The Real Jersey Comeback
Economists and analysts see signs of slow recovery, but warn that New Jersey is not well positioned for longer-term growth.
Analysts, developers, and academicians all saw hopeful signs, however faint, for New Jersey’s economy and housing market, but told a state conference in Atlantic City that the highly suburbanized state is poorly adjusted for longer-term changes.
Attendees at the Governor’s Conference on Housing and Economic Development heard a sprinkling of numbers that should bring comfort -- although not joy -- to Gov. Chris Christie and President Barack Obama.
Building permits are up 3,000 from last year’s pace, and could hit 15,000, the best figure since before the Great Recession, said Tim Touhey, chief executive officer of the New Jersey Builder’s Association. But he described “20,000 and more” as “a healthy market for New Jersey.”
The 33,000 private-sector jobs the state added last year were the most since 2000, said Jeffrey Otteau, adding, “clearly there’s been a turning of the corner.” But the state’s foreclosure rate has risen to 3,200 a month as banks address a backlog built up during court-imposed moratoria, he said.
In another meeting room in the Atlantic City Convention Center, James Hughes, dean of Rutgers’ Bloustein School of Planning and Public Policy, was repeating some of the same numbers.
Since the bottom of the employment trough in February 2010, the United States has seen steady private-sector job growth, Hughes said. But while it has recovered 53 percent of the recession’s losses, that still leaves another 4.1 million to go, he said.
New Jersey’s rebound has been sketchier, regaining only about 35 percent of lost private-sector jobs, but still is heading in the right direction, according to Hughes. But that positive assessment came with his reminder that despite population growth, “we have fewer jobs than we had in the year 1999.”
Hughes pointed to “transformative” demographic changes that should shape policy in housing and elsewhere. Some fallout already is apparent in the office market, he said. Hughes pointed to formerly “iconic” exurban business campuses like the now vacant BASF building in the Mt. Olive foreign trade zone, or Merck’s Whitehouse Station headquarters, being phased out for a reconsolidation to Summit.
Those sort of sprawling business centers are rapidly becoming relics, “along with the McMansions and starter-castles scattered across our countryside,” Hughes said.
Transportation costs, salary pressures, the sparseness of surrounding communities. and changes in personnel priorities are all pushing against the suburban patterns that have reshaped America since World War II, he said.
The Suburban Life
That is particularly a challenge in a state generally considered with Connecticut as the most suburbanized in the nation. Such state rankings can vary by population, land area or other factors, but as Newgeography.com put it last year, “New Jersey virtually defines suburbanization in the United States.”
Just as significantly, the rising “millennial” generation born after 1977 is burdened by student debt, and the poor job climate is more attracted to urban areas with cheaper housing and nearby amenities, Hughes said. For purposes of the housing market, they also could be labeled the “Renter Generation,” he said.
“One of the big questions is qualifying for a mortgage,” agreed Peter Reinhardt, president of the Kislak Real Estate Institute at Monmouth, sharing a panel with Hughes. Mortgage borrowing standards have become tougher, and some lenders are far less active, than before the recession, he said. He cited a recent study by the John Burns Consulting Group of San Diego that the number of first-time home buyers had dropped 20 percent in three years.
“Federal student loans now account for about 18 percent of all consumer credit” outstanding, equivalent to 6 percent of U.S. gross domestic product, he said.
But as baby boomers speaking to an audience largely of similar age, Reinhart and others were not entirely inclined to let the younger generation off the hook for its economic predicament.
While their parents were generally in better financial shape at the same age, some of that is millennials finding other ways to dispose of their money, Reinhardt said, “gym memberships, premium cable TV, iPhones, iPhone apps, and most importantly, the cost of a latte.”
That has implications for the housing market, even as Otteau saw a very slight uptick in New Jersey housing prices, 0.3 percent in the third quarter. While he expects that rebound to continue in the spring, the lower end of the market is where the heat is, as fewer people can afford, or will take a chance on, luxury homes, he said.
But as Reinhart put it, parents of grown children who might ordinarily be downsizing to smaller homes “may hold off because they’ve got to keep Johnny’s bedroom available.”
Some developers already are responding to this, said Mitchell Hersh, president and CEO of Mack-Cali Realty Corp. The company is the state’s largest office landlord, and blossomed during development booms along the Route 80 and Route 78 corridors that produced the kinds of business Xanadus now identified as outdated by Hughes and others.
But at the conference, Hersh pointed to the company’s adjustment to a changing residential market, notably in the huge rental housing towers planned for its Harborside Financial Center in Jersey City.
Aside from providing a cheaper housing alternative to New York, such rental properties make more sense for a workforce that is increasingly mobile and technology driven, not tied to one job or location, Hersh said.
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