From the New York Times:
Decline Seen In Home Prices In New Jersey
By ANTHONY DEPALMA, SPECIAL TO THE NEW YORK TIMES
December 14th, 1989
The days of steeply climbing house prices are over, and the 1990’s could begin with prices dropping by as much as 12 percent, according to a report released today by Rutgers University based on three million house sales in New Jersey.
”This really is the end of a housing and economic era in New Jersey and the Northeast region,” said Dr. James W. Hughes, a professor of urban planning who wrote the report with Dr. George Sternlieb.
The study, ”New Jersey Home Prices,” confirms what anyone who has bought or sold a house or apartment this decade already knows: prices have gone out of sight. But the sheer mass of the data gives new insight into how the increases have profoundly changed the market in nearly every one of the 567 municipalities in the state.
The authors said that although their data were drawn just from New Jersey the trends and general conclusions can be applied to the entire New York metropolitan region. Cooling in Mid-1988
Using computers, the authors examined all house and apartment sales in the state from 1965 to mid-1988, a total of three million transactions. They show that although house prices here remained at or below national levels through the beginning of this decade, they soared starting in 1985.
From 1980 to mid-1988, the median sales price rose to $141,900 from $57,500, with many communities, among them Alpine and Saddle River in Bergen County and Mantoloking in Ocean County, exceeding that by hundreds of thousands of dollars.
Since then, however, prices have cooled considerably, with no increases seen. In some cases, there have been declines, a trend that could continue, depending on the economy.
The housing bubble burst after Wall Street started laying off stockbrokers in 1987. Companies started to cut back, the high prices made many corporations move employees elsewhere and the demand for housing eased. Houses that had sold in three months were sitting on the market for nine months or longer, and sellers began lowering their expectations.
Professor Sternlieb said house prices had already declined in spots and could drop 4 to 12 percent next year, depending on economic conditions will determine whether prices remain depressed. Adjustment in Attitudes
The realignment could change the way that people think about housing, Professor Hughes said. Instead of stretching to buy as much house as possible and banking on appreciation, buyers may be content with less housing and put more money into savings accounts.