From the Record:
Two years ago, builder Meron Sason paid $1.5 million for a small Cape Cod on a wooded lot in Saddle River, tore down the home, and started to build a luxury stone-and-cedar house.
Now, with the new six-bedroom house on the market for $3.87 million, Sason has run smack up against the reality of a new housing market. Not only have sales slowed overall, but sales at the top of the market are slowest of all — and Sason is afraid he may not be able to sell the house at a profit.
“When we started, we thought we’d be able to sell for $4.5 million,” Sason said. “Then, the profit would have been OK.”
Many analysts say there are two real estate markets: the middle-class market, where sales are still chugging along, and the luxury market, where Sason and many other sellers are waiting — and waiting — for buyers.
“You do have kind of a bisected market,” said Karl Kern of Kern & Rogers in Wyckoff.
Signs of an imbalance between the supply of luxury housing and demand for it began appearing around the time of the 2001 recession, said Jeffrey Otteau, an East Brunswick real estate appraiser who analyzes the Garden State’s housing market. That recession followed the dot-com bust and a bear market on Wall Street; investors suddenly were unable to think about buying expensive houses.
Now, the supply of houses in North Jersey with an asking price of $2.5 million or more is so high that it would take about 2½ years, at the current sales pace, to sell them all, Otteau said. By contrast, the supply of houses selling for less than $600,000 ranges from about five to eight months, depending on the county.
“Sellers have to be keenly aware of what is a competitive price, and they have to get a little lucky to sell in this price range, because there are so few buyers,” said Kern.
The market for high-priced houses is always going to be smaller than the market for starter homes; after all, there are more middle-class people than rich people. But this trend may accelerate in future years, Otteau said. For one thing, New Jersey has been slow to create high-paying jobs over the last several years; many of the Garden State’s new jobs are in low-wage, low-skill industries such as restaurants. Waitresses can’t buy million-dollar homes.
And the glut of high-priced houses will increase over the next decade as baby boomers retire and unload their six-bedroom empty nests, Otteau said.