Tag: Real Estate Market Trends

Grabbing an ideal temporary place to live in the offseason is a harder task than usual along the Jersey Shore this year, according to real estate professionals in the area.

There is greater demand for winter rentals up and down the coast for a number of reasons, they say — most are directly connected to the coronavirus pandemic.

And many of the newcomers to the winter rental market appear to be less interested in a specific town or city — they just want something comfortable for a few a months, anywhere along the shore.

“They’re looking from the Toms River area all the way up to Belmar, Long Branch,” said George Coffenberg, broker/owner of Preferred Properties Real Estate.

The new clientele aren’t just folks who want to enjoy a shoreline view while being able to work remotely. Many are in the middle of a strategic process that includes cashing in on the hot housing market and eventually moving into another home.

“People have sold their homes and need short-term rentals to kind of get settled and figure out where they’re going to buy,” Coffenberg said.

Since bidding wars on available listings are still occurring, Coffenberg said, recent sellers are sitting on the sidelines, waiting for things to calm down before buying again.

Unlike summer renters, folks who rent in the winter typically have to prove a solid financial history before a deal is made, as the leases are generally handled on a monthly basis.

“Typically, you’re going to pay monthly what it would be for a week in the summer,” said Mike Loundy, broker of SeasideRealtyNJ.com.

Loundy noted there’s a yearly crowd interested in winter rentals along the shore — some folks need to find a place to stay due to local work projects, for example.

“There’s beautiful accommodations available now that did not exist in the past, so we’re seeing it draw in people that we would not normally have seen,” Loundy said.

Contact reporter Dino Flammia at dino.flammia@townsquaremedia.com.

7 reasons why you need to kill the spotted lanternflies infesting NJ

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Rosy
Real Estate Agent
Coldwell Banker

I am a Realtor in Princeton, NJ with Coldwell Banker Residential Brokerage. I serve the residential needs of Princeton, West Windsor, Plainsboro, Lawrenceville, Hopewell, Pennington, Montgomery, Hillsborough, Belle Mead, Rocky Hill, South Brunswick, East Windsor, Cranbury, Hightstown, Robbinsville, Franklin in Counties of Mercer, Middlesex and Somerset.

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My name is Rosy and I am a Realtor with Coldwell Banker in the Greater Princeton, New Jersey area.

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Since the onset of the coronavirus pandemic, housing prices in New Jersey have soared, and homes have been flying off the market within days.

While today’s heated market may call to mind a similar trend from the mid-2000s, experts say this time around there’s no real concern about another mortgage crisis caused by recent sales — demand for homes and the loans going to buyers are completely different today compared to 15-20 years ago.

The market may see a housing correction in the year or two ahead in the way of prices, but industry observers do not expect to see another “bubble burst” like the one that triggered the Great Recession in 2007.

“That time period was mortgage-driven cheap money. Today, it’s more driven by people’s desire to be in a house and wanting to own a real asset,” said Kevin Riordan, a real estate professor at Montclair State University.

Sales today involve more well-qualified buyers, Riordan noted. During the subprime mortgage crisis, many folks were spending beyond their means and soon felt the pain when they could no longer afford their purchase and the price of their home dipped below the price at which it was purchased.

Since the COVID-19 threat took hold of New Jersey last March, home appreciation rates skyrocketed due to low supply and very strong demand. It hasn’t sent many would-be buyers to the sidelines, though. In June 2021, the Garden State recorded a 41% increase year-over-year in closed sales, despite a 24% jump in the median sales price, according to New Jersey Realtors.

Jeffrey Otteau, managing broker at Hudson Atlantic Realty Advisors in Matawan, expects home prices to continue their climb through 2022, but not at a rate as high as what we’ve seen since the first quarter of 2021.

Prices in New Jersey will experience a correction in 2023, Otteau predicts.

“This is not a bubble that will burst,” Otteau said. “What we’re likely to see this time instead is some air leaking out of the balloon, so it will float a little lower without popping and collapsing.”

