The Ultimate Housing Market Forecast for New Jersey Investors in 2018
I’m a huge fan of The Honeymooners—the classic TV show set and filmed in the 1950s. That probably shows my age a bit but, for the younger followers out there, the show involves Ralph Kramden—a Manhattan bus driver played by the legendary Jackie Gleason—who’s either cooking up a get-rich-quick scheme or trying to pull one over on his wife. In one episode, Kramden and his best friend, Ed Norton—hilariously characterized by Art Carney—meet a newspaper reporter on the street outside the fictional Gotham Bus Company. Norton asks the reporter if a recent question caused a lot of controversy. “Oh, that must have been the one on whether or not the United Nations should outlaw the H-bomb,” the reporter says. “No. No,” says Norton. “This one was: Which is more authentic—the Canarsie or the Weehawken style of mambo?”
Only Carney’s character would view a question on opposing Jersey and Brooklyn dance styles as contentious but I guess my point is, for decades, Eastern New Jersey has shared deep ties with the five boroughs in New York. In the real estate world, those links are accentuated by the high-end home prices that trickle across the Hudson River as well. However, New Jersey’s geographic makeup positions the Garden State as much more than a New York City suburb. Rural living can be had in the mountainous northwestern region that borders the Delaware River and the Pocono Mountains in Pennsylvania. In the southeast, Jersey’s noted 141-mile stretch of seashore extends from Long Branch in the north to Cape May at the southern tip. Naturally, the 2018 housing market forecast in New Jersey highlights some appealing neighborhoods in each of these areas for real estate investment—and others that require avoidance.
The 2018 New Jersey Housing Market Forecast
Like any other statewide real estate market, the potential to optimize return on investment depends heavily on location. Some regions merit investigation and others simply don’t. Not only will I explore those areas in New Jersey that hold promise, but I’ll also uncover towns and neighborhoods that should probably be sidestepped this year. Check it out.
Thumbs Up: Jersey City
One can’t look at the upscale 2018 New Jersey real estate landscape without first examining the effects of the new federal tax laws. The IRS will now only allow homeowners a $10,000 state and local property tax deduction from gross income. While the new code might not impact the business deductions claimed by investors, the actions of the feds just might create some buying opportunities when property owners can no longer use an uncapped exclusion to help defray their rising New Jersey property taxes. As a result, you might be able to scoop up deals in areas where some analysts expect up to a 10% downturn in luxury home prices—like downtown Jersey City.
And, you won’t have too much difficulty renting the property out. Jersey City appeals to Manhattan commuters for a number of reasons. Primarily, the trip to the financial district from the west bank of the Hudson takes less time than travel from a few of the nearby boroughs. The Port Authority Trans-Hudson or PATH train swooshes passengers to One World Trade Center in about 5 minutes. Furthermore, rents in Jersey City price out favorably to its cross-river counterpart. One-bedroom units often fetch about $2,200 per month on average whereas rents on similarly sized properties in the Lower East side command about $2,700. Finally, New Jersey residents also pay less in sales tax than New Yorkers: applicable purchases are subject to an 8.5% levy in the Empire State as opposed to 3.5% in the Garden State. These are just a few of the reasons New Yorkers are fleeing to Jersey.
Thumbs Down: Orange
The number one rule of real estate investing needs to be heeded: location, location, location. Granted, the city of Orange, New Jersey sits about 11 miles west of Jersey City and still provides a manageable commute to the Big Apple. However, property values and rental prices are typically buoyed by livability measures. Crime rates tend to be one of the key metrics analyzed by real estate investors and prospective residents before they decide to shell out money for a home. In 2016, Orange surpassed Newark with respect to violent crime, registering 112 incidents per 10,000 residents. Only three New Jersey locales had worse outcomes. Crime-ridden cities tend to experience less growth in median sales prices as well as lower rental prices.
Although skewed by the pullback in the wake of the 2008-09 financial crisis, the appreciation of Orange home values from 2000 through the third quarter of 2017 have annually averaged a paltry 1.8%. That amounts to a total gain of 37.7% in the approximate 18-year span. There’s little doubt that investors would have realized a greater ROI in other asset classes or in other real estate markets. Even nearby Newark, which has had its share of reputational issues, experienced an average annual growth rate of 3.7% in that same time frame, for a total return of 90.9%. Thus, a $200,000 home purchased in 2000 would have grown to about $380,000 in Newark and about $275,000 in Orange. That’s a significant difference and largely attributed to Newark’s corresponding drop in crime rates.
Thumbs Up: Haddon Heights
If northeastern New Jersey pairs up well with the nation’s largest city, then Camden County to the southwest also acts as a sister-region to Philadelphia, the fifth-largest city in the United States. Haddon Heights, New Jersey residents enjoy the amenities that suburbia offers, along with easy access to big-city life about a 20-minute drive from the City of Brotherly Love. Haddon homes afford New Jersey buyers a chance to acquire properties less expensively than similar neighborhoods in the Philly suburbs. Median home values in Haddon come in at $229,000. Compare that value to Lafayette Hill or Bensalem in the Philadelphia metro area where median home prices are $426,000 and $261,500 respectively.
