After three years of deeply depressed home construction activity, building permits in New Jersey jumped by a third last year, buoyed by multifamily construction.
While the number of units approved by the state, almost 18,000, remained far below the annual averages of a decade ago, it made 2012 the busiest year for housing construction since 2008, according to U.S. census figures.
Nationally, housing permits also remained below long-term averages but rose 31 percent from 2011.
“I think the market has definitely bottomed out,” said New Jersey Builders Association President Winfield E. Ziegenfuss Jr., a Gloucester County builder.
“We can anticipate another year of continued growth,” said Patrick O’Keefe, an economist with CohnReznick of Roseland. O’Keefe predicted that more than 20,000 units would be approved in 2013 — possibly as many as 22,000.
Fifty-eight percent of the 2012 activity was in multifamily units, especially rentals, where demand is higher because many consumers still can’t qualify for mortgages.
That’s the biggest share of multifamily construction on record, which dates to 1980, and it’s probably the highest since the start of the suburban building boom in the early 1950s, O’Keefe said.
Jonathan Schwartz of BNE Real Estate Group in Livingston, which is finishing a 194-unit rental building in Fort Lee, said, “We feel that the millennial generation is certainly more focused on renting.” The building, called Twenty50, was originally planned as a condominium, but as the market shifted, BNE got permission for rentals instead, following a trend of the last few years.
Banks seem willing to lend money to builders more for rental projects than for for-sale housing.
“Banks all want to be in the multi-family space because they see the demand for that,” said Joseph Langan, president of River Drive Construction, which recently completed a 108-unit rental building in Elmwood Park.
River Drive Construction expects to finish a second phase of the project, a 51-unit mixed-use building, by year’s end. And BNE recently started construction on a 316-unit rental building in East Rutherford, near the New Jersey Turnpike, as well as a 139-unit project in Jersey City.
These buildings are just a few examples of a trend: Almost 30 percent of the construction activity statewide last year was in Bergen and Hudson counties, split roughly evenly between the two counties.
“People want to be close to where the jobs are, which is in the city,” Schwartz said.
While most of the current activity is in the rental market, some builders are betting on for-sale housing. Paramus-based HornRock Properties took over a town house project planned in Mountain Lakes in Morris County from another developer after the housing bust.
Because there was so little construction over the last several years, “we feel there’s a pent-up demand,” said Maurice Hornblass, a principal with HornRock.
The properties have been redesigned and will now start in the high $500,000s, down from more than $1 million under the previous developer.
“The market has certainly readjusted,” Hornblass said. “Everyone is price-conscious. People want to get a lot of bang for their buck.”