Rising Rents Could Be Key to Return to Housing

Posted in New Jersey Market | Posted on 11-12-2014 | Written by Metrostudy News

  • 3Q14 New home starts are down 10% from 2Q14, and 32% from 3Q13
  • Home prices are stabilizing with a slowing rate of increase: the median closing price for a new home is now $419k, up 3% YoY
  • Multi-family development is the leading driver in the market; rising rents may drive buyers into new homes

November 2014: The Northern New Jersey/NY Suburbs region recorded 1,252 observed closings for 3Q14, a 10% increase from 2Q14. Monmouth, Middlesex, Ocean, and Orange counties had the largest numbers of closings for the region. These four mentioned counties closed over 100 units in the Northern New Jersey/NY suburbs market for the 3rd quarter, accounting for over 50% of the suburbs region observed closings.

“New home construction for starts and closings for the third quarter has slowed down on an annualized basis,” said Quita Syhapanya, Regional Director of Metrostudy’s Northeast region.  “The region recorded 1,138 new home starts in 3Q14, down 10% from 2Q14. Year over year comparison from 3Q13 versus 3Q14 saw a significant drop off in new home starts activity by 32 percent.  Breaking it down by product type shows that detached closings increased 10% to 562 from 508 the prior quarter, an increase of 1% over 3Q13. Starts increased by 2% to 581 units in comparison to the 566 closed in 2Q14, but saw a decrease of 3% compared to 3Q13. Attached homes saw a decrease in starts to 557 units from the 708 in 2Q14 which is a 21% decrease and a 48% decrease compared to this time last year. Closings saw a 9% increase to 686 from the 629 from the prior quarter, but saw a significant drop off by 35% in comparison to 3Q13.”

Total housing inventory is at 8,493 units, a 1% decrease from 2Q14. It is a slight uptick from the 2nd quarter of 2013 looking at the data at this time last year, by 2% when inventory was at 8,273. Units that are under construction stand at 3,878 and show a 2.9% decrease from the prior quarter. Year over year looking at the 3rd quarter saw an 18% positive swing from this time last year when there were 3,267 units under construction. Finished vacant inventory increased to 4,320 from the 4,289 vacant standing units in 2Q14. Total Inventory months of supply for the 3rd quarter is at 21.6 months which increased from 20.3 months from the 2nd quarter.

The median closing price for a new home closed in the Northern New Jersey/NY Suburbs for the third quarter was $419,400, up 1% from 2Q14 and 3% since 3Q13. The median closing price for a single family home for 3Q14 was $482,600, which is a 5% increase year over year and a 1% increase from 2Q14. Pricing for new home construction has slowed down for 2014 and is expected to continue with moderate increases.

For 3Q14 there are 8,954 Vacant Developed Lots (VDL) in the Northern New Jersey/NY Suburbs market, a 2% decrease from 2Q14. From the 3nd quarter of this year versus the 3rd quarter of last year there has been a 7% decrease in developed lots. This region has 22 months of supply of vacant developed lots remaining. With an annualized starts rate of 4,762 it would take 22.6 months to go through the remaining lots at this pace. This is a two month increase from the months of supply last quarter where there was 20.8 months. A healthy market supply level for equilibrium would be between 24 to 30 months. The Northern New Jersey/NY Suburban market remains under supplied when it comes to finished lots.

There were 891 lots delivered into the market. This is a 27% decrease in lot deliveries from the 1,226 that was delivered in 2Q14. Most of the lot deliveries in the second quarter were due to the catch up in demand in the market from 1Q14 and some from 4Q13. Year over year the lot deliveries is actually up by 8% from the 824 delivered in 3Q13.

The rental market in Northern New Jersey is on fire right now and much of the development is occurring along the Gold Coast in the multi-family product. There are some who are looking at this product type in this market as being ripe for a bust. With the rental market being as strong as it is developers seem to still be very bullish on multi-family even with warnings of some trouble in the near future. There is a strong preference for multi-family development, but there are signs that for sale new home construction is still on the mends and moving in the right direction.

Currently there are 71,977 lots sitting in the pipeline in various stages of the entitlement process in 3Q14. That is a decrease from the 72,877 lots in the futures pipeline for 2Q14. The pipeline is getting replenished and has actually increased 15% year over year.

Overall the pace of new home construction in the Central/Northern New Jersey & New York Suburbs market has slowed down. This is due to many factors including the significant increase in 2Q14 spurred on by developers and builders playing catch up due to stalled construction during the 1st quarter going back to the end of the 4th quarter of 2013. On a rolling four quarters there was 4,762 new homes started ending 3Q14. To end the 2nd quarter the pace was at 5,311 new home starts. It was a 10% decrease in pace annualized. The same can be said in the annualized closings number where there was a 7% decrease from the 5,084 ending 2Q14 to the 4,713 ending 3Q14.

“Development of the multi-family product in the Northern New Jersey market in particular has been the leading driver in the market,” said Syhapanya.  “Although this is not news to anyone there may be a point at which paying skyrocketing rents just doesn’t make sense. You have a variety of funds that are looking to add to their portfolio who no longer see any attractive play in the rental market. They are actually looking to put on the developer hat and will look to complete a building from beginning to end because of the high prices demanded for rental properties.”

