Somerset County NJ Residential Real Estate Market Conditions October 2018 – Canal Walk Edition

Somerset County NJ Residential Real Estate Market Conditions October 2018 – Canal Walk Edition

Real Estate Market Conditions

The Somerset County NJ Residential Real Estate Market Conditions October 2018 Report, compiled by Joe Peters, walks people through the economic and human behaviors that influence local markets. You will come away knowing what is happening and why and 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 five months. Normal market conditions average four to six months in Somerset County.  Units going under contract averaged 52 days on the market. 301 properties went “under contract” in September, down from 364 in the prior month. Newly listed properties in the same period totaled 485.

Somerset County Inventory Breakdown By Price For Last Month:

New Listings Under Contract Active Listings Month’s Supply
Condos/Town Houses * 152 117 394 3
Over 55 Communities* 23 7 38 5
$000K to $199K 23 32 79 2
$200K to $299K 96 85 247 3
$300K to $399K 86 62 223 4
$400K to $499K 64 37 173 5
$500K to $599K 47 24 152 6
$600K to $699K 43 19 121 6
$700K to $799K 31 18 108 6
$800K to $899K 27 8 89 11
$900K to $999K 20 5 81 16
$1,000K and Up 48 11 252 23
Totals for September 485 301 1525 5
Average Price $571,671 $436,507 -23.6%
Average Days on Market 52
* Included in $ breakdowns

Somerset County Sales Breakdown Overview:

  • 71 % of sales in houses < $500,000
  • 25 %of sales in houses > $500,000 and < $1,000,000
  • 4 % percent of total sales (or 11 in total) in houses >$1,000,000

Somerset County Inventory Breakdown By Municipality For Last Month:

Active Listings Under Contract Month’s Supply
Bedminster Twp 69 21 3
Bernards Twp 180 24 8
Bernardsville 99 6 17
Bound Brook 27 8 3
Branchburg Twp 76 8 10
Bridgewater Twp 177 32 6
Far Hills Boro 17 2 0
Franklin Twp 219 64 3
Green Brook 34 9 4
Hillsborough 138 41 3
Manville Boro 32 10 3
Millstone Boro 1 2 1
Montgomery Twp 127 14 9
North Plainfield 54 15 4
Peapack Gladstone 22 0
Raritan Boro 16 3 5
Rocky Hill Boro 7 0
Somerville Boro 28 12 2
South Bound Brook 16 6 3
Warren Twp 134 19 7
Watchung Boro 52 5 10
Totals 1525 301 5

Somerset County Sales Breakdown Detailed:

Two areas in Somerset County reported no sales in the past month

  • Peapack Gladstone
  • Rocky Hill

Two area reported one or two sales each last month

  • Far Hills
  • Millstone

Hotspots:

  • Bernards – 24 sales
  • Bridgewater – 32 sales
  • Franklin – 64 sales
  • Hillsborough – 41 sales
  • Montgomery – 14 sales

These hotspot areas equaled 58% of the sales last month. The average new listing coming on the market last month neared $571,671 The average price of a unit going “under contract” neared $436,507 (24% less).

Note: To get an accurate price point for your property, contact me. Coldwell Banker’s big data technology capabilities will put you at an advantage. Plus, we can now tell you where people are moving into your area from and market to that area directly. Houses priced and marketed accurately sell fast, especially with a real estate industry veteran and local expert helping you navigate the process.

Canal Walk Statistics:

  • Canal Walk offers one floor units, town houses and various models of single family units
  • There are 8 homes currently for sale in Canal Walk as of this writing with an average list price of $443,975.
  • Of the 8, one is an Enclave single floor units and three are townhouses.
  • There were 8 new listings this month with an average list price of $382,475.
  • One units has gone under contract in the past 30 days with an average list price of $559,000 with the average days on the market of 49.
  • Giving us a little under eight months of inventory
  • Close to 50 units changed hands over the past 12 months ranging from the low $300’s in to the low $600’s
  • The actual price per unit varies by type, model, location and upgrades
  • Call for more details…

Why is it happening?

New Jersey’s Economic Drivers:

New Jersey Home Sales:

For the first time in three years, we have seen an improvement in the inventory situation (but is still below what is needed).  Let’s hope that it is the beginning of a trend.

