TRENTON – Treasury Department chief economist Charles Steindel expressed optimism about the state’s housing market rebounding, helping to strengthen the economy as a whole as other indicators also show positive signs.
“Houses now appear to be highly affordable — home prices have fallen much more than incomes, and mortgage rates are at record lows,” Steindel wrote in his monthly newsletter.
In his newsletter, he said that since housing prices have fallen dramatically from their peak, it provides an opportunity for people to buy a home when they otherwise couldn’t have.
The New Jersey data from the National Association of Realtors shows a drop from around $360,000 to about $305,000 for median sales prices between 2006 and 2011.
NAR also reports the number of home re-sales in New Jersey fell from more than 180,000 in 2004-2005 to about 110,000 in 2010 and remained at roughly that same low pace over the first three quarters of 2011.
As there are fewer people buying new homes, there are less being constructed, which hurt homebuilding businesses. Employment at home construction companies fell from nearly 30,000 in 2006 to 17,000 in 2011, Steindel said. Also, employment levels for “specialty trade contractors”— plumbers, electricians, among others — has fallen from 114,000 in 2006 to 83,000 in 2011, he said.
While housing prices have plunged, rents are going in the opposite direction, largely because few new rental properties have come on board. Rents rose 2.5 percent in January, he said.
That trend, he said, is likely to continue, and could actually help spur homebuying.
“The combination of affordable housing and rising rents seems likely to spur growth in home purchases and eventually encourage new construction,” he said.
Even if home sales don’t improve significantly, Steindel said the industry could still be helped as more existing homeowners decide to renovate their homes, which would mean business for contractors.