Otteau said there are signs that the New Jersey housing market is not as hot as it was just a few months ago. Sales activity has begun to slow down, and inventory is rising. Otteau expects to see mortgage interest rates rise, and that tends to reduce home-buying demand.

“The economy right now is continuing to get better, and the rising tide of a growing economy typically causes income to rise and jobs to multiply — all of which would run counter to a doomsday scenario,” Otteau added.

Contact reporter Dino Flammia at dino.flammia@townsquaremedia.com.

This spectacular Somerset County home is for sale

Look inside this gorgeous New Jersey colonial estate

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• Prospective homebuyers will face low supply and high prices for at least another year.
• The US doesn’t have enough homes to meet demand, and builders are struggling to keep up.
• Economists see price growth cooling in 2022, but only if construction picks up and demand holds steady.

America is still in a seller’s market when it comes to housing, and could stay there until next year.

Prices are climbing at the fastest pace in more than three decades, and homes are frequently selling above their list price, according to the National Association of Realtors. In May, the average listing was only on the market for 17 days, said Logan Mohtashami, lead analyst at Housing Wire. For it to become a buyer’s market, “For Sale” signs need to stay up for at least 30 days, Mohtashami said.

Unless construction picks up, the near-term outlook for prices isn’t promising.

Economists interviewed by Insider said price growth will remain elevated through the rest of the year and into 2022 because millennials will keep demand high — and they see the construction industry having a hard time keeping up.

Millennials are hitting peak homebuying age

In his best-case scenario, Mohtashami sees price growth cooling and supply bouncing back in 2022. But demographics complicate the outlook and could keep demand high. The surge of first-time buyers is going to be “historic,” Mohtashami said.

However, if millennial demand falls short, it could be a sign of an even larger issue. The generation’s homebuying prospects were already hammered by the Great Recession , Insider’s Hillary Hoffower reported. With the pandemic sending prices through the roof, the generation could become trapped in a vicious cycle of only renting and never having a home of their own.

“A lot of those buyers are among those for whom cost is prohibitive,” Nancy Vanden Houten, lead economist at Oxford Economics, said. “They haven’t bought a first home, or they’re paying a high rent so it’s hard to accumulate a down payment. They may also have other debts, including student debt.”

Fallout from the late-2000s housing bubble looms large

Ali Wolf, chief economist at Zonda, said more new homes should become available over the next two years, but for now, contractors are lagging.

“Builders didn’t know 2020 and 2021 were going to be some of the best years in the housing market ever,” she told Insider. “They would have needed to plan for this kind of growth in 2019. They didn’t.”

The shortage isn’t a completely new phenomenon. Home construction fell short for two decades, leaving the market with a deficit of up to 6.8 million units, according to NAR research.

Contractors “got burned” after the late-2000s bubble burst as homes away from city centers hurt their books, Zonda’s Wolf said. That damage is still top of mind and will probably hold supply back for years to come, Wolf said.

“I suspect we will continue to underbuild for years, because that deep demand pool further away from central business districts will start to shrink back to what the norm was,” she added.

Others are more optimistic. The severity of the nationwide housing shortage has captured the government’s attention. Federal and state policymakers are “more aware” of the years-long problem and its effect on inequality, Gay Cororaton, director of housing and commercial research at NAR, told Insider. That awareness could lead to zoning laws, apprenticeship programs, and funding to aid builders and boost supply, she added.

“The lack of housing is a crisis.  It’s something that needs to be addressed, it just can’t go on,” Cororaton said. “It’s causing that divide between those who have and those who have not.”

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The average price of a single family home in New Jersey has increased almost $100,000 in the past year, according to data from New Jersey Realtors.

The average home price for the first quarter of 2021 was $500,628 or 24% more than the $403,785 for the first quarter of 2020, the data shows.

“It has jumped dramatically,” said Robert White, President-elect of New Jersey Realtors and Managing broker at Coldwell Banker Realty in Spring Lake.

The price increase is being driven by low inventory and eager buyers.

