit percentages, in fact, in nearly every northern New Jersey county in the first half of the year from the same period the year before. But prices for single-family homes and for condos in northern New Jersey continued rising.
The median price of a home in the region rose 4.6 percent from the second quarter of 2005 through the second quarter of this year to $473,700, according to the National Association of Realtors; the median condo price went up 5.3 percent year over year to $321,000.
Still, the pace of sales has slowed, regardless of the prices.
“The deterioration of the residential market is greatest in the northern half of the state; that is a price thing,” Otteau said. “New Jersey is losing high-paying jobs, and it is happening in New York and Connecticut as well,” he said. “The loss is in the technologically-based jobs. The net effect is that purchasing power in the real estate market is decreasing.”
James Hughes, a housing economist at Rutgers University, said the residential market downturn in northern New Jersey and elsewhere has been caused by several factors. He also cited the loss of high-paying jobs.
Rising mortgage rates rest at the center of the market downturn. Rates reached 6.86 percent in mid-June, a four-year high, but edged down 0.41 percent from that high point to 6.45 percent in mid-August, according to the Mortgage Bankers Association.
Hughes added that rising home fuel costs and gas prices have caused people to rent and live in areas more accessible to mass transportation.
Brokers said the most common advice they give to new sellers is to not look at sale prices for comparable properties from last year, as these numbers reflect a changed market.
“It is a correction in pricing,” said Darlene Bandazian, branch manager of corporate sales for Weichert Realtors in New Jersey. “I do not feel it is a bubble bursting. It is an adjustment and prices will go up a normal 5 percent next year.”
The diversity of the housing market in northern New Jersey will have an impact on the total effects of any market slowdown in the Garden State. The market includes older homes in closer bedroom communities lining the train lines, new McMansion developments in once rural communities, and the large influx of condominiums along Hudson County’s Gold Coast.
Hughes said that the bedroom communities feel the pinch less than other areas. Still, to compensate for any slowdown in sales, many new developers have been offering bonuses to alleviate contract cancellations. These bonuses have included free kitchen upgrades, new BMWs and appliances.
“Because of Manhattan, [Hudson County’s waterfront] may be different,” Hughes said, while noting the rising number of units coming online in the area could be a cause for concern. “There is a potential of a number of high-rise condos in Jersey City. But I would be surprised if all of them got built.”
Otteau said the north Jersey luxury market has been the hardest hit. Proximity to commuter train lines will influence which areas of the luxury market will be most affected. He predicts areas such as Summit and Short Hills, both on New Jersey Transit’s Midtown Direct line, will see less of a downturn than homes in the new developments in rural areas such as western Morris County and western Mercer County, which are a greater distance from train lines.
Otteau’s mid-year report shows an increase in the number of months it would take for housing inventory priced over $1 million to sell out if no new homes were added to the market. The statewide average is 16 months, with Union and Essex counties, home to Summit and Short Hills, coming in with the lowest totals at six and eight months respectively.
While there is a downturn in the market, some brokers see an advantage for prospective buyers.
“We are getting first-time buyers from Hoboken and New York,” said Mary Davis, past president of the New Jersey Association of Realtors. “They were locked out of the market for a number of years. You could not get under $500,000 for your first house here. It is now affordable for them.”