From Otteau Group:
NJ Purchase Contracts Bounce Back in May
After recording a 7% decline in April, home purchase contracts in New Jersey increased by 11% compared to the same month last year. Given the 9% increase during May of 2016, home sales have increased by 21% over the past 2 years. This latest gain was the highest number of purchase contracts recorded in the month of May of the past 12 years, signaling high demand. Overall, home sales have increased in New Jersey by 6% ytd.
While the number of home sales has increased across all price ranges this year, the largest gain has occurred for homes priced between $1.0-Million – $2.5-Million, which have increased by 12%. Home sales in excess of $2.5-Million have also been increasing for the first time in more than a decade. The gains for more expensive homes is attributable to the greater number of homes for sale in these price ranges compared to the tight inventory situation for less expensive homes which is putting constraints on sales volume.
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 7,400 (-14%) compared to one year ago. This is also about 28,100 (-38%) fewer homes on the market compared to the cyclical high in 2011. Today’s unsold inventory equates to 3.8 months of sales (non-seasonally adjusted), which is lower than one year ago when it was 4.8 months.
Currently, all of New Jersey’s 21 counties have less than 8.0 months of supply, which is a balance point for home prices. Hudson County continues to experience the strongest market conditions in the state with just 2.4 months of supply, followed by Essex, Middlesex, Union, Passaic, Monmouth, Bergen, Morris, Burlington, Mercer, Somerset and Camden Counties, which all have fewer than 4.0 months of supply. The counties with the largest amount of unsold inventory (6 months or greater) are concentrated in the southern portion of the state including Cumberland (6.0), Cape May (6.5), Salem (7.4) and Atlantic (7.4), however, these counties are also beginning to exhibit strengthening conditions.
Demand for rental apartments remains strong in NJ with statewide occupancy rates being among the highest in the US. While Central NJ continues to have the lowest vacancy rate in the state (2.3%), it increased by 10 basis points from the prior quarter. The Philadelphia/Southern NJ region now has the highest vacancy in the state (3.8%), up by 20 basis points from the prior quarter, while vacancy in Northern NJ declined by 20 basis points to 3.6%. Nationally, the average vacancy rate increased by 10 basis points from the prior quarter and now stands at 4.3%.
A driving force for the apartment market sector is that the percentage of New Jersey households with children living at home has steadily declined to 35% today, with continued declines likely in the future.This trend, which is rooted in New Jersey’s economic conditions, is anticipated to drive future housing demand increasingly toward smaller homes including multi-family housing in more urban locations. At the present time, 65% of households within the state of New Jersey have no children under the age of 18 living at home.