Get ahead of the residential real estate market drivers in Hunterdon County, New Jersey, with Coldwell Banker Residential Broker sales associate Joe Peters. My monthly market update walks you through the economic conditions and trends that influence our local markets. You will come away knowing “what” is happening in those markets, and more importantly, “why” it is happening. As a result, you will keep informed to make home buying and selling decisions in 2021.
“What’s” Happening in Hunterdon County’s Real Estate Market?
The current Hunterdon County real estate market is anything but typical. Continued acute inventory shortages and gradually rising interest rates have resulted in a strong seller’s market. We saw a nearly 20% rise in prices in 2021. Although further increases will persist, we expect the percentage to diminish in 2022. If you will be selling in 2022, waiting for spring is not a great strategy. The market is at its strongest now!
Contract sales decreased (month over month) over the last month. Statewide, unsold inventory decreased as well, and our local numbers are much higher than that of the state. As a result, it is still a seller’s market as we are still seeing prices increase.
Based on the last month of contract sales, statistics show a deficient supply of inventory of just over one month (down 36% from the previous month). Normal market conditions average four to six months of inventory in Hunterdon County. The units going under contract improved to 45 days on the market. One hundred forty-four units went “under contract” in December, down from 146 in the prior month. Newly listed properties in the same period totaled only 36 down from 100 in the preceding month.
Our total inventory decreased from 301 this time last year to 174 units, 42% less than last year. Inventory numbers were down 97 units in Hunterdon County vs. the prior month (not a good sign for buyers). Sales were up by 1% in December (over last year), as we saw a slowing of buyer activity (or their ability in finding inventory). It is still an optimum supply and demand curve for our sellers.
New Jersey Residential Real Estate Market Forecast
Because of the continued move to the west (urban flight), pent-up demand, attractive mortgage rates, and sellers coming on the market as Covid fears still seem to be in a state of flux, we expect solid listings and sales thru the winter season.
The good news is that most of the new listings are selling very quickly. So, even though we still have low inventory levels, sales are strong. We witnessed many homeowners facing financial and/or life uncertainty and holding off on listing their properties, which seems to be subsiding. There is also uncertainty in finding another more suitable house.
Many sellers and buyers feel safer by taking advantage of virtual showings. Buyers are adjusting to the new virtual selling and buying tools, and these methodologies are leading to safer showings, fewer actual showings.
Hunterdon County Real Estate Market Inventory Breakdown By Price For Last Month:
|Condos/Town Houses *||12||35||22||1|
|Over 55 Communities *||1||2||2||1|
|$000K to $199K||2||13||12||1|
|$200K to $299K||5||26||22||1|
|$300K to $399K||7||31||31||1|
|$400K to $499K||3||26||21||1|
|$500K to $599K||3||10||15||2|
|$600K to $699K||6||18||14||1|
|$700K to $799K||2||8||10||1|
|$800K to $899K||2||6||12||2|
|$900K to $999K||4||1||5||5|
|$1,000K and Up||2||5||32||6|
|Totals for December||36||144||174||1|
|* Included in $ breakdowns|
- 67% of sales in houses > $500,000
- 25% of sales in the $500,000 to $800,00K range
- 8% percent of total sales (or 12 in total) in houses >$800,000
Hunterdon County Real Estate Market Inventory Breakdown By Municipality For Last Month:
|Hunterdon County||Active Listings||Under Contract Last Month||Months’ Supply|
|East Amwell Twp.||3||3||1|
|Glen Gardner Boro.||3||3||1|
|High Bridge Boro.||5||6||1|
|West Amwell Twp.||2||2||1|
Three areas had no sales last month:
Three areas reported 1 or 2 sales each last month:
- W Amwell
- Clinton/Clinton Twp. – 16 Sales
- Raritan – 19 Sales
- Readington – 13 Sales
These hotspot areas equaled 33% of the sales last month. The average new listing coming on the market last month neared $558,439. The average unit price going “under contract” was $486,063 (13% less).
Note: To get a competitive price point on your property based on location and uniqueness, contact me at (908) 238-0118. Coldwell Banker’s big data technology capabilities will give you a unique advantage. I can show you the latest age and earnings breakdown for your particular area where people move from into that area and how I can directly market to those specific areas and demographics. The result is in you receiving the maximum selling price with a shorter time on the market. Houses priced and marketed accurately sell faster, especially with a real estate industry veteran and local expert helping you navigate the process.
“Why” it is happening
New Jersey’s Economic Drivers:
New Jersey Home Sales and inventory levels:
- The rebound that started in June 2020 has continued through 2021.
- We have seen signs of cooling down, mainly due to a lack of inventory and buyer empathy.
- Many possible sellers are experiencing difficulty in finding other housing themselves.
- The current month’s supply of inventory in Hunterdon and Somerset County is still just over one month, and this is due to the quick sales of new listings as they come on the market.