The rental market being an attractive alternative for people looking for a place outside of Manhattan in the Northern New Jersey market was once a cost saving alternative. With rents rising as fast as they are this could be the key ingredient in getting home buying back in play in particular new home construction which according to the numbers is sluggish at best to end 3Q14.

If you exclude condo product new home construction numbers still show some positive headwinds. Closings are up by 15% quarter to quarter and starts are up 5%. Year over year both numbers decreased 7% and 1% respectively. Overall there are some signs that point north, but there are other indicators that point in the other direction. If the job market continues to improve so will housing.

For information contact
Quita Syhapanya
215.893.9890 x231
qsyhapanya@metrostudy.com

About Metrostudy

Metrostudy is the leading provider of primary and secondary market information to the housing and related industries nationwide. Metrostudy provides research, data, analytics and consulting services to help builders, developers, lenders, suppliers, retailers, utilities and others make investment and business decisions every day. For more information, visit www.metrostudy.com

About Hanley Wood

Hanley Wood, LLC is the premier information, media, event, and strategic marketing services company serving the residential, commercial design and construction industries. Utilizing the largest editorial- and analytics-driven construction market database, the company produces powerful market data and insights; award-winning publications, newsletters and websites; marquee trade shows and executive events; and strategic marketing solutions. To learn more, visit hanleywood.com.

Rising Prices & Demand Meet Restricted Lot Supply: Multi-Family Developers Stand to Gain

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.

Philly Mh closings price yoy

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

NJNY top ten subs 2Q14

“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
Email qsyhapanya@metrostudy.com

About Metrostudy

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

About Hanley Wood

Hanley Wood is the premier information, media, event, and strategic marketing services company serving the residential, commercial design and construction industries. Utilizing the largest editorial- and analytics-driven construction market database, the company produces powerful market data and insights; award-winning publications, newsletters and websites; marquee trade shows and executive events; and strategic marketing solutions. To learn more, visit hanleywood.com.

Northern New Jersey Housing Survey 1Q14: The Holding Pattern Continues

Posted in New Jersey Market | Posted on 05-27-2014 | Written by Metrostudy News

May 27, 2014: Metrostudy’s 1Q14 survey of the Northern New Jersey/NY Suburbs housing market showed that the housing recovery that blew through the first half of 2013 has slowed down quite a bit in 2014, especially in new construction. The region recorded 1,194 observed closings for 1Q14, up 16% from 4Q13. Monmouth and Middlesex Counties had the largest numbers of closings for the Northern New Jersey region: Monmouth closed 149 units and Middlesex County closed 142 units.  The Northern New Jersey/NY Suburbs region recorded 1,241 starts in 1Q14, down 16% from 4Q13.

“Quarterly starts have decreased for the past three quarters in this region,” said Quita Syhapanya, Regional Director of Metrostudy’s Northern New Jersey Market.  “Starts may have decreased for 1Q14, but closings have increased by a healthy rate. The “Winter Vortex” that stalled housing in this region has begun to thaw out with the 16% jump in closings. However, some of the effects of the extreme weather are still a factor in the starts numbers.”

Total housing inventory increased slightly from 8,812 in 4Q13 to 8,860 units in 1Q14. In 2Q13 Housing Inventory was at 7,203 units and has increased by 23% to end 1Q14. Under construction inventory has increased by 338 units which is an 8% increase from the prior quarter. Finished vacant inventory decreased by 298 units in the same time period.  The average closing price for a new home closed in the Northern New Jersey/NY Suburbs for February 2014 was $490,019, up 4% year over year.

For 1Q14 there are 9,780 Vacant Developed Lots (VDL) in the Northern New Jersey/NY Suburbs market, a slight decrease from 4Q13 levels. When Metrostudy started monitoring VDLs in this region in 2Q13 there were 11,118 lots available. Since that time there has been a 12% decrease in developed lots. This region has only a 17 month 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,” said Syhapanya. “Ocean, Monmouth and Middlesex counties have the most lot inventory in the region, and respectively they only have 23, 17, and 18 months of supply.”

The past three quarters the number of finished lots being delivered to the marketplace has increased each quarter, but not at the volume needed to meet the demands of the market.  During the wintery months of January, February and even March developing lots was difficult with the unpredictable weather builders and developers were facing. Any sort of construction or site improvement – from digging up foundations or laying concrete down – was a tall order with either the ground being hard as a rock or a muddy mess that slowed site work progress. With spring finally here and the winter behind us you can expect more lots to be delivered in the coming quarters.

The Northern New Jersey/New York suburb region’s new construction housing market has been in a holding pattern to begin 2014 with small gains in closing, but a lag in activity for starts. Some of the spillover from the weather in 4Q13 still held some of the activity down in January and February with activity starting to pick back up towards the end of March. A good proportion of the new home building activity is occurring in counties right outside of New York City. Bergen County specifically saw 316 starts for 1Q14 with increased demand occurring in the condo market in Hudson County. Buyers are looking outside of New York City for a home as market prices have pushed potential homeowners to neighboring counties right outside of the city.