An increase of .8% in home sales in NJ in Year to Date. This increase is being held back by a lack of inventory (the shelves are empty at the entry levels).

Activity concentrates in the under $400,000 market where Millennial buyers transition into home ownership. During the same period, all housing sales showed increases across all other price points showing confidence in the changes made on taxes and deregulation. There has also been an improvement at the very high end in towns where rail service to Manhattan is available.

At the same time, the number of homes offered for sale in New Jersey remained low (and dropped by 2% last month). The supply decreased by ~ nearly 750 homes, compared to a year ago.  Currently, ~31,000 fewer homes are on the market compared to the 2011 peak.

Current unsold inventory in New Jersey varies widely by county with some having only three months.  No county presently has more than nine months of supply.  The average was at 4.1 months compared to 4.1 months a year ago.

We still have an acute shortage of inventory in both Hunterdon and Somerset county in our more popular price points and locations which is the under $400k market.

Hunterdon and Somerset County have 1% more and 1% less inventory respectively than a year ago.  And, those counties have about 9 and 12% less inventory respectively than two years ago.

And, we have seen some initial gentle  “pull back” in 2018 as a reaction to what is considered “price sensitivity” towards some of the existing inventory.

Also, we are now seeing some millennials coming back into our local markets and buying homes (good news).

 

Interest Rates:

Interest rates are rising as a result of our strong economy.

The economy is strengthening, and Interest rates at the end of July rose slightly to around 4.65% for a 30-year conventional mortgage. A fifteen-year conventional mortgage rests at just over the 4% mark. Five-year arms are just under the 3.925% range.

Consumer fears of steadily rising interest rates and slowly rising home prices are driving the current market demand. The Fed already instituted several initial increases in rates and are talking about additional ones. Industry analysts forecast to be nearly 5% by the end of 2018, and 5.5% by the end of 2019. If the rate increases from 4% to 5%, buyers will lose 9% of their buying power and have already lost 6% with rate increases over the past few months.

The fear of increasing interest rates coupled with steadily increases in prices is current market activity.

 

National Job Front:

US unemployment rate has recently dropped to 3.7%, the lowest it has been in forty-nine years (since 1969)! And, there are forecasts that it will drop further.  This trend is expected to continue as a result of the recent tax and jobs reform.

On the national level, the US added nearly 1,650,000+ jobs in January thru August of 2018 and is trending towards 2.4 million added jobs by year-end (a nine percent increase over the prior year)

At the end of July, there were 6.9+ Million openings compared to nearly 6.2 Million unemployed persons, with unemployment being the lowest since December of 2000.

And the GDP is now more than 4% and predicted to keep expanding.

Consumer confidence is the highest since 2004.

Great news for the housing industry!

 

New Jersey Job Front:

The NJ unemployment rate stayed steady to 4.2%, bolstering consumer confidence in NJ as well.  In effect, NJ is rising with the national tide of nearly full employment.

NJ added 1,600 jobs in August, and 49,000+ jobs have been added in NJ year to date 2018 as compared to 31,000 for the same period in 2017, and if it continues, NJ could add over 70,000 jobs by year-end.

The level of jobs created was at a much higher level than in the past several years (a silver lining as these additions can afford to buy houses eventually?).

It also should be noted that these jobs are mostly in the northern half of the state.

 

Rental Market Trends:

We still have an extremely tight rental market!

Prior restrictive mortgage standards nudged Millennials to postpone home ownership in life later than previously seen. These potential buyers live with parents or share rentals. We are starting to see them now re-enter the rental and first-time buyer markets. The average age of our first-time buyer changed from the late 20’s to the mid 30’s over the past five years.  Older Americans impacted by underfunded retirement plans due to the economic downturn rent houses too.

Rental prices in New Jersey rose ~ 5% in 2017, averaging nearly $1,500 per unit. Current vacancy rates in New Jersey rose to 2.7% with the in northern and southern NY and Philadelphia at 4+%.

We have seen a 2Q2018 rise in rental prices in Central NJ of 2.8% alone. With the demand being what it is, we see new construction in this sector rise almost 400%.

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 was a result of the loose lending standards of the early 2000’s 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 has a net wealth of over $230K while the same for a renter is only around $5K.  It also offers a stable place to live, an evident hedge against inflation and way to build wealth (a strong argument for home ownership).