- Hunterdon and Somerset County have about 58% & 53% less inventory than we had a year ago, respectively. This is sort of like visiting the Hoover Dam. We have never seen levels this low.
- Unsold inventory in N.J. has also decreased year-over-year but not by these percentages.
- Decreases in inventory have occurred in all price points, with the under $400,000 market seeing the most considerable impact and the $400K to $600K the second largest.
- We have seen increases in sales across most price points, with the under $400K range witnessing a decrease of over 12% due to lack of inventory.
- New housing has not kept up with our population growth.
- Interest rates have been increased slightly over the past few weeks but are threatening to inch up further.
- The economy is adjusting, and average Interest rates are just over 3% for a 30-year conventional mortgage. A fifteen-year conventional mortgage rests at the 2.3% mark, and five-year arms are under the 2.37% range.
- As said, rates in the last few months have been inching up based on the 10-year note yield. For the past couple of months, consumer prices (inflation) have run above the 30-year mortgage rates for the first time in 50 years. As this is unsustainable, either we will need to see inflation come down a lot, mortgage rates rise, or both.
- Also, there are now plans to ease (or temper) the amount of mortgage-backed securities that the Fed buys each month, which will negatively affect rates going forward. In effect, the rates have already inched up a bit due to this.
National Job Front:
- In December, the U.S. added a disappointing 199,000, and the unemployment rate fell to 3.9%. It was much weaker than the expected 450,000 and less than the jobs reported in November. We have to keep in mind that we have natural job growth of about 175K per month.
- These numbers indicated that we had added 18+ million jobs back to the economy as of the month that ended in December of 2021. That represents about 84% of the jobs lost since the beginning of the pandemic and does not include the effect of the latest Omicron strain.
- But the balance of the 6.4 million unemployed could take years to get back to where we started as they are in the hardest-hit sectors of Leisure, hospitality, and food services.
- Also, we are seeing many resignations as the workforce repurposes itself (in November, we saw4.5 million people quit their current job). These are due to people switching careers due to the desire to pursue new career paths, perceived health risks in their current jobs, the desire for more remote work, and better work-life balance.
- And, there are nearly 12 million job openings at this point.
- Some of this has resulted from people leaving their jobs searching for better positions since the mid-summer. The lower end of the job market has benefited the most from this phenomenon as we see higher starting pay rates competing for the lack of workforce. We are already seeing jobs starting in the mid to upper $20 per hour ranges being offered.
New Jersey Job Front:
- The NJ unemployment numbers were at 3.5% pre-Covid and have followed the national numbers but are now higher than the U.S. at 6,6% for the last month reported, November with just under 26,000 jobs added. YTD, this number was just over 196,000.
- Construction, food services, and accommodations are again the leaders in job losses, though more states are now citing pain in retail, wholesale trade. Health care, social assistance, and manufacturing are shedding workers, too.
- N.J. was hit early and hard with the pandemic with almost twice the national rate of job losses. So, where it is currently is quite remarkable.
- But, the job losses will undoubtedly impact the lower end of the buyer’s market in 2021.
Rental Market Trends:
- The drop in New Jersey’s homeownership since 2008 contributes to rental demand. The 14+ year trend shows a decrease from 71% to 66%. This decrease adds over 20,000+ additional renters in our state. However, the 71% level resulted from the lax lending standards of the early 2000s, and 66% is considered acceptable.
- Rental prices in New Jersey rose again in 2021, averaging 15+% higher year-over-year or just over $1,900 per unit. Current vacancy rates in central New Jersey have decreased to around 2.6%.
- One article states that the average homeowner with 65+ has an average net wealth of over $318K, while the same for a renter is only just under $8K. Homeownership also offers a stable place to live, an evident hedge against inflation, and a way to build wealth (a strong argument for homeownership).
- The central N.J. vacancy rate now stands at 2.4% resulting in a minimal rental supply.
- The rental market sector reflects some low-end buyers now renting due to inventory constraints and job losses in the under $400K market that have hit that segment the hardest.
New Jersey Foreclosures:
- Foreclosures in NJ in 2018 were the lowest in the state in over four years. And 2019 was even better with just under 38,000 foreclosure filings (the weakest since 2012). For 2020, N.J. looked to be on track for 12,000 foreclosures, representing a 70% decline. Then the federal moratorium on foreclosures took effect, which will change depending on how long it takes workers to get back on their feet from the COVID-19 pandemic and how many bankruptcies we see in later 2020.
- However, New Jersey faces foreclosure rate filings at about 3.4%. Other states have begun to or have already recovered. In a tight real estate market, these foreclosures sell at a discount.
- The national baseline number sits 1t around 3.5% (up from 1.2% a year earlier).
