Downtown Jersey City Waterfront during a beautiful sunset

Many real estate investors attempt to profit from the price variance between neighboring real estate markets. This variance is referred to as a price spread. Comparing Manhattan residential real estate prices of $2000 a square foot to some neighborhoods in Brooklyn, Queens, Hoboken, or Jersey City, where real estate prices can be $1000 a square foot, imply a price spread of $1000 ($2000 less $1000) a square foot.

Bond traders or people that trade equity securities, analyze the relationships between markets. Bond traders monitor the relationship between various classes of debt securities and refer to the differences in terms of basis points and yield to maturity. So if a corporate bond yields 6% and an equivalent US treasury bond yields 2%, they would say that corporate bonds trade at a spread of 400 basis points or 4% (6% - 2%) to US treasuries. 

Real estate investors look to profit from the potential revitalization of surrounding areas in anticipation of greater price appreciation, thus closing the spread between the two markets.  The selling price per square foot for housing in Brooklyn Heights is higher than in Downtown Jersey City, both neighborhoods equally convenient to lower Manhattan yet yielding a significant price spread. Recently I previewed several properties in Brooklyn Heights selling for about $1850 a square. Since real estate in Downtown Jersey City sells for about $850 per square foot, this would imply a price spread per square foot of $1,000 ($1,850 - $850) between these two markets.

Much development is occurring in Jersey City and other outlying neighborhoods surrounding Manhattan. This development might keep prices down in the near term as inventory comes on the market and requires market absorption. However, speculation dictates that such improvements should help narrow spreads as community amenities are added, and unique characteristics of each location become more apparent. In Jersey City, ease of access to Liberty State Park and Liberty Landing Marina, both unique to Jersey City, should make a living in Jersey City more appealing.

Mortgage Refinancing Calculator Example:

Refinancing your mortgage? Try this simple mortgage calculator comparing cash flows: Compare (Old) Mortgage To (New) Mortgage.  You can indicate an early payoff if you plan on selling your home before the mortgage is fully amortized.  If you would like to consider present value, try: Compare (Old) Loan To (New) Loan Using Present Value.

Free calculator displaing an amortization schedule and helping homeowners understand the amount of money they will save by refinance there mortgage.