Why would more than a dozen buyers compete for a two-bedroom house that every one of them planned to demolish?
That is what happened on Sunset Drive in Millburn last year. The house went on the market in February 2025 for $799,000. It went pending within nine days. It closed that July for $965,000, roughly 21 percent over asking, after outbidding more than a dozen other potential buyers, according to local reporting from Hoodline. The winning buyer was a construction firm, Vantage Builders LLC, which tore down the original two-bedroom house. Eighteen months later, a replacement spanning more than 5,900 square feet, with six bedrooms and six and a half baths, is nearing completion on the same 0.26 acre lot. Hoodline reported the finished home is expected to be worth roughly $3 million.
No one who bid on that house was evaluating its kitchen. They were evaluating what the lot could become, and that distinction is the thing every buyer comparing Millburn to Short Hills, or either town to somewhere else on the Midtown Direct line, needs to understand before they read a single median price number.
The house and the lot are two different products
In most housing markets, a listing price reflects the structure. Square footage, condition, updates, the roof's age. In a market where buildable land has effectively run out, a second pricing logic takes over. The number a buyer writes on the offer sheet stops being an estimate of what the house is worth and becomes an estimate of what the zoning will allow someone to build in its place.
Essex County's single-family supply dropped 9.3 percent year over year to just 633 available homes in July 2026, a 2.3-month supply, well short of the six months of inventory that typically signals a balanced market, per New Jersey Realtors data cited by Hoodline. Builders responded by shifting their search from vacant land, of which there is almost none left in Millburn and Short Hills, to existing homes they can tear down and rebuild. County-wide, sellers received an average of 111.9 percent of their original list price in July 2026, the highest list-to-sale ratio of any New Jersey county, according to the same reporting.
That is the context for the Sunset Drive bidding war. The buyers competing for that house were not competing on livability. They were competing for one of the few remaining opportunities to build new in an established neighborhood, and the price reflected that scarcity rather than the two bedrooms standing on the property.
The lot's ceiling is set by an ordinance, not the market
Here is the part that changes how a buyer should read any dated listing in this market. The size of the house that can eventually replace the one you are looking at is not open-ended. It is capped by Millburn's Floor Area Ratio rules, and those rules just got more precise.
On August 11, 2026, the Millburn Township Committee passed Ordinance 2756-26, rewriting how the town measures a home's floor area for FAR purposes, according to TAPinto's coverage of the vote. The old definition left rooms with sloped ceilings and double-height great rooms open to inconsistent interpretation during zoning review. The new rule is specific. Every floor is measured using the outside dimensions of exterior walls. Garages count toward floor area. Basements do not. Any room with a ceiling height of 16 feet or more counts twice in the calculation. Any portion of a room with a ceiling below seven feet does not count at all. The Township's own language frames the goal as protecting Millburn's character as a "small suburb of the highest quality." The Planning Board found the ordinance consistent with the town's master plan in a unanimous vote before the Township Committee adopted it.
That matters because FAR, not the purchase price, is what actually determines how large a replacement home can be. In the R-3 zoning district, which covers much of central Short Hills, floor area cannot exceed 25 percent of the lot's total area. Two lots that look similar from the street, similar size, similar setback, can support very different replacement homes if one sits in R-3 and the other sits in a Millburn zone with different ratios. A buyer pricing a teardown opportunity needs the FAR math for that specific parcel, not a general sense that "this is a teardown town."
The historic overlay adds a second gate
A meaningful share of that R-3 district also falls inside the Short Hills Park Historic District, which is listed on the National Register of Historic Places. Any exterior renovation on a property inside that overlay requires a separate review from Millburn's Historic Preservation Commission, on top of the standard zoning process. That review does not exist to block redevelopment outright, but it does mean the clean "buy it, level it, build to the FAR maximum" plan that worked at Sunset Drive is not automatically available on every lot that looks like it. Before a buyer treats a dated house as a teardown play, the practical first question is whether the parcel sits inside that historic boundary, because the answer changes the timeline and the design constraints considerably.
The tax bill catches up last
The old Sunset Drive house carried a 2025 municipal tax assessment of $555,600 and an annual tax bill of $11,218, up from $9,824 in 2016, according to property tax records reviewed by Hoodline. That numbers looks almost quaint next to Millburn's 2025 average, an assessed value of $1,302,529 carrying an average tax bill of $26,292, per Patch's tax tables. Once the new Sunset Drive house is formally assessed, its bill will land far closer to, or above, that township average, not the number the original two-bedroom house was paying.
State tax tables published in early 2026 show that 51.2 percent of a Millburn property tax bill funds the local school district, 26.4 percent supports municipal operations and 22.5 percent goes to Essex County, per Patch. A property's reassessment after a teardown does not just change one household's bill. It changes what that specific parcel now contributes to a district serving roughly 5,000 students across eight public schools, which is part of why the town treats these projects as a planning question and not only a private one.
Reading a listing with both prices in mind
| Move-in ready home | Teardown-target lot | |
|---|---|---|
| What the price reflects | Condition, updates, square footage as built | What the FAR math allows to be built on that lot |
| What sets the ceiling | Comparable sales of similar finished homes | The zoning district's FAR percentage and any historic overlay |
| Where the risk sits | Inspection findings, deferred maintenance | Whether the parcel is inside a historic district requiring Commission review |
| What the future tax bill reflects | The current assessed structure | A reassessment closer to, or above, the township's post-rebuild average |
A buyer touring a dated three bedroom colonial in Millburn or Short Hills this fall is really looking at two different properties layered on top of each other. One is the house as it stands. The other is whatever the lot's zoning permits it to become. Knowing which one the other offers on the table are actually bidding against, before making an offer of your own, is the difference between competing on price and competing on the wrong basis entirely.
A few questions we hear often
Does the new FAR ordinance apply to additions and renovations, or only full teardowns? It applies to any project that changes a home's measured floor area, which includes additions, finished attics, and vaulted or double-height rooms, not just full rebuilds. Anyone planning a renovation should confirm the current FAR math for their specific lot before finalizing design plans.
How do I find out if a specific lot sits inside the Short Hills Park Historic District? The Township maintains zoning district maps and the historic overlay boundary. A property's zoning district and any historic designation can be confirmed through Millburn's Land Use and Building Departments before an offer is written.
Is this teardown pattern happening in Millburn too, or only in Short Hills? Both. The Sunset Drive project is in Millburn, not Short Hills, and Millburn's average home value has risen alongside Short Hills in 2026. The FAR percentages and historic overlays differ by zoning district within each town, which is exactly why the same lot size can mean different things depending on where it sits.
If you are weighing a dated listing anywhere between downtown Millburn and central Short Hills and want to know what the zoning actually allows before you decide what it is worth, the Judith Daniels Real Estate Team can walk the FAR math and historic overlay questions through with you before you write an offer.
