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Re: Is Jersey City Real Estate in a bubble?
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Home away from home
 
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I tend to agree with you except for one HUGE limiting factor and that is the PATH. Jersey City, particularly DTJC, has been on a development binge but has failed to improve or upgrade the underlying infrastructure. Most important of all this is arguably the PATH, which JC does not even control. Right now, rush hour trains are already packed to ridiculous levels (and unlike the NYC subways where people constantly get off the train, each PATH stop only brings in a new flood of people, at least until 9th street). Other posters at Newport have said they have to get on a train going to JSQ just so they can have room for the trip into Manhattan. If this is how it is now I can't imagine how bad it's going to get after the 25,000+ apartments currently under construction get completed. Yes there are some signal improvements scheduled, but I doubt the extra train capacity comes near the increased load on the system the new apartments represent. And no one is tackling the problem because it isn't their problem. Developers don't care, they just want to lease their buildings out. Fulop can't even do anything but I doubt he cares too much since he's thinking of his governor run and that election will take place before these problems really come to a head. And we all know the PA certainly doesn't care. So I think the PATH will tremendously dampen DTJC's future property values. It's the sort of thing people won't realize until it is too late.
Posted on: 2015/4/28 22:30
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Re: Is Jersey City Real Estate in a bubble?
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I am the first one to admit that DTJC is VERY different than the rest of JC, at least pricing wise. When I mention Manhattan, I mean more UES and less East Harlem. Let's call what I mean Manhattan Proper. Yes, people seeking DTJC want cheaper but I think property values are still undervalued in DTJC and should reach Brooklyn Heights levels which would be more in line with the value you described..."parking, newer amenities,etc"
Posted on: 2015/4/28 22:09
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Re: Is Jersey City Real Estate in a bubble?
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Home away from home
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2014/6/9 22:10 Last Login : 2017/6/16 11:22 From Jersey City, NJ
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You're missing the point. First, there's DTJC, and there's the rest of JC. The two are very different and have evolved differently. It's a bit like UES and Spanish Harlem. Close but far apart. Second, DTJC is appealing precisely because it's not Manhattan. You can have your space, a car, quiet, some decent retail, and some transit. I liken it to a mix of Brooklyn and Queens and heckuvalot cheaper than both, with better quality and newer real estate. The folks attracted to DTJC are often seeking a more affordable, lower scale, but proximate alternative to Manhattan, who found Brooklyn too costly.
Posted on: 2015/4/28 21:53
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Re: Is Jersey City Real Estate in a bubble?
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Home away from home
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I agree that DTJC is an inferior product to Manhattan. Duh. However, should a 2 BR high rise apt in DTJC with superior amenities (like in unit washer dryer and parking included) be worth the same as a 1 BR high rise in Manhattan and even sometimes a studio with inferior amenities (washer/dryer ROOM, parquet flooring, maybe not even stainless steel appliances and def no parking included - laughable) ? I like to think not and the the current rise in pricing in dtjc high rises (both in rents and condo sales) agree with me. It is worth less than Manhattan but it is not half off. An analogy - Right now Manhattan is priced at Banana Republic Pricing and DTJC is at Old Navy pricing where it should be at Gap pricing.
Posted on: 2015/4/28 21:45
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Home away from home
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2014/3/4 22:31 Last Login : 2019/8/30 19:03 From Downtown Jersey City
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I don't understand why you think this is a "bargain." Jersey City is an inferior good to living in Manhattan, and you're absolutely kidding yourself if you think otherwise. If you could get a comparable place in Manhattan, then I would immediately sell my JC home and acquire a similar property in Manhattan on Central Park or Riverside (two parks that are better than anything JC has to offer).
Posted on: 2015/4/28 20:41
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Home away from home
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Interest Rates being low = (higher likelihood that) asset prices have/will decouple from income.
Posted on: 2015/4/28 18:11
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Re: Is Jersey City Real Estate in a bubble?
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Home away from home
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Same thing gets said about manhattan year after year yet demand stays high and vacancy is low.
Re: DTJC real estate, which is extremely different than other parts of JC, it is not a bubble. If you compare luxury high rises, 1brs in DTJC are going for the same rental prices as studio apts in manhattan, 2brs in dtjc are around the 1br pricing for manhattan. When such a bargain still exists, there is much catching up to do..
Posted on: 2015/4/28 17:31
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Re: Is Jersey City Real Estate in a bubble?
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Home away from home
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Actually, some of us look at the numbers, the easiest being the GRM, Gross Rent Multiplier, price/yearly rent. When it gets too high and the cost of buying greatly outstrips the cost of renting, it's likely a bubble. Thats because there's a lot of speculation play, and if it looks like prices stop rising, the players will be looking to bail and prices will plummet.
Posted on: 2015/4/28 17:16
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Home away from home
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What people mean when they say "bubble" here is that the price isn't really reflective of supply and demand, but rather ends up bid up by an inaccurate perception of either supply or demand, which will inevitably correct itself with a crash.
Posted on: 2015/4/28 16:47
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Re: Is Jersey City Real Estate in a bubble?
