From the Record:
New Jersey builders used the words “brutal” and “unprecedented” repeatedly at a statewide trade show Tuesday to describe a housing market undermined by surging unemployment and tighter mortgage lending.
Attendance at the annual New Jersey Builders Association convention is off by a third amid a U.S. recession one economist described as the deepest since World War II. The event — which normally draws 15,000 builders, developers and subcontractors — has about 10,000 registered attendees.
Jeffrey G. Otteau, an economist with the Otteau Valuation Group, said New Jersey has a year’s worth of unsold housing inventory and prices typically fall whenever there is more than five months’ worth of inventory.
“We are not in a recovery,” said Otteau, who delivered the association’s economic outlook. “Home prices will continue to decline.”
Otteau’s presentation was marked by exclamations and quiet discussions among attendees.
Another speaker, Rutgers University economist Joseph Seneca, said the state will see a “new normal” in which consumers will spend less and save more, and fewer people will own homes. Fewer people will work in the finance industry, and they’ll make less, Seneca said.
“The bottom of the current economic debacle is close at hand,” he told the builders.
But he cautioned that the state is not there yet. This year will be a weak one, and the recovery will begin in 2010, he said. Problems in the financial sector and in several European countries are troubling, and the worst of commercial real estate problems have yet to come, he said.
Otteau said the New Jersey housing slowdown is being aggravated by the number of people leaving the state, which has the nation’s highest tax burden. He said New Jersey ranks third among U.S. states in population loss, and its housing market is unlikely to recover until the end of this year at the earliest.
Otteau estimated that housing prices have declined 36 percent from their peak and New Jersey prices have fallen 24 percent.
New Jersey issued 1,507 permits for new home construction in January and February, according to association data. That number represents 33 percent of the 4,543 permits issued for the same period of 2006.
“It’s brutal,” said John Kirkenir, co-manager of Alliance Homes in East Windsor. “We have three homes under construction right now and we feel fortunate to have three. Normally, we’d have 20.”