NORTHERN NEW JERSEY / NEW YORK SUBURBS HOUSING 4Q18: As Starts Pace Slows, Affordability & Lot Availability Remain Key Issues Impacting Growth
- 4Q18 Quarterly New Home Starts Down 13.4% YoY; Annual Starts Up 4.6% YoY
- Quarterly Closings Up 20.6% YoY; Annual Closings Up 5.8% YoY
- Affordability is taking the forefront of a slowing housing market; the NJ market has the highest real estate taxes and the cap on state, local and property taxes will only exacerbate the issue.
- There is very limited land available for new development in the market; the pipeline is growing slowly since most undeveloped land in the state is environmentally protected and the rest of the state is overbuilt with older housing stock.
Metrostudy’s 4Q18 survey of the Central/Northern New Jersey & New York Suburbs new home construction market showed 952 starts for 4Q18, a 3.9% increase from 3Q18 and a 13.4% decrease from 4Q17. There were 1,070 closings in the quarter, down 0.5% from 3Q18 and up 20.6% from 4Q17. Annual starts ended 3Q18 with 3,897 new homes started, down 3.6% from the annual pace last quarter and up by 4.6% over 4Q17. Annual closings ended the quarter at 3,653, up by 5.3% from the annual pace in 3Q18 and up 5.8% YoY.
Below is a breakout of starts and closings in the three regions covered in this market:
- Central New Jersey (including condos) started 538 homes in 4Q18, a 1.1% decrease from the prior quarter and down 26.9% YoY. Annual starts were 2,651, down 6.9% from last quarters pace and down 5.9% YoY. Looking at closings, 4Q18 saw 688 homes occupied for the quarter, down 4.4% QoQ and up 23.1% YoY. Annual closings increased by 1.8% YoY, ending the quarter with 2,456 closings.
- Northern New Jersey (including condos) had 1,669 annual new home starts in 4Q18, a 0.6% decrease from last quarter and down by 13% YoY. Annual closings increased by 12.9% QoQ and increased by 6.6%. YoY. The Northern NJ market continues to be the most active market in the Central/Northern NJ & NY Suburbs region.
- The New York Suburbs (Westchester, Rockland, Dutchess, Putnam and Orange Counties) ended 4Q18 with 794 annual starts, down by 4.5% QoQ and up 1% YoY. Annual new home closings for the quarter numbered 733, down 4.6% QoQ and down 4.6% YoY. Vacant developed lots in this market were at 20.6 months of supply.
“The Central/Northern NJ market will continue to benefit from buyers who are priced out of the NYC market as well as a rental alternative to the high rents on the other side of the river,” said Quita Syhapanya, Regional Director of Metrostudy’s New Jersey and New York markets. “The only issue now is that the NJ market has the highest real estate taxes and the cap on state, local and property taxes will only exacerbate the issue. New Jersey remains an unaffordable market and has to find a way to bring in new companies to the state which will draw population and potential new homes.”
For 4Q18 there were 6,370 Vacant Developed Lots (VDL) in the market, a 3.8% increase from 3Q18 and up 6.4% from the same quarter last year. This region had 19.6 months of supply of vacant developed lots remaining. Months of supply increased by 1.4 month QoQ and was up 0.3 months YoY. A healthy market supply level for equilibrium would be between 24 to 30 months. There were 1,185 lots delivered into the market this quarter, up 2.6% from 4Q17. Annual lot deliveries ended 4Q18 with 4,135 lots delivered into the market, down 5.3% from the prior year. There is very limited land available for new development in the market.
“The pipeline is growing slowly since most of the undeveloped land in the state is environmentally protected while the rest of the state is overbuilt with older housing stock,” said Syhapanya. “It doesn’t help that local cities and towns are still determining the amount of affordable housing they must provide. This has a negative effect on market rate new construction as these mandates are imposed pushes taxes up for local residents who in turn end up with a higher tax bill that the ‘middle class’ in NJ can’t afford. With affordability taking the forefront of a slowing housing market and mortgage rates rising it is understandable that both builders and consumers are concerned with where the economy and housing market will be heading in 2019 and beyond.”
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