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Ten years ago, when their grandchildren were young and visiting often, Frank and Rosemary Santolocis bought a brand new five-bedroom, four-bathroom home on four acres in Sparta.
There was ample room to play indoors, swim in the pool and and spend time outdoors.
But now the boys have gown up and don’t come over as frequently, so last spring, the couple put their home on the market. The house sold within four months — after they cut the price.
The Santolocis are among the lucky ones.
There is a glut of these McMansions on the market in the suburbs throughout New Jersey, real estate agents and analysts said.
Certain homebuyers once prized these large houses, tucked away on a few acres of land and featuring half a dozen bedrooms, grand entranceways, and three-car garages.
But in the face of the economic collapse, declines in personal wealth, a tight housing market, and a shift of what prospective homeowners want, all that has changed.
Major demographic changes could also make the market shrink even further in the next five years, as baby boomers retire and look to downsize. The generation behind them is smaller and has less money and a desire to live closer to urban centers.
“We definitely have an oversupply of inventory for the so-called McMansions,” said Mary Pat Spekhardt, a real estate agent with Coldwell Banker in Sparta who worked with the Santolocis.
“Houses are staying on the market double the time that they used to, and everyone is frustrated,” she said. “We can’t make buyers, though, that’s the problem. We market, market, market the house and make the house stand out, but the buyers are few and far between.”
In New Jersey, it would take 14.6 months to sell the current inventory of houses listed between $600,000 and $1 million, according to real estate analyst Jeffrey Otteau, president of Otteau Valuation Group. The only houses that are selling are those with unique features, like an inground pool or a media room in the basement, agents said.
And the issue is only going to get worse.
Baby boomers — the generation who primarily bought these houses when they were built in the 1990s — are now at a crossroads: their children have moved out, they are quickly approaching retirement, and they don’t want to take care of such a large house and lawn. Boomers are reaching age 65 at an average rate of 121,300 per year in New Jersey, with nearly half a million boomers to hit retirement by 2015, according to an analysis of 2010 census figures.
“They’re going to find themselves five years from now, where it’s no longer a choice, they have to sell — they absolutely have to sell,” Otteau said. “They’re paying $20,000 in real estate taxes, not putting anybody through the school system, and prices don’t look like they’re getting back. (They say), ‘Let’s cut our losses and let’s make a move.’”
“We’re just at the beginning of this,” he added.
In an ideal housing market, the next generation — Gen X — would move into the McMansions. Demographic shifts are at play, too. There are only 1.8 million New Jersey residents who make up Gen X, compared to 2.4 million boomers, according to census data. And, because of lower earnings and equity in their current homes, Gen X doesn’t have the same kind of wealth as their parents’ generation to buy these large houses, the Pew Research Center found.
Instead, younger buyers are largely preferring to stay in urban centers and spend more on a house that is near corporate hubs, train stations, restaurants and grocery stores, real estate analysts and agents said.
“The younger population in their 30s and 40s are looking for a different lifestyle that has to do with a mentality of reverse migration,” said Glory-Ann Drazinakis, a real estate agent with Weichert Realtors in their Oldwick office. “They need the daycare, they need to be two minutes from the store for groceries, the town centers — that’s what the draw is.”
Property values for these McMansions have decreased significantly — in Hillsborough, one listing closed at $980,000, but was on the market for $1.175 million and would have “certainly” gone for over $1 million four or five years ago, said Paul Giannantonio, an agent with ERA Statewide Realty in Hillsborough.
“Sellers have to be aware that as beautiful as the house is, they are not in a strong, powerful position from a pricing point,” Giannantonio said. There is still some interest in the houses, largely from relocated corporate executives and young families who are financially able to take advantage of the depressed market, agents said.
“There’s always going to be that person who’s going to want their several acres of land and their privacy and living out in the countryside atmosphere,” said Drazinakis, with Weichert. “But it’s not the norm.”
The Santolocis originally listed their house for $749,000, but received little interest. But buyers began circling when they dropped the price to $729,000, and they sold it to a young couple at $720,000.
Frank Santoloci said he was skeptical it would sell, but he thinks he knows why.
“Our house looks like new (because) only two adults lived there — no dogs, no teddy bears. The best we had was a couple of cats at one time,” Frank Santoloci said. “Our house is in perfect shape, and I think people recognize that.”
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