From the Press of Atlantic City:
A huge loss in high-paying private sector jobs in New Jersey could affect home sales along the shore while a corresponding rise in government jobs is also bad for the housing market because it drives up property taxes.
Those conclusions come from Jeffrey Otteau, whose Otteau Valuation Group Inc. tracks housing trends for the real estate market. His latest report, the 2007 Real Estate Forecast, contains some dire news about job trends.
“New Jersey has added 59,700 jobs since December 2000 of which 53,700 have been government jobs,” Otteau said.
The private sector has lost about 120,000 of the higher paying jobs in professional and business services, manufacturing, information and financial employment. From a real estate perspective, Otteau said this job loss equates to 31,000 home sales at $750,000 per house or 23,000 at $1 million per structure.
While the private sector overall added 6,000 jobs between December 2000 and November 2006, most of these are low-paying jobs. They don’t pay for second homes, although Otteau noted entry level housing for first-time home buyers is one of the few bright spots in his forecast.
The shore is at great risk here because it is the higher paying jobs that account for vacation-home purchases. New Jersey is losing these jobs, which will greatly reduce demand for vacation homes. A large portion of housing demand is second-home buyers,” Otteau said.
He tracked a 9 percent increase in government jobs, from 594,000 in December 2000 to 647,700 in November 2006. The average pay for the jobs is $53,941 per year.
“The concern with the growth of government jobs is the cost of government, which passes through to property taxes. It further reduces housing affordability and holds the potential to drive more jobs out of the state. It sort of becomes a vicious circle,” Otteau said.
There is some good news for the shore. While there is a migration out of northern New Jersey, Otteau said Atlantic County is enjoying “an in-migration” due to the casino industry and southern Ocean County due to a population jump from seniors moving into age-restricted housing developments.
“South Jersey has a better forecast than North Jersey,” Otteau said.
His report also puts the housing market at “near bottom,” but he predicts first-time buyers reentering the market this year and affordable homes leading a recovery.
Otteau said New Jersey is not attracting businesses to locate here due to the high cost of living. This hurts the housing market. Otteau said another disturbing trend is college students from New Jersey are not coming back to live here.
“That’s a big concern, because that’s the future of the housing market,” Otteau said.
He welcomes initiatives to reduce business and property taxes, but his report also notes high housing costs are part of the problem. He said housing affordability is chasing out jobs.
Housing costs have jumped 87 percent in the past five years while salaries rose 16 percent. The report says first-time buyers are being priced out of the market. Otteau projects somewhat of a correction with a drop in home prices of 3 percent this year.
The report shows contract sales were down statewide 17 percent in 2006 and building permits declined 18 percent. Unsold inventory and foreclosures rose. The state has the second highest housing costs and highest property taxes in the nation.
The forecast calls for fewer trade-ups and more remodeling. New homes will be smaller and rental demand will be stronger. He predicts fewer real estate agents.
The deepest price declines, Otteau predicts, will be luxury homes, urban condominiums, and age-restricted townhouses. He said the vacation home demand has been overestimated.