Is owning a home the American dream? Not in NJ, it seems
The percentage of homes in New Jersey that are actually occupied by an owner is at its lowest point on record.
Census Bureau numbers from the second quarter of 2016 put New Jersey's homeownership rate at 60.3 percent. It peaked in the middle of last decade at 71.3 percent.
It's not expected New Jersey will return to that record level, as it was fueled mostly by excesses in the mortgage underwriting process prior to the housing collapse, but it's expected the homeownership rate will continue to fall over the next few quarters.
"For the next year, year and a half, we can expect some bottom bouncing or maybe some further downward drift in the homeownership rate," said Patrick O'Keefe, director of economic research at CohnReznick in Roseland.
New Jersey's decline has been more dramatic than that of the nation as a whole. The U.S. homeownership rate fell to 62.9 percent in the second quarter of 2016.
According to O'Keefe, New Jersey's less-than-stellar performance can be attributed to its slow growth from the recession, a large share of distressed properties and a shift in the types of homes people want to own.
"(Baby) boomers were absolutely committed to being homeowners; it was the American dream," O'Keefe said. "Millennials have seen that the American dream has the potential of becoming a nightmare."
And as a generation that's more likely to be mobile during their careers, millennials are also more likely to rent rather than buy, as evidenced by the bulk of new construction in New Jersey. Two-thirds are apartment buildings that will be used as rentals, O'Keefe noted.
In the short-term, O'Keefe said, New Jersey can expect a continued drop in homeownership due to the large number of distressed mortgages on the books. Nearly 10 percent of outstanding mortgages in the Garden State are either in arrears for 90 or more days or already in the foreclosure process.
"That's about 100,000 units that, at some point over the next couple of years, will come back onto the market in a distressed condition...That will discourage, to a certain extent, other people coming into the market to buy because they will recognize that there is that downward pressure on prices," O'Keefe said.
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