This is a letter in the Voice around half a year ago:
To my fellow Lakewooders,
I’m writing this letter to address an issue that has recently become a major concern, and can affect a lot of residents of this great city, therefore I consider it my obligation to alert anyone who may otherwise not grasp the severity of the issue.
It is no secret that the price of housing in Lakewood has skyrocketed. Houses that just two or three ago were on the market for already exorbitant rates are now going for a hundred thousand dollars more (or even more!). In prime areas, houses that were sold for 400k or 450k now neighbor homes that are on the market for 700k! The seemingly endless amount of new developments (not the subject of this letter, sorry) haven’t managed to make a dent in stinting the market prices.
All this isn’t news.
What may seem surprising is that people are still buying houses. But to most readers, that is no shock at all. After all, having a place to live is a necessity, and rent costs good money, so why pay for your landlord’s mortgage if you can be putting that money towards your own. So people will scrape together a down payment, and look for the cheapest house they can find within the proximity of their standards (location, size, crowd, etc.). They will then figure out exactly how much their monthly payments will amount to, and budget it out to the penny. X amount from the paycheck, X amount from the Kollel check, X amount from the basement tenant, etc. And then, with a to-the-penny plan and a good dose of Emunah, they proceed to purchase the house.
This too is not news.
So what prompted me to sit down and write this letter? As I mentioned at the onset, there is something newsworthy, something new that warrants our attention.
The issue is that there is a flaw in the reasoning of these homebuyers. A flaw that is caused by a new phenomenon, something unprecedented that people fail to take into account.
Dependable basement income no longer exists! The ability to rent out the basement isn’t a given anymore, and it cannot possibly be relied upon as a source of money to cover the monthly mortgage payment. Not even near-reliable!
If you would but open up the local publication that lists the rentals available, you would be confronted by pages upon pages of listings. In last week’s edition, there were 542 listings, spread across seventeen pages! (Yes, I counted.) A mere two years ago there was less than one full page of listings! The bulletin boards in BMG are inundated with “basement available” signs, now accounting for a majority of all signs, when not too long ago they were relegated to but small corners of the board. The “epidemic” of vacancies is so widespread that people have been coming up with creative ways to try to lure people into checking out their apartments. A recent sign on a Yeshiva bulletin actually had an inset on it that stated: “Ask about free Eretz Yisroel trip!” That’s just an indication how extensive this problem really is.
Why is this so?
The simple explanation is that the overabundance of new houses created an imbalance in the infrastructure. Every basement dweller who buys and moves into a new house leaves two basements empty, the one he just moved out of, plus the basement of the house he just bought. The only way to support that is if the demographic of new basement renters (usually newly married couples) is growing faster than that of the house buyers. Because house buyers must rent out their basement indefinitely, while basement renters generally only stay in basements for a few years, the size of their demographic must be growing a lot faster in order to keep the market balanced. Although it’s possible that it is indeed growing faster, it evidently is not “faster enough” to keep up with the overwhelming amount of new houses.
Many readers will now roll their eyes and allow their familiarity of precedents to discredit my claim away from ever touching upon their conscience. They will wave away the concern as a mere temporary phase, pointing to “the cycle of Lakewood rentals” as justification for this pattern. (“The cycle of Lakewood rentals” refers to a cycle that in the past has always proven itself true in Lakewood: rentals would be scarce, and then a wave of new developments would be completed, thereby leaving an abundance of available basements. Those would slowly fill up, again leading to a shortage of available basements, but only until the next wave of developments were completed. Most young individuals will remember “when I got married, there were hardly any available basements” or “when I got married, there were tons of available basements.”)
But even if they will consider the number of houses being built as normal, it still cannot be pinned on a precedent! Because there is something new that has completely disrupted the cycle.
That something is Jackson.
Jackson presents a unique opportunity to many who otherwise can’t afford houses, to actually buy a house. While I don’t know the exact numbers, there is a substantial amount of people moving to Jackson, most who, I think it is safe to assume, would otherwise be renters in Lakewood. (I am not intentionally omitting Toms River, Howell, and Brick, it’s just that Jackson seems to have the biggest movement and the least hurdles.) And when you’re sucking such a significant number of renters out of an already busting rental market, the result is a deluge of vacancies.
(Please note, that this issue affects people wishing to rent out the main floors possibly just as much as it affects basement renters, because some of the buyers in Jackson would otherwise be renting houses in Lakewood. And even though there’s a smaller market of house rentals, there’s also a smaller pool of clients.)
The extreme abundance of availabilities has begun to drive rental prices down, thus creating somewhat of an additional attraction toward basements, but even so there is still a tremendous overabundance. If the trend continues, while it may draw back potential Jackson-buyers, it will nevertheless result in the basement income becoming inadequate to ever cover the gap in the mortgage payment.
And so my fellow Lakewooders, I implore you, please don’t fall into the trap! Don’t get yourself straddled into a situation that can so easily lead to total financial disaster. Just because your siblings all did it ten, five, or even two years ago, and have not (yet) had issues, doesn’t conjecture that you too can do the same. Don’t allow yourself to be persuaded into a commitment of 500k, 550k, or 600k, prices that can only be justified because of the rentable basements (if at all), when you will very possibly (or can I even say probably?) have tremendous difficulty filling that basement. Countless sleepless nights and untold mental anguish can all be avoided, if you consider the difficulties carefully instead of blindly jumping in.
Don’t be fooled by people who tell you that it is a mere passing phase. Jackson has an indefinite amount of houses, with more becoming available as the previous ones are bought. If the prices in the more sought out areas begin to go up, there is always the next neighborhood, and then the next. Many Jackson residents are eager to sell, and for the foreseeable future there is an adequate amount of houses to continue being a threat to Lakewood buyers seeking to rent their basements, if not enough to actually accelerate the problem. Al Pi Derech Hateva, Jackson is here to stay.
A probable result of this problem will be a big dip in prices of Lakewood houses, partly to reflect the risk, and also (if not primarily) because people (or at least most people) will stop buying such expensive houses with no reliable renters. That may very well happen. But for someone who jumps in now, it will forever be too late.
-Yona Bellar
