New Jersey Real Estate Report

Good stuff over at NJ Spotlight:

The Real Jersey Comeback

Analysts, developers, and academicians all saw hopeful signs, however faint, for New Jersey’s economy and housing market, but told a state conference in Atlantic City that the highly suburbanized state is poorly adjusted for longer-term changes.

Attendees at the Governor’s Conference on Housing and Economic Development heard a sprinkling of numbers that should bring comfort — although not joy — to Gov. Chris Christie and President Barack Obama.
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Hughes pointed to “transformative” demographic changes that should shape policy in housing and elsewhere. Some fallout already is apparent in the office market, he said. Hughes pointed to formerly “iconic” exurban business campuses like the now vacant BASF building in the Mt. Olive foreign trade zone, or Merck’s Whitehouse Station headquarters, being phased out for a reconsolidation to Summit.

Those sort of sprawling business centers are rapidly becoming relics, “along with the McMansions and starter-castles scattered across our countryside,” Hughes said.

Transportation costs, salary pressures, the sparseness of surrounding communities. and changes in personnel priorities are all pushing against the suburban patterns that have reshaped America since World War II, he said.
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That is particularly a challenge in a state generally considered with Connecticut as the most suburbanized in the nation. Such state rankings can vary by population, land area or other factors, but as Newgeography.com put it last year, “New Jersey virtually defines suburbanization in the United States.”

Just as significantly, the rising “millennial” generation born after 1977 is burdened by student debt, and the poor job climate is more attracted to urban areas with cheaper housing and nearby amenities, Hughes said. For purposes of the housing market, they also could be labeled the “Renter Generation,” he said.

“One of the big questions is qualifying for a mortgage,” agreed Peter Reinhardt, president of the Kislak Real Estate Institute at Monmouth, sharing a panel with Hughes. Mortgage borrowing standards have become tougher, and some lenders are far less active, than before the recession, he said. He cited a recent study by the John Burns Consulting Group of San Diego that the number of first-time home buyers had dropped 20 percent in three years.

“Federal student loans now account for about 18 percent of all consumer credit” outstanding, equivalent to 6 percent of U.S. gross domestic product, he said.

But as baby boomers speaking to an audience largely of similar age, Reinhart and others were not entirely inclined to let the younger generation off the hook for its economic predicament.

While their parents were generally in better financial shape at the same age, some of that is millennials finding other ways to dispose of their money, Reinhardt said, “gym memberships, premium cable TV, iPhones, iPhone apps, and most importantly, the cost of a latte.”
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Many of America’s cities are already coming back from the doldrums of the late 20th Century, but in a place like New Jersey, “remaking the suburbs is going to be the greatest revitalization project we have ever seen.”

Again, various panel discussions anticipated him. Otteau surprised many in his audience by pointing out that only 30 percent of the state’s households now have children living at home. That figure drops when scanned for two-parent households.

That is another demographic change that undermines the suburban development pattern that has marched across New Jersey, according to Hughes. While well suited for a boom in child-rearing by parents in a stable economy, sprawl is less suited to current times, he said.

From the Record:

Area economy still keeping adult children tied to mom and dad

They could never afford their own home but their daughter changed the picture recently, clearing that financial obstacle and allowing them to all live together in one common residence in West Milford.

“It’s a wonderful thing because mom and dad never owned a house before and now they’re all under one roof,” said Karen Wiedmann, broker associate with Re/Max Country Realty, West Milford.

Yet in this tumultuous economy their story is not unique. Several Suburban Trends area sales agents say they too know of experiences where multiple generations live together and often shoulder together the high cost of living in New Jersey.

Walter Molony, public affairs spokesman for the National Association of Realtors (NAR), calls this a “temporary phenomenon” that created “a lot of uncomfortable living situations” from 2008 through 2011 as the floundering economy forced adult children to stay with parents or move in with a lot of roommates.

The real estate industry considers this a pent-up demand for housing, amounting to just shy of 2 million households a year. But it is a demand that Molony expects will begin to be addressed as the real estate market emerges from its “rut of the previous four years.”
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Beyond economics, there is also a cultural influence that leads extended families to share their living space. Those who emigrated from countries where multi-generational housing is more common are not likely to change their habits with economic recovery.

Though Molony anticipates that pent-up demand will help to boost the growth of home sales, for right now, northern New Jersey sales agents continue to work with clients looking for expanded family housing.

“I’m seeing people divorcing and migrating back to their parents’ residences,” said Robert Burr, sales agent with Realty Executives in West Milford.

Then there is the trend of young adults never leaving their parents’ home, or moving back after a bout of independence cut short by housing costs, a trend Wiedmann said she definitely encounters.
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According to the Pew Research Center, by 2009, some 51.4 million Americans were living in multi-generational households, or about 16.7 percent of the population, said Steve Melman, director of Economic Services for the National Association of Home Builders (NAHB).

“That is up from the low of 12.1 percent of the population in 1980,” he said.

“The drivers are economic and cultural. Many college students have returned home, but so have unemployed relatives.… The economic strategy works…. Among the unemployed, the 2009 poverty rate was 17.5 percent of those living in multi-generational households, but 30.3 percent for unemployed persons not living in those larger households,” said Melman.
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According to Halpin, the number of households headed by someone under 25 years old has fallen steadily over the last four years in New Jersey, supporting the contention that more young adults are remaining in the family nest.

She reports there were 74,466 households headed by someone under 25 years in 2007 in New Jersey, 63,324 in 2010, and 58,700 in 2011.

The Great Recession seems to have taken the greatest toll on households headed by those under 25 years of age, accounting for the biggest demographic change from 2007 to 2010.