A route to higher home values
Sunday, November 30, 2008
Jennifer V. Hughes
And, yes, it is an oncoming train.
But in this real estate market — more than any other — that’s a good thing.
Homes in towns with rail stations at their heart or nearby fare much better than those in any other market, said real estate guru Jeffrey Otteau, who has been analyzing New Jersey real estate for 30 years.
“It’s not enough to have a rail station,” Otteau said. “But it’s a really good start.”
In an October report, Otteau found that nine of the top 10 New Jersey housing markets either have a train station or are less than a mile away from a rail stop. In Bergen County, Midland Park and Ridgewood made the list.
That top designation was determined by how long it would take to sell out the homes currently on the market, Otteau said. Statewide, the figure is 13 months; in rail-friendly towns it ranges from two to five months.
Homes near train stations are also worth more. In a 2005 survey of towns in Essex, Union, Somerset and Morris counties, Otteau found that homes within walking distance of a rail station sold for 5 percent more than those houses where residents would have to drive to the station.
Those increased values were even more evident in a slow market. This year Otteau revisited that survey, in central New Jersey, and found that homes within walking distance had values 10 percent higher than their counterparts’. Otteau said the findings would “certainly” hold true for Bergen County rail towns.
“This is true in the northern half of New Jersey,” he said. “The closer you get to Manhattan, the greater the effect.”
Martin Robins, senior fellow at the Alan M. Voorhees Transportation Center at Rutgers University, said if not for a shaky financial climate, transit-oriented development “would be a runaway market.”
One thing slowing things down is that people who might want to downsize into smaller homes or condos near transit can’t sell their current homes.
“People want to sell and move now but they can’t,” Robins said.
As for demand, Robins cited an example of a new condo development that opened up two years ago on the Raritan Valley line at Cranford. More than 1,300 applications were put in for 80 units.
The center also studied the Hudson-Bergen Light Rail Line, focusing on five stations in Hoboken, Jersey City and Bayonne. It found that the housing boom around those stations has added more than $5 billion in property value to the local tax base, said Jan Wells, an adjunct professor at the Rutgers center.
“For the most part, these were parking lots and brownfields,” said Wells. “You’re putting people there who will support your local businesses, buy new furniture, need groceries.”
There are also so-called Transit Villages, an official designation by the state Department of Transportation. There are 19 Transit Villages built or under construction statewide, including Rutherford, Morristown and Jersey City.
Transit Villages can apply for grants for landscaping, street lights, sidewalk projects and other improvements. In 2008 the DOT spent $1.2 million to fund a bikeway in Pleasantville and a river walk project in Belmar. The budget for 2009 is $2 million.
Transit hubs are thriving because of demographic changes, said Otteau. In the 1940s and 1950s, homebuyers moved westward from the city, creating suburbs bolstered by highway projects, cheap gas and an exodus of jobs from urban centers. Wealth and family size were on the rise, leading to a demand for larger homes.
Now, the two biggest demographic groups are baby boomers and Generation Y-ers — both of whom don’t have young children and crave walkable neighborhoods and transit into New York City.
In his surveys, Otteau has identified markets that have not hit yet, but could. These “investment” markets include several with rail stops, such as Hackensack and Glen Rock.
To encourage rail-friendly projects, towns need to rezone properties to welcome mixed-use development, Otteau said. Also, towns should reexamine whether it is a good idea to have ordinances that mandate a certain amount of parking in new developments. Today’s buyers in transit towns often have fewer cars and use them less often.
Additionally, Otteau said, planners need to realize children are not “toxic.” In the past, planners often shunned multi-unit developments because of a fear that they would attract families with children in numbers that would burden schools. But new demographics show families are having fewer children, or forgoing them altogether.
“What we need to understand is that all the old models don’t work in this new world,” he said.
In Wood-Ridge, construction is beginning on a $500 million project that will bring rental apartments, condos, shops, restaurants and an NJ Transit train station to the former site of Curtiss-Wright’s B-29 bomber factory.
The cost of the $37 million rail station on the Bergen County Line will be split by the developer, Somerset Development, and NJ Transit. It is expected to open in late 2010 or early 2011. The development, Westmont Station, is expected to have about 800 rental and condo units. Ralph Zucker, president of Somerset Development, said planning for the project began six years ago during a very different real estate market.
“We’ve definitely had some sleepless nights,” he said. Originally the company planned to open the project by offering condos. Now, rental apartments will come online first. Could the project have survived without the train station?
“I don’t think so,” Zucker said.
NJ Transit partnered with the developer to boost ridership, which is good for the agency and the state in the long run, said Jack Kanarek, NJ Transit’s senior director of project development.
Kanarek said a national study found that people who live in transit-oriented developments make 44 percent fewer car trips than in non-transit communities. That’s good for roadways and pocketbooks, he said.
Transit-oriented developments should also boom as the new trans-Hudson tunnel project progresses, said Kanarek.
Construction on the $8.7 billion project is expected to begin in 2009 and the tunnel will open in 2017. The rail tunnel is expected to double capacity from New Jersey to New York. It will also enable one-seat rides into Manhattan’s Penn Station on 10 of NJ Transit’s 11 commuter rail lines, including the Pascack Valley and Bergen County lines.
In addition, NJ Transit is considering providing passenger service on an existing freight rail line, offering nine stations from Hawthorne to Hackensack.
Towns with stations should act now to capitalize on demand for rail, Kanarek said.
“If towns plan for transit-oriented development, they can enhance their communities and bring not only a mix of uses but also more vibrancy to their community, because transit is such a permanent part,” he said.
So what does all of this mean for values and selling rates for homes that are not in transit-friendly towns? Otteau said prices there will rise more slowly in a good market and will fall faster in a bad one. His research found that the most expensive homes remained on the market the longest.
“It’s all about price,” said Rutgers’ Wells. “People may not get a price that reflects what they have in the house. You have to decide if you’re going to take the loss or sit there and make it more economic and efficient to get around in the suburban sprawl.”
Realtor Barry Colyer, of ReMax Traditions in Oakland said he thinks there will still always be some buyers who are not demanding homes near train stations. He estimates about 30 percent of his clients want transit as close as possible.
“Buyers who want train access will only look at places with train access,” he said. “If it’s on your list, it’s pretty high up there.”