From the APP:
How would you characterize the health of New Jersey’s residential housing market, from the perspective of homeowners and potential home buyers and sellers?
In a word, uncertain. The basic economic measures are reasonably good. The job market is growing, albeit slower than some would like, but growing. The lower inventory of homes for sale remains low. This should be good for sellers, but the uncertain impact of the new tax laws may give potential buyers pause and thus reduce demand. There is much noise currently about the negative impact of the new tax laws on housing prices that may lead buyers to offer lower prices to sellers. Sellers may be reluctant to lower their asking prices until there is more certainty on the tax law impact. I believe that strong market towns will continue to be strong as the community characteristics, school system reputation, proximity to transit and other features will offset the tax law impacts. On the other hand, towns that do not have those advantages may suffer greater reductions in home prices as there is little to offset the tax law impacts.
What kinds of housing are in greatest demand in New Jersey, and does that match what is being built?
The greatest demand is for higher-density townhomes, condominiums and rentals near mass transit. That housing is being built in those towns that have undergone a redevelopment analysis and revised their zoning to allow it. In those towns that have not undertaken to amend their master plans and zoning to attract the younger generations, that type of housing is not being built. The belief that higher-density housing is bad for a suburban town because it brings in too many schoolchildren persists despite a decline in pupil enrollment in many towns. There are a sizeable number of commercial and other non-residential structures that have outlived their usefulness but are in desirable locations and could be converted into residential uses. All towns should take a look at their inventory and take steps to allow the conversion of these buildings to residential.
Average home values in most municipalities in New Jersey remain well below what they were more than a decade ago. Do you see that changing any time soon?
Average is a dangerous term here. In those municipalities with the advantages of market-favored locations, good school system reputations, proximity to mass transit, home values have largely recovered or surpassed the pre-recession values. Other towns not fortunate to have those advantages will continue to struggle. The new tax laws will only make the home value recovery more difficult. The type of home also has a large impact on the value recovery analysis. Older homes that have not been upgraded will continue to decline in value. Location is still the major factor in value analysis. Look at the steep increase in home values in some older towns in close proximity to transit. During the latter part of the 20th century, most new development was in the outer suburbs. Now, the more desirable locations and most new housing is in the municipalities close to mass transit. We have also benefited from a low interest rate for many years. Interest rates are likely to rise in the next two years, which will likely not help values. And, by the way, those pre-recession home values were not sustainable and the frothiness was the result of speculators and horrible lending practices.
What kinds of policies would you like to see Gov. Phil Murphy implement that would benefit homebuyers and developers?
I think the allowance of full deduction of property taxes on state income tax returns would be of some help. In addition, a full review of the entire state tax structure should be undertaken. Taking a holistic view of all revenues and expenses at all levels of government has not been done since the 1980s. That is long overdue. A review of the overall land use process from the Municipal Land Use Law through the county and state administrative policies and regulations would also be helpful in finding ways to shorten the regulatory process and align with market needs without sacrificing environmental safeguards. A comprehensive plan to better coordinate the needs of businesses and residents is needed. New Jersey is in competition with the rest of the country for jobs and talent and cannot afford to allow outdated laws and regulations at all levels of government to hurt us in that competition. The Murphy administration’s support for housing for all income levels will be very important in allowing the state to compete favorably. Nimble and flexible are not terms normally associated with government. But the state needs to be more nimble and flexible to compete.