From the Record:
New Jersey home prices are likely to rise about 4 percent this year, as a thriving job market boosts a housing sector that’s still recovering from the worst downturn in decades, a housing analyst said Wednesday.
“Job creation fuels home purchases,” appraiser Jeffrey Otteau of East Brunswick, who researches the real estate market statewide, told an audience of real estate agents in Hasbrouck Heights.
Employers created more than 81,500 jobs in New Jersey last year, the best performance since 1999. Those new jobs, in turn, helped push the number of home sales in the state up 17 percent last year, to the highest level since 2005, Otteau said.
But New Jersey home values are still more than 15 percent below the peaks they reached during the housing bubble, and they will not reach those levels again till 2023, Otteau predicted. That was a less optimistic prediction than he has given in the past; at various points during the housing bust, he forecast that prices would return to their peaks in 2018, 2019 or 2020. His new forecast apparently reflects a slower pace of price increases than he earlier forecast. Average values rose about 1.5-percent annually in the last two years, Otteau said Wednesday.
Areas closer to New York City’s powerful economic engine have fared best, he said. In affluent towns with rail lines to New York, such as Ridgewood and Glen Rock, prices have recovered to their peaks, he said.
“The lowest unemployment rates and the best housing markets, for the most part, are in the places closest to New York City,” Otteau said. Bergen and Passaic counties both have less than a six-month supply of homes for sale at the current sales pace — an inventory level that points to rising prices as buyers bid on a small number of choices.
But sales along the shore are less robust, partly because of changes in flood insurance rules after Superstorm Sandy and partly because baby boomers are at an age where they’re less interested in buying beach homes, Otteau said. And demand for houses in Sussex and Warren counties is also sluggish, because those counties are beyond easy commuting distance to New York City, he said.
Most of the new construction in the state has been in multi-family rentals, Otteau noted. Millennials are renting longer than their parents did, in part because incomes have been flat and in part because young people have seen firsthand that home values can plummet.
“Young people don’t have the confidence in the investment value of homeownership that prior generations had,” Otteau said.