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 to their discretionary income (including savings).  Makes one wonder where this all is heading…

 

New Jersey Foreclosures:

New Jersey continues to face high foreclosure rate filings. Other states have begun to, or already have recovered. In a tight real estate market, these foreclosures sell at a small discount.

Note:  Figures vary by local market, especially those walloped by Hurricane Sandy three years ago and rural and urban areas. We rank #3 in the country at 2.8%, led by FL with 4.3% (mostly hurricane-related) & NY and followed by LA, MS, ME, DE, and PA.  The national baseline number sits at ~ 1.7%.

2017 foreclosure filings decreased slightly to 70,150+ or -5%, putting pressure on home prices in concentrated areas.  Base on the year to date results for 2018 could fall another 7% to around 65,000 filings.

 

Tax cuts and Jobs Act effect:

Three specific areas had appeared were concerns:

  1. State and Local Taxes (SALT) are now limited to a $10,000 deduction going forward.
  2. Mortgage and Interest Deductions (MID) are now limited to a maximum principal balance of $750,000.
  3. Home Equity Line of Credit (HELOC) Loan interest deductions is for the most part eliminated

The SALT fears were offset by the lower tax brackets.  It would appear that this was an unwarranted fear.

Although it is still too early to tell how these areas will impact total 2018 real estate values in New Jersey, they are sure to have some impact. New Jersey is one of the highest taxed states in the union, and our home values are also some of the highest. How this affects each of us on an individual basis needs to be better understood as there is some trade-off such as higher deductions and overall lower income brackets.

The higher income luxury market is probably most at risk.  It appears that you have to earn $400K and own $1 million property. And, there are some people in NJ that do, and they will be affected.  But, how it affects the overall incentive to own a home is still unfolding.

There were several proposals on the new tax code, and most consumers are not up to date on what passed.  It will take time for this information to be digested.

It also is evident that the out-migration from New Jersey to other more affordable states has continued.

In a nutshell, these changes appear to be having little impact to date, but there will be some very high-end people affected, and that will, in turn, affect that market…

That effect might slow the price growth in higher priced homes NJ and even turn into a deficit in some most affluent areas.

 

Real Estate Market Recap 

 

Economic conditions:

  • 2017 was the seventh straight year of 2 million + job gains.
  • Although improving in 2018, the NJ job situation had been declining for the past two years.
  • At 4.2% unemployment, NJ is almost 12% above the national average which is currently 3.7% (and forecasted to go down further).
  • The best paying and most attractive jobs are in NYC attracting the millennials in that direction.
  • Interest rates have already risen .75% since the first of the year are forecasted to rise another .25 to .5% by year’s end, taking almost 10% away from buyers buying power.
  • And, house prices are rising 6+ % in the popular housing price points further exasperating the situation.
  • Baby boomers are choosing to “stay put’ and update rather than “move up” to their dream house as it is no longer considered a sound investment (and a lot of times is simply not available) which is causing most of the housing shortage.
  • And there is no entry level construction going on in our area.  Just larger homes and new rentals.
  • As a result of the previous two points, we are experiencing the current housing inventory shortage (as stated earlier, the shelves are empty in our starter housing price points).
  • Foreclosures are on the decline and to some extent are helping to offset fewer listings.
  • Also, there is confidence that the new tax and jobs act will further stimulate the economy with more jobs as the economy remains robust.
  • The new tax rules appear only to affect our very higher-end buyers.

Changes in lifestyle:

  • Average age at marriage is now in the mid to late 30’s (up seven years from just a decade ago).
  • Families usually have only one to two children due to costs and the ability to choose.
  • 65% of all NJ homes have no children of school age.
  • 50% do not have more than one person in them.
  • Demand for larger houses has diminished not only in NJ but everywhere.
  • As a result of the job situation, buyers are gravitating to areas within 15 miles of NYC with good mass transportation systems.
  • 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 4 BR center hall colonials on 1+ acre in the country.
  • Buyers are thinking luxury hi-rise close to mass transportation and work (truly a mismatch).
  • And, for the first time in history, Hunterdon County (which has been declining in population) has reported more deaths than births in 2017.

