From the Record:
North Jersey’s lower-priced neighborhoods were hit harder by the housing downturn last year, as home values plummeted by 9.1 percent in Passaic County, while Bergen County saw a milder 1.9 percent drop.
The split reflected higher rates of foreclosures and unemployment in lower-income areas, as well as tighter mortgage standards for marginal buyers.
Bergen County’s median home value was $412,000 last year, while Passaic’s was $294,000, according to an analysis of sales data by The Record. Home values in the region have declined 15 to 20 percent since they peaked in 2007, and are back to the levels of 2004.
Even with these declines, some analysts say the national and regional markets have not yet hit bottom.
“While the housing market still has a pulse, it remains faint,” East Brunswick appraiser Jeffrey Otteau wrote in a recent report on the statewide real estate market.
The price drops have been painful for homeowners who bought at the market’s peak. Brian Berkowitz, a watchmaker, paid $420,000 for a Hawthorne home in 2006, and sold it last year for $350,000 after a move to Texas. He had to bring money to the closing to pay off the mortgage.
“Of course, I was upset,” said Berkowitz, 36. “That’s life. There’s nothing you can do about it.”
On the other hand, the lower prices offer opportunities for buyers. Dave and Kelly Maver, for example, looked to Passaic County when they decided to move from their town house in Garfield. They were expecting their third child and needed more room.
“We started to look in Bergen County, but there was nothing we could afford,” said Dave Maver, who teaches in Paterson. “Even in a down market, we couldn’t find anything under $400,000 that didn’t need considerable work.” They ended up spending $260,000 for an updated four-bedroom house in West Milford, near Upper Greenwood Lake.
But the biggest factor in Passaic County’s larger price drop is probably the housing distress in urban areas. Prices are down 35 to 52 percent in Paterson, Haledon, Passaic and Prospect Park since the peak of the real estate boom in the mid-2000s.
In Paterson, about half of all sales are either short sales or foreclosures, according to John Susani, broker/owner of Coldwell Banker Susani Realty in Paterson. These tend to sell at a steep discount to the market.
But the larger pattern is that lower-priced areas in both counties — such as Garfield, Wallington and Ridgefield in Bergen — have experienced the largest declines. At the same time, median prices rose last year in some wealthier communities in northern Bergen County, including Glen Rock, Allendale and Old Tappan.
Over the four-year course of the real estate downturn, prices have dropped 30 percent in North Jersey’s lowest-priced communities, compared with 20 percent in lower middle-class areas and 17 percent at the high end.
Otteau said that pattern is to be expected in a recession, which has more impact in what he calls “secondary” housing markets, which are less desirable than primary markets with easier commutes and high-ranked school systems. Homeowners in secondary markets tend to have lower incomes and are more vulnerable to layoffs when recession hits, Otteau said.
In both counties, the number of sales last year was less than half the level seen during the housing boom. Even with the boost of a federal home buyer’s tax credit that expired in 2010, about 6,000 homes sold last year in Bergen and 2,700 in Passaic, compared with up to 13,000 homes a year sold in Bergen and 6,300 in Passaic during the peak years.
Prices are likely to continue to decline in the area, especially in Passaic County for the rest of this year, in part because foreclosures remain a threat, Otteau predicted. While the volume of foreclosures has dropped over the past six months in the wake of questions over lenders’ handling of legal documents, those issues are likely to be resolved soon. That will restart the foreclosure engine, dumping more foreclosed properties on the market, Otteau said, especially in urban and rural areas.
“This could trigger a next round of price declines in those submarkets,” Otteau said.