OCEAN CITY – Factors affecting the regional and local economy include minimum wage increases, unemployment rates, housing, casinos, weather and gas prices.
Gregory Matuson, president and CEO of Sturdy Savings Bank, told the Ocean City Regional Chamber of Commerce on Jan. 18 that most employers in New Jersey pay $15.13 per hour, while seasonal and small businesses (fewer than six employees) pay $13.73.
He said he recently read an article that outlined unintended negative outcomes of minimum wage increases.
“On the surface of this, when you think about it, you think it’s a good thing. It turns out that it’s not, really,” Matuson said.
He said the Congressional Budget Office estimated that large federal minimum wage increases would cost hundreds of thousands of jobs, driving up prices, interest rates and federal deficits, reducing family incomes and costing hundreds of thousands of workers to lose their jobs permanently and leave the workforce.
“A 14 percent increase in 2009 led to a 16 percent decline for workers with less than a high school diploma, who this is supposed to help the most,” Matuson said. “It turns out it doesn’t help them but leads to a reduction in the workforce.”
He said wage hikes lead to higher prices when employers pass the cost onto customers.
New Jersey has the third-highest unemployment rate in the country, and Matuson believes higher wages may be a contributing factor. Unemployment rose sharply in 2023, from 3.4 percent in January to 4.7 in November, one full point above the national average.
Home affordability is another factor affecting the local economy. Matuson said while housing prices have fallen across the country, they are about 3 percentage points higher in New Jersey.
He said the combination of high prices and high interest rates are keeping inventory low.
“If you are looking for one, they’re hard to find, they’re expensive and mortgage rates are not your friend right now,” Matuson said.
He said affordability is a huge problem throughout New Jersey, but especially in Cape May County, which has a significant lack of housing for middle class buyers.
“The issue seems to be that for a middle-class family making a decent living, a married couple making $150,000 to $200,00, the reality is there’s no homes for them to buy, no homes in the $250,000-$300,000 range,” he said, noting some bank employees have chosen to move because they could not afford to continue living here.
“It’s a problem we are going to be dealing with for some time,” he said.
During COVID, he said, when island prices shot up, people looked to the mainland, driving up prices there, too.
Matuson said one thing not affecting the housing market is the delinquency rate, since it is amazingly low in the Garden State.
“I don’t know what brings home prices down if anything at this point, but it’s not going to be people not paying their mortgage and foreclosures,” Matuson said.
According to the New Jersey Association of Realtors, mortgage rates have doubled over the past two years and the number of homes for sale has been falling significantly while prices continue to increase.
“A lot of that doesn’t make sense,” he said.
As a result, people are opting to rehabilitate their homes instead of paying a high price with a high interest rate.
The Cape May County real estate market dropped, with new single-family home listings falling by 14.6 percent from November 2022 to November 2023 and closings falling 13 percent while the median price increased 10.8 percent.
Likewise for the townhouse/condominium market, new listings fell 7.1 percent and closings dropped 21.2 percent while the median price increased 4.4 percent.
In Ocean City, prices rose by 5 percent while total units sold dropped 20 percent from 2022 to 2023. New construction plummeted from a high of 218 units in 2021 to 114 in 2023, a drop of 42 percent.
In the Atlantic County real estate market, new single-family home listings fell 17.9 percent from November 2022 to November 2023 and closings fell 22.2 percent while the median sale price increased 6 percent.
Likewise for the townhouse/condominium market, new listings fell 12. 8 percent and closings fell 15.1 percent while the median price rose 16.5 percent.
The casinos, which Matuson said always want people to believe they are not doing well, took in $2.8 billion from gamblers in 2023, exceeding pre-COVID levels. Most of the growth is from newer casinos such as the Borgata, Hard Rock and Ocean, while internet gambling set new records.
Another factor is gas prices, which topped out close to $4 per gallon in August and September but have fallen briefly to less than $3 per gallon now.
By CRAIG D. SCHENCK/Sentinel staff