As Wall Street suffers, so does nearby New Jersey
Thu Jan 1, 2009 1:21am

By Helen Chernikoff

NEW YORK, Dec 31 (Reuters) - The Wall Street upheaval that has depressed New York City's high-flying real estate market is also slowing property sales and lowering prices right across the river in the state of New Jersey.

Long known as the city's "sixth borough" due to its proximity to New York, Hudson County, New Jersey, basked in Wall Street's boom as financial firms relocated back office operations there to avoid skyscraping Manhattan rents, said Derrick Gross of the house-hunting website StreetEasy.com.

Now Hudson, home to two of New Jersey's highest-profile cities, Jersey City and Hoboken, is feeling the pain of the bust. Sales have slowed to a crawl and homes for sale are piling up.

"New York is one of the epicenters of the accelerated recession -- or the potential depression -- because of how important the financial industry is," said Bill Staniford, chief executive of real estate research website PropertyShark.com. "There is going to be a softening affecting anyone in the vicinity."

At the current pace of sales, which in November was down 47 percent from last year, it would take 24.1 months for all the properties on the market in Hudson County to sell, said Jeffrey Otteau, president of Otteau Valuation Group, a real estate consultancy and appraisal service.

"The weakness that's been gripping everyone else has just come home to roost in Manhattan, and that's affecting Hudson County," Otteau said.

Job losses in the financial sector are reducing housing demand in Manhattan and related markets such as Jersey City and Hoboken, he said.

Also, Hudson County is now sitting on excess supply because New York City's formerly healthy economy and the resulting high cost of housing fueled a construction boom there to meet the demand from those priced out of Manhattan who still wanted a carless commute.

PRICES DROP

The situation is exacerbated by Manhattan's falling prices, which are drawing demand away from its secondary markets as more buyers find they can afford the city again.

The slowdown has forced sellers in Hudson to drop their prices.

In the past two months, sellers of 16 percent of Hudson County's listings have cut their prices by an average of 8.7 percent, according to StreetEasy.com's data.

In Hoboken, prices have dropped on 43 percent of the listings during the time the properties have been on the market; in Jersey City, that is true for 34 percent of the listings, Gross said.

The homes that are selling tend to be in the lower price ranges, around $350,000, said Hoboken broker Norma De Ruggiero.

"Three years ago you couldn't buy anything for $350,000," she said. "It just wasn't there."

As unemployment numbers climb, a pervasive lack of job security is keeping buyers out of the market, De Ruggiero said.

"We've certainly seen buyers that were ready to go who are holding off because they're worried about job security," said Marco Tartaglia, a sales manager at Canco Lofts in Jersey City.

The project is selling slightly more slowly than its developer had anticipated, Tartaglia said. Of its 202 units, 70 have been sold, instead of the 50 percent projected for this date, which pushes the sell-out date into 2010 and forces a delay in the building of the next phase.

But at least Canco's developers plan to proceed, which Tartaglia attributes in part to the relative rarity of lofts compared to condos in Hudson County.

Wall Street's distress combined with the difficulty builders are experiencing in obtaining their own financing has caused developers to delay construction on the second tower of Trump Plaza, the Jersey City condo high-rises bearing developer Donald Trump's brand, said George Cahn, a spokesman for several Hudson County developers.

"People whose projects aren't out of the ground are going to hold off until things improve," Cahn said. (Reporting by Helen Chernikoff; Editing by Brian Moss)

? Thomson Reuters 2009 All rights reserved

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Your thought process cracks me up sometimes, GP. Condo owners never drink and are never, ever fun. Ever! And they all reproduce at a frightening rate.

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Sure. I'll give you $10,000 in cash.

30 years ago that would get you a whole townhouse downtown. I wish people would stop whining.

anybody want to buy my apartment?

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There's a problem with that logic;
#1 Many jobs that had high salaries which help people pay ridiculous rents especially in financial and real estate markets have been lost.
#2 Rents are way too high in downtown
#3 Rents in Manhattan are starting to get competitive since there are more vacancies.
#4 Crime in Jersey City has started to go up
#5 Everyone is feeling the pinch of the recession and they will certainly stay put where they are right now or downsizing and moving into cheaper not more expensive housing.

Bring on the drunk, childless renters!

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It might not be good for the developers, nor for the Condo market, but they will likely just rent the unsold units out, which may be great for downtown - renters tend to be younger and "funner" than Condo owners. No offense! Just less baby strollers and more drinkers.

We are still much cheaper over here than Manhattan, and the best parts of Brooklyn & Queens. So it'll be rentals...

24 months isn't so bad really. Some markets are up to 60, 72, even 96 months.

December 28, 2008
In the Region

Housing Inventories on the Rise
By ANTOINETTE MARTIN

ON the eve of a new year, it is becoming clear that the real estate market in Hudson County, the ?Gold Coast? zone just across the river from Manhattan, will have to wait at least two years to celebrate a more prosperous era.

Once New Jersey?s hottest market for high-end condominiums ? drawing streams of Manhattanites ? Hudson now finds itself with 24.1 months? worth of unsold inventory.