Market conditions:

  • We are starting to see some warnings of an economic slowdown starting in late 2020 as the fed raises interest rates to curb inflation.
  • The effect on housing will probably be limited to curtailing the growth in appreciation and no loss in value.
  • But, in general, homeowners are sitting with more equity than ever (NJ reports 92% with positive equity) and are no longer using their homes as an ATM.  So, the effect of any slowdown on housing should be minimal (if at all).
  • Consumer confidence remains extremely high nation-wide based on the job and stock market increases.
  • This confidence is reflected in buyer traffic being up at open houses.  However, with lack of inventory, there are fewer houses for sale.
  • Affordability will never be in this good of shape as interest and price increases start to eat into what you can afford.
  • Millennials make up 24% of our current homeowners with much more room for expansion at the lower end of the market when adequate inventory supply materializes.
  • Central New Jersey’s trend for 2016 and early 2017 showed a surge in home sales but price increases only in houses clustered in < $500,000 market where the first-time buyers and Millennials are focused.
  • The >$600K market holds steady to diminishing slightly, depending on location and price.  Often when a >$600K property goes on the market, it’s competing with a >$700K that needs to sell quickly (etc.). The extreme high-end market has also seen some appreciation in 2018 so far.
  • Minimal new construction, lack of entry-level new housing and COAH restrictions add additional value to the current inventory.
  • Analysts five-year forecast indicates slow and steady price growth at an annual average of 3 to 4%.  This is higher in the under $400K market.
  • There is an acute shortage of inventory in both Hunterdon and Somerset County. In our more popular price points and locations, this holds back sales.  In general, we have only about 50% of the inventory that we had in 2011.
  • If we had more inventory, we could sell more houses.  It is simple.  And, we have started to see inventory increase over the past two months. As a result, 2019 can be a boom for resales.
  • In 2017 prices rose ~ averaging just over 3.5% and depending on price points and locations.  2018 promises to be even stronger and closer to 5 %(without factoring in any tax impact).
  • Mortgage delinquency is normalizing.

Forecast:

  • The economy will continue to prosper with no recession currently in sight for the next 24 + months.  And, there most likely will be only an impact on the rate of price appreciation if this happens.
  • Interest rates will Climb to about 5% by year-end further decreasing buying power.
  • Home prices will rise by an average of another 3% during that same period (this will depend on your price point and location) further decreasing buying power.
  • Supply will remain tight in the more popular price points in the residential real estate.
  • Many new jobs seem to be resulting from the Tax and Jobs act (look at the help wanted signs).
  • For the first time in memory, the US is reporting 6.8+ million open jobs and only 6 million unemployed.
  • We now need to match the skills of the unemployed to the job openings to prosper further as many four year degrees currently being obtained, are not useful in the current job market. It may also open up the need for inward migration of workers to out the economy.
  • The affordability index shows that there is room for much more sales, we need the increase in inventory.  The most affordable time to buy is now!
  • Some decrease in moderate prices home ownership could result in the raising of the standard deduction.
  • Some high-end fall-out could result in the residential real estate from the SALT and mortgage interest changes in the Tax and Jobs act.
  • The commercial real estate market will flourish as a result of creating more buying demand.
  • Mid-term elections effect is a total unknown at this point.
  • People in their home > 10 years have very positive home equity built up, and a more significant portion of payments applies to principle.  Increases in selling prices should eventually motivate people to make changes in their lifestyle by investing in summer homes or even start a new business with the extra equity cash.

 

Note:  Presented as a public service by Joe Peters of Coldwell Banker Residential Brokerage. I took reasonable precautions for 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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Somerset County, NJ Residential Real Estate Market Conditions | September 2018 – Canal Walk Edition

Somerset County, NJ

Residential Real Estate Market Conditions | September 2018 – Canal Walk Edition

Real Estate Market Conditions

Get ahead of the residential real estate market in Somerset County, NJ with Coldwell Banker Residential Broker sales associate, Joe Peters.

This Market Update will not only show you what is happening in your local market area, but it will also explain why it is happening and what is contributing to these results.

“What” it 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 Somerset County.  Units going under contract averaged 57 days on the market. 364 properties went “under contract” in August, down from 423 in the prior month. Newly listed properties in the same period totaled 426.

