Metrostudy released their 2Q14 survey of the New York/New Jersey suburban region’s housing market, showing that strong demand is fueling price increases and growth even as lot supplies will hamper further development. The Northern New Jersey/NY Suburbs region recorded 1,271 starts in 2Q14, up 32% from the prior quarter total of 958. The 1,271 still remains less than the output for 4Q13 when there were 1,514 starts and 3Q13 when there were 1,671.
“The demand in this market is being spurred on by potential buyers who can’t afford to live in New York City and are choosing to look in counties right outside of the city,” said Quita Syhapanya, Director of Metrostudy’s Northeast Region. “The Northern New Jersey/New York suburbs have seen price increases month to month, quarter to quarter and year over year. Builders have no choice but to build more homes at a more expensive price point on larger lots since many of the municipalities are not bending in the requirements for density.”
Product type breakdown shows that detached closings increased 12.1% to 509. Starts increased by 24.7% to 574 units compared to 1Q14. Attached homes saw a big swing in starts to 707 units from the 498 in 1Q14, a 41% uptick. Closings saw a 20% decrease to 610 from the 772 from the prior quarter. The first quarter saw a big increase in closings and it could be due to buyers moving in at the end of the 1st quarter as opposed to moving in the beginning of the 2nd or postponing the move from the end of 4Q until 1Q14 due to the extreme weather that may have delayed the move.
Total housing inventory stands at 8,710 units, up 2% from 1Q14. Total housing inventory is made up of models, units under construction, and finished vacant units. In 2Q13 Housing Inventory was at 7,278 units and has increased by 19% to end 2Q14. Under construction inventory is at its highest count since Metrostudy started collecting inventory data in 2Q13. Units under construction stand at 4,145, up 4% from 1Q14. It is a 33% positive swing from 2Q13 when there were 3,108 units under construction. Finished vacant inventory increased slightly to 4,261 from the 4,203 vacant standing units in 1Q14.
There is significant pricing pressure in this market: the median closing price for a new home closed in the Northern New Jersey/NY Suburbs for the second quarter was $421,800, up 9% from 1Q14 and 4% year over year. The median closing price for a single family home for 2Q14 was $466,000, a 5% increase from 1Q14.
While the increase in inventory for new homes is a welcome sign, it just isn’t enough at this time to satisfy the demand in this market. Prices will continue to rise until the right balance is found with homes in the resale market and new homes for sale are readily available for potential buyers.