From Otteau Group:
MarketNEWS January 30, 2017 Edition
In December, the number of contract purchases by homebuyers exceeded the same month in the prior year for the 28th consecutive month, reflecting a 4% increase over December 2015. Considering the 28% increase (y-o-y) in December of 2015, home sales have increased by 33% over the past 2 years. This latest gain was the highest number of purchase contracts recorded in the month of December of the past 11 years.
For the full year of 2016, home purchase demand in New Jersey increased by 15%, which follows a 17% increase in 2015. This increase has however been largely concentrated in lower priced homes as first-time ‘Millennial’ buyers begin to transition from rentership to homeownership. By comparison, the number of luxury home sales priced at $2,500,000 and above declined by 4% in 2016. Reasons for this trend include a greater number of younger-age first home buyers, trade-down purchases by older-age empty-nesters, and relaxed mortgage lending standards which have reduced minimum down-payment amounts.
Shifting to the supply side of the equation, the supply of homes being offered for sale remains constricted, which is limiting choices for home buyers. The number of homes being offered for sale today in New Jersey has declined by nearly 6,000 (-13%) compared to one year ago. This is also about 35,000 (-48%) fewer homes on the market compared to the cyclical high in 2011. Today’s unsold inventory equates to 5.8 months of sales (non-seasonally adjusted), which is lower than one year ago when it was 6.9 months.
Currently, the majority (81%) of New Jersey’s 21 counties have less than 8.0 months of supply, which is a balance point for home prices. Hudson County is presently experiencing the strongest market conditions in the state with just 3.2 months of supply, followed by Essex, Union, Middlesex, Bergen, Passaic and Somerset Counties, which all have fewer than 5 months of supply. All of the counties with an unsold inventory level equivalent to a supply of 12 months or greater are concentrated in the southern portion of the state including Atlantic (12.5) and Cumberland (12.9).
Demand for rental apartments remains strong in NJ with statewide occupancy rates being amongst the highest in the US. The statewide vacancy rate fell to 3.2% in Q4, which was 20 basis points less than in the prior quarter. The continued strength in occupancy has allowed for asking rents to continue to rise, reaching $1,462 monthly, which is an 8-year high in the state. This is a 3.8% increase over the past year, and a 0.7% increase from the prior quarter.
Regionally, the northern part of the state continues to have the highest asking rent, due to its proximity to Manhattan and the accelerating pace of new construction offerings, which typically command higher rental rates. In 2016, asking rents in the region saw an increase of 3.8%. The Central and Southern/Philadelphia regions have lower asking rents, $1,333 and $1,236, respectively. However, these regions also experienced impressive price increases as it relates to asking rents in 2016 with a 3.6% increase in the Central region, and 3.9% in the Southern/Philadelphia region.