New Jersey Fundamentals Continue To Erode

N.J. economy lagging in key areas, State House seminar told

Hughes and his Rutgers colleague, Joseph J. Seneca, addressed state officials at an annual State House seminar in Trenton. The economists predicted that the state would add 35,000 to 40,000 jobs in 2006 – about the same number added in 2005. Just over 4 million people work in the Garden State.

The rate of job growth is below the rate of previous economic expansions, when the state added an average of 75,000 jobs each year. Last year, New Jersey employment grew at an estimated 0.8 percent, well below the national rate of about 1.5 percent, Seneca and Hughes said.

Worse yet, many of the new jobs in New Jersey have been in lower-paid fields such as health care and leisure and hospitality (mostly restaurant workers).

At the same time, the state has seen minimal growth in the highly paid financial sector, with 16,700 new jobs from 2000 to 2005. And the information sector, which includes the telecom industry, lost 31,500 over that span, while professional and business services lost 12,200.

Caveat Emptor,

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30 Responses to New Jersey Fundamentals Continue To Erode

  1. Grim Ghost says:

    Question: does this include NJ residents employed in NYC or Philadelphia ? If so, its useful but incomplete.

  2. Metroplexual says:

    I saw these guys speak in October on the subject. I believe it is about the households in NJ. It is based on US census and Department of Labor stats.

  3. RentinginNJ says:

    “Rising house values have also enriched New Jersey homeowners. Seneca and Hughes predicted that house prices might level off this year, but said they do not expect a collapse.”

    Interesting. They predicted the same thing back in October 2003*; prices would level off, but not collapse. They thought the boom had run its course at the time, prices had maxed-out and that future appreciation would be more “normal” and based on fundamentals such as income growth. After all, price appreciation “could not continue to outstrip income growth”.

    So, its now 2 ½ years later and NJ is lagging behind in income growth, but houses prices continued to grow at a double-digit rates? If their analysis in the 2003 report was correct, then we are clearly in bubble territory, making a correction a real possibility. So, why will prices only level off?

    * “Housing Bubble or Shelter-Safe Haven?” Oct. 2002

  4. Metroplexual says:


    They were wrong. I think they are wrong now as well. But their analysis is usually top notch.

    That same paper you cite also says how wonderful the NJ economy was at the time and look at what they are saying now with stats that were available then.

    They are in a responsible position and they are well regarded in the business community. If they came out and said “pop” it would be regarded as saying fire in a crowded theory. Remember people can be very dumb, these guys don’t want fingers pointing back at them saying they did it they popped the bubble.

  5. Grim Ghost says:

    Furthermore, interest rates are higher than 2 years back as well.

    I do not expect a collapse this year except in the most speculative areas, but I do expect a slow grinding leak for 2-3 years.

  6. grim: how would you define collapse?

  7. Metroplexual says:

    This post has been removed by the author.

  8. Metroplexual says:


    Me too, it won’t tank until ’07. But I think this year will be very important to the psyche of the seller as well as the RE people. That is the shock will settle in.

    the 5 stages of real estate bubbles bursting. Based on Kubler-Ross’s stages of accepting death.

    We are here right now. There is no bubble, stop talking about it, it will come if you keep talking about it. yada yada yada….

    This when the finger pointing will start.
    Greenspan, Fannie Mae, NAR etc.

    3) Bargaining
    This is when a bailout will be requested or a change in the recently passed Bankruptcy Law.

    4) Depression.
    I really have to pay this thing off and live here for 20 years when I was hoping to trade up.

    5) Acceptance
    I’m totally screwed.

  9. RentinginNJ says:


    I agree. The Bloustein School has very close ties to both business and the State government. This is exactly the message that the business community wants to hear. They have been complaining about the deteriorating business climate over the past 4 years, but this has largely fallen on deaf ears. Now they have evidence from a reputable source. It also sets up Corzine to save the day.

  10. Anonymous says:

    I moved out of Bergen County three years ago when I purchased my house in 1972 it required working 3 years, to repurchase it now I’d have to work 9 years. How far can reality be stretched ?

  11. Anonymous says:

    3 times vs 9 times income.

    this says it all.



