July 25 (Bloomberg) -- Jack Mello first came to Maxwell’s in Hoboken, New Jersey, in the early 1980s to see a then-little-known band called R.E.M. He since has attended hundreds of shows at the club, most recently to watch the Feelies perform their July 4th farewell concerts before the venue closes next week.
“This is the sort of place where bands play that are up and coming as well as those that are well-known,” Mello, 53, said as he stopped for a drink at the club, located across the street from the fifth-floor walk-up apartment where he has lived since 1987. “I’m just glad it’s lasted this long.”
The demise of Maxwell’s, a 35-year-old rock institution where Kurt Cobain once performed and Bruce Springsteen filmed his “Glory Days” music video, highlights demographic and cultural shifts in Hoboken as young families and wealthy couples increasingly join the artists, post-college singles and Wall Street commuters that have transformed the mile-square city from its industrial roots. Home prices are surging as buyers seek a more affordable option than New York City, just across the Hudson River, while independent businesses are giving way to chain stores.
The median sale price of all co-ops, condominiums and single-family homes in Hoboken -- the birthplace of Frank Sinatra -- jumped almost 11 percent in the year through June to $516,000, according to data compiled by Jeffrey Otteau, a real estate appraiser and president of Otteau Valuation Group Inc. in East Brunswick, New Jersey. That surpassed the $510,000 median in June 2006, near the peak of the U.S. housing market. The average household size rose to 1.95 this year from 1.89 in 2005, Otteau said.
“Driving down the streets in Hoboken five or 10 years ago, what you saw was young singles and couples, now you see mothers and fathers pushing strollers,” Otteau said. “Households with children are now opting to stay in places like Hoboken which, in turn, is putting pressure on demand for larger-sized apartments.”
Demand for three-bedroom units is especially high, with frequent bidding wars, according to Lori Turoff, a Realtor in Hoboken since 2004. Home purchases rose to 140 in the first quarter from 137 the prior year as the number of active listings fell 45 percent.
Units were on the market for an average of 50 days in the first three months of the year, compared with 77 days at the same time in 2012, according to data compiled by Turoff earlier this month. That was the fewest for a first quarter in data going back to 2000. The average listing discount, or the difference between the asking and final sale price, fell to 1.12 percent, the lowest for the period since 2004, she said.
“It isn’t a bubble, this is true demand,” said Turoff, who works for Coldwell Banker. “Hoboken is a wonderful community to raise a family, and young people are willing to pay for it. It’s still a great deal compared to New York City.”
First-time homebuyers Stewart Mader and Amy Sommer, who have a 5-month-old daughter, made an offer on a two-bedroom home with a back yard on Willow Avenue the day it came on the market. After a nine-month search and losing several bidding wars in Brooklyn, they started looking in Hoboken and eventually bought their home for $590,000, paying $40,000 more than the asking price to ensure they secured the unit. They moved in earlier this month.
“We knew we had to move quickly,” said Mader, 32, director of social media and online tools at CFA Institute, who commutes every day to Manhattan. “And we liked Hoboken. It feels very similar to the West Village or the Lower East Side. As we spent time here, we really liked the vibe.”
The median price of co-ops and condos sold in Manhattan in the second quarter was $865,000, up 4.3 percent from a year earlier, appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate said in a July 2 report. In the Brooklyn borough, the median home price jumped 15 percent to a record $550,000.
Hoboken’s population is expected to rise to more than 52,000 this year from 50,005 in 2010 and 38,577 in 2000, according to data from the U.S. Census Bureau. The population is expected to grow an additional six percent in the next five years, the data show. Eighty-nine percent of the city’s residents over age 16 work at a white-collar job, the majority of which are in finance, sales or management, Otteau said. The average household income this year is estimated to be $147,363, data compiled by Otteau show.
Demand for high-end apartments is rising. Toll Brothers Inc., the largest U.S. luxury-home builder, has condo communities along the waterfront and Frank Sinatra Drive. At its newest complex, 1100 Maxwell Place, 40 percent of the 210 units that started going on the market in February for a 2014 move-in date have been sold, said Henry Waller, vice president of the Horsham, Pennsylvania-based company’s City Living office in Hoboken.
