The Jersey shore markets have had their share of challenges over the past several years. The housing bust fell especially hard on the market for second homes, and led to an abnormally large price depreciation in these communities. Hurricane Sandy hit in 2012, leading to further depreciation in not only the value of many Shore homes, but in their physical condition as well. Four of Atlantic City’s 12 casinos closed last year while gaming revenue has been almost cut in half from eight years ago. The resulting layoffs from some of the area’s largest employers exerted further downward pressure on the values of nearby workforce housing.
However, recent statistics show that 2014 may have been a turning point for many markets in this region. Home prices have started to trend upward overall, with some areas performing better than others over the past year. The data indicates that home prices in many Shore towns have bottomed out and are starting to recover. In Ocean County, home prices are 40% higher than they were a year ago, according to Zonda. South Jersey beach towns near Atlantic City, such as Ventnor, Margate and Brigantine, have all posted more modest single-digit appreciation at the end of last year. Even in hard-hit Atlantic City, home prices showed a slight uptick at the end of 2014, but the price for a median existing single-family home is still under $100,000. The good news is that almost all the Shore towns up and down the coast are seeing prices either stabilize or trending higher.
Larger home sizes are also a contributing factor to the rise in Jersey Shore home prices. Homes that were destroyed by Sandy were razed and replaced by newer, stronger, and larger homes that helped boost sale prices significantly in some areas.
“It’s ironic that a storm that would damage your housing stock ends up increasing the value of the housing stock by promoting more expensive housing stock,” said Kevin Gillen, Chief Economist at Meyers Research LLC.
Since Sandy, Shore businesses have been reporting steady increases in business over the past couple of summers and home prices have followed suit. Zonda shows that median single-family home prices increased for the second straight year in Ocean County. Prices are now back to their highest levels since 2010 and are trending upwards. The 6.1% annual price growth outperformed the New Jersey state average of just about 1% growth over the past year and Ocean County’s 20-year average annual appreciation rate of 4.3%.
Atlantic City’s home prices have suffered as a result of the area’s struggling gaming industry. New Jersey was once the second-largest gaming state in the U.S. behind Nevada, but the introduction of casinos in the surrounding states have cannibalized much of the gaming business that used to belong to Atlantic City. Gaming revenue continued to plunge in 2014 as four of Atlantic City’s closed their doors. However, the area’s casinos started the year off strong which is a positive sign for 2015. According to New Jersey’s Division of Gaming Enforcement, the eight existing casinos in Atlantic City saw total revenue jump 19% from January of last year. According to data in Zonda, home prices reached a recent bottom in 2013 and have shown signs of recovery in 2014. As seen in the chart below, home prices in the region have been highly correlated with the performance of the gaming industry. With an increase in revenue from the casinos to start the year, 2015 may shape out to be a much-needed turning point for Atlantic City home values.
Kevin Gillen, Ph.D., Chief Economist
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