From the Otteau Group:
Home purchase contracts in New Jersey declined in August by 2% compared to the same month last year. Almost half of the markets in NJ have seen a decline in the pace of home sales on a year-to-date basis. As a result, the number of year-to-date purchase contracts (January-August) in New Jersey is up marginally by 0.8%, or roughly 600 contracts. While this is partially attributable to an under-supply of housing inventory, a growing affordability gap due to rising prices and interest rates is a significant factor.
While the number of year-to-date home sales has increased by 0.8% overall, that is not the case for all price ranges. Contract activity for homes priced under $400,000 have declined due to supply shortages, with unsold inventory having dropped by 12% year-to-date. Sales have stagnated in the $1+mil-$2.5mil range. At the opposite end of the spectrum, contract activity for luxury priced homes over $2.5-Million has increased by an impressive 12% (243 in 2017 vs. 272 today).
Shifting to the supply side of the equation, inventory remains restricted, which is limiting choices for home buyers. The number of homes being offered for sale today in New Jersey continues to be at its lowest point since 2005, having declined by 760 (-2%) over the past year. This is also 42% (31,000) less than the amount of homes on the market compared to the cyclical high in 2011. Today’s unsold inventory equates to just 4.1 months of sales (non-seasonally adjusted), which is the same as this time last year.
Currently, all of New Jersey’s 21 counties have less than 8.0 months of supply, which is a balance point for home prices. Middlesex and Essex Counties have the strongest market conditions in the state with just 3.1 months of supply, followed by Union (3.4), Passaic (3.5), Monmouth (3.5) and Camden (3.8), which all have fewer than 4.0 months of supply. The counties with the largest amount of unsold inventory (6.5 months or greater) are concentrated in the southern portion of the state including Cumberland (6.7) and Salem (6.8).
Demand for rental apartments remains strong in NJ with statewide occupancy rates being among the highest in the US, which has allowed for average asking rents to rise for 33 consecutive quarters. The Central NJ region has the lowest vacancy rate in the state at 2.7%, which is slightly higher from the prior quarter’s 2.5%.
In spite of these strong metrics, vacancy rates have been rising recently, except for NYC where vacancy declined from 5.6% to 5.3% in the Q2. The vacancy increases in New Jersey is attributable to the staggering pace of new construction deliveries. In 2008.Q2, there were 6,400 apartment units being constructed, which has increased to over 30,000 units presently, equating to an astounding 368% rise in apartment construction over the past decade. The pace of new construction deliveries in key markets like Hudson County is especially rapid with almost 15,000 apartment units currently in construction compared to just 4,300 in 2008, representing a 248% increase.