Posted in New Jersey Market | Posted on 08-14-2014 | Written by Metrostudy News
August 2014: Metrostudy today released their 2Q14 survey of the New York/New Jersey suburban region’s housing market, showing that strong demand is fueling price increases and growth even as lot supplies will hamper further development. The Northern New Jersey/NY Suburbs region recorded 1,271 starts in 2Q14, up 32% from the prior quarter total of 958. The 1,271 still remains less than the output for 4Q13 when there were 1,514 starts and 3Q13 when there were 1,671.
“The demand in this market is being spurred on by potential buyers who can’t afford to live in New York City and are choosing to look in counties right outside of the city,” said Quita Syhapanya, Director of Metrostudy’s Northeast Region. “The Northern New Jersey/New York suburbs have seen price increases month to month, quarter to quarter and year over year. Builders have no choice but to build more homes at a more expensive price point on larger lots since many of the municipalities are not bending in the requirements for density.”
Product type breakdown shows that detached closings increased 12.1% to 509. Starts increased by 24.7% to 574 units compared to 1Q14. Attached homes saw a big swing in starts to 707 units from the 498 in 1Q14, a 41% uptick. Closings saw a 20% decrease to 610 from the 772 from the prior quarter. The first quarter saw a big increase in closings and it could be due to buyers moving in at the end of the 1st quarter as opposed to moving in the beginning of the 2nd or postponing the move from the end of 4Q until 1Q14 due to the extreme weather that may have delayed the move.
Total housing inventory stands at 8,710 units, up 2% from 1Q14. Total housing inventory is made up of models, units under construction, and finished vacant units. In 2Q13 Housing Inventory was at 7,278 units and has increased by 19% to end 2Q14. Under construction inventory is at its highest count since Metrostudy started collecting inventory data in 2Q13. Units under construction stand at 4,145, up 4% from 1Q14. It is a 33% positive swing from 2Q13 when there were 3,108 units under construction. Finished vacant inventory increased slightly to 4,261 from the 4,203 vacant standing units in 1Q14.
There is significant pricing pressure in this market: the median closing price for a new home closed in the Northern New Jersey/NY Suburbs for the second quarter was $421,800, up 9% from 1Q14 and 4% year over year. The median closing price for a single family home for 2Q14 was $466,000, a 5% increase from 1Q14.
For 2Q14 there are 9,483 Vacant Developed Lots (VDL) in the Northern New Jersey/NY Suburbs market. That represents a .67% increase in developed lots in the region from the 9,420 lots available in 1Q14. When Metrostudy started collecting Vacant Developed Lots in this region for 2Q13 there were 10,852 lots available. From 2Q13 to the 2Q14 there has been a 12% decrease in developed lots. With an annualized starts rate of 5,414, this region has 21 months of supply of vacant developed lots remaining. A healthy market supply level for equilibrium would be between 24 to 30 months. The Northern New Jersey/NY Suburban market is extremely under supplied when it comes to finished lots.
There were 1,334 lots delivered into the market as VDL which is the highest level since Metrostudy started collecting the data. This represents a 44% increase in lot deliveries from the 926 delivered in 1Q14. Even with an increase in lots delivered the volume needed to meet the demands of the market is still not on pace since there is only 21 months of supply of VDL.
The Top 10 suburbs for the New Jersey/NYRegion by Starts based of Metrostudy’s Data
“Much of the lot development not accounted for in our survey is occurring in the multi-family rental product,” said Syhapanya. “These units are coming on-line fast with developers looking to gain access to the movement of younger buyers burdened with school debt, short on a down payment, and quite simply choosing a lifestyle that is centered on walkability and no mortgage to hold them in one place. The rental route is picking up a good amount of the building activity as well as gaining access to new household formations that can’t afford to buy.”
While the increase in inventory for new homes is a welcome sign, it just isn’t enough at this time to satisfy the demand in this market. Prices will continue to rise until the right balance is found with homes in the resale market and new homes for sale are readily available for potential buyers.
For information contact: Quita Syhapanya @ 215.893.9890 Ext. 231
Metrostudy, a Hanley Wood company, is the leading provider of primary and secondary market information to the housing and related industries nationwide. Established in 1975 in Houston, Metrostudy provides research, data, analytics and consulting services that help builders, developers, lenders, suppliers, retailers, utilities and others make investment and business decisions every day. www.metrostudy.com
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