Housing prices are on the rise in New Jersey and experts expect they will continue in an upward trend this year. Otteau Valuation Group President Jeffrey Otteau told NJ Today Senior Correspondent Desirée Taylor that he believes “the stars are aligned” for the housing market to continue to gain momentum and prices will increase this spring and summer.
The housing market began its rebound last year, according to Otteau. “It’s pretty much a certainty that housing prices will continue to rise. We saw our first rise here in New Jersey in the fourth quarter of 2012 and it was a modest 3 percent increase during that fourth quarter,” he said.
Otteau said home buyers are feeling a sense of urgency now because they want to take advantage of today’s prices and very low mortgage rates before they both increase.
“Home buyers have come to the realization that it’s in their best interest to purchase sooner rather than later. But beneath all of that, we have a continuing economic recovery which is beginning to accelerate at a faster pace here in New Jersey than we were seeing previously. More confidence in both the economy and job security and in house prices,” Otteau said. “And in addition to all of that, we have this incredible 133 percent housing affordability today. So essentially, housing is cheaper than it would have otherwise been and as a result, buyers are moving back into the marketplace.”
The average 30-year fixed mortgage rate is about 3.5 percent, which Otteau said hasn’t been seen before. He added that rate will likely start to rise later this year.
Not all of New Jersey is performing in the same way. Otteau said the northern part of the state is outperforming the southern portion because of its proximity to Manhattan and its higher concentration of higher paying jobs.
“Another thing that we see is that towns with rail stations that connect with Manhattan and its employment centers are outperforming even those towns in northern New Jersey. For example, the overall decline in house prices in the state was about 24 percent on average from the peak, but in those towns that have rail stations which are commutable to New Jersey, the decline was only about half, about 12 percent,” Otteau said. “We’re also seeing that lower priced homes are experiencing the greatest rebound. And that upper priced houses are still a bit soft in terms of demand.”
The South Jersey housing market doesn’t get a spillover effect from Philadelphia like North Jersey does from Manhattan because Pennsylvania offers both lower housing prices and lower property taxes, according to Otteau. He said there is a rebound happening in southern New Jersey, but it isn’t as robust as in the northern part of the state.
The shore areas of New Jersey impacted by Hurricane Sandy are a different story, however. “Both the economic and housing recovery have been put on hold there,” Otteau said. “We see that the pace of sales has fallen dramatically. And prices are beginning to show signs of decline at a time when the rest of the state sees rising home prices.”
Rural areas are also under-performing, according to Otteau. “When gasoline prices rise above $3 a gallon, the price and cost advantages of commuting further to your job evaporate,” he said.
Otteau estimates that New Jersey will get back to the housing market highs of 2006, but probably not for about five years, which isn’t necessarily bad. “My hope is that it moves slowly so that the recovery is sustainable,” he said.