Somerset County Inventory Breakdown By Price For Last Month:

New Listings Under Contract Active Listings Month’s Supply
Condos/Town Houses * 145 119 382 3
Over 55 Communities* 8 11 23 2
$000K to $199K 35 39 84 2
$200K to $299K 99 80 245 3
$300K to $399K 81 65 223 3
$400K to $499K 53 54 153 3
$500K to $599K 49 42 141 3
$600K to $699K 28 25 111 4
$700K to $799K 19 24 106 4
$800K to $899K 14 12 85 7
$900K to $999K 14 8 89 11
$1,000K and Up 34 15 253 17
Totals for August 426 364 1490 4
Average Price $519,030 $468,431 -9.7%
Average Days on Market 57
* Included in $ breakdowns

Somerset County Sales Breakdown Overview:

  • 65 % of sales in houses < $500,000
  • 30 %of sales in houses > $500,000 and < $1,000,000
  • 04 % percent of total sales (or 15 in total) in houses >$1,000,000

Somerset County Inventory Breakdown By Municipality For Last Month:

Active Listings Under Contract Month’s Supply
Bedminster Twp 69 14 5
Bernards Twp 174 41 4
Bernardsville 84 9 9
Bound Brook 24 12 2
Branchburg Twp 68 14 5
Bridgewater Twp 163 43 4
Far Hills Boro 16 2 0
Franklin Twp 212 85 2
Green Brook 42 7 6
Hillsborough 147 36 4
Manville Boro 35 9 4
Millstone Boro 3 2 2
Montgomery Twp 128 22 6
North Plainfield 56 25 2
Peapack Gladstone 16 4 4
Raritan Boro 13 5 3
Rocky Hill Boro 6 0
Somerville Boro 27 12 2
South Bound Brook 19 3 6
Warren Twp 138 15 9
Watchung Boro 50 4 13
Totals 1490 364 4

Somerset County Sales Breakdown Detailed:

One area in Somerset County reported no sales in the past month

  • Rocky Hill

Two area reported one or two sales each last month

  • Far Hills
  • Millstone

Hotspots:

  • Bernards – 41 sales
  • Bridgewater – 43 sales
  • Franklin – 85 sales
  • Hillsborough – 36 sales
  • Montgomery – 22 sales

These hotspot areas equaled 62% of the sales last month. The average new listing coming on the market last month neared $519,030 The average price of a unit going “under contract” neared $468,431 (10% less).

Note: To get an accurate price point for your property, contact me. Coldwell Banker’s big data technology capabilities will put you at an advantage. Plus, we can now tell you where people are moving into your area from and market to that area directly. Houses priced and marketed accurately sell fast, especially with a real estate industry veteran and local expert helping you navigate the process.

Canal Walk Statistics:

  • Canal Walk offers one floor units, town houses and various models of single family units
  • There are 3 homes currently for sale in Canal Walk as of this writing with an average list price of $482,667.
  • Of the 3, none are an Enclave single floor units and one is a townhouse.
  • There were 2 new listings this month with an average list price of $544,000.
  • Five units have gone under contract in the past 30 days with an average list price of $461,880 with the average days on the market of 24.
  • Giving us a little under one month of inventory
  • Close to 50 units changed hands over the past 12 months ranging from the low $300’s in to the low $600’s
  • The actual price per unit varies by type, model, location and upgrades
  • Call for more details…

The initial section of this Market Report reported on “What” is happening.

This section will focus on “Why” it is happening

 

New Jersey’s Economic Drivers:

New Jersey Home Sales:

For the first time in three years, we have seen an improvement in the inventory situation (but is still below what is needed).  Let’s hope that it is the beginning of a trend.

An increase of 1% in home sales in NJ in Year to Date. This is being held back somewhat by a lack of inventory.

Activity concentrates in the under $400,000 market where Millennial buyers transition into home ownership. During the same period, all housing sales showed increases across all other price points showing confidence in the changes made on taxes and deregulation. There has also been an improvement at the very high end in towns where rail service to Manhattan is available.

At the same time, the number of homes offered for sale in New Jersey remained low (but has been improving). The supply decreased by ~ nearly 1,000 homes, compared to a year ago.  Currently, ~30,000 fewer homes are on the market compared to the 2011 peak.

Current unsold inventory in New Jersey varies widely by county with some having only three months.  No county presently has more than nine months of supply.  The average was at 4.1 months compared to 4.3 months a year ago.

We still have an acute shortage of inventory in both Hunterdon and Somerset county in our more popular price points and locations which is the under $400k market.

