With two children and a third on the way, Heather and Patrick Healy decided their 1,900-square-foot home in New Providence was just too small. Knowing the real estate market was hot early this year, the couple figured looking in the million-dollar range would give them a cushion. But the market was just too tough.
They lost out in bidding wars for homes in Chatham and Basking Ridge before snaring a Basking Ridge 4,300-square-foot colonial revival built in the 1980s. The purchase price: $1,082,000.
“There’s no room for negotiations,” said Heather Healy, 34. “You have to be willing to pull the trigger right away.”
Welcome to the COVID pandemic real estate market in New Jersey, where homes are selling as soon as they are listed, often with multiple offers. Low inventory — coupled with the increased appeal of suburban living — has created a fiercely competitive market for buyers. Even as COVID restrictions about showing homes lifted, properties are still not coming on the market.
“It’s crazy. It’s really crazy,” said Ann Marie Battaglia, a real estate agent at KL Sotheby’s International Realty in Madison.
Traditionally, the spring season, which runs from early April through the end of June, is the busiest time for home sales in North Jersey. This year — with low inventory — sellers have the upper hand.
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Low inventory, high prices
According to the New Jersey Association of Realtors, the number of single-family homes listed on the market in Bergen County fell 52.5% this February compared to last February, just before the pandemic shutdown. There were 2,650 homes on the market last February, compared to 1,260 this year.
That caused the median sale price this February to jump 17.5% compared to the same period last year in Bergen County — from $485,000 to $570,000.
In Essex County, the number of homes on the market this February dropped 48.6%, from 1,460 last year to 750 this year. The median sale price was up 28.6%, from $382,500 to $492,000.
In Morris County, homes on the market this February fell 55.8%. There were 1,725 homes for sale in February of 2020, but only 763 this February. The median sale price was up 24.7% — from $425,000 to $530,000.
Similarly, the number of homes on the market in February in Passaic County fell 51.7%, from 931 to 450. The median sale price grew 17.3%, from $332,500 to $390,000.
Sussex County homes for sale in February of 2021 fell 61% compared to the same month in 2020, from 1,016 to 396. The median sale price climbed 35.6%, from $232,000 to $315,000.
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Battaglia calls the increase in pricing a “COVID premium.” Buyers in this market should expect a bidding war and pay about 10% above asking price, she said.
“The buyers are coming in from the city and they are clamoring to get in,” Battaglia said.
In addition to New York City, people are also moving from such places as Hoboken and Jersey City, seeking more space as more people work from home. Some of the hot areas include Montclair, Chatham and Maplewood, Battaglia said. Areas close to New York City and along NJ Transit’s Midtown Direct line with direct access to Penn Station have always been popular, but this market is creating demand for homes farther west in New Jersey, she noted.
Buyers are making more aggressive moves, such as offering to pay in cash, forgoing inspection and being flexible about a closing date, she said.
The National Association of Realtors’ estimate of a 15.8% surge in home prices over the past year has raised concerns that the housing market is on the verge of another bubble. While that remains a possibility at some point in the future, home prices appear to have been pulled higher this past year due to the imbalance of the supply and demand of existing homes rather than an increase in speculation, said Mark Vitner, senior economist at Wells Fargo Securities.
Illustrating the inequities of the pandemic economy, demand for homes has been strongest at the upper-end of the price range, where the supply of homes is unusually tight, according to Wells Fargo Research.
“The exceptionally low number of homes on the market today reflects the extraordinary crosscurrents brought about by the pandemic,” Vitner said. “Social distancing requirements greatly increased housing demand, as more people needed space at home to work remotely and accommodate remote schooling needs.
“Demand in the trade-up market has been particularly strong,” he said. “With more people spending more time at home, however, fewer homeowners — particularly those that might have downsized at this point in their lives — have chosen to sell their home.”
What buyers want
Even with the tight market, buyers remain selective about the type of homes they want, said Mia Hur, licensed salesperson at Keller Williams SEG Realty in Tenafly. Buyers are looking for remodeled homes in turnkey condition and do not mind paying for the aesthetics and convenience, she said.
Her realty team, for instance, recently sold a remodeled home in Demarest listed at $1,498,000 in a weekend. Towns such as Tenafly, Closter and Demarest are in high demand, Hur said.
Understanding the state of the market, the Healys opted to buy a home before listing their home in New Providence for sale, working with Battaglia as their agent. As soon as their 1960s split-level home was listed at $644,900, three offers came in immediately.
Having just purchased and sold homes, Heather Healy’s advice to others in the market is to be ready to act fast and pay more. She is a stay-at-home mom and her husband is an insurance broker.
“You have to be willing to go over asking,” she said.
Tips on the spring 2021 market in NJ
1. Be prepared
Have your mortgage pre-approval or proof of funds ready, Battaglia said. Know what your scope for inspection requests will be, such as asking for only structural, environmental and wood destroying insect items.
Talk to your lender before putting in the offer to see if you could tighten up the mortgage commitment to two to three weeks.
Be flexible in terms of closing in order to accommodate the seller.
With buyers in bidding wars, some offer to waive the appraisal. This only works if you have a lot of money for the down payment or extra cash in case the house does not appraise for the purchase price, Battaglia said, adding it is not a tactic she recommends. It is a risk but it competes with all cash offers.
2. Act fast
If a house comes on the market on Monday, don’t wait until the weekend to see it, Battaglia said.
“You could lose the house before you see it,” she said. “There could be multiple offers and you may miss the best and highest round before you see the home.”
3. Be smart
If you love the house, chances are other buyers will love the house, Battaglia said.
“Once there are multiple offers, there is a good possibility that you will have to put in an offer over the asking price,” she said. “Put as much earnest money down up front to show the seller that you are serious.”
Mary Chao 趙 慶 華 covers the Asian community and real estate for NorthJersey.com. To get unlimited access to the latest news out of North Jersey, please subscribe or activate your digital account today.
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