The New Jersey township has enjoyed a double-digit increase in value through all of 2017, making it the only locale in Camden County to rank among the prior year’s fastest-growing neighborhoods in terms of home prices. Rising foreclosure rates in Southern New Jersey have brought a great number of buyers into the market and Haddon Heights’ prices, unlike the remainder of the county, have been buoyed as a result. Much of the town’s appeal springs from the feel that reflects a small slice of Americana, where small family business thrives, single-family homes populate tree-lined streets, and kids play in their yards. In addition, Haddon schools rank among the highest of all educational institutions in New Jersey.
Thumbs Down: Camden
The last time I visited Camden, my nephew and I ventured from Center City Philadelphia to a concert at the BB&T Pavilion on the city’s waterfront. The PATCO train from Rittenhouse Square across the Delaware River to the Broadway stop in Camden took about a half-hour of travel time. But the scene at the train stop took about a half-year off my life. The bicycle stalls alongside the depot were makeshift homeless shelters. Some young concertgoers were being harassed by a few locals and, not surprisingly, there was no police presence until we got within 300 yards of the venue. I’ve been in some bad neighborhoods in a few notoriously rough cities in the United States—Chicago, Baltimore, Detroit—but the Camden experience made the others look like Sesame Street. I knew I could never invest in property there, and I can’t imagine that anyone else would either.
The negative vibe given off in Camden—a stone’s throw from a major attraction no less—likely gives an indication of why investors should scratch Camden off their list of cities in which to purchase properties for rent or renovation and resale. Additionally, developers spend a lot of time researching the best places to launch new housing projects. If real estate tycoons are willing to make multi-million dollar wagers in certain locales, individual speculators often follow suit. Despite the best efforts of the New Jersey Economic Development Authority, a seemingly appealing tract of land in North Camden along the river has seen little to no interest in 2017 from the big real estate players. No activity on that land is slated for 2018, either. If buyers follow the money, and their instincts, Camden doesn’t make the cut for investment.
Thumbs Up: Sea Isle City
Being a lifelong resident of Eastern Pennsylvania I had taken most of my adult beach vacations in Delaware or Maryland. So when some friends suggested we split a house in Sea Isle City, New Jersey, I was a little skeptical but thought, “Why not?” Nestled between Ocean City and Avalon, Sea Isle impressed me for one main reason: walkability. Other than a quick trip to the grocery store and a short drive to dinner in Avalon, I didn’t get in my car all week. My wife, my friends, and I casually ambled everywhere in Sea Isle—beaches, taverns, and a quiet little boardwalk with shops and restaurants. The little seaside town thankfully lacked the party atmosphere of Wildwood but was a bit livelier than serene Cape May to the south. My main criteria for a thumbs up: Would I return? The answer– a resounding yes.
Beach properties in New Jersey are always sought after, especially as the needle moves south toward Cape May. Sea Isle median values of $749,000 present a bargain for shore buyers compared to the nation’s ninth-most expensive market of Cape May, which doubles the median value of its northern neighbor. A more family-oriented destination than Atlantic City, Sea Isle’s growth in home prices can’t help but be supported by a carryover effect from nearby Stone Harbor and Avalon.
Thumbs Down: Atlantic City
You need to realize that all Jersey Shore towns have not progressed equally. Granted, the reality television show that heaped attention on coastal New Jersey may have given a bad rap to the whole seaside expanse. That’s patently unfair but, nonetheless, there are some areas along the 141-mile stretch that don’t merit investment. Atlantic City has taken its lumps both from Hurricane Sandy in 2012 and the fading casino business that suffered at the hands of legalized gambling in bordering Pennsylvania. The unemployment rate in Atlantic City sat at 7.2% as of November 2017, a marked improvement from post-Sandy figures of 22% but still about three points higher the national number.
Looking into 2018, the forecast doesn’t get any rosier for median home prices in Atlantic City, which has seen a backslide in all years since 2007 with the exception of 2014 and 2016. Prices in the third quarter of 2018 are projected to dip below levels seen at the end of the same three-month period for 2017. Investors willing to buy and hold may ferret out some bargains among homes listed with a $110,000 median price but more patience may need to be exhibited than with other can’t-miss hamlets on either side of this city.
Finding Leads Across the State
Whether you prefer the Canarsie or the Weehawken style of mambo, there are real estate investment opportunities in New Jersey that will suit your business goals just right. It’s a matter of finding them, however. For that, you’ll need a solid real estate investor lead generation system. I don’t know about you, but I simply don’t have the time to waste on chasing investment fantasies that won’t turn into a real deal. That’s why I became an independently owned and operated HomeVestors® franchisee. The nationally-known “We Buy Ugly Houses®” marketing campaign is known throughout the state, so distressed homeowners know who to call when the need to sell fast.
Contact HomeVestors® today to see how you can make the most out of the fast-paced Garden State real estate market.
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