Hunterdon and Somerset County have 1% more and 5% less inventory respectively than a year ago.  And, those counties have about 9 and 15% less inventory respectively than two years ago.

The fear of increasing interest rates based on future increases and the Fed’s slightly loosening lending standards are driving the current market activity.

Interest Rates:

Interest rates are holding.

The economy is strengthening, and Interest rates at the end of July fall slightly to around 4.5% for a 30-year conventional mortgage. A fifteen-year conventional mortgage rests at just under the 4% mark. Five-year arms are just under the 3.825% range.

Consumer fears of steadily rising interest rates and slowly rising home prices are driving the current market demand. The Fed already instituted several initial increases in rates and are talking about additional ones. Industry analysts forecast to be nearly 5% by the end of 2018, and 5.5% by the end of 2019. If the rate increases from 4% to 5%, buyers will lose 9% of their buying power and have already lost 6% with rate increases over the past few months.

Combine this with the steadily increasing prices and consumer confidence, and you have what is driving our current market activity

National Job Front:

US unemployment rate has risen a bit to 3.9%, the lowest it has been in eighteen years! This trend is expected to continue as a result of the recent tax and jobs reform.

On the national level, the US added nearly 1,500,000+ jobs in January thru July of 2018 and is trending towards 2.5 million added jobs by year-end (a sixteen percent increase over the prior year)

At the end of June, there were 6.7+ Million openings compared to nearly 6.6 Million unemployed persons, with unemployment being the lowest since December of 2000.

And the GDP is predicted to keep expanding.

Consumer confidence is the highest since 2004.

Great news for the housing industry!

New Jersey Job Front:

The NJ unemployment rate fell slightly to 4.2%, bolstering consumer confidence in NJ as well.

NJ added 3,000 jobs in July, and 33,700+ jobs have been added in NJ year to date 2018 as compared to 21,700 for the same period in 2017, and if it continues, NJ could add over 100,000 jobs by year-end.

The level of jobs created was at a much higher level than in the past several years (a silver lining?).

It also should be noted that these jobs are concentrated in the northern half of the state.

Rental Market Trends:

We still have an extremely tight rental market!

Prior restrictive mortgage standards nudged Millennials to postpone home ownership in life later than previously seen. These potential buyers live with parents or share rentals. We are starting to see them now re-enter the rental and first-time buyer markets. The average age of our first-time buyer changed from the late 20’s to the mid 30’s over the past five years.  Older Americans impacted by underfunded retirement plans due to the economic downturn rent houses too.

Rental prices in New Jersey rose ~ 5% in 2017, averaging nearly $1,500 per unit. Current vacancy rates in New Jersey rose to 3.8% with the in northern and southern NY and Philadelphia at 4+%.

We have seen a 2Q2018 rise in rental prices in Central NJ of 2.8% alone. With the demand being what it is, we see new construction in this sector rise almost 400%.

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.  Households with no children stand at 65%, reflecting the decline in our school population.

One article states that the average homeowner has a net wealth of over $230K while the same for a renter is only around $5K.  It also offers a stable place to live, an evident hedge against inflation and way to build wealth (a strong argument for home ownership).

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 to their discretionary income (including savings).  Makes one wonder where this all is heading…

New Jersey Foreclosures:

New Jersey continues to face high foreclosure rate filings. Other states have begun to, or already have recovered. In a tight real estate market, these foreclosures sell at a small discount.

Note:  Figures vary by local market, especially those walloped by Hurricane Sandy three years ago and rural and urban areas. We rank #4 in the country at 2.8%, led by FL with 4.3% (mostly hurricane-related) & NY, LA, MS and followed by, ME, DE, and PA.  The national baseline number sits at ~ 1.7%.

2017 foreclosure filings decreased slightly to 70,150+ or -5%, putting pressure on home prices in concentrated areas.  Base on the year to date results for 2018 could fall another 7% to around 65,000 filings.

Tax cuts and Jobs Act effect:

Three specific areas had appeared as concerns:

  1. State and Local Taxes (SALT) are now limited to a $10,000 deduction going forward.
  2. Mortgage and Interest Deductions (MID) are now limited to a maximum principal balance of $750,000.
  3. Home Equity Line of Credit (HELOC) Loan interest deductions is for the most part eliminated

Although it is still too early to tell how these areas will impact total 2018 real estate values in New Jersey, they are sure to have some impact. New Jersey is one of the highest taxed states in the union, and our home values are also some of the highest. How this affects each of us on an individual basis needs to be better understood as there is some trade-off such as higher deductions and overall lower income brackets.

