As a by-product of Manhattan real estate market, what happens in the city usually at some point spills over to the northern New Jersey market. When Manhattan real estate does well New Jersey prospers. Conversely when Manhattan hits the skids as it did when the market crashes in 2008, the New Jersey market tanks. This is usually how it goes in New Jersey…”usually” being the key word.
We’re still waiting for this to happen in New Jersey…and we’ve been impatiently waiting for years and there’s no light at the end of the tunnel. And worse, there’s more bad news for us to the west of the city. Why has the New York City real estate prospered so much while the Bergen County, New Jersey market (except for new rental projects) still languishes after so many years.
Here are a few reasons:
As a recent New York Times article points out…
It was a banner year for Manhattan real estate. In 2014, buoyed by sales of ultraluxury apartments in new developments, the real estate market rebounded to surpass its previous peak, reached in 2008, when the financial crisis hit, according to Jonathan J. Miller, the president of the appraisal firm Miller Samuel.
The average sales price reached a new high of $1,718,530 last year, surpassing the record set in 2008, when the average sales price for the year was $1,591,823, according to Mr. Miller, the author of a report for Douglas Elliman Real Estate.
Big-ticket closings also helped the average price per square foot climb to a record $1,297 for the year, above the previous high of $1,251 per square foot in 2008.
The median apartment price, which measures the middle of the market and is less affected by high-end sales, was $940,000 in 2014, just behind the record of $955,000 set in 2008, according to Miller Samuel.
The better the market is in New York City the worse it seems to be for the suburbs
“It was an extremely strong year,” said Sofia Song, the head of research at Urban Compass, which reported record dollar volume in the fourth quarter of 2014 with approximately $5.4 billion in closed deals. “Properties were being snapped up faster and at higher closing prices than the 2008 market peak.”
This is what’s happening with the housing market in Bergen County:
- Single family home sales decreased 6% in 2014…decrease of 368 homes on a sales volume of 5564 homes
- Multi-family home sales decreased 3%…decrease of 88 units on a volume of 2655 units
And this is what’s happening with the Manhattan housing market:
Dottie Herman, the chief executive of Douglas Elliman, reported half of all apartments in the fourth quarter sold at or above list prices, the highest percentage in six years.
Pamela Liebman, the chief executive of the Corcoran Group. “And there’s really no sign of things slowing down.”
The number of contracts signed in the fourth quarter, 3,216, was the highest since the fourth quarter of 2006, when 3,246 were signed, according to the Corcoran Group. Co-ops accounted for 58 percent of signed contracts this quarter, the highest co-op market share since the third quarter of 2009.
And the real killer…”at least twice as many new condominium units are scheduled to hit the Manhattan market this year as in 2014, the most since 2007, leading some real estate watchers to predict a tempering of price growth and slower pace of sales. “It is anticipated that the market will likely see a price adjustment,” in the first quarter of 2015, Urban Compass stated in its report.
All of this points to problems for a New Jersey real estate recovery:
- If prices in Manhattan stabilize or even decrease fewer city lovers will be inclined to make the exodus out of the State. Even with the super quick inflation, city residents haven’t fled in mass numbers to the much cheaper burbs…at least not to the single family market
- As long as people continue to invest in new ultra luxury condos in the city the New Jersey ultra-luxury market will continue its downward spiral
- And the real kicker is that with all of the new rental buildings being built along the New Jersey waterfront with their amazing designs and amenities and sexy locations, this has become huge competition for homes that are for sale, and will surely take a major bite out of the sales numbers…and prices.
Example: The Modern…Fort Lee, New Jersey
As just published in the New York Post…
The New York Post tells the story of The Modern in Fort Lee, New Jersey…the areas newest and most spectacular ultra luxury rental building, and why people are attracted to this iconic new 40 story building. And this is just the tip of the iceberg for what is to come of the real estate market along the Hudson River waterfront in New Jersey.
Those of us who have followed Steve Pozycki over the years will understand why no one will ever duplicate the design and quality of The Modern in New Jersey…unless of course he decides to build another building. SJP also duplicates this incredible attention to detail in their new 500,000sf Waterfront Corporate Center 3 on the Hoboken waterfront.
And this is only one developer and one residential rental project in New Jersey.
How can the suburban real estate market withstand the competition from so many new rental buildings. It’s a case of the new vs the old. Guess who’s going to win?