N.J. home construction jumps to 10-year high
Home construction in New Jersey is running 20 percent ahead of last year’s pace, powered by the multifamily sector’s recovery from the worst housing downturn in decades.
New Jersey builders got permits for 6,448 housing units in the first quarter of this year, according to the U.S. Census Bureau. That was the strongest performance since the first quarter of 2006, when the housing market was booming. Last year, home builders started more than 31,000 units in the state, the highest number since 2006.
Multifamily approvals accounted for about 65 percent of the state’s home-building activity in the first quarter, continuing a trend of the last several years. The Garden State’s longtime development patterns, dominated by single-family houses in ever-expanding suburbs, have been reversed in recent years as builders construct rental apartments in more densely populated areas, especially in Bergen and Hudson counties.
The number of single-family homes built in the first quarter barely budged from last year’s pace.
“The multifamily activity is predominantly Manhattan-centric,” said Patrick O’Keefe, an economist with CohnReznick, an accounting firm with offices in Roseland. Home construction in South Jersey, he added, “is not robust at all.”
Allen Goldman, president of SJP Residential Properties, developer of two 47-story glass apartment towers next to the George Washington Bridge in Fort Lee, said the demand for new rental apartments has been strong as the homeownership rate has dropped. And he predicted it is likely to remain strong.
“More people, especially Millennials, are not interested in being tied down” to homeownership, Goldman said recently as he led a tour of the first of the two apartment buildings in Fort Lee, a complex called the Modern. Construction started recently on the second building, which is expected to open in 2018. Each building has 450 apartments.
“No one is saying that homeownership is going out of style, but the role of rental housing has grown dramatically,” Goldman said.
Many young households prefer to live in more transit-friendly, walkable neighborhoods closer to New York City, rather than commute long distances to far-out suburbs, experts say. And they want the flexibility to be able to move quickly for a job.
“Millennials are a lot more hesitant about making a purchase because they may have a job opportunity in another region and want to move,” O’Keefe said.
In addition, young households have witnessed the fallout of the housing bust, and realize there’s a risk of being stuck with a home whose value has dropped, O’Keefe said.
High land costs and environmental restrictions have constrained single-family construction in New Jersey. And, O’Keefe said, demand for new homes is slow because many homeowners are reluctant to list their current homes at today’s prices, which remain well below their peaks in the housing boom. If they’re not selling their current homes, they’re not trading up to new homes.
“Without increased activity in home resales, we aren’t going to see more single-family construction,” O’Keefe said.