The higher income luxury market is probably most at risk.  But how it affects the overall incentive to own a home is still unfolding.

There were several proposals on the new tax code, and most consumers are not up to date on what passed.  It will take time for this information to be digested.

It also is evident that the out-migration from New Jersey to other more affordable states has continued.

In a nutshell, these changes appear to be having little impact to date, but there will be some very high-end people affected, and that will, in turn, affect that market…

That effect might slow the price growth in higher priced homes NJ and even turn into a deficit in some most affluent areas.

Real Estate Market Recap 

Economic conditions:

  • 2017 was the seventh straight year of 2 million + job gains.
  • Although improving in 2018, the NJ job situation had been declining for the past two years.
  • At 4.2% unemployment, NJ is almost 8% above the national average which is currently 3.9%.
  • The best paying and most attractive jobs are in NYC attracting the millennials in that direction.
  • Interest rates have already risen .5% since the first of the year are forecasted to rise another .25 to .5% by year’s end, taking almost 10% away from buyers buying power.
  • And, house prices are rising 6+ % in the popular housing price points further exasperating the situation.
  • Baby boomers are choosing to “stay put’ and update rather than “move up” to their dream house as it is no longer considered a sound investment (and a lot of times is simply not available) which is causing most of the housing shortage.
  • And there is no entry level construction going on in our area.  Just larger homes and new rentals.
  • As a result of the previous two points, we are experiencing the current housing inventory shortage.
  • Foreclosures are on the decline and to some extent are helping to offset fewer listings.
  • Also, there is confidence that the new tax and jobs act will further stimulate the economy with more jobs as the economy remains robust.
  • The new tax rules appear only to affect our very higher-end buyers.

Changes in lifestyle:

  • Average age at marriage is now in the mid to late 30’s (up 7 years from just a decade ago).
  • Families usually have only one to two children due to costs and ability to choose.
  • 65% of all NJ homes have no children of school age.
  • 50% do not have more than 1 person in them.
  • Demand for larger houses has diminished.
  • As a result of the job situation, buyers are gravitating to areas within 15 miles of NYC with good mass transportation systems.
  • 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 4 BR center hall colonials on 1+ acre in the country.
  • Buyers are thinking luxury hi-rise close to mass transportation and work.
  • And, for the first time in history, Hunterdon County (which has been declining in population) has reported more deaths than births in 2017.

Market conditions:

  • We are starting to see some warnings of an economic slowdown in late 2020 as the fed raises interest rates to curb inflation, and this needs to be monitored.
  • But, in general, homeowners are sitting with more equity than ever and are no longer using their homes as an ATM.  So, the effect of any slowdown on housing should be minimal (if at all).
  • Consumer confidence remains extremely high nation-wide based on the job and stock market increases.
  • This confidence is reflected in buyer traffic being up at open houses.  However, with lack of inventory, there are fewer houses for sale.
  • Millennials make up 24% of our current homeowners with more room for expansion at the lower end of the market when adequate inventory supply materializes.
  • Central New Jersey’s trend for 2016 and early 2017 showed a surge in home sales but price increases only in houses clustered in < $500,000 market where the first-time buyers and Millennials are focused.
  • The >$600K market holds steady to diminishing slightly, depending on location and price.  Often when a >$600K property goes on the market, it’s competing with a >$700K that needs to sell quickly (etc.). The extreme high-end market has also seen some appreciation in 2018 so far.
  • Minimal new construction, lack of entry-level new housing and COAH restrictions add additional value to the current inventory.
  • Analysts five-year forecast indicates slow and steady price growth at an annual 3 to 4%.  This is higher in the under $400K market.
  • There is an acute shortage of inventory in both Hunterdon and Somerset County. In our more popular price points and locations, this holds back sales.  In general, we have only about 50% of the inventory that we had in 2011.
  • In 2017 prices rose ~ averaging just over 3.5% and depending on price points and locations.  2018 promises to be even stronger (without factoring in any tax impact).
  • Mortgage delinquency is normalizing.

