NJ housing expert: ‘Good news, but not enough of it’
Most of the latest numbers related to the housing market in New Jersey point to solid movement in the right direction, but can conditions ever return to the way they were before last decade's recession?
New Jersey's real estate market in 2015 was the most robust its been since the economic downturn that began at the end of 2007. On top of that, homebuilding in New Jersey, represented by the number of authorized permits, saw its strongest start in a decade during the first quarter of 2016.
But Patrick O'Keefe, director of economic research at CohnReznick in Roseland, said while it's possible New Jersey's housing market will perform even better this year, there's one significant measure that can't be overlooked and forecasts a doubtful bounce-back to pre-recession levels.
Figures released Thursday morning, O'Keefe noted, point to a near-record low for New Jersey's homeownership rate — the share of housing units that are owned by the occupant.
"Back in 2005, the homeownership rate peaked at 71.3 percent," O'Keefe told New Jersey 101.5. "Today's it's down at about 61 percent."
According to O'Keefe, it's unlikely New Jersey's rate will ever return to those record levels. And that's not only due to economic factors. "Attitudinal shifts" have resulted in a weaker desire to own a home compared to the years prior to the housing meltdown, he said.
"In addition, younger adults today recognize that over the course of their careers, they're going to be far more mobile not only among employers, but across state lines," O'Keefe said. "Tying themselves down to a particular piece of real estate that they may have to sell at an uncomfortable time, when prices aren't as robust as they could be, are things that cause them to hesitate in making the purchase decision."
At the same time, an elevated inventory of distressed mortgages and a shortage of inventory of single-family homes have resulted in a constrained rebound of housing activity in the Garden State. New Jersey currently has the largest share of mortgages that are 90 or more days in arrears, or already in the foreclosure process.
"We've got good news in several reports, but just not enough of that good news," O'Keefe added.
Multifamily development, comprised many times of rental units, has accounted for an overwhelming majority of new home construction in New Jersey.
Construction authorization of multifamily dwellings in New Jersey experienced a sharp drop in March but still made up more than half of all permits issued.
New Jersey home prices, on average, could return to a level prior to the recession, according to O'Keefe. But there still would be a sizeable number of properties - purchased between 2006 and 2008, predominantly - with market values that have not fully recovered.