  12. Anonymous says:

    Toll Brothers Sees Slowdown in Contracts
    Friday January 13, 1:31 pm ET
    Toll Brothers Says Slowdown in New Home Contracts Continues Into First Quarter

    NEW YORK (AP) — Toll Brothers Inc., one of the nation’s top luxury builders, said Friday it is seeing a slowdown in contracts for new homes, as people take more time to make buying decisions.
    “Beginning in the fourth quarter of fiscal 2005 and continuing into the first quarter of fiscal 2006, we have experienced a slowdown in new contracts signed,” Toll Brothers said in its annual 10-K report for 2005.

  13. NJ Sucks says:

    Here is my view of how I have experienced the housing market in NJ over the last 4-5 years based on personal experience from some VERY close relatives. This are 2 stories which I believe might sound familiar

    Story #1

    1) My aunt’s (61) (father’s sister) almost paid-off house was refinanced in 2002 after her younger daughter got married. She got an extra 120k and she gave 60k to each of her other 2 kids. Her younger daughter moved into her house with her husband and she it paying the 120k+ mortgage.

    2) My first cousin(aunt’s son from above) bought a single family house in 2002 for 340k using the 60k he got for his mother as a down payment. In 2003 he refinanced the house and he got an extra 60k which he used to pay-off his credit cards and buy a nice brand new Audi. My cousin thinks this is the best Investment since his house now is worth 470k

    3) My other cousin (Aunt’s daughter from #1) used her money(60K) for home improvement and to buy a new car

    Story #2

    1) My aunt’s (73) (Mother’s Sister) almost paid-off house was refinanced in 2002 and she got 160k on hand. She used 60k to redo the siding of the house and redo the roof/new garages etc. She also has an income from this house. She gets $1000 from a Pizzeria restaurant at the front, $600 rent from the tenants from the first floor and $200 from renting the garages. Along with SS this is her only income.

    2) My aunt also got another 100k from another house she owns(and rents) and along with the 100k from the house above she gave this money(200k) to her divorced daughter to buy off her husband of her 400,000 home she lives in(since her ex-husband was entitled to half the house).

    3) The pizzeria guy(also friend of mine) who rents the store in the front of my aunt’s house is barely able to pay the rent since his business in VERY SLOW. He is probably going out of business. Meanwhile down the street there are 2-3 boarded-up places which also went out of business and nobody is renting. My aunt’s tenants on the first floor used to own a Laundry place in Hoboken which it went out of business after September 11 since their landlord increased their rent from 1.5k to 3k per month. Right now they are collecting junk from the streets which they try to sell in the Flee market to make some money to survive.

    If these people cannot afford the rent and move out my aunt will not be able to pay her mortgage

    I wanted to share these 2 stories as an example of the Avalanche effect what will be triggered when this thing finally blows.
    From what it seems to me almost everybody who owns a house has “tapped” into their equity piggy-bank for one reason or another. What is going to happed when they housing values go down one day……. These 2 stories above are from people who do not know what the word “Stock Market” is so Imagine the extend of turmoil that will occur when this thing finally breaks-up.

    I myself decided to look for an opportunity to get a house for a reasonable price. I give myself 2 years. If I don’t find anything I will
    move back to Europe(where I own a house) and with the money I have saved I will be able to live good for a couple of years. I really do not want to get tied in a 400k home which 6 years ago wasn’t even worth 180k and dumping a good portion my salary to an empty hole.

    BTW I make 6 figures and NO Debt…….I really do not know what the “average” people fare.

    Any thoughts….

  14. Anonymous says:

    Just stumbled upon this blog. You people are freaking me out. The wife and I just went under contract on a townhome in Nutley for $470k. It’s fairly new, 3 1/2 yrs old. Great condition. 2000 sq ft. Gated comm. Original owners paid $320 for it. That’s a 146% appreciation in a short time.
    I admit I’m feeling a bit apprehensive about this purchase. But the reasons we’re buying:
    – We want to stay in the area for a while. Family is in NJ/PA
    – Nutley is convenient for commuting to NYC where our jobs are
    – Needed a bigger space, and
    – Hated p**ssing money away on rent.

    I don’t expect prices to go up anymore. I’m just hoping we don’t burn our fingers and more…

  15. Anonymous says:

    The appreciation is not 146%, its 46% over 3 years, which amounts to 13-14% annually. Definitely, but not totally beyond the bounds of reason.

    Is the townhouse in the Cambridge Heights Area ? There were a lot of townhouses for sale there when I was looking in November — I remember seeing one for 440K (although it might have been smaller).

    Good luck, anyway.

  16. RentinginNJ says:

    “Just stumbled upon this blog. You people are freaking me out. The wife and I just went under contract on a townhome in Nutley for $470k.”

