New Jersey is a tough state for residents to realize the American dream of owning a home.
At 64 percent, New Jersey had the nation’s eighth-lowest rate of homeownership as of the first quarter of this year.
New York (52 percent), California (54 percent) and Hawaii (57 percent) had the lowest rates, according to a U.S. Census Bureau Housing Vacancy Survey of 72,000 homes. West Virginia had the highest rate at nearly 78 percent.
Pennsylvania (70 percent) and Delaware (74 percent) also have much higher rates of homeownership than New Jersey does.
Homeownership nationwide was at 69 percent in 2004, before the mortgage-loan crisis and recession. That figure has dropped to 65 percent, the lowest level in 15 years, the survey found. Pending foreclosures are expected to drive down that figure even more.
The state Supreme Court ordered a moratorium on many foreclosures in New Jersey in 2011 after homeowners reported numerous mistakes by lenders who were processing tens of thousands of foreclosures. In some cases, banks mistakenly initiated foreclosure proceedings against homeowners whose mortgages were not in default.
The court lifted that ban last fall, and now the courts are working to clear the backlog of cases.
New Jersey’s southern counties had a higher rate of homeownership than the state average. According to U.S. Census Bureau figures, about 68 percent of properties in Atlantic County are owner-occupied. In Cumberland County, it’s 67 percent; Cape May County, 74 percent; and Ocean County, 81 percent.
Rural Estell Manor in Atlantic County had the region’s highest rate of homeownership at 94 percent, followed by Cape May Point at 93 percent. Of course, many owners live in Cape May Point’s resort homes only part of the year.
But within the counties, there are places where owning a home is the exception. In Wildwood, only one-third of homes are occupied by the property owners. In Atlantic City, it’s just 29 percent, the lowest rate in the region.
Why is New Jersey homeownership so low?
Upper Township financial consultant Russell Graves said the explanation in South Jersey was obvious.
“The answer in a nutshell is jobs. People need jobs to buy houses and maintain them,” he said.
Graves is director of Consumer Credit and Budget Counseling of Marmora, a nonprofit group that helps people with their personal finances in Cape May, Cumberland and Atlantic counties.
“I think one of the big reasons New Jersey is among the lowest in homeownership today is that New Jersey is near the top in unemployment rate. We’re No. 6, with 9.2 percent in May,” he said. The rate increased to 9.6 percent in June.
And South Jersey’s rate is even higher. Atlantic County’s unemployment rate was 12.4 percent in May. In Cumberland County, it was 13 percent. Cape May County recorded a rate of 11.9 percent that month.
Graves said many people would like to enter the housing market to take advantage of low interest rates and good prices, but without a job, it is impossible.
“Right now is a wonderful time for homeownership,” he said. “Prices are bottoming out. Mortgage rates will be at an all-time low. You have an opportunity where the time to buy is now. But those who are eligible to buy and have savings and jobs are shrinking.”
Kimberly Perkins, 24, of Egg Harbor City, and her boyfriend recently applied for a mortgage but were turned down because of their limited credit histories. Perkins, a student at The Richard Stockton College of New Jersey, said she has always wanted a home of her own.
“Just a simple two-story home with a big backyard and dogs,” she said. “It’s the corny, white-picket-fence American dream.”
They plan to stay in an apartment, build up their credit and try again in a year.
Graves said federal programs designed to help first-time homebuyers have redirected their attention to helping distressed homeowners keep their houses. The housing market has responded with a bigger focus on apartment and home rentals.
“The rental market is very hot right now,” said Rick Van Osten, spokesman for the Builders League of South Jersey. “We’ve seen a lot more builders going forward with apartment projects and multifamily projects than we have in the past.”
There is another good reason the nation’s rate of homeownership is lagging, Van Osten said.
More students are graduating with a huge amount of debt, which makes the prospect of adding a mortgage an unrealistic burden once they enter the job market.
About two-thirds of students who graduated in 2010 had hefty college loans to pay off, according to the nonprofit Project on Student Debt. They carried an average bill of $25,250.
And that is if they could even find a job, as they faced the highest unemployment rate for new graduates in recent history at 9 percent. The two factors explain why as many as 9 percent of graduates are defaulting on their federal loans.
In addition, Van Osten said, the generation that watched its parents lose their investment savings to the housing-market collapse is less inclined to follow their paths.
“There seems to be a rift in generational values,” Van Osten said. “I can recall eight years ago, kids who were graduating from college were buying a new home. People were caught up in the zeal to own a home. It was the hot investment. But it seems young people coming out of college are putting off thinking about that right now. It’s a lifestyle thing.”
Brian Honick, 19, of Linwood, is an undergraduate at Stockton but plans to study medicine when he graduates. With nearly 10 more years of education in his future, he is not even considering buying a home, he said.
His friends, too, are not in a hurry to buy a house until they establish themselves in their careers, he said.
“People are having kids later in life, too, these days,” he said. “The whole idea of living the American dream with a house is less emphasized.”
Meanwhile, more apartment complexes are going up in South Jersey. In Stafford Township, the Walters Group of Barnegat Township is building 216 garden-style apartments with starting rents ranging from $1,195 to $1,650 per month.
“Right now, the demand in southern New Jersey is for luxury apartments. In the same breath, we are still selling homes,” said Melissa Giarratano, asset manager for Walters Group.
The luxury apartments include a clubhouse, fitness center, swimming pool, video-game room, and tennis and basketball courts.
Giarratano said applicants range from professionals who have little time and no interest in maintaining a house or yard to empty nesters who are downsizing their homes. Younger applicants seem especially determined to rent instead of buy nowadays, she said.
“They’re more interested in renting. They’re starting out in their careers. They don’t want the hassles of homeownership. Plus it’s harder now to get qualified for a home mortgage,” she said.
Renting has other advantages. Annual property taxes are included in the monthly rent, so renters do not have to budget additional money for property taxes. That is no small consideration because New Jersey in 2009 had the nation’s highest per-capita property taxes at $2,663 per person, according to a study by the nonpartisan research group the Tax Foundation based in Washington.
A 2010 U.S. census found that all 21 counties in New Jersey ranked in the top 100 highest-taxed counties in the nation. The survey of more than 3,000 U.S. counties found that 10 of the top 15 highest-taxed counties were in northern New Jersey.
Atlantic County ranked 43rd, Ocean County 50th, Cumberland County 80th and Cape May County 84th out of 742 of the nation’s most populous counties.
“We have very high property taxes. When we look at affordability in New Jersey, we have a problem,” Upper Township’s Graves said. “Someone’s mortgage payment might be just $800 because of low interest rates, but they’re paying $1,600 per month because of taxes. Half goes to the house, and half goes to the state.”
Then there is the cyclical nature of the economy.
The last time homeownership in New Jersey was so low, the nation was recovering from another recession in the early 1990s.
“Homeownership rates in New Jersey will start to climb again,” Van Osten said. “It feels like we’ve bottomed out with the housing market. Things are on the gradual uptick. Numbers are going to go back up. It’s just a matter of time.”
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