“With the current inventory situation and the buying frenzy, you’re seeing … many homes selling over asking price in today’s market and that is forcing values to increase because appraisers are coming out and appraising at those higher numbers,” he said.

New listings were down 18% overall from January through March this year compared to last, but up about 8 percent in March 2021, compared to the same month last year. That’s partially reflective of the state shutting down in mid-March last year, said Spencer Freedman, an agent with Keller Williams Realty West Monmouth.

“But this time of year typically is always higher inventory,” he said. “People like to wait until their flowers are in bloom and the weather warms up.”

Despite the low inventory, closed sales were up 18%, from the first quarter of 2021 versus the same time period in 2020.

Percent of list price received was also up by 3%, from 97.6% of list price in 2020 to 100.2% of list price in 2021.

White says that number isn’t necessarily reflective of what’s going on in today’s market.

A house that’s listed for $500,000 will likely sell for $530,000 to $540,000, he said. “There’s just so much demand.”

And homes that are listed for sale are on the market for less time before selling than in the first quarter of 2020 — 47 days versus 73.

Tarah Logan, a sales associate for Berkshire Hathaway in Mullica Hill who works in Gloucester, Camden and Salem counties, said agents have to take buyers to look at a house the first day it hits the market or they may miss out.

“I can’t tell you how many times I refresh the MLS throughout the day,” Logan said.

Because of COVID-19 there are limited appointments to see homes in person. “Some agents give a couple of days for showings so they can get the best offer,” she said. “Some homeowners don’t want the showings, so they take the first couple offers and then shut it down.”

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The frenzied market has caused a big change in N.J. real estate — more cash buyers

The housing market in N.J. is hot. If you’re a buyer, seller or work in real estate, we want to hear from you

These are the N.J. counties that saw the biggest spikes, dips in homes sales

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The current housing boom will flatten in 2022—or possibly early 2023—when mortgage interest rates rise. There is no bubble to burst, though prices may retreat from panic-buying highs.

The boom produced some frantic buying, bids in excess of asking prices, and plenty of worry among would-be homeowners. But this has not been a bubble. A bubble is not simply rising prices, but demand not justified by fundamental economic factors. The key to the buying boom has been low mortgage rates plus a shift in desired housing type.

Mortgage rates hit what was then an all-time low of four percent in 2011, and then remained in that neighborhood until the pandemic, when they hit three percent. The decline in mortgage rates in 2020 dropped the monthly payment on a house by 12 percent, enabling many people to buy houses now rather than later.

In addition to the low mortgage rates, some people saw a future of remote work and wanted more space, which often means moving out of an apartment into a single family house. Others found urban living less fun, so they headed into the suburbs where houses are more common than apartments.

The increased demand for houses drove prices up, quite predictably. Yet the supply could not adjust as fast as demand. Home builders ramped up production in the second half of 2020, but after a few months they ran into supply constraints. Ready-to-build lots were all bought up, labor for construction was hard to find and social distancing made workers less productive. Now rising materials prices and goods on back-order squeeze profit margins. That’s how we find ourselves in the current housing boom.

But this boom is not a bubble, because the rise in prices is easily explained by the fundamentals of cheap mortgages and supply limitations. Recent housing starts are below historical averages, though that is justified by lower population growth. But with the shift from multifamily to single family housing, recent construction levels make sense. There need be no sudden drop in new construction to maintain a reasonable equilibrium.

When will the boom end? The two keys are satisfying the new demand and mortgage rates. Low mortgage rates allowed young families to buy houses earlier than they otherwise would have. It did not change the economics of buying for people who were never going to be homeowners. Instead, low mortgage rates enabled people to achieve their dreams earlier than they otherwise would have. In this sense, the strong housing market of 2020 and 2021 has been borrowing from the future. However, the shift in preferences from urban living to suburban living by people who previously could have bought houses is permanent new demand. At least, so long as they don’t become disillusioned about homeownership.

