NORTHERN NEW JERSEY / NEW YORK SUBURBS HOUSING 1Q17: Strong Upswing in Starts Driven By Rising Demand for High-Density, High-Rise Projects
- 1Q17 Quarterly New Home Starts Up 34.7% YoY; Quarterly Closings Down 14.2% YoY.
- Northern NJ saw starts grow 1% YoY due to high-rise starts; getting these completed units moved into quickly will be important for the region’s housing market.
- 1Q17 lot deliveries were up 13% YoY and annual lot deliveries were up 94.9% YoY; most of the lot deliveries are for high density attached product.
Metrostudy’s 1Q17 survey of the housing market in the Central/Northern New Jersey & NY Suburbs region shows the new home market had 2,158 starts in the quarter, up 13.8% from 4Q16 and up a considerable 34.7% from 1Q16. There were 928 closings for 1Q17, down 9.7% from 4Q16 and up 14.2% from the same quarter last year. In 1Q17, annual starts had 8,194 new homes started, up 7.3% from the annual pace last quarter and up 61.5% over 1Q16. Annual closings totaled 4,366 as of 1Q17, a 3.4% decrease QoQ and a 1.9% decline from 1Q16.
“A majority of the swing upward this quarter can be attributed to high-density projects in this market not only in Hudson County, but any project that is near public transportation,” said Quita Syhapanya, Regional Director for Metrostudy’s Northern New Jersey & New York Suburbs market. “The demand for housing in this market is not just a NY-centric move from folks who are looking for alternative living outside of the expensive NYC market, to a market that is seeing growth throughout the eastern part of NJ close to the Hudson River or town centers like cities in Hoboken and Jersey City that appeal to the millennial generation. You are also seeing increased activity in active adult communities in Central New Jersey.”
In 1Q17, Northern New Jersey’s activity increased as new home starts were up to 4,335, a 3.4% increase from last quarter and up by 133.1% YoY, due to the construction starts of high-rise projects. Annual closings decreased by 6.9% YoY and were down 1.6% QoQ. The increase in starts will make it important for the housing market in this region that these units get moved into quickly when these multi-family units complete. Any overhang of unoccupied units could be a concern.
Central NJ started 778 homes in 1Q17, a 44.1% increase from the prior quarter and an uptick of 10.5% over the starts from last year. Annually starts are up 2.8% from last quarter’s pace, ending 1Q17 at 2,729. Looking at closings, 1Q17 saw 548 homes occupied for the quarter, up 3.8% QoQ and down 17.6% YoY. Annual closings slowed down 4.5% off last quarter’s pace. Central NJ has seen increased demand for new attached housing communities, especially in areas close to public transit. The increased activity has brought Central NJ’s VDL months of supply down to 16.7 months.
The NY Suburbs (Westchester, Rockland, Dutchess, Putnam and Orange) saw 1,130 annual starts, up 42.7% QoQ and up 37.1% YoY. Annual closings for the quarter were down 2.3% QoQ and down 3.6% YoY, closing out 1Q17 with 836 new home closings. For the first quarter, NY suburbs quarterly starts experienced impressive gains – up 204.8% YoY. VDL months of supply had a big drop to 15.2 from 24.3 in 4Q16.
For 1Q17, there were 7,018 Vacant Developed Lots (VDL) in the market, representing a 4.1% decrease in developed lots in the region from 4Q16 and a 2% decrease YoY. This region has 10.3 months of supply of vacant developed lots remaining based on the annual starts rate. Months of supply decreased by 1.2 months from the last quarter. A healthy market supply level for equilibrium would be between 24 to 30 months. There were 1,858 lots delivered into the market this quarter, up 13% from 1Q16. Annual lot deliveries ended 1Q17 with 8,054 lots delivered into the market, up 2.7% QoQ and up 94.9% YoY. Most of the lot deliveries are for high-density attached product. Seeing how fast those homes get absorbed will be important early on in 2017.
“The Northern/Central NJ and NY Suburbs market saw increased activity for 1Q17, but this market continues to be limited in viable vacant developed lots,” said Syhapanya. “Lot affordability is a big concern in this market and is important in a market that does not have much supply remaining. The opportunities that do remain are challenged sites that will require patience and capital to see to the finish line. Developers are actively pursuing sites that can accommodate high density projects to appease demand. The challenge comes from the municipalities and residents who oppose this type of development. It will be important for both to work together to keep residents and attract new ones.”
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