If cities were athletes, then Jersey City would be a long-distance runner. While foreclosures and the credit crunch are causing the residential housing market in much of the rest of New Jersey to cramp up, business in Jersey City has continued jogging forward at a healthy clip. Prices are holding steady, and thousands of new units are under construction or in development.
“This is a submarket that shares more with Manhattan than with the traditional submarket of New Jersey,” said Peter Mocco, the developer behind Liberty Harbor North, a new neighborhood in Jersey City. “The subprime borrower never made up a meaningful percentage of the buyers in Jersey City.”
But it’s Jersey City’s link with Manhattan that may eventually cause the city’s booming housing market to falter. That’s because Jersey City’s market draws a lot of its business from young professionals, usually first-time buyers who’ve been priced out of New York City’s market. Because of the credit crunch, those first-time buyers might not be able to borrow money as easily as before.
So far there have only been only a handful of foreclosures in Jersey City. Brokers say that most of these foreclosures have happened in down-and-out neighborhoods away from the booming waterfront and downtown area, so they largely haven’t affected prices.
“If you look at sales at Hudson County specifically, while the state is down year-to-date in terms of number of sales by 3 percent, Hudson County is ahead by 16 percent,” said Jeffrey Otteau, president of the Otteau Valuation Group, a real estate research firm. “This is generally attributable to the strength of the Manhattan market.”
Much of the new development in Jersey City has been one- and two-bedroom units in tall residential buildings. Starting prices are in the mid-$300,000s for a one-bedroom and $500,000 for a two-bedroom. The average price per square foot is about $500, a figure that has remained stable this year.
The market is expected to absorb nearly 3,000 new units in the next few years, with another 10,000 projected over the next decade. On average, Jersey City has seen about 1,000 new units developed each year, making it one of the most construction-intense areas in the New York metro region.
Those new units are largely aimed at young professionals, many of whom work in Manhattan. Their personal incomes and credit scores may be high, but experts say that more scrutiny is being paid to loan applications. Anxious they won’t qualify for mortgages at reasonable rates, applicants may decide to continue renting.
Jackie Urgo, president of the Marketing Directors, a real estate firm that manages sales of high-end condos in the metro area, said that she and others have been advising clients to make sure their finances are in order and suggesting they apply for a government-sponsored mortgage, which is easier to qualify for in the current market. However, Fannie Mae loans are capped at $417,000, so consumers typically need to take a second mortgage for the remainder of the property. Many of Urgo’s clients in Jersey City work in finance and plan to use their bonuses to pay off their second mortgages.
So far, no projects have been canceled. George Filopoulos, president of Metrovest, which is constructing the Beacon, a 1,200-unit, 10-building complex several blocks west of downtown Jersey City, said that the first phase of the project has almost sold out. Filopoulos said he has not seen much of an impact from the credit crunch on his primarily New York-based buyers.
Mocco noted that the first 667 units of his Liberty Harbor project are 90 percent sold. Interest is strong, he indicated, in future phases, and as many as 10,000 units could be built.
Yet to make sure that sales maintain momentum, developers are offering more incentives. Free parking, two years’ free maintenance and free storage have become commonplace add-ons. These are in addition to health clubs, pools, in-house cinemas and poker rooms.
One unusual amenity is coming to Donald Trump’s two-tower complex in Jersey City, called Trump Plaza Jersey City, which is under construction. A rain simulator will offer Amazonian downpours and North European fogs.