Northern New Jersey – New York Suburbs Housing: 1q16 Starts Up 118.1% YoY; Lot Availability & Affordability Remain Concerns by MetroStudy
- 1Q16 Quarterly New Home Starts Up an impressive 118.1% YoY and Up 22% QoQ.
- 1Q16 Quarterly Closings Down 8.2% YoY and Up 12.3% QoQ.
- Lot availability, affordability and the rate of closings are important indicators to watch closely in 2016.
MAY 2016 – Metrostudy’s 1Q16 survey of the housing market in the Central/Northern New Jersey & NY Suburbs region shows the new home construction market had 1,695 starts in the quarter, a 22% increase from 4Q15 and an impressive 118.1% increase from 1Q15. There were 1,068 closings for 1Q16, up 12.3% from 4Q15 and but down 8.2% YoY. In 1Q16, annual starts ended the year with 5,433 new homes started, a 20.3% increase from the annual pace in 4Q15 and up 36.2% YoY. Annual closings totaled 4,176 in 1Q16, a decrease of 2.2% off the 4Q15 annual pace and a 14.6% decrease YoY.
“A majority of the swing upward can be attributed to high-density projects in this market that are driving the starts numbers,” said Quita Syhapanya, Regional Director for Metrostudy’s Northern New Jersey & New York Suburbs market. “The decrease in closings is due to a large number of condo units where the pace of the move ins is taking longer than expected for a finished condo project or they are still under construction, which could be a concern with finished vacant homes or attached units. Getting homes built and moved into in a timely fashion has been a challenge in this market with lack of skilled labor.”
Northern New Jersey’s Housing Starts
In 1Q16, Northern New Jersey picked up where it left off in 4Q15 with strong momentum in new home starts, which numbered 2,413 annual starts, a 103.6% increase over 1Q15. The pace has picked up 34.1% off of last quarter. Starts have been on a tear for the past three quarters and have continued to increase quarter to quarter to quarter. With 857 quarterly new home starts, 1Q16 had the most starts Northern NJ has recorded for a quarter since Metrostudy started tracking the data in 2Q13. On the other hand, closings for 1Q16 decreased by 9.6% annually and 28.6% over this time last year. Getting these new homes that started occupied as well as any finished vacant inventory in condo projects moved into will be an important indicator to watch closely in 2016.
Central New Jersey had a big first quarter both in starts in closings. For 1Q16, the region saw quarterly starts of 1,196, a 70.6% increase over the starts from 1Q15. Annually starts were 2,209 in 1Q16, up 15.1% from 4Q15. Looking at closings, 1Q16 saw 683 homes occupied for the quarter, up 43.2% QoQ and up 0.6% YoY. Annually closings are up 0.2% from 4Q15. The market has gone through a majority of the finished lots in the Central NJ. There is only 21.9 months of supply which is on the low side for equilibrium and down from the 25.9 last quarter. Backfilling the pipeline in Central NJ will be important for 2016.
In 1Q16, total housing inventory – models, units under construction, and finished vacant units – ended 1Q16 with 7,056 units, a 9.9% increase of 9.9% from 4Q15. Year over year also saw a 23.6% lift from 1Q15, when inventory was at 5,708 units. Units that are under construction stood at 3,948 in 1Q16, a 16% increase from the prior quarter and a big 41% upward swing from this time last year when there were 2,797 units under construction. Finished vacant inventory totaled 2,834, increasing by 3.7% from the 2,732 vacant standing units in 4Q15. Year over year saw an increase of 7.5%, which is one indicator of some softness in the market, but it has more to do with condo inventory that has come online recently. Total Inventory months of supply for 1Q16 was at 20.3 months, an increase from 18 months from the prior quarter. The months of supply has increased due to the new under construction units that increased for 1Q16 as well as new unoccupied condo units. The market is still on the high side regarding housing inventory months of supply only because of the condo units that are brand new in the market. Single family detached months of supply is at 9.8, slightly up from the 9.1 last quarters.
For 1Q16, there were 7,300 Vacant Developed Lots (VDL) in the market. That represents a 1.3% decrease in developed lots in the region from the 7,395 lots available in 4Q15 and a 13.4% decline YoY. This region has 16.1 months of supply of vacant developed lots remaining. With an annual starts rate of 5,433 it would take 16.1 months to go through the remaining lots at this pace. The months of supply decreased by 3.6 months from last quarter this is significant drop in available lots. A healthy market supply level for equilibrium would be between 24 to 30 months.
There were 1,600 lots delivered into the market in 1Q16. Lot deliveries jumped from the prior quarter by 48.6%. Lot deliveries were up a big 117.4% YoY from the 736 lots delivered in 1Q15. Annual lot deliveries ended 1Q16 with 4,305 lots delivered into the market, up 25% QoQ and up 9.3% YoY.
“The increases seen in the quarterly and annual paces of lot deliveries in 1Q16 are healthy indicators for a new home market that is expanding,” said Syhapanya. “The Northern New Jersey/NY Suburban market is now in under supplied territory for vacant developed lots. There is very limited land available for new development in the market. Lot affordability is a big concern in a market that is still on the rebound for the new home for sale market. Builders and developers must get creative to make land deals work with the price of land and lots outpacing home prices. Much of the demand in this market is heavily favored east toward the Hudson River on the other side of Manhattan as counties like Hudson and Bergan have seen many buyers priced out of NYC market and have taken root in NJ. Most of the new home construction demand in NJ is NYC centric with high density projects driving the starts numbers in this region.”
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