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Pricing, construction on increase in residential market

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Residential construction has been slow for years, but the number of permits issued for new single- and multifamily homes has risen by about 30 percent in the last 12 months, according to Patrick J. O'Keefe, director of economic research for CohnReznick.

Jeffrey G. Otteau

Nearly 60 percent of permits were for multifamily use, while permits for single-family homes are up 16 percent from 2012.

"All of the numbers are positive and indicative of an improving market of which new housing is a part," said Jeffrey G. Otteau, president of the Otteau Valuation Group.

January continued on that trend, and was the best start of any year since 2007, he said.

"Home prices in New Jersey were up 2.9 percent in the fourth quarter," Otteau said. "This tells us that new construction will increase. Profitability is restored when prices start to rise."

Otteau said construction had been slow for many reasons, chiefly the high rate of unemployment and the high number of underwater homeowners who are unable to trade up to more expensive homes.

"That's taking a big bite out of the middle of the housing supply," Otteau said.

The construction of multifamily units is much stronger than single-family homes as gas prices rise and people move closer to their jobs and public transportation, Otteau said.

"The sprawl of the last 50 years is reversing," he said. "Corporations are moving back to urban areas and so are the people."

Otteau points to the rise in retail, supermarkets and rental units as New Jersey's cities are redeveloped.

"It's difficult for young people to find employment that pays enough for them to be able to afford a home, two cars and day care for their children," he said. "Of the homeowners who are over 55, 60 percent have underfunded retirement accounts. Many of them are selling their homes, pulling out the equity and moving into rentals."

CohnReznick anticipates the approval of construction permits for 21,500 housing units in 2013.

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