The New York Times

September 20, 2009


First Signs of Recovery

WHERE do signs of a housing market recovery show up first? In New Jersey, the answer is: in the northern part of the state, in relatively affluent towns, especially those with train stations.

“Recoveries first take root in what we call the primary markets,” said Jeffrey G. Otteau, a residential market analyst. “These are more desirable markets, but not necessarily those in luxury or high-priced areas. They are close to jobs, and close to trains.”

There are now 28 towns in the state with an inventory of homes on the market that would take just four months or less to sell, given their current rates of sale, according to the latest Otteau Appraisal Group report.

Analysts and brokers generally call a market healthy when the inventory can be sold in six months or less. Statewide, the inventory stands at nine months; at the start of the year, according to the data, it was nearly twice that. (Only a relatively small portion of that decline can be ascribed to sellers’ holding off on listing their homes.)

Seven counties in northern New Jersey have the healthiest markets: Bergen, Essex, Morris, Union, Somerset, Mercer and Middlesex all have inventories of eight months or less.

The towns with the lowest inventories all lie within those higher-performing counties, except for two: Keyport in Monmouth County, which is one of the first shore towns south of Newark on the Garden State Parkway, and also not far from the busy train station in Woodbridge; and Bordenton Township in Burlington County, on the Delaware River.

Bergen County is the healthiest — if health is measured by the number of towns with the sparsest inventories. It has eight, based on numbers of signed sales contracts. Essex County has six.

Bergen is home to the town of Alpine, recently described by Forbes magazine as the most expensive ZIP code for real estate in the nation. The median price of a home in Alpine, a haven for professional athletes and entertainers, is $4.14 million.

But Alpine was excluded from the Otteau Group list of towns leading the way to market recovery. With 45 houses currently on the market, and prices down an estimated 23 percent from last year (according to Altos Research, which supplied data to Forbes), the inventory of unsold homes there is 22 months. There have been several months so far this year in which no homes there were sold, and the time-to-sell estimate provided in monthly Otteau Group reports shot up as high as six years at one point.

Midland Park in Bergen County has a two-month inventory. Also in Bergen, Dumont and River Edge each have three months’ worth of homes on the market; Allendale, New Milford, Oakland, Ramsey and Ridgewood have four months’ worth.

Ridgewood, by all accounts, has been hurt by the Wall Street crisis; one in six of its residents was employed in financial services at the time that companies began shedding jobs. Vacant storefronts now pockmark the retail village; a stone mansion in the Old Country Club neighborhood has been on the market for 466 days (despite a price reduction of more than $300,000, to $2.695 million); average sale prices are down 10 percent from last year, to a median of $775,000.

And yet, even with those numbers, the average house lingers only 114 days on the Ridgewood market, according to Altos, which provides weekly updates on its data analysis.

“Ridgewood has been doing well throughout this crisis period,” Mr. Otteau said. “For one thing, the Wall Street job losses were not nearly as massive as had been feared. It is a desirable community, with a commuter rail station, and people who buy homes there tend to stay a long time — absent a financial catastrophe, of course.”

In Essex County, a community with a similar real estate profile is Glen Ridge. It is much smaller, with about 7,300 residents, versus Ridgewood’s 24,936, but it has about 35 homes on the market, which the Otteau Group calculated to be a three-month inventory.

One big asset to Glen Ridge is its commuter train station, which Mr. Otteau has repeatedly emphasized as a critical bulwark to long-term home values. In fact, 12 of the 28 low-inventory towns have train stations.

The overall health of the Essex County market is patchy, the analyst noted, ascribing that to the wide economic disparity of the towns within its fold. For example East Orange, a struggling city situated just south of Glen Ridge, has a 15-month inventory.

In Essex, the list of “recovery leader” towns with four-month inventories includes both Essex Fells Township, an even smaller and perhaps more exclusive community than Glen Ridge, and Millburn Township, which encompasses the affluent Short Hills section. It also includes the substantial community of Livingston (population 27,500), as well as North Caldwell and Verona.

Livingston has no train station, but is “strategically located,” Mr. Otteau said. “It’s in Essex County, but right on the fringe of Morris County, in the epicenter of jobs,” he said, “and its highway access is superb.” Interstate 78 can be reached to the south, I-80 to the north and I-287 to the west. In Union County, Cranford has a slim inventory; it is home to the state’s first designated Transit Village, under a now-12-year-old program that backs planning and development around rail stations, Mr. Otteau noted.