- The forbearance numbers will affect foreclosures as that program comes to an end. About 17% of the total forbearance cases are still unresolved and headed in the wrong direction. But, this is not yet showing in these numbers and will affect future years’ statistics.
- However, this effect will be nowhere near the last housing crisis since the is a lot of positive equity in houses today. But delinquencies have been rising.
Real Estate Market Recap
Changes in Lifestyle (Non-Covid):
- The average age at marriage has risen to the mid-thirties.
- Due to costs and the ability to choose, families usually have only one (or maybe two) children. The national average is now 1.6 children per family, while the number needed to maintain our current population is 2.1. If this continues, the result will be a fore-coming population implosion.
- And, the fact that people are living longer helps support the workforce.
- In many job markets, immigration is now also supplementing the workforce numbers.
- As a result of job opportunities, buyers once gravitated to areas within 15 miles of NYC with sound mass transportation systems.
- Starting several years ago, we were beginning to see a reversal of the above as late millennials were looking for more space and a place to raise their upcoming families better.
- This trend was sure to continue as 80% of consumers still perceive homeownership as part of the American Dream. It is just what they want to buy (or rent) that has changed.
- Builders have built most of the affordable land. Affordability is affected by local zoning, safety, and environmental constraints.
- While first-time buyers are typically looking for smaller sub $400K single-family or luxury hi-rise properties, builders target much larger and more costly projects in scope or rentals.
- 70% of all NJ homes have no children of school age, and 50% do not have more than one person in them, and this factor minimizes the need for larger housing.
- The majority of all new housing starts in 2020/21 in NJ were in the rental sector, and the 2022 numbers look to surpass that contributing to the lack of new construction and inventory.
- Also, builders are encountering severe supply chain issues causing delays and erratic increases in pricing.
- The recent trend of moving further away from the city to more rural areas is helping out two counties.
- And, we could see additional work from home job opportunities as we see more emerging/disruptive advances in technology which allows this westward move to happen.
Changes in Lifestyle (Covid Related):
- The “Great American Move” to more rural areas is a term that we are starting to see for this new lifestyle exacerbated by the pandemic and civil unrest in metropolitan cities.
- Many workers now only have to go to the office on occasion, allowing them to live further out.
- But, this move is primarily among the more educated and skilled workers that can use technology to adapt to a work-from-home environment.
- First responders and many lower-skilled service sector workers cannot work remotely from home.
- There is an open question of how many workers will continue to gravitate away from (or return to) the city as they adapt to work from home environments and as buyers need a live/work/play/learn environment.
- Many people have rethought their lifestyles, are changing jobs and work locations to accommodate their new thinking.
- Also, workers can now find more competitive wages in the lower end of this job market, allowing them to consider more rural options.
- Open floor plans, the list-topper for the past twenty years, seem no longer critical as buyers gravitated towards more compartmentalization within the home.
- Live/Work/Education/Exercise (or play) areas are now vital.
- Also, backyard recreation facilities such as recreational areas and pools are now preferred, and backyard oasis environments add value to the above lifestyle.
- What a difference we have seen in consumer thinking since the pandemic started. And it is still evolving.
- Consumer confidence was put on pause in early 2020 and then started to fast forward in June of 2020 and has not slowed appreciably since.
- A 2020/2021 winter slowdown never appeared in the real estate market. It is too early to tell if this will repeat for 2021/2022.
- Consumers still see homeownership as a sound long-term investment based on affordability. It is just that their shopping list as to what they want has changed.
- And, in general, homeowners are sitting with more equity than ever (NJ reports 95+% with positive equity) and are no longer using their homes as an ATM. The average equity in NJ rose by $58K over the past year due to price increases.
- In 2020/21, many strong equity homeowners will decide to sell or trade to take advantage of the buying surge as they rethink their housing options.
- Some moved to their second homes or out of state as they no longer needed to commute.
- Others pushed up their retirement plans.
- The current seller’s market has resulted as we still have many more buyers than sellers. And, it appears that there is no end in sight.
- People usually buy and sell homes based on life events and will not change. Life events have gone on (maybe even moving faster).
- And never before seen (but slowly rising) low-interest rates plus the move west has helped the migration pattern towards NYC reverse.
- We hope to see a continued trend in new cases as the vaccines are starting to become a reality and things are better understood, and people get back to a new normal lifestyle.
- The new virus variants are now causing concerns in this thinking.
- But it is anticipated that the new lifestyle will be much different from the old as we adopt the best of the two cultures.
- Nation-wide we sold more houses in 2021 than in 2020. And 2022 as being even more robust.
- The current shortage is for a different reason than in 2020. People who want to list their homes in 2021 are now hesitant due to finding new housing themselves. The problem is feeding on itself.
- As a result, we see many offers with competitive terms like waiving appraisals and inspections.
- Because of the above point, we are now starting to see some buyer fatigue.
- But, we anticipate a hectic winter season in 2021/2022.
