I strive to bring certainty in understanding our Somerset County and Bridgewater real estate market. My monthly market update walks you through the economic conditions and trends that influence our local markets. It also offers hyper-local statistics that you will not be able to find elsewhere. 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 2022.

 

“What’s” Happening in Somerset County’s Real Estate Market?

What does the rest of the year look like for the housing market? Our inventory numbers will continue to grow, mortgage rates will likely continue to rise and home prices are projected to climb…

Fast-moving inventory and rising interest rates have resulted in a strong seller’s market. We saw a nearly 20% rise in prices in 2021 and 12% in 2020. Although further increases will persist, we expect the rate of increase to diminish in 2022.  And, rapidly rising interest rates are now also affecting the cost to own. If you will be selling in 2022, waiting for later in the spring is not a good strategy.  The market is at its strongest now!

Contract sales increased month over month in Somerset County in May by 42 units.

Based on the last month of contract sales (down 10% from the previous year), statistics show a fast-moving supply of inventory of just 1.2 months countywide. The units going under contract rose slightly to 24 days on the market. Four hundred and forty-four units went “under contract” in May, up slightly from 402 in the prior month. Newly listed properties in the same period totaled only 316 down slightly from 326 in the preceding month.

Our inventory decreased from 604 this time last year to 511 units (15% less) due to the mentioned fast-moving market. But the inventory numbers were up 18 units in Somerset County vs. the prior month (a good sign for buyers).

Our sales decreased from 495 this time last year to 444 units (10% less). But sales were up 42 units over the prior month.  We did see a slowing of first-time buyer activity (or their ability in finding affordable inventory). While many of the first-time buyers are being priced out of the market due to price + interest increases, it is still an optimum supply and demand curve for our sellers.

New Jersey Residential Real Estate Market Forecast

Because of the continued (but slowing) move to the west (urban flight), pent-up demand, still relatively somewhat attractive mortgage rates, and sellers coming on the market as Covid fears seem to be diminishing, we expect solid listings and sales thru the spring season. Just, not as strong as in 2021.

As previously mentioned, the new listings are selling extremely fast. So, even though we still have low inventory levels, sales are very strong. In 2021 we witnessed many homeowners facing financial and/or life uncertainty and holding off on listing their properties. In 2022, their biggest uncertainty is finding another more suitable house at an affordable price (which now includes interest rates).

On the buyer side, it is estimated that the buyer of a median-priced house will need to earn $20 to 30K more than just a year ago in order to qualify for a mortgage. This is pricing many first-time buyers out of the market.

We are actually seeing fewer open houses in 2022 due to the fast pace of sales.

Somerset County Real Estate Market Inventory Breakdown By Price For Last Month:

May May Total
Somerset County New Under Active Months’
Listings Contract Listings Supply
Condos/Town Houses * 85 175 126 1
Over 55 Communities* 8 16 17 1
$000K to $199K 7 12 12 2
$200K to $299K 16 42 39 2
$300K to $399K 72 119 94 1
$400K to $499K 45 68 69 2
$500K to $599K 37 45 52 1
$600K to $699K 41 42 51 1
$700K to $799K 18 34 30 2
$800K to $899K 15 24 24 2
$900K to $999K 11 17 19 2
$1,000K and Up 54 41 121 2
Totals for May 316 444 511 1
Average Price $727,783 $582,127 -20.0%
Average Days on Market 24
* Included in $ breakdowns
  • 54% of sales in houses > $500,000
  • 36% of sales in the $500,000 to $1,000,00K range
  • 9% percent of total sales (or 41 in total) in houses >$1,000,000

Somerset County Real Estate Market Inventory Breakdown By Municipality For Last Month:

Active Listings Under Contract Month’s Supply
Bedminster Twp 27 15 2
Bernards Twp 47 49 1
Bernardsville 33 7 5
Bound Brook 9 8 1
Branchburg Twp 21 18 1
Bridgewater Twp 50 63 1
Far Hills Boro 4 1 4
Franklin Twp 67 88 1
Green Brook 14 7 2
Hillsborough 48 66 1
Manville Boro 25 17 1
Millstone Boro 4 0
Montgomery Twp 32 36 1
North Plainfield 26 16 2
Peapack Gladstone 6 1 6
Raritan Boro 3 3 1
Rocky Hill Boro 1 1 1
Somerville Boro 23 14 2
South Bound Brook 8 5 2
Warren Twp 44 23 2
Watchung Boro 19 6 3
Totals 511 444 1

One area had no sales last month:

  • Millstone

Four areas reported 3 sales or less each last month:

  • Far Hills
  • Peapack/Gladstone
  • Raritan Boro
  • Rocky Hill

Hotspots:

  • Bernards/Bernards Twp. – 56 Sales
  • Bridgewater – 63 Sales
  • Franklin Twp. – 88 Sales
  • Hillsborough – 66 Sales
  • Warren/Watchung – 29 Sales

Bridgewater Township Statistics:

  • There are 50 homes for sale in Bridgewater Township as of this writing.
  • Of the 50 homes for sale, 10 are community properties (such as townhouses and condos) and none is in our 55+ communities
  • The average list price for all listings in Bridgewater Township is $590,066.
  • There were 50 new listings in Bridgewater Township last month with an average list price of $590,066.
  • There were also 63 homes that have gone under contract in the past 30 days with an average list price of $615,787 and 25 days on market.
  • Giving us  under 1 month of inventory
  • Call for additional details

 

These hotspot areas equaled 68% of the sales last month. The average new listing coming on the market last month neared $727,783. The average unit price going “under contract” was $582,127 (20% less).

