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April 13, 2010, 9:03PM
Coming off one of the worst years for real estate since the Great Depression, most developers say the housing landscape still looks rocky.
An inevitable rise in historically low mortgage rates, high unemployment, foreclosures, a state budget in financial crisis and a lack of credit will continue to plague New Jersey home builders as the decade unfolds, according to a panel of industry experts at the Atlantic Builder’s Convention in Atlantic City yesterday.
"It’s not going to be one of those things where we’ll have an ‘aha’ moment and say: ‘That’s when it’s going to happen,’ " said David Crowe, chief economist for the National Association of Home Builders, referring to a turnaround.
Now that the Federal Reserve has stopped buying bad loans, the six-month streak of falling interest rates seems to be at an end.
Last week, the average rate for a 30-year fixed-rate mortgage rose to an eight-month high of 5.31 percent.
And some estimates push that number to more than 6 percent by 2011, chipping away at affordability. "That will assure that our housing market will be constrained for a very long time," said Jeffrey Otteau of the Otteau Valuation Group, an East Brunswick real estate appraisal firm.
Things don’t look too good for job growth, either.
Crowe said he expects the unemployment rate to hover around 8 percent for the next several years. And in New Jersey, where about one in five adults are employed by the government, Gov. Chris Christie’s budget eventually will affect housing.
In the previous decade, the private sector lost about 223,000 jobs, while government jobs grew by 57,000 positions, according to the Otteau Valuation Group.
"But the state doesn’t have a choice at this point," said Joel Naroff of Naroff Economic Advisors.
Naroff said in the long term, health care reform legislation will help create state jobs in one of New Jersey’s most crucial sectors: pharmaceuticals.
The outlook, however, for the state’s real estate isn’t too sunny for at least the next several years.
Housing prices are now at 2004 levels. And there is a 16-year supply of age-restricted, or senior, housing in the state. Otteau said luxury housing will perhaps never fully recover.
He predicted housing prices won’t reach 2005 levels until at least 2020. The children of Baby Boomers won’t have the wherewithal to handle the mortgages accompanying their parent’s three-car garages, outdoor kitchens and McMansions, he said.
"What we’re going to see is a more European market model efficiency," he said of future housing, adding that home prices will first come back in North and Central Jersey because of their proximity to business centers. "Homebuyers will seek to live close to jobs and transportation."
The consensus among the panel’s three members was that at least the real estate market won’t get any worse.
"We are in for some good news," Crowe said. "But this is a steady steep climb out of a deep hole."
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