By KEVIN POST, Press of A.C. Business Editor | Thursday, April 8, 2010
The southern New Jersey housing market is emerging from the severe real estate downturn with home values remarkably intact.
A Press analysis of state home sales has found that while home prices declined the past two years, price appreciation remains strong for the five- and 10-year periods.
“You can see from the numbers that there was some very nicely sized appreciation in housing prices over the course of the decade,” said Joel Naroff, of Naroff Economic Advisors in Holland, Pa.
For Atlantic County homes, median price gains in each municipality averaged 16 percent from 2004 to ’09
and 105 percent from 1999. In Cumberland County, municipalities averaged 30 percent home value appreciation for the five years and 74 percent for the decade.
The tourism- and second-home-dominated markets of Cape May and southern Ocean counties saw little change in median prices since 2004 — an average 3.7 percent decline for Cape May County and a 0.2 percent gain in southern Ocean County.
But that flat appreciation came after a huge run-up in prices in those shore communities starting in the late 1990s, according to Richard Perniciaro, director of Atlantic Cape Community College’s Center for Regional and Business Research. From 1999 through 2009, home values surged the same average amount — 142 percent — for towns in Cape May and southern Ocean counties, Press figures show.
“When you look at it objectively, we’ve actually done a lot better than the other places we were similar to on the upside of the housing bubble in the middle of the decade,” Perniciaro said. “The gang we were running with, the resort places like Florida and Arizona and Nevada, have taken a bigger tumble than we have.”
Naroff said the persistent appeal of shore properties to vacationers and second-home buyers helped sustain prices in the region through the downturn.
“It is a shore area, so it’s not surprising that there were significant increases where we more than doubled prices in the decade despite the declines that occurred in 2008 and 2009,” he said.
Perniciaro said he expects those factors to speed the housing recovery in Cape May and southern Ocean counties, while Atlantic and Cumberland counties will be more job-dependent and therefore slower to rebound.
But with the worst housing slump of a generation largely past and home values still strong, the outlook for the region is better than the nation as a whole, Naroff said.
“The demand will come back and while we’re not going to see over the next decade anything like what we got over the previous decade, home appreciation will be better than the average for the rest of the country and many other areas,” he said.
Variations by county
A Press analysis of all 2009 New Jersey home sales of at least $50,000 and comparisons to 2004 and 1999 prices bear out what Realtors have long maintained: All real estate is local. In southern New Jersey, it is also highly diverse.
Of the 25 New Jersey municipalities with the highest median prices for homes sold in 2009, six were in Ocean, Cape May and Atlantic counties. Among the 25 (out of 566 towns in the state) with the lowest median prices, five were in Cumberland and Atlantic counties.
Perniciaro said the home sales figures and appreciation rates confirm that Cape May and Ocean counties are very similar, while Atlantic and Cumberland counties have much in common.
Strong home-price gains didn’t start in Atlantic and Cumberland counties until 2002-03, he said, whereas Cape May County and the Long Beach Island area saw rapid appreciation beginning in 1997-98.
“Cumberland and Atlantic are more dependent on job growth. They’re more diverse real estate markets,” Perniciaro said.
Optimism about the casino industry earlier in the decade helped drive those markets, he said.
“In 2005, the Casino Reinvestment Development Authority was talking about 50,000 new jobs,” he said. “By 2007, it was all over and people began to realize it wasn’t happening.”
Having inflated less in the decade-long property bubble, home prices in Atlantic and Cumberland counties dropped less when it burst. From 2008 to 2009, the average Atlantic County municipalities saw prices drop 7 percent; in Cumberland County, 5 percent.
“The next couple of years is going to depend on what happens in the counties economically,” Perniciaro said. “If Revel announces its financing and completion, you’ll get a boost.”
But even if the casino industry stabilizes after the impact of the recession and increased competition in neighboring states, it’s not expected to hire a lot of new people.
That will mean the recovery of housing markets in Atlantic and Cumberland counties will take time, he said.
In Cape May and Ocean counties, those patterns are reversed.
Their real estate markets — more dominated by vacation properties, second-home owners and investors — boomed earlier and took bigger hits when the property bubble burst.
Cape May County municipalities averaged a 15.6 percent drop in median home prices from 2008 to 2009, while the 13 municipalities making up southern Ocean County averaged a 6.3 percent drop.
Even so, the boom since the 1990s left prices in those counties more than doubled. Today, they’re positioned to rebound more quickly than other parts of the region.
As the U.S. economy recovers, investors and retiring baby boomers will return to the real estate markets in Cape May County and the Long Beach Island area, Perniciaro said.
That sort of buying is more discretionary and fell more during the recession, he said, but as the economic recovery proceeds, it will bounce back and help southern New Jersey’s shore areas.
Municipalities matter
Even among municipalities, there has been great variation in real estate markets the past decade.
The Atlantic County growth townships saw strong home appreciation in the five years ending in 2009: 20 percent in Egg Harbor Township, 30 percent in Galloway Township and 23 percent in Hamilton Township.
Some Absecon Island municipalities did even better:
52 percent in Atlantic City and a whopping 61 percent in Longport.
Brigantine seemed to defy the shore town trend, with zero gain in home prices during the five-year period. But that’s because the island city saw a huge rise in prices in the previous five years, when the announcement and then building of the Atlantic City Expressway Connector greatly improved access to Brigantine. As a result, even though Brigantine prices were flat from 2004 to 2009, for the decade after 1999 they’re up 152 percent.
Such price increases for the decade were routine for oceanfront municipalities. For example, in Stone Harbor — with the state’s fifth-highest median home price in 2009 of $975,000 — prices were up 212 percent since 1999.
By comparison, Vineland home prices gained 76 percent during the period — good, but half the typical rate for shore towns.
The brighter future
There is widespread agreement in the real estate industry that from here on the market will improve. The question is, by how much and how fast?
Home sales fell from 2008 to 2009 by 21 percent in Atlantic County, 10 percent in Cape May County, 4 percent in Cumberland County and just 1 percent in southern Ocean County.
“We’re at the bottom and we’re coming out very soon,” said Richard Shaffer III, president of the Atlantic City & County Board of Realtors. “We’re also coming out of winter, the slowest time of year. After the snow and everything else, we’re definitely seeing more activity.”
Allan Dechert, president-elect of the New Jersey Association of Realtors and principal of Ferguson Dechert Inc. in Avalon, has also seen the improvement.
“We’re making good strides. We had a really nice month in March,” Dechert said. “I think the home market’s going to rise over the years ahead and real estate will continue to be a good investment.”
The National Association of Realtors predicts U.S. home sales will increase 6.5 percent this year to 5.5 million, and another 3.8 percent next year to 5.7 million.
Home prices are expected to rise 2.8 percent this year and 4.3 percent in 2011. The NAR also expects the average fixed mortgage rate to reach 6.1 percent next year.
Heidi Anderson, an agent with Coldwell Banker Casa Bella Realtors in Linwood, said the worst part of the real estate slump locally was the snow-filled winter months of December, January and February.
“It’s funny, but it really started to get better when the sun came out,” she said. “The first sunny day in the beginning of March, we started to get busier.”
Spring always gives a boost to the real estate industry. This year, it may thaw a market seriously chilled for three years.
Press Photo, Photo by Michael Ein