This is a much bigger backlog than exists in Brooklyn, which has a 13.8-month supply, and it exceeds unsold inventory levels in Queens; in Orange, Rockland and Westchester counties in New York; and in Fairfield County in Connecticut.

On Long Island, the unsold inventory is also swollen. It would take 20.9 months for all the houses and condos currently on the market there to find buyers, given the current pace of sales.

A new assessment of the region prepared by the Otteau Valuation Group presents a generally unlovely picture of residential sales markets:

Manhattan now has an 11.8-month supply of unsold inventory, said Jeffrey G. Otteau, whose Old Bridge, N.J., company analyzes contract sales figures and advises real estate brokers. ?This is not terribly big,? he said, ?but it is significantly bigger than a year ago ? and much bigger than the days when multiple bidders were circling around every available unit on the market.?

There are a few other areas encircling Manhattan that also maintain what might be described as less-than-albatross-sized inventories, including:

? Passaic County in New Jersey, home to the large suburban communities of Clifton and Wayne, which has a 12.9-month supply of housing on the market;

? Union County, N.J., home to Elizabeth, Summit and Westfield, which has a 13.8-month supply;

? Morris County, N.J., an area with 150 towns, including Mendham, Morristown and Mountain Lakes, which has a 14.1-month supply.

Across New Jersey last month, the pace of sales fell 30 percent below the same month in 2007. In October, the drop was 28 percent.

Before that, according to various market reports, there had been a brief, sharp uptick around the region, ascribed to lower mortgage rates and asking prices. But Mr. Otteau?s numbers clearly indicate that once the banking crisis, job losses and bailouts began in October, sales fell and inventories rose.

In Hudson County, home to Hoboken and Jersey City ? an area known as ?Wall Street West? ? sales were 26 percent fewer in November than the month before, and 47 percent fewer than in November 2007.

Looking further ahead, Mr. Otteau has recently raised the issue of potential overbuilding in Hudson County ? in addition to his contention that outer-ring suburbs already have a surfeit of single-family housing on large lots that will not appeal to buyers of the next decade.

One large developer in Hoboken, the Applied Development Company, stopped building anything other than rentals as of nearly two years ago, said its president, David Barry. ?We saw the condo market getting ahead of itself, and becoming temporarily overbuilt, for sure,? he said.

But of the rentals that Applied is moving ahead with, several developments are in Hudson County. ?We just started on 225 Grand, a 348-unit rental in Jersey City,? Mr. Barry said, ?and we?re preparing to start with the Berkshire, 93 rental units, at the Shipyard.? The Shipyard is an Applied rental/condo complex on the Hudson in Hoboken.

?It will be about two years before these come online,? he said, ?and when the economy does turn around, my experience is that the first market to benefit from that is the apartment market. As jobs are added, the first thing that happens is many people go out and rent an apartment.?

Land costs have become ?more reasonable lately,? Mr. Barry added; as a developer, he is seeking to capitalize on ?an opportune time to get in the ground with apartments.?

Condominium developments that have already posted strong numbers of sales contracts ? like the Trump Plaza Jersey City ? will most likely continue to sell units during this ?off time,? he said, but starting new condo construction at this point is ?plain crazy.?

As for the ?suburban sprawl? single-family-home developments that New Jersey policymakers have long been trying to rein in, Mr. Otteau predicts the market will only worsen.

Sales pace is slack in the northwestern part of the state, where large-lot single-family development prevails. The inventory backlog is 23.6 months in Sussex County, 21.6 months in Warren County and 16 percent in Hunterdon County, according to the Otteau numbers.

In the more urbanized northeastern New Jersey counties of Bergen and Essex, the residential backlog approaches 16 months.

Likewise, in New York State, the inventory in outlying boroughs and counties is very large compared with that of Manhattan and Brooklyn. Westchester County has the next-largest inventory to Long Island, at 18 months. Orange County?s inventory is nearly 18 months, and Rockland?s is 14.5. Mr. Otteau foresees a ?structural shift? in housing demand that will come into sharper focus in the region when the overall market improves.

?Right now we are all focusing on how bad it is,? he said, ?but what we are also seeing is a historic reversal of home-buying demand away from suburban and rural areas to cities and inner-ring suburbs that are more walkable than driveable.?

Mr. Otteau says the shift was partly because of higher energy prices. But the dominant reason is that the number of households with children living at home is on a persistent decline.

?In 1985,? he said, ?50 percent of households had children at home. In 2000, that was down to 33 percent. Today it is 29 percent, headed to 25 percent.

?That means that 75 percent of home buyers over the next 15 years will have childless households ? and within that group are empty-nester baby-boomers, or couples or singles buying a first house. And that means that three out of four home buyers will have no interest in a house in the suburbs with a good school system, which is pretty much what we?ve created over the last 50 years.?

Mr. Otteau cited a new study from Virginia Tech projecting that a nationwide surplus of 22 million suburban homes on lots larger than a sixth of an acre will be languishing on the market by 2025.


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