Not even the effects of an encouraging economic recovery seem to compensate for the hard times New Jersey Shore real estate had to face in the past years. The foreseeable difficulties following the Great Recession marked a period known for declining prices, with values remarkably lower on the New Jersey Shore than those corresponding to the surrounding regions. Moreover, Hurricane Sandy and last year’s long, cold winter obviously affected the New Jersey housing market along with the interest for real estate transactions. In the meantime, middle class families trying to build a home in the area struggled with rising housing prices. Also, some key contributors to the Shore’s economy are closing their business, as the case is with some Atlantic City casinos.
Optimistically, a study conducted by Kevin Gillen and published by the Fels Institute of Government at the University of Pennsylvania presents some rather encouraging forecasts, which include an appreciation of high-priced areas and a stabilization of mid-priced communities. In the following, we’ll go through some key elements affecting the current housing market in New Jersey. We predict a reserved and restrained real estate market forecast, bearing in mind the actual concerns in the area, but with hopes for stabilization and a constant growth.
Influencing Factors of the 2015 New Jersey Housing Market:
The average house value in New Jersey barely changed throughout 2014, but this is only a result of a proportion between an increase of the averaging price among some communities and a decrease in others. While Atlantic City lowered its average house prices by -19.8%, Cape May registered a whopping +14% during the previous year. Compared to the 2006 peak, the typical New Jersey Shore house is currently valued 29% below. More optimistic numbers in regards to the same economic peak are to be found in the case of the typical Philadelphia home, which is currently valued at only 13% below that same moment in time. In spite of the overshadowing negativity that can arise from these predictions, the median home value in New Jersey is currently being listed at $285,000 with an ascension of 3,4% over the past year. A rise of 0.7% is expected within the next year.
- For the time being, New Jersey shore real estate manifests a positive moment for buyers willing to invest in million-dollar homes. Since 2007, last year was the strongest second quarter, summing up 43 transactions at a price of minimum one million dollars. Surprisingly, sales of properties over $1 million like shore houses and condos reached all-time highs, escalating over the peak years of the housing boom. This leads to a significant increase in seasonal housing, but presents a discouraging trend among middle-class families. Year-round population continues to decline and young working class families find few communities where living is still affordable on the shore.
- Buyers changed their preferences after October 2012, especially at the South Jersey Shore. They became aware of the risks of living along the Eastern Seaboard after seeing the damage and the aftermath of Hurricane Sandy, which only means that the New Jersey Housing Market is now marked by relevant needs: higher elevations, less physical depreciation, sturdier construction. Therefore, a bigger price and a larger preference for newly built homes over time. The damage inflicted by Hurricane Sandy affected New Jersey’s Shore real estate in more than one way. The housing market predictions have changed since October 2012, regarding both the Shore’s housing stock as well as the home sales in a unique way. A lot of homes were damaged to the degree that required a whole process of reconstruction. Several houses have been demolished and redeveloped into what we can practically call new buildings. This new type of homes is characterized by larger spaces and special designs, replacing the previous housing options which were smaller and older. As is, median house prices with a significant redevelopment after Sandy will have an upward bias, because the newly designed and constructed housing options attracted buyers with a deeper pocket. The ascension of house prices modified the overall change in house values and therefore a new consequence arises. Even if areas like Atlantic City dramatically manifested an economical decrease which also affected the real estate market, those communities on the Shore which benefited from relevant redevelopment of their housing stock will present unrealistically large increases in house prices. Also, there has been a difference between house prices and their indices, among the same communities. We predict a significant inflation for median house prices in communities in which the house price indices will actually remain flat or exhibit modest inflation.
Making real estate predictions about New Jersey Shore can still be quite a challenge. Going forward, the full effect of Atlantic City’s industry contraction affected the whole local community and its gaming and hospitality, which furthermore affects employment and generates population changes. With an unemployment rate of 41% in 2014, New Jersey might not be a prolific real estate market for middle-class too soon, since it is not currently manifesting positive or at least neutral numbers like other areas of the United States. In the case of states like Vermont or Massachusetts, predictions are relatively optimistic and specialists have reason to believe there is hope for an evolution of the real estate market. Of course, there are communities like Ventnor, Cape May or Wildwood which elevate the general hope for house price appreciation rates in New Jersey as well.
Since employment is one the most important aspects influencing the New Jersey Housing Market in these times with some industries strongly affected, it yet remains to be seen if and how the financial conditions will generate a new buyer’s setting of opportunities and possibilities.
Even if the New Jersey shore real estate is obviously marked by intense change in the past years, change which furthermore depends on several key aspects we mentioned above, realtors seem to be optimistic about a certain stabilization in most markets. Both million-dollar sales and new home acquisitions are certainly supporting an upward trend on overall price levels.
According to the New Jersey REALTORS® and their local market update from February 2015, new listings have been available in the case of single family homes, townhouse condos and adult community, with percents varying between +2,5% and 52,6%, but closed sales have a positive number only in the last case of adult community. If the interest for rented homes will grow as much on the New Jersey Shore as in the rest of the U.S., according to real estate predictions, it is possible that the current $1,700 estimate will also elevate.
It’s probably too soon to estimate if the New Jersey house market can benefit from the wildcard of the expensive property sale or if the communities can survive with seasonal housing. What is hopefully safe to say is that the threat of the extreme Polar Vortex is far and away, but that doesn’t mean that its effects have been forgotten since last winter. It is quite difficult to ignore a weather history including this cold and long winter, which followed after a hurricane. Any buyer is definitely entitled to worry if a new property in an exposed area is a good investment, but according to current weather and economic forecasts, New Jersey is far from being a risky choice.
All in all, it may just be either too soon or much too challenging to precisely expect how the New Jersey housing market will evolve in 2015. However, according to our real estate market forecast, if the weather remains safe and reasonable, it’s probably not unrealistic to hope that this year will mark a slow but reliable increase in transaction activities. We all know that after being hit by recession pretty hard, some favourable news may be just what the doctor ordered for the slow recovering New Jersey housing market.