Overall, the entire real estate market including resales in Northern New Jersey/New York suburbs region is seeing strong price gains in attractive locations. Areas not in prime locations are still climbing back up and may take some time to get to positive equity. The inventory of homes up for sale is still very low in the region, but with spring in the air many potential sellers who were on the sideline may put their homes on the market. This increase in inventory coupled with the increase in demand should help the real estate market expand further in the coming quarters. With inventory being low, prices are continuing to increase suggesting a “sellers’ market”, but as potential sellers feel more confidence in the housing market more homes will get listed and prices should stabilize.

For information contact: quita syhapanya @ 215.893.9890 Ext. 231
Email qsyhapanya@metrostudy.com

About Metrostudy

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

About Hanley Wood

Hanley Wood is the premier information, media, event, and strategic marketing services company serving the residential, commercial design and construction industries. Utilizing the largest editorial- and analytics-driven construction market database, the company produces powerful market data and insights; award-winning publications, newsletters and websites; marquee trade shows and executive events; and strategic marketing solutions. To learn more, visit hanleywood.com.

Mother Nature Stalled Housing in the Northern New Jersey Market – Momentarily

Posted in New Jersey Market | Posted on 02-18-2014 | Written by Metrostudy News

(New Jersey – February 18, 2014) The Northern New Jersey/New York suburb region housing market showed great improvement in 3Q13 but has pulled back a bit for the 4th Quarter. The main factors in the slow-down can be attributed to the government shutdown, mortgage rate increases, lack of first time home buyers, and mother-nature. This is according to a recent report by Metrostudy, a national housing data and consulting firm that maintains the most extensive primary database on residential construction in the US housing market.

The Northern New Jersey/NY Suburbs region recorded 965 observed closings for 4Q13. This is a significant drop off from the closings recorded in the third quarter. It is a 39% decrease in closings. There were 1,642 starts in 4Q13. The starts numbers had a slight dip from the prior quarter by about 9 % where there were 1,819 starts. “The activity levels have dropped a bit in starts and a good amount in closings. This can be due to several factors and the most obvious is the fact that the fourth quarter typically will see a drop off in activity. The other factor is that the weather has not been beneficially to builders during the fourth quarter with record amounts of snow falling across the Northeast,” said Quita Syhapanya, Regional Director of Metrostudy’s Northern New Jersey Market.

Total housing inventory has increased from 3Q13 to 4Q13. Total housing inventory is made up of models, units under construction, and finished vacant units. Total housing inventory increased by 9 % from 8,124 to 8,874 units in 4Q13. Under construction inventory has increased by 847 units, which is a 24% increase. Finished vacant inventory decreased by 93 units in the same time period. “Builders continue to sell their limited existing inventory and new starts are occurring in prime locations across the Northern New Jersey/NY Suburbs region hence the minor decrease in starts for the fourth quarter,” said Syhapanya.

Currently at the close of 4Q13 there are 10,500 vacant developed lots in the Northern New Jersey/NY Suburbs market. That represents about a 4% decrease in developed lots in the region from the 10,959 lots available in 3Q13. In 2Q13 there were 11,732 lots available. From the second quarter to the fourth quarter there has been a 10 % decrease in developed lots. This region based on estimates for an annualized starts rate has 16 months of supply. With the slow-down in observed closings, the starts are still very healthy keeping the VDL at 16 months of supply which tells you that supply is extremely tight. A healthy market supply level for equilibrium would be between 24 to 30 months.

Currently there are 78,905 lots sitting in the pipeline in various stages of the entitlement process. That is a slight decrease from the 79,495 lots in the futures pipeline for 3Q13. Hudson County, NJ has the vast majority of future lots at 21,467 lots, which make up a bulk of the pipeline. Orange County, NY has the second most at 9,483 lots.

“The activity level for starts is promising but the observed closings dip could be somewhat concerning. The weather and it being the fourth quarter can explain some of the decrease in closings. Pricing has continued to show great gains. With foreclosures still at a relatively high level the Northern New Jersey market will continue to slowly improve as the shadow inventory starts to decrease and move through the Judicial system,” said Syhapanya.

“Home sales in this market have increased but the lack of resale inventory has been a big factor in the increase in pricing much like most markets. With that said we are still expecting the level of activity in the Northern New Jersey/NY Suburbs region to continue to gain steam as the economy improves. Pricing will continue to increase but at a smaller clip,” said Syhapanya.

About Metrostudy

Metrostudy is the leading provider of primary and secondary market information to the housing and related industries nationwide. Metrostudy provides research, data, analytics and consulting services to help builders, developers, lenders, suppliers, retailers, utilities and others make investment and business decisions every day. For more information, visit www.metrostudy.com

About Hanley Wood

Hanley Wood, LLC is the premier information, media, event, and strategic marketing services company serving the residential, commercial design and construction industries. Utilizing the largest editorial- and analytics-driven construction market database, the company produces powerful market data and insights; award-winning publications, newsletters and websites; marquee trade shows and executive events; and strategic marketing solutions. To learn more, visit hanleywood.com.