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Home away from home
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And some of them find they don't need all that much space. My family of 4 lives in a 1200 ft apt. Suburbanites are horrified.
Posted on: 2015/4/28 14:58
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Home away from home
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You're presuming that all young families can't afford larger homes. Many who choose to settle in DTJC are quite well-funded through some combination of family help, high personal incomes, and large savings bases to fund large down payments. Many buy, some rent, all can generally absorb the high costs.
Posted on: 2015/4/28 14:41
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Quite a regular
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You got me, I only read half of the "Tipping Point." - That being said one may not realize a trend until well after.
Yes, the current net inflow of people clearly exceeds the outflow. My question is, what is happening to young families that are either currently or pretty close to outgrowing their 1 or 2 bedroom apartments. I wonder if there is a hidden trend that people are not focused on.
Posted on: 2015/4/28 14:18
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Just can't stay away
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If supply and demand change dramatically, due to a riot or any other reason, and no one wants to live in JC anymore, then prices will go down. Yes, it is true. That doesn't mean it's a bubble. It just means there's a free market in operation, where the price point is set by the current balance of supply and demand. Yes, it's an expensive place to live, and getting more expensive every year. That doesn't make it a bubble. Get over it.
Posted on: 2015/4/28 12:30
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Home away from home
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Let's also not forget that white flight and urban decay was set into motion by federal housing policies that subsidized suburban home ownership and tolerated redlining.
Today you have the opposite issue. Everyone is attempting to rebuild new urbanist living. NJ in particular is very forward in what they call transit-oriented development.
Posted on: 2015/4/28 11:34
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Home away from home
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Tipping points are just that, the culmination of a trend, they're not sudden reversals of huge demographic trends. Did you actually read the book or just catch the phrase? The 68 riots WERE a tipping point, but the growth of the suburbs at the expense of the urban middle class had been going on for decades since WW2. There's no anti-urban trend for the current unrest to tip.
Posted on: 2015/4/28 5:25
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Re: Is Jersey City Real Estate in a bubble?
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Yes, we should all be worried that there will be a yuppie riot if Starbucks runs out of Pumpkin Spice Lattes in October. :D Quote: ....no different than the pendulum having shifted towards urbanization during recent decades, there can easily be a Malcolm Gladwell type tipping point that shifts it back. Heaven forbid something like this could happen but if it did, no doubt it would have a major change on the current housing market. Yes, and Buffy the Vampire Slayer could also marry Bob Dole, and raise penguins in Guam. Maybe I'm missing something, but I can't think of a single neighborhood in the metro NYC area that has slid backwards after gentrification. We should also remember that Hurricane Sandy didn't make the slightest dent in DTJC or Hoboken real estate values... and it probably should have.
Posted on: 2015/4/28 3:41
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IIRC 70% or more of JC is rental. That includes condos. Quote: When the supply of rental units increases that dramatically, that increases competition among owners of rental units. Aren't you forgetting something? Y'know, it's on the tip of my tongue, from that first week in Microecon 101, it's... it's... Oh yeah. It's demand. Keeping in mind that no one has a crystal ball: Rental prices are increasing all along the Gold Coast. As more supply comes onto the market, prices may drop a little bit, but they might not. It depends heavily on how many people want to rent those units. While it is possible that some buildings will sell instead of rent, that kind of shift is not trivial and is not fast, especially in larger buildings. Condo conversions take at least 2 years, lots of paperwork, and dealing with recalcitrant tenants. I.e. We are not going to wake up one fine Tuesday morning with 50,000 new condos for sale in DTJC. Even if that impossible scenario did happen, the market for condos is pretty healthy too. Demand is high right now for condo sales, which means the market probably can absorb a big increase in supply without killing condo prices. By the way, JC is not the only place that's experiencing a resurgence in the real estate market. Existing home sales are up across the US, mortgages are up. New housing starts faltered for years after the real estate bubble popped, which means they're now a bit below where they ought to be. There are fewer defaults and fewer foreclosures. Inventories are down; they should be at 6 months, but are closer to 4.5 months. All this despite strict lending requirements by mortgage originators. I.e. don't expect a big crash in JC real estate any time soon. It is likely to cool off a bit, but drop significantly or crash? Possible, but unlikely. And if it does, no one can possibly know when, or how much -- or how quickly it will recover thereafter.
Posted on: 2015/4/28 3:37
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Quite a regular
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I'm not afraid, what I am saying is that certain people may be underestimating the impact that social unrest could have on their transitional neighborhood and no different than the pendulum having shifted towards urbanization during recent decades, there can easily be a Malcolm Gladwell type tipping point that shifts it back. Heaven forbid something like this could happen but if it did, no doubt it would have a major change on the current housing market.
Posted on: 2015/4/28 3:33
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Wow, are you really that afraid? Sorry, but it's a pretty ridiculous statement. The white flight of the late 60s was the culmination of 2 decades of demographic trends. The current urbanization trends have been moving the other way now for decades. And demographically, WAY more of JC's poor are striving immigrants than generational underclass. The whole "death by cop" thing is actually good news for our cities and country, it's always been there but now it's being exposed and called out. The bad part is it's feeding off the lower 3/5 of the populace that are restless after being left out of the economic growth for 3 decades.
