Caution Urged For NJ Builders
From the Record/Herald, by Prashant Gopal:
Build with caution
It's a time of transition for New Jersey home builders.
The real estate market appears to be cooling from the peak levels of 2004 and 2005, as cautious buyers are less willing to bid up prices. Vacant land is disappearing. And New Jersey's environmental regulations make it difficult to build on what land is available.
Builders are responding by finding ways to boost both new home supplies and demand. Some developers are focusing on housing for senior citizens, many of whom might otherwise retire outside the state. And builders are redeveloping former industrial zones in urban areas.
Still, developers should prepare for the possibility of a market pullback, said Patrick O'Keefe, CEO for the New Jersey Builders Association
"Builders are advised ... to manage their levels of activity with an eye toward the future, rather than assume the trends of the past," O'Keefe said.
Build with caution
It's a time of transition for New Jersey home builders.
The real estate market appears to be cooling from the peak levels of 2004 and 2005, as cautious buyers are less willing to bid up prices. Vacant land is disappearing. And New Jersey's environmental regulations make it difficult to build on what land is available.
Builders are responding by finding ways to boost both new home supplies and demand. Some developers are focusing on housing for senior citizens, many of whom might otherwise retire outside the state. And builders are redeveloping former industrial zones in urban areas.
Still, developers should prepare for the possibility of a market pullback, said Patrick O'Keefe, CEO for the New Jersey Builders Association
"Builders are advised ... to manage their levels of activity with an eye toward the future, rather than assume the trends of the past," O'Keefe said.
21 Comments:
Thankfully, for builders the words "minutes from NYC" will always bring in top dollar!
We get the first look at the Q1 GDP at 8:30 this morning.
grim
"Several talks focus on age-restricted housing, which is typically limited to people who are at least 50 years old. Half of all housing built in New Jersey last year was age-restricted, O'Keefe said.
Builders are not just drawn to such projects because of demand. It's often easier to get approvals for these subdivisions because municipal leaders welcome new taxpayers who don't have schoolchildren."
Half of all housing built last year was age restricted!!!!
U.S. Economy Expanded at a 4.8% Annual Rate in First Quarter
The U.S. economy expanded in the first quarter at an annual pace of 4.8 percent, the fastest in more than two years, led by resurgent consumer spending and a rebound in business investment that gave the economy momentum going into the second quarter, a government report showed.
...
Consumer spending, which accounts for about 70 percent of the economy, rose 5.5 percent at an annual rate last quarter, the fastest since the third quarter of 2003, compared with a 0.9 percent pace in the previous three months. The first-quarter rate compares with an average of about 3.3 percent over the last 20 years.
...
Business fixed investment, which includes spending on commercial construction as well as equipment and software, rose at a 14.3 percent annual rate in the first quarter, after rising at a 4.5 percent rate. Spending on new equipment and software rose 16.4 percent, the most since the first quarter of 2000, after a 5 percent rate in the fourth quarter.
...
The government's personal consumption expenditures index, a measure of prices tied to consumer spending, rose 2.0 percent after a 2.9 percent rise in the fourth quarter. The index excluding food and energy, a measure favored by Fed policy makers, rose at a 2.0 percent annual rate after a 2.4 percent rise the previous quarter.
The GDP price index, a measure of prices tied to the report rose at a 3.3 percent annual rate in the first quarter, following a 3.5 percent fourth-quarter gain.
Shailesh mentioned - >>I think we need political lobbying campaign to make housing more affordable for young families. <<
If young families with children were required to pay a per-child fee for every kid that attends public school, that would take away some of the distortion of real estate taxes that is causing much of this misalignment (towns focusing on senior housing only etc etc).
CNS
Whiners complaining up $3 gas maybe $25--$30 a week more while real estate has skyrocketed up $100K's of thousands and pricing out the average person.
Why no complaints about builders and realtors jacking up prices?????????????
Though age-restricted housing is not without its faults. As noted in this blog weeks ago, it was found that use of age restricted housing may actually increase the number of children in a community b/c the people buying the new housing are from the same community, thus freeing up their homes for more families
"I also agree on the age-restricted housing. For most towns, it's perfect. You get taxes, but no kids in the schools. The people don’t drive, and don’t cause trouble. "
First of all these developments are mostly for empty nesters who don't want to cut grass or shovel snow anymore. Second, they do drive. While a typical household will generate 10.2 trips per household per day and condos only around 6/day. Age restricted communities generate 5.6 according to Stephen Corcoran in his paper published at the ITE (Institute for Transportation Engineers). The Traffic reports for these places will often be submitted as "retirement community" which has tripgens of 2.8/day. The seventh edition of the ITE trip gen manual has an Age Restricted category but it has only 3 places that it studied, one in AZ, one in FL and one in NJ. FL and AZ are likely retirement communities and I think the NJ example is in Ocean or Atlantic County and thus do not accurately depict these type of developments.