The company raised the price at 1100 Maxwell Place by $140,000 on average since sales started, Chief Executive Officer Douglas Yearley said on a May conference call. A two-bedroom condo at the building ranges from the high $800,000s to more than $1.3 million.
Rising mortgage rates may slow the pace of Hoboken’s real estate market, according to Otteau. The average rate for a 30-year fixed mortgage was 4.31 percent for the week ended today. Rates climbed to a two-year high of 4.51 percent earlier this month after reaching a near-record low of 3.35 percent in May.
“It will price people out of the market,” Otteau said. “House prices are going to rise and will be quite strong for the next year or two and then we are going to get a pause, because of the double whammy of house prices and higher mortgage rates in an economy where salary increases are still very modest.”
The city’s family-oriented residents may also move once their children are older. Hoboken is home to the country’s “least attractive” school district, according to a report last year by Trulia Inc., an online property-listings service. It has the lowest ratio of elementary-school-age kids to preschool-aged children, based on the largest 100 metropolitan areas with at least 1,000 children under the age of 9, the company’s data show. Trulia ranked each district using 2010 U.S. Census data as well as ratings on GreatSchools.com.
The area was hit hard by October’s Superstorm Sandy, which flooded more than 1,700 homes and caused more than $100 million in damage to the city’s residences and businesses, Mayor Dawn Zimmer said in a December testimony before the U.S. Senate Committee on Small Business and Entrepreneurship. Some homebuyers have been deterred from considering units on the ground and first floors as a result, Turoff said.
On Washington Street, where the majority of city’s shops and restaurants are located, chain retailers are betting on demand from Hoboken’s newest residents. Gap Inc., the largest U.S. specialty apparel retailer, opened a babyGap earlier this year, while Urban Outfitters Inc.’s Anthropologie clothing and housewares store opens tomorrow.
Sarah Himmelbaum, 31, moved to Hoboken three years ago from Brooklyn and lives in a two-bedroom apartment with her husband, a lawyer who commutes to Manhattan, and their 2-year-old son. She organizes networking events for local families as part of her blog, Hoboken Mommies 24/7, and said she hopes the city will attract more national brands and retailers catering to moms.
“In a lot of ways, this is a mini-Manhattan,” said Himmelbaum, who said that like many other mothers she knows, she moved to Hoboken as a compromise between Manhattan and New York-area suburbs. “We’re moving away from mom-and-pop stores. Now we have a mix of small stores and national brands but there is room for others,” she said, citing high-end designer Tory Burch as a desired boutique.
As Hoboken moms like Himmelbaum seek more specialty retail stores and the dozens of sports bars like Village Pourhouse and the Shannon draw young professionals and commuters, an alternative-rock club like Maxwell’s doesn’t fit in on Washington Street like it once did, according to Todd Abramson, part owner of the restaurant and club.
“A lot of my crowd has moved out of town and the people who have replaced them are not that interested in coming to Maxwell’s,” said Abramson, who added that rising costs and challenges related to parking also contributed to the closing. “If we made the restaurant fancier, for lack of a better word, perhaps that would have more appeal to some of the newer local residents, but it would work against the vibe of the place and a lot of the people who come to see the shows. We don’t want to do that.”
Artists and musicians who frequent Maxwell’s are now moving to nearby areas such as Jersey City, where Abramson said he is considering opening another music club sometime in the next year.
Kevin and Lauren O’Brien, both 38, were priced out of Hoboken more than four years ago. They moved north to Weehawken to have more space for their daughter, who is now 6, after witnessing the city change and become more expensive.
“We would have stayed but the makeup of the city is so different and it’s pretty unaffordable these days to live here,” said Lauren O’Brien, who celebrated her wedding reception with Kevin at Maxwell’s as well as a good part of her late 20s at the club. “This being the last cultural hold-out, it’s kind of a bummer they’re closing.”
Mello said he’s seen 300 to 500 shows at Maxwell’s and his last will be Lee Ranaldo and the Dust, featuring Sonic Youth’s guitarist and drummer, on July 30, the night before the club’s final show. He’s not surprised that Maxwell’s is closing.
“It was great, it was rowdy, loud and a lot of fun,” Mello said, recalling how only about 25 people came to see Cobain’s Nirvana play in 1989. “This shows it’s definitely a time of change in Hoboken.”
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