Posted on: 2015/4/28 3:15
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Quite a regular
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Hopefully its not a long hot summer. If a Baltimore type event happens here, the bubble will burst and everyone will be running back to the suburbs where they grew up.
Posted on: 2015/4/28 2:53
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Re: Is Jersey City Real Estate in a bubble?
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Home away from home
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Bubble? You got to look at the economics:
- Proximity to greatest city on the planet: no. JC is cheap. - Interest rates on mortgages: as cheap as they've ever been. So no. - Demand - Millenials want to rent, Overseas investors want to buy. So Debatable. - History - on zillow - looks like there's been a 20-30% pop on prices in the past 2-3 years. Bubble - probably not. But I wouldn't bet your retirement on it. Is there a bubble in JC? IMO you've probably missed the opportunity. Dollar will fall, interest rates will rise...entirely my guess though....make your own guesses. That's how it works.
Posted on: 2015/4/28 1:35
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Re: Is Jersey City Real Estate in a bubble?
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Does anyone actually net cashflow from these properties? When I've looked at the numbers the GRM's are astronomical, indicating they are more market speculation than B&H investing. I asked this question a couple of months ago and got market opinions but none based on numbers.
Posted on: 2015/4/28 1:33
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To determine whether there is a bubble at this specific point in Jersey City history, you really need to know how many CONDO units are owned by investors. I believe it's a fairly high percentage from what I've read & heard.
There were an average of 150 rental units added to the downtown market per year from 2008 through 2013. From mid-2015 to mid-2016, there will be that many units added, on average, every 2 weeks. When the supply of rental units increases that dramatically, that increases competition among owners of rental units. Many investors who own condos that they are renting out may begin to lose money on their properties due to competition from a drop in net effective rents at large rental buildings, and this may prompt them to sell. This could potentially cause a flood of investor-owned condos to come onto the for-sale market, and the increased competition may burst the bubble.
Posted on: 2015/4/28 0:50
Edited by jcwalkingman on 2015/4/28 1:06:34
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Re: Is Jersey City Real Estate in a bubble?
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Just can't stay away
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This is a nice talking-point, but with real estate, how can you say objectively what the "value" should be? If it is a rental building with a rent-roll, then the income stream can define a value, but for a single owner-occupied unit, the value is simply the fair-market price that someone is willing to pay for it. You could look at an appraisal based on comps, but someone could argue the comps are also priced too high. It only becomes a bubble when people are willing to pay almost any price, because they think the value will go up and up. I don't see that kind of irrational exuberance in JC, personally.
Posted on: 2015/4/27 16:50
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Re: Is Jersey City Real Estate in a bubble?
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The majority of the new construction projects in JC are rentals. It drives up the price of condos that are for sale since there is a greater demand than there is supply. The units that seem to be in greatest demand are 2 br/2bth and large 1 br units.
Posted on: 2015/4/27 16:43
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Re: Is Jersey City Real Estate in a bubble?
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Home away from home
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In a word, no - DTJC is not in a bubble. What seems to be happening is that, due to it's proximity to downtown Manhattan, amenities, etc., prices for entry-level luxury properties are getting somewhat more in line with Manhattan. Currently on www.streeteasy.com, there are 62 condos in a similar price range in downtown Manhattan, all but 1 is smaller, most are in the 1,600 - 1,800 s.f. range, and few with the views.
If people persist in seeing DTJC as standing apart from Manhattan, then yes - it's hard to justify or explain a $3.5 million apartment. But with the lack of inventory, ever increasing prices etc. in Manhattan, DTJC stands to really benefit by association.
Posted on: 2015/4/27 16:16
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Re: Is Jersey City Real Estate in a bubble?
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Home away from home
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I think this is the key. As LimpiarElSucio said, "a bubble is when prices de-couple from value". The problem is that the high end is ALWAYS decoupled from value! When a single superlux apartment may sell for the price of an entire skyscraper, it's clear it has nothing to do with real estate and everything to do with the way luxury goods are sold. Is a $10k watch or handbag "worth it?". That said, I don't think the new construction lux intrinsically drives up the market any more than a new Rolex does. But it does affect pricing structure that ripples all the down to us.
Posted on: 2015/4/27 15:33
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Home away from home
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Posted on: 2015/4/27 14:36
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Home away from home
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Just because a deal is all cash does not mean that it won't be financed post-close.
a bubble is when prices de-couple from value. it is extremely difficult to determine whether an asset class is experiencing a bubble, and 1-3 family real estate is even more difficult because the intrinsic value of the property class is not based on the cash that could be earned from the asset.
Posted on: 2015/4/27 14:27
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Re: Is Jersey City Real Estate in a bubble?
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Home away from home
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2014/6/9 22:10 Last Login : 2017/6/16 11:22 From Jersey City, NJ
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+1. There are many well-compensated people working in NYC. Many choose to live in JC for obvious reasons around income taxes and property prices. There are also many offshore buyers seeking investment properties. All that has a knock on effect on pricing. This isn't a debt-fueled situation unlike pre-2007. Lots of all-cash deals here.
Posted on: 2015/4/27 14:14
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