WHAT $1 MILLION WILL BUY IN N.J.
The Star-Ledger - August 31, 2006
The Star-Ledger Archive COPYRIGHT © The Star-Ledger 2006
Date: 2006/08/31 Thursday Page: 001 Section: NEWS Edition: FINAL Size: 1044 words
Thanks to runaway prices, seven figures no longer guarantees palatial digs Luxury properties today can be downright ordinary, or worse
By SAM ALI STAR-LEDGER STAFF
Walking past the vacant house at 10 Nottingham Road in affluent Short Hills is like stepping onto the set of that animated horror movie "Monster House" – except the neighbors here insist this place does not devour stray kites, basketballs or people.
The droopy slate roof is brittle and cracked. When two underground oil tanks were removed earlier in the year, the temperature inside the house plummeted and the pipes froze and burst, real estate agents said. And then, of course, there's that nagging problem of mold in the basement. So much for lifestyles of the rich and famous.
While the phrase "million-dollar home" can conjure images of stately Georgians or grand, rambling Victorians, the definition is rapidly changing in New Jersey.
In a state where home prices have climbed 87 percent between 2000 and 2005, seven-figure homes – including the one at 10 Nottingham Road – are becoming more common – with a heavy emphasis on the word "common."
The Census Bureau's latest American Community Survey found more than 1 million homes nationwide worth at least $1 million in 2004, compared with 595,000 in 2002 and just 395,000 in 2000. In New Jersey, the number of million-dollar homes nearly tripled in 2004 to 44,735 from just 15,625 in 2000, after reaching 25,446 in 2002.
Just how much "house" a million bucks will get you these days might surprise you.
You can get anything from a stately colonial in Chester on four acres with oodles of charm overlooking a pond to a shopworn, one-bedroom cracker box in Sea Bright that looks like a garage. In a number of towns, like Montgomery, East Brunswick and Montville, $1 million will get you a brand new 6,000-square-foot house with a three-car garage.
"The reality is that most of these million-dollar homes are very ordinary," said Arthur Tassaro, a sales agent with Friedberg Properties & Associates in Cresskill, which specializes in selling luxury homes in Bergen County. "A million dollars really doesn't get you a lot."
That hasn't seemed to dampen homebuyers' appetites.
Although real estate markets are cooling, the number of homes sold for $1 million or more climbed 302 percent between 2000 and 2005, according to DataQuick Information Systems, making it the fastest-growing segment of the housing market.
In all, 15 states accounted for 90 percent of those sales, DataQuick found, with California clocking half of them. New Jersey ranked 12th with sales of homes worth $1 million or more climbing 342 percent during that five-year period.
In Alpine in Bergen County, where the average price of a home in 2004 was $1.89 million, $1 million will buy you a 1,000-square-foot, two-bedroom ranch built in the 1950s entirely out of big porcelain-enameled steel tiles, Tassaro said.
The all-steel house, which sits on a snug 0.34 acres, is called a Lustron home and is one of only 2,500 homes built after World War II in response to the severe housing shortage and the surplus of steel, Tassaro said.
Of the 15 built in New Jersey, only six remain.
Just like other Lustrons, it was made from 3,000 different parts – weighing a total of 12 tons – and assembled on the spot on top of a concrete slab.
"There is not one stick of wood on the house," said its owner, Eoghan "Owen" Chuapoco, a local builder who has been living in the Lustron since 1999. Because it's all steel, the home is fireproof, rustproof, termite-proof and can be washed down with a garden house and waxed just like an automobile, he said.
"It was the cheapest house in Alpine at the time and it's still the cheapest house," Chuapoco said proudly.
Chuapoco acknowledges that $1 million sounds like a lot of money. But Alpine is one of the richest towns in the country. "There is a 7,800-square-foot house right across the street from me selling for $2.4 million," he said.
So comparatively speaking, his little steel house really is a steal.
Proximity to New York or a waterfront, lot size and quality of the school systems all factor into the equation, according to real estate agents.
"Statistically, the closer you get to New York, the more expensive the land becomes, so it will cost someone more to live there," said Dennis McCormack, owner of Prominent Properties, Sotheby's International Realty, which specializes in luxury listings.
This doesn't seem to be much of a stumbling block for folks in New Jersey.
Just released U.S. Census data shows New Jersey is still the nation's wealthiest state. Its median household income is $61,700, compared with $46,200 for the nation. Nearly 12 percent of New Jersey households have more than $150,000 in income.
But if you're like most people, you consider a million dollars a lot of money – and you should.
Assuming you can scrape up a 20 percent down payment and opt for a 30-year fixed mortgage at 6.5 percent, the monthly mortgage on a $1 million home easily surpasses $5,000.
That means you would need at least $60,000 a year in take-home pay just to satisfy your mortgage bill – and that doesn't factor in costs like property taxes or insurance. Or food.
Jeffrey G. Otteau, who runs an appraisal firm in East Brunswick, believes a number of shifts are under way that will lead to a glut of luxury houses in the $1 million to $2.5 million range in the coming years, particularly as Baby Boomers start trading in their trophy houses for smaller condominiums or age-restricted housing.
In addition, the lack of growth in the highest-paying job sectors in New Jersey, as well as the scarcity of buildable land and its high cost, does not bode well for this segment of the luxury housing market, Otteau said.
In the 18 New Jersey counties his firm covers, the inventory of million-dollar homes is already much higher than homes in the lower price ranges. There is a 13-month supply of houses priced at $600,000 to $1 million, and an 18-month supply of dwellings listed between $1 million and $2.5 million.
"This weakness in the luxury market has been developing slowly for several years now and will likely continue for the foreseeable future," Otteau said.