Hunterdon County’s Real Estate Market Conditions June 2020

Get ahead of the residential real estate market drivers in Hunterdon County, New Jersey, with Coldwell Banker Residential Broker sales associate, Joe Peters. Joe’s monthly report walks people through the economic conditions and trends that influence our local markets.  You will come away knowing what is happening and more importantly, why it is happening. As a result, you will be better informed to make home buying and selling decisions.

What is happening

Based on the last full month’s contract sales, statistics show a supply of approximately four months. Normal market conditions average four to six months in Hunterdon County.  Units going under contract averaged 75 days on the market. 145 properties went “under contract” in May, quite a bit up from 99 in the prior month. Newly listed properties in the same period totaled 187, also quite a bit up from 103 in the prior month.

Our total inventory number decreased from 992 (last year)  to 621 units nearly 37% less than the same time last year.  And sales were down by nearly 32% as well.  In May, we saw the full effect of the COVID-19 pandemic effect.  And, some of the sales and new listings that were seen in May were already in the pipeline form January and February. In May, we have nearly exhausted the pre-COVID-19 pipeline activity resulting in only 145 sales for the month as compared to 99 a year earlier (a decrease of roughly 32%).

Looking forward to June, we expect to see a continuance of fewer (but increasing) listings and sales as compared to a year earlier.  Just how many fewer, time will tell.  But we are seeing many existing listings restricting showings and new listings hesitant to list just yet because they do not want people in their house.  And, most buyers are hesitant to view listings as well.  This is where virtual showings are filling the gap.  It will take time to understand and adjust to virtual showing and open house methodology to know better just how much of an effect these issues will have.  But, the listings that are coming on the market are selling quickly due to more buyers than sellers. I will try to cover the possibilities under the Why it is Happening section.

We are expecting a strong bounce back in listings and sales in late summer.  The pent up demand combined with the below 3% mortgage rates should give us a strong fall season. You can read more about these predictions in the “Why it is Happening” section of this market report as well.

Hunterdon County Inventory Breakdown By Price For Last Month:

• 75% of sales in houses < $500,000
• 25% of sales in houses > $500,000
• 06% percent of total sales (or 9 in total) in houses >$700,000

Hunterdon County Inventory Breakdown By Municipality For Last Month:

Three areas had no sales last month:

• Califon
• Kingwood
• W. Amwell

Five areas reported 1 or 2 sales each last month:

• Bloomsbury
• Frenchtown
• Lebanon Boro
• Milford
• Stockton

Hotspots:

• Clinton/Clinton Township – 20 sales
• Raritan Township – 26 sales
• Readington Township – 13 sales
• Tewksbury – 14 Sales

Hotspot areas equaled 50% of the sales last month. The average new listing coming on the market last month neared $562.270. The average price of a unit going “under contract” neared $418,308 (26% less).

Note: To get an accurate price point for your property based on its location and price point, contact me at (908) 238-0118. Coldwell Banker’s big data technology capabilities will put you at a unique advantage. I can show you the latest age and earnings breakdown for your particular area, show you where people are moving into that area from and how I can market to those specific areas and demographics directly. 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:

• After record-setting increases in January and February, we have seen a more than 50% decline in sales in April and 35% in May over the same month last year.
• At the same time, the unsold inventory in NJ dropped by 15,000+ homes vs. this time next year (a 36% decline on a statewide basis).
• We have not only seen some sellers reluctant to list in this troublesome time, but we have also seen some homes removed from the active inventory.
• The current unsold inventory in Hunterdon now averages four months and in Somerset County three months.  This is mostly due to the rapid sales as new inventory comes on the market.
• Hunterdon and Somerset County have about 35% & 37% less inventory than we had a year ago, respectively.  This is a big drop. And it is predicted to stay low.
• Decreases in inventory have occurred in all price points with the under $400,000 market seeing the largest drop which, was about a 25% decline.
• As we have depleted most of the pipeline from before April, most of the current month’s sales were post the COVID-19 outbreak.