    Good luck with the new place. Not to scare you, but you do need to be prepared for the possibility of a correction in home prices. If you plan to stay put for a while (10 yrs.) and can afford the place using a conventional mortgage (i.e. 30 yr. fixed), then you can probably weather any downturn. If you need to use an option ARM or interest only loan, then I would seriously reconsider.

    Also, renting isn’t necessarily pissing money away. Paying interest on a mortgage, maintenance and property taxes is basically the same thing as paying rent. Depending on how long you plan on staying for, you might be better off renting a comparable place and investing the savings.

  17. Nutley Townhouse poster:

    You will be fine if you:

    (1) financed yourself properly with a mortgage that is consistent with your intended use (i.e. no i/o, 30Y Fixed or else an ARM consistent with the number of years you plan to stay.

    (2) ensure the costs of maintaining your home is not more than roughly 30% of your gross income – bear in mind, one of you may wish to leave the workforce if you have children.

    (3) don’t lose your steady stream of income (i.e. don’t lose jobs).

    (4) have a rich relative who will front you money in an emergency that doesn’t have to be repaid.

  18. Anonymous says:

    anonymous 1:
    Thanks for the math lesson. The townhome is in cambridge heights (in the news this week for a string of burglaries). They have several different models and prices vary a bit.

    We prolly don’t want to stay 10 years. We’re thinking about 4-5.
    Property taxes in NJ is a major sticker shock which makes renting seem not so bad. But besides the reasons I listed in my first post there were also the usual psychological reasons (plus the wife really wants a “home” =))
    We have no debt and have savings to make 20% down and do a conventional 30 yr loan.
    I’m not too concerned if price drops in the next year or two as long as it remains stable in the mid-term (4-5 yrs).
    I’m hoping Nutley’s convenient location and commmuting options to NYC will act as a buffer against real estate turbulence.

  19. Anonymous says:


    1) check

    2) check. We comfortably beat that equation. Of course, if we’re down to one income then things change.

    3) Wish I had a crystal ball =)

    4) We don’t have rich relatives, but a close and loving family who would help out if we got in a financial mess.

  20. Anonymous says:

    I remember being in Joe Seneca’s Environmental Economics class – had this ugly first period Friday schedule. Almost as ugly as his tie collection which were always a bland pattern earth-tone.

    That was a long time ago.


    “plus the wife really wants a ‘home’ =)”

    Gotta wonder how many guys got dragged into a purchase decision due to the wife’s nesting instinct.

  21. grim says:

    I know more than a handful of people that fit that category.

  22. desi dude says:

    at least i can say I over came it

    I rented a 4 BR- Condo for 1850 in ventura county- signed a two yr lease.

    left on my own i’d have rented a 3BR apt for 1600.

    condo is in every good locality and owner(realestate agent) bought it for 466K 6 months ago
    Right now similar condos sitting for 450K. guess a 10% hair cut in 2 years will pay for the rent I pay. Isave on association fee(200pm), property tax etc

  23. RentinginNJ says:

    “plus the wife really wants a ‘home’ =)”

    Gotta wonder how many guys got dragged into a purchase decision due to the wife’s nesting instinct. ”

    I just got married 9 months ago. Believe me, the pressure is on. Even our families are in it “oh, come on…It was tough for us too. Just bring your lunch to work for a while”

    My wife really doesn’t understand the concept of a bubble (doesn’t really care), but at least she is fiscally conservative and believes in a real down payment and a traditional mortgage. Given that, she can’t find a house that we can comfortable afford that she actually likes.

  24. Richard says:

    question for everyone. what’s an acceptable range for a rent increase % in NJ? thanks.

  25. Grim Ghost says:

    Richard — NJ state law forbids “unconscionable” rent increases, but that term is undefined. In geneal, I think 20% and above would be unconscionable.

    Townships sometimes have their own rules. My town has rules of 3-4 % increases.

    Also, a lot of buildings (largely owner occupied 2 and 3 families are exempt)

  26. Dublin Boy says:

    “- Hated p**ssing money away on rent.”

    How often you hear this. And how rarely owners realize, they *are* paying rent – rent on the money they borrowed to buy the house. Whether you “borrow” a house or “rent” the money, it’s the same concept, just different words.

  27. Richard says:

    thanks grim ghost. a friend of mine is getting an increase of 4.6% and was asking me if that was a fair increase.

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