Note: To get a competitive price point on your property based on location and uniqueness, contact me at (908) 304-4660. Coldwell Banker’s big data technology and Artificial Intellegence 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 receive 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.

 

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 births per woman is now nearing 1.5 children per family, while the number needed to maintain our current population level 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 with many seniors still in the job market.
  • In many job markets, immigration is now also supplementing and supporting the workforce numbers.
  • As a result of prior 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 2021 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 Hunterdon and Somerset counties.
  • We are also seeing the formation of multi-generational housing due to the difficulty in finding new housing.
  • 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.
  • In effect, Covid-19 has caused the speed of the evolution of these technologies to increase.

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 only on occasion, allowing them to live further out in the “burbs”.
  • But, this move is primarily among the more educated and skilled workers that can use technology to adapt to a work-from-home environment.
  • Many professionals such as medical and first responders as well as many lower-skilled/educated 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. This trend already seems to have slowed down.
  • Many people have rethought their lifestyles, and 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 important as buyers gravitated towards more compartmentalization within the home.
  • Live/Work/Education/Exercise (or play) areas are now vital.
  • Smart home technologies are now in.
  • Also, backyard recreation facilities such as recreational areas and pools are now preferred, and backyard oasis environments add value to the above lifestyle.
  • There is also an interest in properties with outbuildings and studios/Lofts.

Market conditions:

  • 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 2021/2022 winter slowdown hardly appeared in the real estate market.
  • Yet, it appears to be slowing down due to higher home prices and interest rates, inflation, and shortages of inventory.
  • 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 $55K over the past year due to price increases.
  • In 2021/22, 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.
  • People usually buy and sell homes based on life events and will not change. Life events have gone on (sometimes even moving faster).
  • And never before seen (but now rising) low-interest rates plus the move west has helped the migration pattern towards NYC reverse.
  • We are seeing a continued downtrend 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 now seem to be diminishing.
  • 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 was seen as being even more robust but is now being threatened.
  • The current shortage is for a different reason than in 2021.  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 buyer fatigue in the under $400K market.
  • In Hunterdon and Somerset counties, the buyer of an average-priced house now needs to earn at about 25% more just to qualify for what they were able to buy just a year ago.
  • But, we anticipate a hectic spring/summer season in 2022.

 Homeownership: A Hedge Against Inflation

A few interesting statistics:

  • The national average home appreciation over the past 5 years in our area, has been 45%.
  • The national average home appreciation over the past 30 years in our area, has been 219%.
  • The home as an investment seems to speak for itself.
  • However, the amount you can qualify for is diminishing as interest rates rise (see chart below):

Forecast:

  • The effect of the COVID-19 pandemic now seems to be almost under control (let’s hope).
  • The economy is recovering (but at a slower pace) from the recent cooling in employment numbers.
  • Supply chain shortages have been affecting inflation. There are even now some concerns that we may are oversupplied and this could suddenly reverse causing massive price reductions and possible lay-offs.
  • Inflation is continuing to cause havoc on auto, finished goods, and energy pricing.
  • The recent invasion of Europe has shed some doubt on market predictability.  In effect, we have never seen a pandemic followed by a war. The near future is somewhat unpredictable.
  • Mortgage rates continue to slowly rise and are now at 5.1% as the fed is tapering its current level of investment in mortgage-backed securities. It looks like this is certain to rise further.
  • Inventory supply continues to increase in the above $600K market as we move further into 2022.
  • The housing affordability index is better than ever, with mortgage payments at just over 21% of gross.
  • But, we are starting to see the consumer sentiment index wain due to inflation and that is concerning.
  • 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 backyard spas 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?”. Predictions are for slower sales and price increases in the balance of 2022.
  • Also, what will be the effect of continued inflation on the economy? It is already affecting mortgage rates. And retail sales are not advancing faster than inflation. This is very concerning.
  • 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 saw at least 18%+ appreciation in 2021 and another 12% in 2020. The 2022 appreciation forecast is looing as the will be under 9%.
  • Days on the market in our area are holding steady showing active buyers.
  • But this could change back towards a more normalized environment if inventory continues coming on to the market and the 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.
  • And, if history proves itself correct, the effect of a recession should be minimal (see chart below):

 

Futures:

  • Remote work demands have caused technology t0 to evolve quickly and offer many new options in the Live/Work/Plan/Learn 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 (see example)
    • 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 (see short video).
    • Robotics (we see this today via vacumes, lawnmowers, and pool cleaners). Drone useage is another good example.
    • The Internet of Things (IOT) is alloying us to connect more and more things to our smart homes.
    • 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.  In essence, we have pushed 5 years of advancement in these technologies into the past year. And, it looks like it will continue.

 

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. You can contact me at (908) 304-4660.

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.

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