I have extensively researched this topic and have found that the terms age restricted and retirement seem to get confused. I have also found out that in Monmouth County that they treat these things as being even worse than a regular house because they have experienced boomerang kids in alot of these developments who go to college and have jobs and go out at night.
I think we need political lobbying campaign to make housing more affordable for young families.
I respectfully disagree. You simply can't muck with markets in this fashion. It simply does not work. In many cases the outcome of this type of legislature is the opposite of what was intended.
If young families with children were required to pay a per-child fee for every kid that attends public school
Very bad idea from a growth perspective. This kind of burden has two outcomes, young families move elsewhere or young families have fewer children.
grim
Shailesh Gala said...
"There was a formula created for Affordable housing, but in last few years loopholes have been put into that as well. For e.g. The plan also allows for up to 50 percent of a municipality's obligation to be fulfilled through the development of senior housing, and another 50 percent to be transferred to other municipalities in the same housing region or a statewide affordable housing bank."
I beg to differ. The third round is based on a municipalities development patterns from 2004 to 2015. It states for every 8 units of market rate housing 1 unit of affordable must be made. Also the allocation of units goes like this 25 % Apartments, 25% senior the rest are regular affordable units. I have written acouple of these plans so I have some expertise. BTW square footage of commercial and industrial are factored in as well.
I think it is fair. But all of these age restricted units being built will incur obligations.
metropexual said:
"Half of all housing built last year was age restricted!!!!"
Of the other half, I would say 25-30% high end condo's, 15-20% spec. & non-spec. luxury homes, and less than 1% middle of the road SFH's which someone probably built themselves on a piece of land they owned prior to the boom.
JM
metroplexual, not metropexual...sorry for the typo...
JM
I'm against using legislature to restrict the rights of property owners and I'm against using legislature to try to control the marketplace.
Builders are building big McMansions on tiny lots and "luxury" condos because buyers are buying them, it's that simple.
Why on earth would a builder build a "middle of the road" home? The variable costs of the structure itself are minimal compared to the base fixed costs. It really doesn't cost much more for the builder to "go big". As long as you can sell for top dollar, the bigger you go, the higher the ROI.
Builders are going to build as big as zoning permits, and when zoning doesn't permit, they are going to try like hell to get the variances to let them go big.
grim
Grim,
Exactly, a developer is going to look to maximize return on investment. Labor expenses as well as land are comparbale to a modest sized home. There is no incentive to go modest sized. Builders I know, will tell you that and with the regulatory hurdles to subdivide a property it only worth their time to go big.
subsidies for young families?
next we'll start hearing about a windfall profits tax
NJ is in trouble because the business climate is terrible and government is too big
do not exacerbate the problem
the market is the best regulator of all behavior
Since when are families with kids that pay their fair share of property taxes a problem?
It is the bureaucracy the collects the property tax that is the issue.
Treat the problem, not the symptom.
chicagofinance,
I did not say that young families with kids are a problem. I think all kids are wonderful. I am only trying to nudge the property tax issue so that it is a fairer-pay-as-you-use kind of a system.
In full disclosure - I do not have any kids (and hence am probably biased). However, I pay a full share of the property taxes. When times are tough, as they are for me now, I do wish it was slightly different.
CNS
What about privitization of the schools?
Can private industry run our schools better than big government can?
grim said...
What about privitization of the schools?
Can private industry run our schools better than big government can?
12:43 PM
Hasn't this solution been used only in instances of gross incompetence/underperformance?
I like the idea of regional government planning in NJ. Just removing the redundancies at the county and local levels would be a godsend for the state.
You guys are complaing because it is a regressive tax in most cases. Because NJ has fiefdoms called municipalities, you get redundancies of services, add to it the NJEA's stranglehold on the Dems in this state and you end up with school teachers salaries approaching 6 figures for 9 months of work w/ a pension and free graduate education. That is where the fat is at.
Make education funding a state responsibility with a state tax paying for education and you would not have the same anti-children mentality.
As far as private vs. public, generally you would think that private would be better, but they need to make a profit which would add a premium. I was at a transportation conference three weeks ago and the selling of toll roads was brought up. Apparently, where they have been sold in the US, tolls have all gone up while maintenance has gone down. So your be the judge.
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