Mortgage rates are likely to rise when financial markets anticipate more inflation and action by the Federal Reserve to stem inflation. Although the Fed’s traditional tools impact short-term rates, with only small effect on mortgage rates, the new actions by the Fed impact mortgages directly. The Fed has been buying mortgages wholesale, depressing mortgage interest rates. The Fed has also been buying many treasury securities, which are often competitors to mortgages for institutional investors.

Mortgage rates are likely to rise a full percentage point by mid-2022, though this forecast exceeds the average prediction of my fellow economists. They doubt long-term interest rates will rise by a percentage point even out to December 2022. If they are right and I am wrong, then the housing market will remain strong longer.

Business leaders in the housing supply chain should enjoy their strong sales this year but not anticipate further growth in the coming years. Major capital projects must pencil out with sales back at 2019 levels.

Prospective home buyers should probably chill. It’s been a tough buying season. Although prices are unlikely to fall nationwide, there will probably be easier buying opportunities in 2023.

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Home buyers during the pandemic have been willing to take on long commutes in exchange for lower prices, a new analysis shows.

In some of the nation’s most expensive metro areas, home prices rose faster in areas with longer morning commutes to business districts compared with neighborhoods with short commutes, according to an analysis from Zillow Group Inc. and HERE Technologies.

That is a reversal from prior years, when home prices in those metro areas accelerated faster in neighborhoods close to job centers.

Analysts say the change reflects that commute length has declined in importance for home buyers, as many workers expect to travel to their offices less often going forward. At the same time, rapidly rising prices have made affordability a bigger concern for many buyers.

“It’s been a big change,” said Ed Pinto, director of the AEI Housing Center at the American Enterprise Institute, who expects the shift in home-buyer demand to be long-lasting. “There’s a huge group of people who can work from home, and they’ll continue to work from home when things go back to…normal.”

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More buyers in New Jersey’s red-hot real estate market are relying on an old virtue to get their offers accepted — cash is king.

Real estate agents throughout the state have said their buyers are often losing bidding wars to offers that are cash, meaning the sale is not contingent upon the buyer getting a mortgage to close. Cash buyers also run the risk of losing their deposit, so their offers are seen as more committed. And an appraisal isn’t needed for a cash purchase, eliminating another contingency.

According to a data comparison prepared by the Otteau Group, the number of cash closings in March 2020 compared to the number in March 2021 rose 4% statewide. But those sales that closed in March were likely inked in December or January, so the trend is expected to continue to emerge in closing data.

“This is a bit of a lagging indicator,” said Jeffrey Otteau, a real estate economist and president of the Otteau Group. “It’s likely to accelerate as we get to closings later in the year.”

The biggest increase in cash purchases was for homes that were above the median price of $355,000.

“These are all symptomatic or a byproduct of a sparse market in which buyers need to sweeten the offer to get the house and one of the ways to sweeten the offer is to remove the mortgage contingency,” said Otteau.

The buyers are panicked, he said, that they’re not going to be able to find a home before the prices go even higher so they’re willing to put their deposit at risk to make their offer more competitive.

Home prices increased about 12% last year, Otteau said.

“What it really is, is an indication of the desperation homebuyers are feeling now to find a home, lock up a house and get it under contract,” Otteau said.

“We are seeing it across the board at all price points. And it’s very creative,” said Robert White, President-elect of New Jersey Realtor, and managing broker at Coldwell Banker Realty in Spring Lake.

But just because the homes are being purchased with cash, doesn’t mean there is no mortgage. Some high-end buyers are borrowing from their investment portfolio to make the purchase and then paying all or part of it back with a mortgage.

“Mortgage money is so cheap and a lot of the investment advisors are recommending their clients borrow the money instead of divesting their portfolio,” White said.

The mid- and entry-level markets are also seeing an increase in cash purchases.

Pat Settar, of Berkshire Hathaway Fox & Roach Realtors in Mullica Hill, had a buyer who was trying to purchase a home in Haddon Township. The market there is very competitive, she said, due largely to investors who are flipping homes.

“I just kept hearing over and over it’s a cash buyer,” Settar said, for the reason her client’s offers were turned down. “When I told this young girl, she told her parents what was going on and they borrowed out of their 401k to give her the cash and, after she settled, she paid them back with a mortgage.”

