Single-family homes stay in the game, but North Jersey land scarce to build them
Buyers looking for new, single-family homes in New Jersey once had plenty to choose from. As the state’s suburbs boomed in the second half of the 20th century, developers blanketed farm fields with new houses aimed at middle-income buyers.
But those days are no more. Now, close to two-thirds of the home construction in the state is multifamily, led by rentals along the Hudson River. Single-family construction is piecemeal and pricey — a new home here or there, on pockets of land that open up, often when an older house is knocked down.
A new development on Roosevelt Boulevard in Paramus, not far from Route 17, is an example.
Six colonials with a shingle-style feel are being built on 2 1/2 acres that belonged to a longtime Paramus family, the Schreibers. Landscape architect William Comery approached the family about the property before the death of matriarch Alice Schreiber, and he is now working with two partners on the homes, which have asking prices of more than $1 million each.
"It never entered our mind to do anything other than single-family," Comery said. "That’s what I think Paramus is about. We weren’t looking to build town homes or apartments or anything like that."
That makes him different from most of the builders in the state. While multifamily construction has rebounded from the worst housing crash since the Depression, annual construction of single-family homes has lingered in the 10,000 to 11,000 range, down from more than 20,000 a year through most of the 1990s. Single-family construction has been led by activity in Monmouth and Ocean counties.
Through August of this year, builders have started about 6,500 single-family homes in the state, about 36 percent of the total number of housing units started.
The main reason for this shift away from single-family: There’s just not enough space, especially in North Jersey. The state is already largely developed, and regulations bar further development in environmentally sensitive areas, such as the Highlands. As a result, land in the state has just become too scarce and too expensive to support a mass of single-family homes — particularly homes affordable to middle-income families.
"There’s very, very little developable land left for any significant size of single-family subdivision," said George Vallone, president of the Hoboken Brownstone Co. in Jersey City and a past president of the New Jersey Builders Association. "This is the most built-out state in the country."
There are a couple of larger-scale single-family developments on the horizon. Toll Brothers plans to build 78 luxury single-family homes on the site of the old Apple Ridge country club in Mahwah and Upper Saddle River. Toll also is planning to build 60 single-family homes, along with 160 town houses, on the site of the former High Mountain golf course in Franklin Lakes. Prices haven’t been set yet, but these homes will likely go for more than $1 million, said Craig Cherry, Toll’s division vice president for the New Jersey suburbs. He said Bergen County’s strong schools and location near New York City’s strong job market help support that price.
"We have found the market is very strong in this price point," Cherry said.
But these larger developments are the exception.
"You just will never see again the type of single-family building we had in the past, because there just simply is not the land for it," said Billy Procida of Procida Funding & Advisors in Englewood Cliffs, which lends money for real estate development.
"If you can find a deal with five lots, you’re lucky. You tell me where in New Jersey you’re going to find space to build 100 houses."
Because the land is so scarce, it is expensive, which in turn drives up the price of the homes. New single-family homes in Bergen County — often on a lot where the developer has torn down an older home — tend to be pricey, and builders say the market of potential buyers thins out as the price tag heads toward (or above) $1 million.
"The problem is, if you’re paying $300,000 or $400,000 for the property and knocking it down, you can’t put up something and charge a couple of hundred thousand," said Lou Chiellini, a Park Ridge builder who is active in Park Ridge and nearby towns. "I’m looking at a few new lots for $300,000 or $350,000. That means I can keep the house in the $850,000-$900,000 range." Chiellini likes to keep the price under $1 million, because at $1 million, a state "mansion tax" of 1 percent kicks in, adding at least $10,000 to the buyer’s cost.
Chiellini said that as the housing market has improved, he’s notched up his production from two or three houses a year to four or five. The buyers are typically two-career couples with a child or two, moving from Manhattan, Brooklyn or Hoboken to the suburbs for the highly rated schools and more space for their children.
Patrick O’Keefe, an economist with CohnReznick and a former CEO of the New Jersey Builders Association, said that because of their price point, new homes tend to be a trade-up market. And many homeowners aren’t willing or able to trade up, because the housing crash left them facing lower sale prices if they decide to sell their current homes. As a result, builders are cautious about constructing single-family homes, unwilling to get ahead of the market demand.
Joseph Carbone, a builder based in Old Tappan, said he has recently shifted from single-family to two-family homes, where each unit sells for about $600,000 to $800,000. Those sell much more quickly than the single-family homes he was building for $1.5 million to $2 million.
"The higher the price, the longer you wait" for a buyer, Carbone said. "If you sell a home at $1.5 million, it might take three months. If you sell a home at $600,000, it make take three weeks. … If I’m selling two-families this quickly, why tie my money up in a one-family?" (Duplexes or two-family homes are not allowed in all areas, however.)
"You don’t want to be in a market over $1 million right now," said Robert Abbott, a Berkshire Hathaway broker in Wyckoff. "You’ve got people buying their first homes later in life. Meanwhile, boomers are trading down. You’ve got a buy-up market that is very limited."
As a result, instead of doing large, single-family homes, many builders are doing additions or renovating and flipping homes, Abbott said.
But some of those trends may soon change. As the millennials begin to marry and have children in greater numbers, the demand for suburban, single-family homes is likely to rise.
"They’re going to start getting married and forming households, and pretty soon they’re going to want to start paying a mortgage instead of paying rent," Vallone said.
Of course, there’s just not enough land to re-create the single-family housing boom that followed World War II. But Vallone pointed to one property class that could be the smaller, 21st-century version of the farmland that once provided space for single-family development. That would be older suburban or exurban office parks, which have high vacancy rates as corporations and young workers turn to more updated buildings in transit-friendly, urban locations. Many of these office parks cover large acreage, and there are already moves to redevelop some for housing or mixed use.
So far, in North Jersey, proposals to redevelop older office parks have involved town houses, as in the redevelopment of the former Pearson publishing building in Upper Saddle River, another Toll Brothers proposal. But in Holmdel, Toll Brothers is building single-family homes on part of the massive Bell Labs site, as part of Somerset Development’s overall redevelopment of the landmark property.
Leave a Reply.
Tress Realty Group compiles some of the best real estate news, tips, and information for buyers, sellers and investors.