Why doesn't NJ build more homes? Eleven Jersey Shore towns that approved the most in 2023
Michael L. Diamond, Asbury Park Press
5 min read
Home construction permits in New Jersey have slowed down this year, according to state data, in a sign that rising interest rates are putting the brakes on an industry that already was struggling to keep up with the demand for homes and apartments.
Without new inventory coming onto the market, builders and economists say, New Jersey home prices likely will remain expensive, giving buyers little relief.
"I think the already-existing supply challenges are going to get even worse," said Michael Kokes, president of Kokes Properties, a Brielle-based builder that specializes in apartments. "As it becomes less economically feasible for new projects to get started, you're going to have naturally a bigger supply issue."
New Jersey builders through the first half of 2023 were approved for 10,653 permits for single- and multi-family homes, putting construction companies on a pace that would fall far short of the 31,792 permits they received last year. At that rate, this year would see the fewest permits approved since 2015, according to data from the state Department of Community Affairs.
Construction of townhomes continues at Pulte Homes Parkers Creek on the east side of Fort Monmouth. Oceanport, NJ Wednesday, November 1, 2023
The residential real estate industry has been grasping for ways to create more housing, particularly for lower- and middle-income residents. With the millennial generation at peak home-buying age, the U.S. as of 2020 had an estimated shortage of 3.8 million housing units, according to a report by Freddie Mac, an agency that backs mortgages.
"That's why we're seeing home prices, even with mortgage rates pushing close to 8%, reaccelerating," Len Kiefer, deputy chief economist for Freddie Mac, said in an interview. "Because fundamentally, there is not enough housing to meet demand."
The lack of construction activity dampens a housing market that already has slowed to a crawl.
Construction of townhomes continues at Traditions at Wall near the intersection of Routes 33 and 34. Wall, NJ Wednesday, November 1, 2023
Even though the economy has been strong, rising mortgage rates have sharply increased the cost of buying a home. And owners who took out or refinanced mortgages when rates were at record lows during the pandemic are staying put, unless a life event forces them to move.
In Monmouth County, sales of single-family homes during the first nine months of the year fell 22.5% compared with the same time last year, but the median sales price of $667,500 was up 4.3%, according to the New Jersey Association of Realtors, a trade group.
In Ocean County during the same time, sales declined 25.2%, but the median sales price of $530,000 was up 6%, the Realtors group said.
Construction of townhomes continues at Traditions at Wall near the intersection of Routes 33 and 34. Wall, NJ Wednesday, November 1, 2023
One antidote — simply build more homes — is slow going. New Jersey's permit activity last year was its strongest in more than 15 years, but it still was 20% below what it was in 2005, according to state data.
The difference between then and now is more pronounced at the Shore. In both Monmouth and Ocean counties, the number of construction permits approved in 2022 was at least 45% less than in 2005, data shows.
Among the reasons:
Rising interest rates.
Lack of available construction labor.
A contingent of residents that doesn't want to see development nearby. It's a group known as NIMBYs, short for "not in my backyard."
Construction of townhomes continues at Traditions at Wall near the intersection of Routes 33 and 34. Wall, NJ Wednesday, November 1, 2023
Not that anyone is hoping for a repeat of 2005, when housing demand was inflated by subprime loans. It created a bubble that eventually collapsed when owners couldn't keep up with their mortgage payments. It touched off a global recession.
But Kiefer at Freddie Mac said the current housing market could benefit from new construction. Even if the development is relatively expensive, he said, its buyers likely would be moving out of a less expensive home that could then be put on the market.
For now, buyers continue to outnumber sellers. Annette Morano, an agent with Century 21 Solid Gold Realty in Ocean Township, said she recently listed a home in Audubon, Camden County, for $249,000. The owner received eight offers before selling it for $285,000.
Construction of townhomes continues at Traditions at Wall near the intersection of Routes 33 and 34. Wall, NJ Wednesday, November 1, 2023
"There are so many first-time home buyers waiting for something to come on the market for that price point," Morano said.
Here are the 11 towns in Monmouth and Ocean counties with the most home construction permits approved through the first six months of the year, according to the state Department of Community Affairs.
Michael L. Diamond is a business reporter who has been writing about the New Jersey economy and health care industry for more than 20 years. He can be reached at mdiamond@gannettnj.com.
