Posted in New Jersey Market | Posted on 02-19-2015 | Written by Metrostudy News
- New Home Starts showed a significant decline of 41.3% from 3Q14; YoY activity is down by 54.6%
- Multi-family product in the Northern New Jersey market continues to be the driving force in construction in this region.
- Multi-unit structures are up 55.6% month to month and are up 2.6% year over year even considering year over year for November 2013 skyrocketed up plus 85.1%.
February 2015: Metrostudy’s survey of the housing market in the Northern New Jersey/NY Suburbs region showed 671 starts in 4Q14, a decrease of 41.3% from 3Q14. Year over year comparison from 4Q13 versus 4Q14 saw an even greater drop off in new home starts activity by 54.6 percent. The Northern New Jersey/NY Suburbs region recorded 1,064 observed closings for 4Q14., down 17.3% from 3Q14.
“A product type break down shows that detached closings decreased 19.3% to 440 from 545 in the third quarter,” said Quita Syhapanya, Regional Director of Metrostudy’s Northeast region. “Year over year closings increased 1.4% but it is a disappointing number compared to the depressed starts that occurred during the harsh winter in 4Q13. Starts in detached single family also took a big hit with a decrease of 46.6% to 298 units in comparison to the 558 started in 3Q14. Year over year also reflected a decrease in new home starts by 50.9%.”
Attached homes saw a decrease in starts as well to 373 units from 585 in 3Q14, a 36.2% decrease and an even larger 57.2% decrease compared to this time last year. This decline is particularly concerning considering attached product starts accounts for 56% market share. Closings saw a 15.9% decrease to 624 from the 742 from the prior quarter as well as a decrease year over year by 10.5% when there was 697 closings in 4Q13.
The median closing price for a new home closed in the Northern New Jersey/NY Suburbs in 4Q14 was $436,900, up 4.3% from 3Q14 and up 7.1% from 4Q13. The median closing price for a single family home for 4Q14 was $468,900, a .4% increase YoY and a 1.6% decrease from 3Q14. Pricing for new home construction has continued to slow down to wrap up 2014. We expect pricing to moderately increase in 2015 with no dramatic swings one way or the other.
For 4Q14 there are 9,742 Vacant Developed Lots (VDL) in the Northern New Jersey/NY Suburbs market, a 3.5% YoY increase in developed lots. With an annual starts rate of 3,905 it would take 29.9 months to go through the remaining lots at this pace, up five months from 3Q14. The Northern New Jersey/NY Suburban market remains in equilibrium but is moving closer to over-supply from the 1,761 lots that were delivered in 2Q14 that have not been absorbed. There were 635 lots delivered into the market this quarter. Year over year lot deliveries dropped by 33.3% from the 952 delivered in 4Q13. Quarter to quarter saw deliveries drop by 32.8%.
“With multi-family product type moving the needle north in construction it remains a struggle for new home builders to move new product in Central, Northern NJ as well as the New York suburbs,” said Syhapanya. “Looking at permit data 1 unit structures took a 4.7% decrease year over year and a 13.3% decrease month to month ending November 2014 which is our earliest indicator of a new home start. Meanwhile, multi-unit structures are up 55.6% month to month and are up 2.6% year over year even considering that year over year for November 2013 skyrocketed up plus 85.1%.”
The overall outlook on new home construction in the Northern New Jersey and NY Suburbs region is tepid at best. The activity for the 4th Quarter has stalled a great deal in comparison to the last few quarters and year over year. The region ended the year with significant signs of a struggling new home construction market. There were many factors in play that caused the drastic decline in construction activity. One of the main impediments was builders and developers playing catch up due to stalled construction earlier in the year with most of the activity starting in 2Q14 where we saw an increase of 35% in starts. On a rolling four quarters there was 3,905 annual new homes started ending 4Q14. To end the 3rd quarter the pace was at 4,712 new home starts. It was a 17.1% decrease in quarter to quarter comparing the pace ending 4Q14 versus 3Q14. The annual closings pace did not take the same hit due to the homes beginning to be occupied from the big jump in new home starts back in 2Q14. To end 4Q14 the annual closings pace ended the quarter at 4,757 new homes being occupied which is just a slight decrease off the pace ending 3Q14 by only a decrease of 1.4% when there was 4,824 closings.
“Multi-family product in the Northern New Jersey market continues to be the driving force in construction in this region,” said Syhapanya. “A hot topic of debate and discussion we will hear in the media is if there is an oversaturation of rental units in this market in the near future. I don’t believe at this point over saturation or bubble will form in the near term for rental units only because the entry level or first time buyer can’t get their foot in the door in regards to their jobs, flat income growth, debt, and not having enough for a down payment even with 3% down. They have no choice but to rent at this point. It may be a few years before they enter into buying their first home, in particular in this region where the job market is dominated by firms in Manhattan and NJ is having trouble retaining companies who are packing up and taking their jobs elsewhere. Buying will be in the equation just not now. Maybe after this group gets to their second milestone which is their first baby a home purchase will be in order!”
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