- The effect of the COVID-19 pandemic now seems to be raising its head a bit due to the latest variants.
- The economy is recovering (but at a slower pace) from the recent cooling in employment numbers.
- Supply chain shortages are affecting inflation.
- Inflation is causing havoc on auto, finished goods, and energy pricing.
- Most have predicted that the balance of the recovery will be a long multi-year effort. In effect, we have put the easy part of the workforce back to work in the past eighteen months, and the hard part remains in front of us.
- And this will affect the following:
- Forecasted increases in real estate values
- The amount of inventory available
- The ability for some buyers to get a mortgage.
- There may be additional foreclosures (this is several years out).
- Mortgage rates continue to hold at around 3% as the fed is tapering its current level of investment in mortgage-backed securities. It looks like this might be about to change.
- Inventory supply continues to decrease as we move further into 2021/2022.
- The housing affordability index is better than ever, with mortgage payments at just over 21% of gross.
- But, as we have a more substantial confidence level in having things under control, the housing market should have a strong continued bounce-back or upward spike due to:
- The economy and housing market were strong going into the current COVID-19 issue.
- Pent-up demand in the millennial market resulted in their move west.
- Life events (as mentioned earlier) will still happen and will surely drive the pent-up demand.
- Low mortgage rates will persist (even as they start to drift up (which in itself will cause more market activity)).
- Sellers reluctant to sell in 2020 will start to appear in droves in 2022 if they can find available inventory.
- Due to the COVID-19 and recent unrest in NYC, we are starting to see more interest in living in more suburban counties such as Hunterdon and Somerset.
- Also, many people have found that working from home (either in total or part) is a reality, and we will see less commuting and traveling in general as things start to open up once again.
- What were once “bedroom” communities are changing to” live, work, play & learn” communities bringing lots of change to our local economies.
- It is only a matter of time before we see more jobs (or remote capabilities) following workers into our suburban areas.
- Retailing and using vacant industrial space will transform to meet the new altered demands and lifestyles.
- More attention is now given to houses with pools and less open areas which lend themselves to working and studying at home.
- And, the local market will have to adapt to the new suburban renaissance of where people will be working from and what they will need to adapt to this.
- The lingering question is, “Can we keep this momentum up with low to falling inventory?”. So far, it seems to be happening due to quick sales. But, it is the most significant challenge that we are facing.
- Also, what will be the effect of continued inflation on the economy?
- Jobs opportunities will surely follow the workforce and housing then follow jobs. It seems out of logical sequence but will sort itself out as we progress.
- Depending on their location and price points, local property values are forecasted to see at least 18%+ appreciation in 2021.
- And 2022 will see a cool down with a forecasted 5% increase in prices. (but didn’t we say that last year as well?)
- Days on the market in our area are still low (but rising).
- But this could change back towards a more normalized environment if inventory continues coming on to the market and buyer fatigue that we have seen continues.
- We still have many younger buyers coming of age in the pipeline for at least the next four to five years, which will continue to put more demand on the first-time buyer market, usually under $400K.
- Technology is evolving quickly and is offering many new options in the Live/Work/Plan/Leard environments. Areas to watch are:
- Virtual Reality (a form of VR is where you can virtually walk thru a house while sitting at your PC or Tablet)
- Augmented Reality (where you can place a piece of furniture in a 3D rendering of a room in your home or try on glasses, makeup, or clothes)
- Artificial Intelligence (which will utilize computer analysis of data to help make decisions). I use this to understand where buyers are moving from to an area and then advertising when listing a new house to those zip codes.
- Robotics (we see this today via vacumes, lawnmowers, and pool cleaners)
- Increased 5G availability (having the speed to do more things remotely)
- 3D printing (having the ability to deliver an item remotely)
- Autonomous driving (eliminating the need for delivery drivers, for example)
- As the demand for remote capabilities increases, these technologies will meet the challenges, and the convergences of several of them will offer capabilities that we have never even envisioned in the past.
- They will also eliminate many jobs as we know them today. One estimate states that 80% of all jobs we currently know will disappear over the next ten years and be replaced (in part) by new occupations (many of them being remote).
- Resulting unemployment will require retraining and repurposing many employees.
All of this has been taking place in the past. But the requirement for remote capabilities and lack of workforce has significantly sped up their development cycle.
Wow. That is a lot to digest. And it is changing daily but seems to be heading in the right direction for now. For clarity and understanding, I am always available if you want to talk and better understand how this might affect your particular situation.
Note: Presented as a public service by Joe Peters of Coldwell Banker Residential Brokerage. I took reasonable precautions in presenting this information. Please consult with a professional sales agent and take no actions based on my opinions, gathered trends, and statistics. I assume no liability. You can contact me at (908) 238-0118.
You can ask me a question or request a monthly copy of this newsletter here.