South Jersey home prices have taken big hits
South Jersey home prices have taken one hard punch to the kidneys after another from the bruising economy.
Few Burlington, Camden, and Gloucester County communities have held on to the gains achieved from 2005 through the mid-2007 peak of the housing boom, an Econsult Corp. analysis of 376,257 Philadelphia-region sales from April 1, 2005, through June 30, 2011, shows.
And in all but 17 of the 98 municipalities in these counties, median home prices at the end of this year's second quarter were less than they were in 2005 - from two or three percentage points in Tabernacle, Collingswood, and East Greenwich, to almost half off where they began in Lindenwold, Magnolia, and Willingboro. (Median is the middle value: Half the homes sold for more; half sold for less.)
Yet the median sale prices in Gibbsboro ($171,500) and Lawnside ($158,000), Westampton ($255,000), and Swedesboro ($172,250) appeared to be recovering as of June 30, after hitting a low point a year or two ago, though it may be some time before it's clear that there's been an actual turnaround.
Buttressed by a decade of new-home construction along its northern border with Mercer County, median prices in Burlington County were higher at the end of 2011's second quarter than prices were in Camden and Gloucester Counties, the sales data show.
In six of the 10 most expensive towns in Burlington County - Moorestown, Chesterfield, Hainesport, Medford, Shamong, and Tabernacle, which continue to attract buyers who commute to Center City, central New Jersey, and New York City - the median price is above $300,000. There are few newly constructed homes in the market mix there, with the highest-priced municipalities benefiting from resale of houses built since 1998.
"From the beginning of the boom in 1998 to their peak, house prices rose an average of 80 percent in the South Jersey counties and rose by 77 percent in the Pennsylvania counties covered by our data," said economist Kevin Gillen, vice president of Econsult, who collected and analyzed the sales data for The Inquirer.
But since 2007, Gillen said, house prices have fallen by an average 29 percent in those South Jersey counties, while dropping only 18.7 percent in the Pennsylvania suburbs.
Why have South Jersey prices taken such a hit? According to Gillen:
Unemployment remains high throughout the state, 9.4 percent vs. Pennsylvania's 8.2 percent, with the Jersey Shore downturn a contributing factor. As a result, many people can neither afford to pay higher prices for houses nor afford the mortgages they currently have.
A higher percentage of houses were purchased with subprime or exotic loans, meaning that interest rates, and therefore monthly mortgage payments, adjusted far higher than borrowers could afford to pay.
Greater density in the three counties means that foreclosures have affected a larger swath of properties, with 84.7 percent of homes suffering devaluation as a result of distressed homes returning to the market, compared with 48.5 percent across the river.
"So the combination of a larger economic downturn combined with greater overleveraging by homeowners has led to greater price declines in New Jersey," he said.
Data released Sept. 29 by RealtyTrac of Irvine, Calif., which tracks trends nationwide, showed that almost 3,000 mortgages in Camden County alone were in default (90 days or more delinquent on payments), the second-highest level in the state after Ocean County. That was just 200 fewer than in more-populous Philadelphia and equaled the number of mortgages in default in the four Pennsylvania suburban counties combined.
In Burlington County, 2,300 homes were in default, RealtyTrac's September figures showed, as were 1,564 Gloucester County homes.
RealtyTrac's Daren Blomquist said the drop in foreclosure activity after revelations of document robo-signing probably has served to create "more uncertainty in the market because buyers are waiting for the other shoe to drop. That means home prices will continue to be weighed down by the prospect of future foreclosures - if not by the actual foreclosures."
Subprime and "exotic" mortgage financing during the mid-decade housing boom amplifies pressure on homeowners during an economic downturn like this one by subjecting them to higher mortgage payments and/or greater negative equity, Gillen said.
At the peak of the lending boom in 2005, he said, 16.4 percent of all mortgage loans originated in New Jersey were subprime, compared with 13 percent in Pennsylvania, according to federal data.
With the exception of traditionally high-value towns such as Moorestown and Haddonfield, known for their top-ranked public-school systems, homes in South Jersey have never been as pricey as in the Pennsylvania suburbs.
That's because Philadelphia expanded north, west, and south along transit lines, rather than east across the Delaware, said Long & Foster Real Estate regional vice president Art Herling. To attract city buyers when the Ben Franklin Bridge opened in 1926, "properties were initially priced less," a tendency that has endured for 85 years.
But property taxes generally are higher in New Jersey than in Pennsylvania and Delaware, often half or more of the monthly mortgage payment, Herling said, and buyers weigh that when considering what to spend for a house.
"It affects the prices we can get for the homes," Sandra Levenson, an agent with Prudential Fox & Roach in Cherry Hill, agreed. "Everyone is concerned with what their monthly payment will be."
Armed with knowledge of the market's realities, Gary Schaal, 61, who worked for several builders in a nearly 40-year career, has just put up for sale the Voorhees house he bought in 1978.
"People say it is the wrong time, and I realize that I probably won't get the money out of it that I put into it," said Schaal, now in consulting and sales of solar-power systems.
But, he added, "Remember that what I'll be buying will cost less now than it used to."
Contact real estate writer Alan J. Heavens at 215-854-2472, firstname.lastname@example.org or @alheavens at Twitter.