A number of year’s ago there was a joke going around about a man who built a house on top of Lake Carasaljo in Lakewood, NJ. He was now looking to buy a submarine so that he, too, could rent out his basement. However, with today’s market, this joke is not only not applicable, but many wouldn’t even get it.
Markets change and fluctuate, it’s just a fact of life. Sometimes they do better and other times they do worse, and for those invested in any market, this can be both a source of great benefit and loss. However, sometimes a market changes in unexpected ways that can have a major impact, not only on those invested in the traditional sense of the word, but on an entire community at large.
For years, many Lakewood residents purchased homes by taking out large mortgages. They relied on a steady, and even growing rental market for supplemental income. A unique factor of the Lakewood rental market is that whenever a new house is built, it generates a new rental because it has a basement, so a strong buyers-market creates an extremely weak rental-market. Many times, the basement rental generated income sufficient to cover half or more of the monthly mortgage payment. This trend allowed for young families to purchase homes that, while suited to their growing families, was sometimes a stretch on their means.
Currently, the rental market is the weakest we’ve ever seen. A strong buyer’s market generally translates in to a weak renter’s market. In the Lakewood market, this has definitely played into the current state of the market, but a unique factor of the Lakewood rental market is that each new construction home, comes along with a new apartment rental, creating a weaker renter’s market when the buyer’s market is hot. Naturally, we are left with is an outstanding amount of vacancies in Lakewood. Moshe Michel, founder of MyRentools.com, tells us that currently there is over 500 home available for rent. With around 100 of those being single family homes and over 400 apartments, with most of those basement apartments, every aspect of the rental market is being affected. Moshe gives a few examples of the market effecting all areas and tells us that in the general, yeshiva area has over 40 available spaces for rent (Forest Ave, Clifton, Lexington etc.) as well as over 90 in the Sqankum, Ridge, East County Line, Somerset, areas. There are over 50 in the New Central, Central, and Westgate area!
As Lakewood was further developed, and residents began seeking more affordable housing options beyond its boarders into Jackson, Toms River, and Brick, a seller’s market transformed into a buyer’s market. “We are seeing a drop in new construction home purchases by $50-100,000,” says Marc, a leading Lakewood real estate broker.”
These factors: the affordability of homes, the availability of homes, and over-development have, in part, led to hundreds of empty apartments and homes for rent. Just ask any of the myriad of frum families looking to rent out their basement,and they’ll tell you it’s a hard market. Landowners have trouble renting out their space, and the problem compounds as the availability of apartments has driven down prices.
Currently, there are about 450 buildable lots zoned for residential housing along the Oak Street corridor. Some of the builders and investors are trying to control the market by not building now, or by building very slowly so that the supply doesn’t further outgrow the demand. But this doesn’t seem to be enough. “And choosing whether or not to build is not always an option,” says one local expert, “as property values continue to go up, and properties get reassessed, property taxes go up to. Not every owner of land is able to swallow the hit on taxes and wait to build till the market readjusts.”
One renter we spoke with, Avi, tells us how he recently moved from a two bedroom apartment where he was paying $1100 a month to a brand new three bedroom apartment in a new development that he is only paying $850 a month rent. “While I feel bad for my previous landlord and I know my new landlord was hoping to get much more for their apartment, I am saving money and living in a bigger, nicer, and newer home. I guess for us renters this is a good thing.”
Marc, the real estate broker we spoke with, agrees that Avi, like many renters, may be benefiting, and of course it’s a good thing for them, but it is not a good thing for the market as a whole. “The real estate market will always be driven by home ownership, not rentals, that’s just the way it is.”
Let’s look at those landowners who purchased their homes with the hopes of renting out some of the space who are now having trouble paying their monthly mortgage, since those spaces remain empty. Young avreichim hoping to move near their yeshivos are confused as to how to make that happen. The market is a mess, the current listings are all over the place, and nobody seems to be able to take the situation in hand.
Moshe created MyRentools.com, an innovative website to ease the process of renting in Lakewood. Its benefits in today’s market are obvious. By being able to search for exactly what you’re looking for in an apartment or home by area as well as by features and amenities, you can save hours and hours of time. In today’s world, who has the patience to browse through a long list in no specific order, with very little information, requiring dozens and dozens of phone calls and apartment viewings? MyRentools easily provides the user with all the available homes within their criteria, displaying exactly what’s available. Moshe tells us that he’s been getting amazing feedback from those who have been using the site, they love how easy it is to find exactly what their looking for with ease. Besides for helping to locate the perfect home with ease, it’s also a great tool that provides the ultimate clarity into the Lakewood rental market.
Mendy, another local real estate professional, had an interesting perspective. He believes that in the past, people bought homes reliant on the rental income, but without necessarily relying on the home to be a long term home for their family. For example, Yankywho bought a townhouse in one neighborhood for $389,000 would have about $2500 in monthly payments, including mortgage and property taxes. A rental income of almost $1000 a month would make a big difference. But, as Yanky’s family grows, the townhouse will start to get tight. So, Yanky finds a nice home in a different area for $750,000 which would cost him about $4500 a month! Why not keep the smaller home and use the basement to accommodate a growing family? It can be a cheaper and more affordable option for many.
When asked to predict what the future holds, all of the experts we spoke to were in agreement that there are too many factors that determine real estate markets to be able to have a worthwhile opinion. But they were all optimistic about Lakewood’s future, believing that real estate markets always move in cycles and that there is no reason for alarm. So, will these apartments be rented out soon? Will the homeowner’s burden be eased? Will homes become more or less affordable? Only time will tell.