Interest Rates:

• Interest rates have been all over the place over the last few months.
• The economy is adjusting, and Interest rates are just over 3.15% for a 30-year conventional mortgage. A fifteen-year conventional mortgage rests at just under the 2.62%  mark. Five-year arms are just under the 3.13% range.
• Mortgages are becoming harder to get.  This is based on which industry you are employed in and the new stricter rules being adopted by lenders.  This could affect the size of the buyer pool.
• And, mortgage forbearance is causing unforeseen issues in the mortgage market which may cause a drop in the amount of funds that are available.
• As said, the last few weeks have been a rollercoaster.  Yet, we expect the rates to fall further, giving buyers a once in a lifetime opportunity to buy at rates they probably will not see again.
• We are already using some rated below 3%.

National Job Front:

• On the national level, the US added over 2,100,000+ in 2019 v. 2,700,000 jobs in 2018.
• US unemployment rate slowed in January, with just 225,000 jobs added.  An additional 325,000 were added in February which put the US on pace to add 3 million + jobs in 2020.  Then COVID-19 appeared and we saw nearly all of the jobs created in the past five years erased.
• We have had nearly 41 million unemployment claims in the last ten weeks alone, pushing unemployment numbers to around 15%.
• These new end of month numbers were expected to be somewhere south of 20%.  But, we received a big surprise in that they actually came in lower by 2.5 Million claims at 13.3%.
• This indicated that the recovery is apparently underway and the results are promising.
• The claims have been falling each week and indicating that the PPP and associated programs are starting to work.
• Fortunately, the economy was very strong going into this, but the effect is devastating and will be long term.

New Jersey Job Front:

• In 2019 NJ added 39,000 jobs once again. NJ added 39,000+ jobs in 2018 as compared to 47,100 for the same period in 2017.
• The NJ unemployment numbers were at 3.5%, just two months ago, and were just over 10% in April. The May numbers were at around 15%.
• The level of jobs created has been at consistently higher levels than in the past several years (a silver lining as these additions to our job market will be able to afford to buy houses eventually).
• But, this too has ended as 1.2 million+ people have filed for NJ unemployment over the past ten weeks.
• Construction, food services, and accommodations are again the leaders in job losses, though more states are now citing pain in retail, wholesale trade, according to the U.S. Department of Labor. Health care, social assistance, and manufacturing are shedding workers, too.
• This will certainly have a huge impact on the buyers market in the balance of 2020.

Rental Market Trends:

• Rental prices in New Jersey rose again in 2019, averaging just over $1,700 per unit. Current vacancy rates in New Jersey have risen to around 4.5% in central NJ. & state-wide.
• The drop in New Jersey’s homeownership contributes to rental demand.  A 12+ year trend shows a decrease from  71% to 66%.  This 7% decrease compared to an 8% national decrease contributes to the slower recovery of home prices in the state and adds over 20,000+ additional renters in our state. However, the 71% level resulted from the loose lending standards of the early 2000s and is actually at a good level.  Households with no children stand at 65%, reflecting the decline in our school population.
• One article states that the average homeowner who is 65+ has an average net wealth of over $318K, while the same for a renter is only just under $8K.  It also offers a stable place to live, an evident hedge against inflation, and a way to build wealth (a strong argument for homeownership).
• However, the number of renters has increased by 7% over the past 25 years, with the less educated leading the way.  And, we are now seeing more educated millennials moving east into higher rent and cost of living areas that eat into their discretionary income (including savings).  It makes one wonder where this all is heading.
• The pace of new rental construction has increased by nearly 5 fold to meet this demand.

New Jersey Foreclosures:

• New Jersey continues to face falling foreclosure rate filings at about 1.8%. Other states have begun to or have already recovered. In a tight real estate market, these foreclosures sell at a small discount.
• Note: Figures vary by the local market, especially those walloped by Hurricane Sandy three years ago and rural and urban areas. We rank #5 in the country with 1.8%, led by NY with 2.4%, MI with 2.3%, LA with 2.3% (mostly hurricane-related), and ME also with 1.8%.  The national baseline number sits at a little under 1.2%.
• Foreclosures in NJ in 2018 were the lowest in the state in over four years.  And, 2019 was even better with a number of just under 38,000 foreclosure filings (the lowest since 2012). With only one month in, NJ looks to be on track for a 40,000 foreclosure number in 2020.  Obviously, this could change depending on how long it takes workers to get back on their feet from the COVID-19 pandemic.