Agents also attribute the cash buying trend to the high-prices, and low inventory market.

“Everybody is cashing in on their homes because the shortage of inventory is so severe,” Settar said. “People up north are cashing in and buying down here. I’ve never had so many cash buyers in my life.”

Brian Morganweck, the broker/owner of Power Realty in Hackensack, said 90% of his buyers in high rises are empty nesters who are selling their larger home for a big profit and downsizing to a condo with the cash profit.

“If the seller has 12 offers and one is iron clad because it’s all cash – no appraisal, they’re not going to change their mind — they edge out all the ‘what ifs’ in a seller’s mind,” Morganweck said.

READ MORE:

— These are the N.J. counties that saw the biggest spikes, dips in homes sales

— The housing market is hot for many reasons. Millenials are one of them

— Fistfights. Free tacos. This is how crazy the N.J. real estate market is, agents say.

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With well documented reports of people moving out of the crowded Northeastern cities and towns, an annual survey of real estate industry professionals predicts Northern New Jersey could be the country’s fourteenth hottest market in 2021.

The Urban Land Institute’s Emerging Trends in Real Estate 2021 also gave North Jersey real estate high rankings in other categories, in some cases beating out New York, its outer boroughs and Long Island.

“Northern New Jersey moved from 55 to 14 this year and we think that is a reflection of the move toward suburban areas,” said Anitia Kramer, senior vice president of ULI center for capital markets and real estate.

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Typically this time of year in Randolph, there are 120 to 140 homes listed for sale. Right now there are just 23.

It’s a trend agents and buyers are seeing throughout the state brought on in part by COVID-19 concerns — and the intense competition for the few houses that are on the market.

“The inventory is ridiculously low. Unprecedented,” said Missy Iemmello, office manager for Weichert Realtors corporate sales office in Morris Plains, which has 120 real estate agents doing business in Morris, Sussex, Warren, Bergen and Essex counties.

Throughout the state, there were only 23,011 single-family homes, townhomes and condominiums, and adult community properties available for sale in the month of January. Last January, there were nearly double that amount, 41,005 listed for sale, according to a report from New Jersey Realtors.

The low inventory and high demand are pushing sale prices higher, causing houses to sell for tens of thousands of dollars over the asking price and generating bidding wars.

The median sales price for a single-family home in New Jersey in January was $504,585, a 22% increase over the median price in January 2020.

A lot more buyers have equity in their homes during this surge in the market, unlike back in 2006, said Iemmello. “They’re financially comfortable where they are. Because of the activity and the rising prices, it’s a great time to sell, but where would they go,” she said.

Those who are selling are likely retirees who are moving out of state or people who have a second home, for example at the shore, that they can go stay in and work virtually from. “That’s where we’re seeing people take advantage of this market,” she said.

Another reason for the low inventory is a moratorium on foreclosures and evictions, signed by Gov. Phil Murphy last March.

But Beth Kimmick, Broker manager for ERA Central Realty in Robbinsville, doesn’t think there will be a flood of foreclosure listings hitting the market when the moratorium is lifted.

“Everything I read and hear shows there’s going to be a small percentage of properties that actually get foreclosed on,” she said. “A majority of people will be able to make that up or sell their house and not go into foreclosure.”

So, is this a good time to buy, if you can find a property?

Eric Anderson of Alexander Anderson Real Estate Group in Hackensack says yes — if you’re buying for the long term.

“What goes up, must come down,” he said. “If you’re looking for the short term, you would be better off renting.”

Some other key findings from the latest trends, according to a report from New Jersey Realtors:

• Single-family homes are selling for 100.2% of the listing price, up from 97.3% in January 2020
• Single-family homes are on the market for just 44 days on average, down from 72 last year
• Pending and closed sales on single family homes in January are both up by 14% and 17%, compared to the same time last year

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Are you buying or selling a home in New Jersey? Tell us about your experiences. Allison Pries may be reached at apries@njadvancemedia.com.

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