HOBOKEN/JC HOUSING

JP Livingston at TheMoneyHabit.org
 Executive Summary
We are considering the purchase of a home in JC/Hoboken.
Our down payment will be 20% of purchase price. Total 5-year cash outlay compared to renting is
approximately [redacted].
30-Year fixed rate mortgage at 3.75% interest rate.
We are evaluating three options, using a specific sample property as representative of the
opportunity:
1. Standard property in Downtown JC/Hoboken (Standard)
2. Property near Southwest Park in Hoboken (SW Park)
3. Single-Family home (Single-Family)

IRR Chart Standard IRR Chart SW Park IRR Chart Single Family

Downside Base Low Base High Tail Downside Base Low Base High Tail Downside Base Low Base High Tail

Note: Estimated appreciation rates differ for different areas, covered later
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What You Have To Believe
Manhattan is a significant source of jobs and is landlocked, making all areas
within a 30 minute commute highly coveted.
The Manhattan market will grow at 2-6%+ over the hold of the investment.
Given JC and Hobokens equivalent commute to Manhattan and amenities,
JC and Hoboken prices should approach that of Brooklyn neighborhoods as
the neighborhoods continue to gentrify, stabilizing at a 10% discount to
Brooklyn (i.e. $900 PPSF).
JC/Hoboken Positives: No NYC income tax
JC/Hoboken Negatives: Most gentrified Brooklyn neighborhoods have strong
elementary schools, cachet of an NYC address

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Market Overview
Manhattan median price per square foot is $2,042, up 11% over last year,
and having grown at a CAGR of 18.1% over the past four years (since 2012).
Brooklyn median price per square foot is above $1,000.
Hoboken median price per square foot is approximately $700-$775 and
downtown Jersey City median price per square foot is also approximately
$700-$775 (sources: one and two).

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 Market - Manhattan
Manhattan median price per square foot
is $2,042, up 11% over last year, and
having grown at a CAGR of 18.1% over
the past four years (since 2012).
A second source based on median sales
price suggests Manhattan saw 8.9%
appreciation last year and 6.7% CAGR
since 2012.

Manhattan median price per square foot

is $2,042 and the market has appreciated
7-11% in the past year.

Source: Redfin Raw Data, MNS Report (2016) themoneyhabit.org

 Market - Brooklyn
Gentrified Brooklyn neighborhoods
trade at $938-$1,307 per square foot.
Transitional Brooklyn neighborhoods
trade at $642-$765 per square foot.

Brooklyn neighborhoods comparable

to JC/Hoboken trade at north of
$1,000 per square foot.

Source: StreetEasy Data Team (2015) themoneyhabit.org

 Market JC/Hoboken
Cornelia Bradford Elementary Zone Harsimus Cove South of Harsimus Cove to Grand St

2014 2015 2016 2014 2015 2016 2014 2015 2016

Median 669.1919 735.4686 783.571 Median 502.3117 602.0504 658.9149 Median 497.5758 563.6466 609.7499
Mean 685.6556 761.9189 806.6512 Mean 499.3096 588.0206 657.239 Mean 496.9249 569.7053 616.8824
9.90% 6.50% 19.90% 9.40% 13.30% 8.20%
Count 95 124 116 Count 44 60 92 Count 57 58 70

Seast Hoboken - Clinton ST, 4th st S West Hoboken, 3rd St Harrison to Grand
Recently All
2014 2015 2016 2014 2015 2016
Sold Homes Active Listings
Median 617.4096 655.4366 697.392 Median 540 586.6076 614.9111 (Last 3 Months) (April 2017)
Mean 615.8394 683.43 702.5818 Mean 538.0624 595.5524 609.2311 Median PPSF: $700 Median PPSF: $775
6.20% 6.40% 8.60% 4.80% Count: 176 Count: 116
Count 74 78 110 Count 96 93 98

JC and Hoboken neighbors have grown robustly through the past three years. YTD 2017
has grown approximately 7% over EOY 2016 figures. Active listings are asking for a
median $775 per square foot.
Source: Redfin Raw Data
Note: Neighborhood-level YTD and Active listings not shown because of low N
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Appreciation Build-Up: Standard + Single-
Family
Conservatively estimate our entry price at $725 per square foot for a median-quality unit.
Estimate 10 years to achieve gentrification equivalent to Brooklyn. CAGR from $725-$900 in 8 years
equates to 2.7%.
Layer in growth in overall market, which JC/Hoboken should track. Assume 2.5-6% (Manhattan
appreciated 11% last year).
Downside Case: Hoboken/JC barely outperforms inflation, appreciating at 3%.
Base Case: Estimated appreciation for Hoboken/JC over next 8 years would be approximately 5.2%-8.7%.
Tail Case: Continued strong growth over next 8 years in Manhattan (i.e. 7-8% CAGR). This would equate to
9.7-10.7% appreciation.

IRR Chart Standard (Converted Schoolhouse) IRR Chart Single Family (Carriage House)

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Appreciation Build-Up: SW Park
Southwest Park to open June 2017. City active on revitalization of southwest Hoboken, a traditionally industrial .
Several developments have broken ground with retail square footage built into the plan. Suggests that the price
per square foot of the Southwest Park area, currently around $620-$650 per square foot, should quickly approach
that of the rest of Hoboken.
Timeline of gentrification is uncertain: Harsimus Cove has caught up to the rest of JC in the span of two years.
Conservatively estimate our entry price at $650 per square foot for a median-quality unit. CAGR from $650-$900
in 8 years equates to 4.15%. In a slower market assume growth from$650-$825 which is a CAGR of 3.4%.
Layer in growth in overall market, which JC/Hoboken should track. Assume 2.5-6% (Manhattan appreciated 11%
last year).
Downside Case: Hoboken/JC barely outperforms inflation, appreciating at 3%.
Base Case: Estimated appreciation for Hoboken/JC over next 8 years would be approximately 5.9% in a slower
market. It would be 9.4% in a better market.
Tail Case: Continued strong growth over next 8 year in Manhattan (i.e. 7-8% CAGR). This would equate to 10.4-
11.4% appreciation.
IRR Chart SW Park

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IRR Bridge: Key Drivers
SW Park Property is $95k more expensive while our rent expectations remains the same (-
60 bps versus Schoolhouse)
Lower HOA and lower property tax at SW Park explains about 40 bps (we have a
conservative estimate of 1.3% of purchase price for the Converted Schoolhouse given JC
tax reval initiative Hoboken completed a citywide tax reval in 2013)
The difference in appreciation accounts for the balance of the difference in IRR
Every additional point of appreciation equals approximately 2-4 pts of IRR

IRR Chart SW Park IRR Chart Standard (Converted Schoolhouse)

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Key Investment Questions
How quickly do we believe the Manhattan market will rise in the next 5-10 years?
How close will JC/Hoboken PPSF approach that of gentrified Brooklyn neighborhoods?
How long will this take?
Will the gap in PPSF between outlying areas surrounding Manhattan (i.e. Brooklyn,
JC/Hoboken, and all others) and the PPSF in Manhattan continue to close even more over
time (current scenarios dont anticipate Brooklyn closing the gap any more if it does,
JC/Hoboken should also see more growth).
Is the property we are considering a median quality property? If not, how much of a
premium/discount does it deserve? Example: In 2016, 151 properties out of 1200 sold had
elevator in the listing and 133 out of 1200 were Single-Family/Multi-Family buildings

Our key investment questions center around projections for appreciation.

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