Real Estate Market Recap

Overall Economic Conditions:

• In early March:
  • We were at our longest economic expansion period just a month ago in America’s history with 125+ months of positive job gains.
  • The GDP was still rising (although its rate of increase seems to be slowing a bit).
  • And, wages are up significantly at the same time.
  • Interest rates have decreased to just under 3.5%.
  • Foreclosures rates have almost normalized.

• In April and May:
  • We have seen a sharp spike in unemployment
  • The GDP has been adversely affected
  • Wage growth is Affected.
  • Interest rates are bouncing around (but holding).
  • Inventory levels are down by 35+% as listings are being withheld.
  • Buying activity is also down about 35%
  • The balance of 2020 real estate is now under extreme pressure as a result.
  • Current Real estate values do not seem to be affected as to the lack of inventory.

Changes in lifestyle:

• The average age at marriage is now in the mid to late ’30s (up seven years from just a decade ago).
• Families usually have only one to two children due to costs and the ability to choose.
  70% of all NJ homes have no children of school age, and 50% do not have more than one person in them. This factor minimizes the need for larger housing not only in NJ but everywhere.
• As a result of job opportunities, buyers are gravitating to areas within 15 miles of NYC with good mass transportation systems.
• We are already seeing a reversal of the above after the NYC area has become a COVID-19 hotspot.
• 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 been thinking larger 4 BR center hall colonials on 1+ acre in the country (based mostly on local building codes).
• Buyers are thinking of smaller luxury hi-rise close to mass transportation and work in the east (truly a mismatch).
• 60% of all new housing starts in 2020 in NJ were in the rental sector and, 2020 numbers will surpass that.  This is contributing to the lack of new construction.

Market conditions:

• What a difference a 3 months make!
• Consumer confidence is now on pause (at best) until the total effect of the COVID-19 pandemic plays out and is better understood.
• The recent civil unrest has further affected this.
• This will affect how many listings and new buyers we see during the next few months and surely could have an effect on prices.
• In May, we saw a supply and demand effect as the lack of inventory and high buyer demand keep prices at current levels.
• Most consumers will still see homeownership as a sound investment.
• 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 total effect will hopefully be helped by our having such a strong economy and real estate going into the pandemic.
• It is going to take time to tell and how much time is the question. In the meantime, real estate is predicted to be pretty much paused.
• Yet people buy and sell homes based on life events. This will no change. Life events will go on.
• And never before seen interest rates will help this situation once it stabilizes.
• We are hoping to see a strong spike up as things are better understood, and people get back to a normal life.
• The latest unemployment dip should surly have and effect on the market in June and we are starting to see more listings coming on to the market.
• It may be that the spring market starts to appear more mid-summer and lasts until late in 2020.

Forecast:

• The effect of the COVID-19 pandemic is now seeming to begin to correct itself.
• The economy is suffering from the recent spike in unemployment numbers, and we are only eleven weeks into this crisis (at this writing).  T
• And this will affect the following:
  • Current and future real estate values (including any appreciation in the foreseeable future)
  • The amount of inventory available (hopefully we are starting to bottom out at -35%)
  • The ability for some buyers to get a mortgage
  • More possible foreclosures (this is way out)
• Prime Interest rates have dropped several times in the past months in order to stimulate the economy and, as of yet have had not had any downward effect on mortgage rates.
• Inventory supply will start to increase or at best stay low over the next few months.
• But, once we have a stronger confidence level in having things under control, the housing market should have a strong bounce-back or upward spike due to:
  • The economy and housing market both being very strong going into the current COVID-19 issue.
  • Pent up demand and a spring market being pushed out till further in 2020.
  • Life events (as mentioned earlier) will still happen.  This will drive the pent up demand.
  • Lower than ever mortgage rates.
• 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, people have found that working from home is a reality and we will probably see less commuting as things start to open up once again.

Wow.  That is a lot to digest.  And it is changing daily.  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.