From Otteau Group:
MarketNEWS November Edition
After home sales were basically unchanged during the month of September, New Jersey experienced a 9% increase in purchase contracts in October. Considering the 4% increase one year ago in October of 2016, home sales have increased at a compounded rate of 14% over the past 2 years. This latest gain was the highest number of purchase contracts recorded in the month of October over the past 12 years, signaling rising homeownership demand. Overall, home sales have increased in New Jersey by 5% year-to-date.
While the number of home sales has increased across all price ranges this year, the largest gain has occurred for luxury homes priced over $2.5-Million, rising by 15%, while homes priced under $600,000 have seen the smallest increases. It’s important to note that home sales in excess of $2.5-Million are increasing for the first time in more than a decade. The improvement has however been primarily concentrated in towns with direct rail service to Manhattan.
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 fallen to the fewest of the past 12 years, having declined by 5,000 over the past year. This is also about 33,000 (-46%) fewer homes on the market compared to the cyclical high in 2011. Today’s unsold inventory equates to 4.3 months of sales (non-seasonally adjusted), which is lower than one year ago, when it was 5.2 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. Essex and Middlesex Counties have the strongest market conditions in the state with just 3.0 months of supply, followed by Union, Hudson, Monmouth, Passaic, Mercer and Morris Counties, which all have 4.0 months of supply or less. The counties with the largest amount of unsold inventory (6 months or greater) are concentrated in the southern portion of the state including Cape May (6.7), Cumberland (7.2), Salem (7.3) and Atlantic (7.4), however, these counties have shown significant improvement and are beginning to exhibit strengthening conditions.
Demand for rental apartments continues to expand in NJ with statewide occupancy rates being among the highest in the US. Statewide vacancy increased slightly to 3.5% (10 basis points). Nationally, the average vacancy rate also increased by 10 basis points to 4.5%. Still, the statewide and national vacancy rates remain well below their 2010 peak with vacancy rates having fallen by 170 bp and 350 bp, respectively.
Continuing economic growth and Millennials buying their 1st home has boosted the homeownership rate in New Jersey over the past 2 quarters from 62.2% to 65.4%, which is now 150 basis points higherthan the national rate. Still, the homeownership rate in the state has declined from 71.3% in 2005.Q1 to 63.8% in 2017.Q2, equating to an 8% drop, which is the same as the national trend. The homeownership decline over this period has created 194,000 additional renters in New Jersey.