NORTHERN NEW JERSEY / NEW YORK HOUSING 3Q17: New Home Starts Down from Inflated 2016 Levels – Activity in this Market Clusters near Transit Stops
- New Home Starts for 3Q17 are down 50% YoY – mainly due to the number of big condo projects completed in 2016. Annual new home starts are up 0.2% YoY.
- This market is only seeing growth in activity in areas close to transit stops. The closer you are to the Hudson River the more advantages that particular market will have in terms of buyers looking to buy and builders looking to build in that submarket.
- There is very limited land available for new development in the market. Most of the lot deliveries are for high density attached product.
Metrostudy’s 3Q17 survey of the Central/Northern New Jersey & NY Suburbs new home construction market shows 1,009 starts for the quarter, a decrease of 19.2% from 2Q17 and down 50% YoY. The drop off in quarterly starts for 3Q17 is due to the big condo projects that have started in 2016 which had artificially spike up 2016 numbers versus 2017. With that said activity is down a bit in this market. When you look at only detached product year over year both saw decreases as well just not as big as the drop in the activity for all product types including condo.
For the 3Q17 there were 986 closings, down 10.5% over last quarter and down 23.3% from 3Q16. Getting homes sold and occupied for 4Q17 will be essential to gauge the health of this market as we wrap up 2017. In 3Q17 annual starts ended the quarter with 6,020 new homes started which was a decrease of 14.6% off the annual pace last quarter. Year over year the pace is up .2% over 3Q16. Annual closings decreased by 6.8% off last quarters annual pace ending the quarter at 4,101. Year over year saw annual closings decrease 11.4%.
“This market is only seeing growth in activity in areas close to transit stops,” said Quita Syhapanya, Regional Director for Metrostudy’s New Jersey and New York Suburbs market. “This market has seen growth in pockets east towards the Hudson River, but that growth is not felt in the western parts of the region. There used to be a time when larger subdivisions had plenty of opportunities for prospective buyers to choose from when developers/builders were able to build homes on larger farmland in decades gone by. Those opportunities today are few and far between. Most of the activity that is spurring this market continues to be multi-family housing close to the river with easy access to public transit in and out of NYC.”
For 3Q17 there are 7,471 Vacant Developed Lots (VDL) in the market, a 4.7% increase in developed lots in the region from 2Q17. Year over year saw a decrease in available lots by 6%. This region has 14.9 months of supply of vacant developed lots remaining. With an annual starts rate of 6,020 it would take 14.9 months to go through the remaining lots at this pace. A healthy market supply level for equilibrium would be between 24 to 30 months. The Northern New Jersey/NY Suburban market continues to be under supplied. Lot affordability is a big concern in this market and is important in a market that does not have much supply remaining with land scare as well.
There were 1,345 lots delivered into the market this quarter. Year over year lot deliveries are down 35.6% from 3Q16. There is very limited land available for new development in the market. Most of the lot deliveries are for high density attached product. Developers will have to get creative to get these new project pipeline projects through for approval with limited land opportunities remaining. This market is fully mature with many of the open land available to develop protected and will remain that way.
Central NJ started 561 homes in 3Q17 which is a decrease of 2.3% from prior quarter. For the 3rd Quarter year over year saw a decrease of 19.9% over the starts from last year. Annually starts are down 5.4% from last quarters pace ending 3Q17 at 2,451. Looking at closings for 3Q17 saw 586 homes occupied for the quarter. Closings are down 7.7% quarter to quarter and down 16.4% year over year. Annually closings decreased by 4.7% off of the pace of last quarter’s. Central NJ has seen some challenges getting subdivisions started and slow new home building activity. There is a sign of future activity with new lots being developed. Over the course of the past 4 quarters new lots are up 17.3%.
Northern New Jersey’s annual new home starts are at 2,761 which is a 23.2% decrease from last quarter. Year over year the numbers are up by 11.4%. Annual closings decreased by 5.7% quarter to quarter and year over year decreased by 9.7%. Any overhang of unoccupied finished projects will be a concern as condos have seen the biggest development in this market and the largest price appreciation. As it stands today the Northern NJ market is positioned for further growth being close to NYC, but challenges remain with lack of land available.
The NY Suburbs (Westchester, Rockland, Dutchess, Putnam and Orange) has seen a decrease in annual starts by 6.5% quarter to quarter. It’s up 7.3% year over year ending 3Q17 with 807 annual starts. Annual closings for the quarter are down 14.5% and year over year was down 12.4% closing out 3Q17 at 716 new home closings. Vacant developed lots in this market is at 22.1 months of supply which makes the NY Suburbs market a under supplied market much like most of the markets in the Northeast region. The NY Suburbs is looking for ways to reinvent itself to be an attractive alternative to locations in the Northern NJ market.
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