Though the pace of sales activity in New Jersey's residential real estate market has picked up dramatically over the past year, home prices across the state have barely nudged toward their prerecession levels, leading one local industry watcher to forecast their recovery will drag through 2020.
With the exception of Mercer and Cape May counties, average home prices throughout New Jersey dropped significantly between July 2008 and July 2012, according to a national report by Irvine, Calif.-based RealtyTrac.
But Jeffrey Otteau, president of East Brunswick-based Otteau Valuation Group, said the RealtyTrac data don't account for "the mix of house sales that has changed over time."
"Lower-income households have been disproportionately damaged by the recession, which has resulted in low-priced houses experiencing the greatest reduction in sales volume — while people who are more wealthy and didn't suffer a loss in personal wealth go on with their lives, buying new homes," Otteau said. "When the bottom falls out of the market, it distorts those average prices."
Instead, Otteau said he measures New Jersey counties' median home prices in order to get the real picture of the residential market, since "a house that sells in Princeton for $5 million has a great effect on Mercer County's average home price, but has no effect on its median price."
Analyzing that data, Otteau said median home prices in every county fell year-over-year through the second quarter of 2012, which caused the statewide median home price to drop from $339,000 in 2005 to $251,000 in 2011 — indicating homes throughout New Jersey were sold last year at prices nearly 75 percent of their 2005 levels.
But Otteau said the state's median home price ticked up by one-third of 1 percent in the third quarter of 2012, which he said finally signals the start of a long road of recovery.
"Looking at the projections of continued job recovery in the private sector and rising personal income in New Jersey, coupled with buyers' confidence that home prices won't go any lower, I think we're going to see much of the pent-up demand come out and purchase homes," Otteau said. "If home prices continue to rise in small measures, I think by 2020, we can expect to get back to 2005 price levels."