Princeton Real Estate: A Tale Of Two Towns
By Panthea Reid
I’m not writing about Dickens’s Tale of Two Cities, Paris and London during the French Revolution. Nor do I mean the two Princetons, situated one inside the other until citizens voted in November 2011, to consolidate the Borough’s less than two square miles with the Township’s surrounding sixteen square miles. Princeton is now a geographically unified town of almost eighteen square miles. But it is not unified economically. There is a huge divide between the real estate prospects of the have-a-whole-lot and those of the haven’t-so-much. Or maybe this is a tale of three towns: one inhabited by the have-very-little, another by the have-enough, and another by the have-a-whole-whole-lot.
My husband and I are relative newcomers to Princeton, having lived here only thirteen years. We live among the have-enoughs, in a leafy neighborhood, populated by large and smaller houses, with attractively landscaped community housing nearby. Recently, two of the smaller, poorly maintained houses on our street were attacked by a huge swing-loader with a large metal jaw. Looking like a Tyrannosaurus rex on a rampage, it gobbled up those houses. Because they have been replaced by large, tasteful homes, I don’t mind.
A GOOD RATABLE BASE
A market analysis from Callaway Henderson Sotheby’s International Realty affirms that in Princeton the residential real estate market’s recovery after the recession is “firmly entrenched.” The same is true for the commercial real estate market, as Jerry Fennelly of NAI Fennelly confirms. Fennelly writes that over thirty percent of companies in the Greater Princeton area “are planning for fasttracked growth” and office buildings are “a favorable investment among the wealthy, financial institutions, hedge funds and International Markets.” Neal Snyder, Princeton Tax Assessor, affirms that the over fifteen and a half percent of Princeton property that is commercial provides “a good ratable base” since it “attracts consumers with money” who do not stay here and hence do not stress the school system and other public services. Since property taxes are based on market value, a booming residential market also benefits the community, enabling it to offer amenities that cash-strapped municipalities cannot. Snyder adds that Princeton University is a good neighbor, paying 8.3 million dollars in taxes.
SUPPLY AND DEMAND
So . . . what’s not to like?
The law of supply and demand works its logic in Princeton, especially in the downtown area. The Callaway Henderson Sotheby’s International Realty analysis shows that the recovery in the residential market is “much more segmented’ now than in the past. Buyers have to search for bargains “at some distance from the town center.” Though they would like “newer or renovated homes within walking distance of a cup of coffee,” such houses are usually near other towns’ centers. The analysis also makes a revealing distinction between houses priced at under and over a million dollars. The average sale price of a Princeton house, priced at one million or under, was $622,537 in the first quarter of 2014, slightly lower (minus less than one percent) from the same period in 2013. However, Princeton houses priced between one and two million dollars have an average price of $1,450,593, up almost ten percent from the same period in 2013. Not only are house prices escalating over a million dollars, but the number of such houses in Princeton is increasing, as is the demand for them. As one realtor told me, the market for upper-end houses is “on fire.”
In fact, sales of houses at over a million dollars have nearly tripled since 2010. And, of the total sales of single-family houses in Princeton in the first five months of 2014, one half the sales are of houses selling at over a million dollars. Furthermore, days on the market (DOM) have been almost cut in half, from 186 in 2010 to 97 in 2014.
These sales suggest that the town may be moving away from its Master Plan (available at Princetonnj.gov). The Plan offers an inclusive vision, as does the non-profit organization called Princeton Future, that fosters diversity in the community, a “mix and balance of uses that crosscut socio-economic lines,” especially in the downtown area whose viability, the Plan maintains, is “dependent on its mixed-use character and the compatibility of uses. Residential use, especially in upper floors, is an essential component of the central business district.” Sheldon Sturges, of Princeton Future, tells me that some downtown buildings are zoned as potentially five-story establishments for residents. Princeton Planner Lee Solow, though, says such development is not on the books, thanks to parking problems and the historical nature of some buildings.
Meanwhile, modest homes, especially those near the downtown or the shopping center, are vulnerable as “tear-downs,” replaced by million-dollar houses. Again, I don’t object to the two tear-downs on my street, because the builder replaced them with handsome two-story houses and left many trees standing. I am actually pleased to see that another house on my street is apparently scheduled to be torn down. (It was a place where renters parked in the front yard and feral animals roamed an untended back yard.) Still, the pattern of replacing small houses with mega-mansions does make for less affordable housing in Princeton.
