N.J. Bucking The National Trend In Home Sales

waxman_realtyNew Jersey has outpaced the nation when it comes to the sales of homes. According to figures recently released from the National Association of Realtors, New Jersey was one of only three states that showed positive growth in sales volume from the fourth quarter of 2009 to the first quarter of 2010. New Jersey’s growth in homes sales bucked both the national trend, where sales growth diminished by 14 percent, and the Northeast regional trend, where sales volume dipped by 17.7 percent. The quarter-to-quarter growth in real estate sales in New Jersey, at 6.8 percent, was the best growth in the nation among high-volume states and was second among all states in the nation, exceeded only by Wyoming. It is important to keep the Cowboy State’s numbers in context. Real estate sales in Wyoming are at such a low level (on an annual basis, home sales in Wyoming generally hover around 10,000 units per year) that modest changes in actual sales push their percentage number quite dramatically. New Jersey’s annual sales volume typically exceeds 125,000 units.

The nationwide data show that the volume of existing home sales in New Jersey has increased in every one of the last four quarters. The Garden State is one of only two states that can boast of this positive trend.

Confidence in the market is high, home prices are both reasonable and appropriate, and mortgages are affordable and available.

Maintaining steady growth in home sales in New Jersey will be a challenge, but it is doable.

Several factors loom on our economic horizon, all having to do with the “affordability index,” that could threaten New Jersey’s economic progress.

The affordability index takes into account median home prices, median family income, average mortgage interest rates and the cost of such things as property taxes. The most recent data indicate that the affordability index is at a level that has rarely been achieved.

Mortgage rates are at record lows, median family incomes in New Jersey continue to be among the highest in the nation, and home prices are at very attractive levels.

Mortgage interest rates for a 30-year fixed-rate mortgage in the first quarter of 2010 averaged 5 percent. That figure is slightly above the 4.92 percent figure from the previous quarter, but still at one of the lowest levels ever.

Most economists believe that mortgage interest rates will continue to be set at affordable levels, but that they will increase over time. During a period of high unemployment and stagnant wage growth, buyers would be well advised to take advantage of current rates before they inch upward.

Property taxes are a substantial impediment to housing affordability. New Jersey has the highest property taxes in the nation. The average property tax bill in New Jersey now, for the first time ever, exceeds $7,000. The typical monthly property tax payment for a New Jersey homeowner averages about $600, and that’s just the average.

It is not unusual for potential homebuyers to find the perfectly priced home is unaffordable because their property tax bill will be $600, $1,000, or more each month.

The good news about property taxes is that both the governor and the Legislature have embarked on a mission to permanently curb the growth in property taxes. Property taxes have always been a potent political issue; the party that is out of power blames tax increases on the incumbents, the party in power convenes commissions and task forces that make recommendations.

Perhaps divided government, where one party occupies the executive branch and the other controls the legislative branch, may work to the advantage of struggling property taxpayers. Both parties are in charge, and the time for action is now, the blame game is over.

The real estate market is at the heart of the state’s economy. New home construction has an unrivaled “multiplier effect” with respect to economic activity. Affordable and available housing is an absolute determinant for businesses seeking to locate or expand.

Affordability allows young couples and other first-time homebuyers to enter the market, which allows the state to keep its highly educated young entrepreneurs here at home rather than chasing them, and the enormous investment we have made in their educations, to locations in other states.

New Jersey’s inherent advantages — its workforce, its affordable and varied housing stock, its leisure time options and its perfect location — have combined to keep our housing market strong and helped us to once again lead the nation.

Hopefully, our political leaders will commit themselves to keeping New Jersey in its leadership position. Newjerseynewsroom

Jarrod C. Grasso. is chief executive officer of the New Jersey Association of Realtors, a statewide organization representing more than 50,000 real estate professionals.

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