AFFORDABLE HOUSING ADVANCES
Under court decisions and legislative rulings known collectively for decades as the “Mount Laurel Doctrine,” New Jersey municipalities must provide some affordable housing. Communities retain one-and-a-half percent of contractors’ building fees to provide “safe and decent” housing for qualified low- and middle-income families and individuals and “to promote self-sufficiency initiatives and improve the quality of life and economic stability of its residents.” Stability, however, is undermined when a family pays more for housing than it can afford. Federal housing funds, known as HOME grants, have been cut in half over the last decade, leaving towns and cities to address housing issues on their own. The Federal Government recommends people pay no more than thirty percent of their income in rent. But almost a third of New Jerseyans spend more than fifty percent of their household income on housing, leaving less for food, clothing and medicine and thus generating instability for these families and the community they live in (according to the Princeton Housing Authority).
Princeton has a good Affordable Housing Program, providing separate and diverse living options based on income. There are no massive and ugly “projects” with resultant problems of crimes and drugs. Instead, Princeton Community Housing offers attractive rental units, where rent is priced at thirty percent of a household’s gross income. New real estate developments with affordable rental units include: Merwick Stanworth, on Bayard Lane, offering 56 out of 326 units as affordable; Copperwood on Bunn Drive, offering 12 affordable units out of 153; and Avalon Bay’s proposed development of the former hospital site, with 56 affordable units out of 280. Also, Princeton Affordable Housing, managed by Christy Peacock, enables low- and moderate-income households to purchase their own homes, usually condominiums priced not at market value but at twenty-eight percent of the buyers’ gross annual household income, with monthly costs, excluding utilities, also calculated at twenty-eight percent of income. Linda Twining of Weichert Realtors lists affordable units for sale. Residents seem generally pleased, except they’d like more public transportation to community colleges and trade schools. While these real estate programs take some pressure off demand, 2,000 households still remain on waiting lists for affordable housing.
An exception to the Mt. Laurel Doctrine might appear to be the Bespoke Luxury Townhomes, advertised with a Palmer Square, not a Paul Robeson Place, address. These townhouses sell from $1,775, 000; condo flats there sell from $1,230,000; rentals are priced from $4,800 a month. Through a negotiated settlement, the affordable units required under the Mt. Laurel Doctrine are at Hulfish North, dissociated from the “Bespoke” residences.
MAINTAINING COMMUNITY STABILITY
New Jersey’s Department of Treasury lists the state’s most expensive location in 2013 as Alpine Borough, where the average house assessment is $2,697,575. Alpine’s zip code, 07620, formerly topped Forbes’ list of the most expensive zip codes in the country. Now it places second behind Manhattan’s 10065 zip, where the most expensive house for sale at 40 million dollars hasn’t yet been built. By comparison, the New Jersey Treasury lists the average Princeton house assessment as $799,624 in 2013. That’s an assessment, not a sales figure, but it’s about $691,000 more than the national median price of $108,500 for an existing house, according to Realtor.org. While Princeton real estate is costly compared to the national median, it is modest compared to Alpine real estate and hence offers investment opportunities.
We moved to Princeton to enjoy its beauty, culture, and livability. Others are drawn here by its profitable technical, medical, and pharmaceutical markets, thanks to research and development fostered in particular by Princeton University. Investors in those markets spend millions on housing here. If current trends in Princeton real estate continue, 08540 might soon place on Forbes list of the country’s most expensive zip codes. That would be a boon to folks selling their houses and for wealthy investors who wish to buy before prices escalate further.
The stability of the community depends, however, on its not being too exclusive. A Princeton University administrator told me that at least seventy-five percent of her staff already resides outside Princeton because it’s too expensive to live here. But the presence of teachers, firefighters, librarians, police, social workers, ministers, community volunteers, and other engaged citizens is vital to the health of our community. Low income workers who cook our food, mow our lawns, and care for our children are also essential to our community. The haven’tso- much cannot afford safe and stable housing among us without government assistance, which is terribly scarce, so ever-escalating prices could precipitate an exodus of middle-and working-class citizens from our town.
A WISE INVESTMENT
In his much-talked-about Capital in the Twenty-First Century, Thomas Piketty warns of dire consequences from ever-widening divisions between the very rich and the very poor. And in the May 26 New Yorker, James Surowieki, writing “Real Estate Goes Global,” focuses on Vancouver, British Columbia, as “the most expensive housing market in North America.” Vancouver’s housing has little to do with “local fundamentals—above all, how much people earn. . . . If there are enough rich people in China who want property in Vancouver, prices can float out of reach of the people who actually live and work there.” Vancouver exemplifies the condition toward which Princeton now is gravitating. Businessman Jerry Fennelly writes that “China sent over 1 million visitors to New Jersey last year (spending an average of $7,000 per visitor).” The Chinese “have invested 12 billion dollars in the US real estate market in 2013, up from 7 billion in 2012.” Fennelly names other countries which also “consider Princeton a second home by owning real estate here.” Sometimes, such people do not live in their second homes but instead park their money in Princeton real estate, as a hedge against global instability.
As a diverse, vibrant community, Princeton should remain marvelously livable and wisely investable.