Forecast:

  • The economy will continue to prosper with no recession currently in sight for the next 18 + months.
  • Interest rates will Climb to about 5% by year-end further decreasing buying power.
  • Home prices will rise by an average of another 3% during that same period (this will depend on your price point and location).
  • Supply will remain tight in the more popular price points in the residential real estate.
  • Many new jobs seem to be resulting from the Tax and Jobs act.
  • For the first time in memory, the US is reporting 6+ million open jobs and only 6 million unemployed.
  • We now need to match the skills of the unemployed to the job openings to prosper further.
  • The affordability index shows that there is room for much more sales, we just need the increase in inventory.
  • Some decrease in moderate prices home ownership could result in the raising of the standard deduction.
  • Some high-end fall-out could result in the residential real estate from the SALT and mortgage interest changes in the Tax and Jobs act.
  • The commercial real estate market will flourish as a result.
  • Mid-term elections effect is a total unknown at this point.
  • People in their home > 10 years have very positive home equity built up, and a more significant portion of payments applies to principle.  Increases in selling prices should eventually motivate people to make changes in their lifestyle by investing in summer homes or even start a new business with the extra equity cash.

Note:  Presented as a public service by Joe Peters of Coldwell Banker Residential Brokerage. I took reasonable precautions for 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.

 


Presented as a public service by:

Joe Peters Logo
 


Click Here to Real Estate Market Guides

Somerset County’s Real Estate Market Conditions | August 2018 – Canal Walk Edition

Somerset County’s Real Estate Market Conditions | August 2018 – Canal Walk Edition

Real Estate Market Conditions

Get ahead of the real estate market economic and behavior drivers in Somerset County, New Jersey with Coldwell Banker Residential Broker sales associate, Joe Peters.

This Market Update will not only show you what is happening in your local market area, but it will also explain why it is happening and what is contributing to these results.

 

“What” it 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 Somerset County.  Units going under contract averaged 55 days on the market. 423 properties went “under contract” in June, down from 429 in the prior month. Newly listed properties in the same period totaled 459.

Somerset County Inventory Breakdown By Price For Last Month:

New Listings Under Contract Active Listings Month’s Supply
Condos/Town Houses * 151 123 397 3
Over 55 Communities* 8 12 27 2
$000K to $199K 27 31 87 3
$200K to $299K 92 97 221 2
$300K to $399K 85 81 217 3
$400K to $499K 69 56 167 3
$500K to $599K 44 49 144 3
$600K to $699K 34 31 130 4
$700K to $799K 25 20 133 7
$800K to $899K 21 15 89 6
$900K to $999K 25 20 94 5
$1,000K and Up 37 23 265 12
Totals for July 459 423 1547 4
Average Price $551,835 $493,468 -10.6%
Average Days on Market 55
* Included in $ breakdowns

Somerset County Sales Breakdown Overview:

  • 63 % of sales in houses < $500,000
  • 32 %of sales in houses > $500,000 and < $1,000,000
  • 05 % percent of total sales (or 23 in total) in houses >$1,000,000

Somerset County Inventory Breakdown By Municipality For Last Month:

Active Listings Under Contract Month’s Supply
Bedminster Twp 61 20 3
Bernards Twp 198 45 4
Bernardsville 91 13 7
Bound Brook 24 8 3
Branchburg Twp 68 21 3
Bridgewater Twp 177 64 3
Far Hills Boro 16 1 0
Franklin Twp 226 74 3
Green Brook 41 9 5
Hillsborough 138 49 3
Manville Boro 28 15 2
Millstone Boro 2 0
Montgomery Twp 139 21 7
North Plainfield 54 27 2
Peapack Gladstone 17 6 3
Raritan Boro 13 6 2
Rocky Hill Boro 6 0
Somerville Boro 26 6 4
South Bound Brook 21 4 5
Warren Twp 148 25 6
Watchung Boro 53 9 6
Totals 1547 423 4

Somerset County Sales Breakdown Detailed:

Two areas in Somerset County reported no sales in the past month

  • Millstone
  • Raritan

One area reported one or two sales each last month

  • Far Hills

Hotspots:

  • Bernards – 45 sales
  • Bridgewater – 64 sales
  • Franklin – 74 sales
  • Hillsborough – 49 sales
  • Montgomery – 21 sales

These hotspot areas equaled 60% of the sales last month. The average new listing coming on the market last month neared $551,835 The average price of a unit going “under contract” neared $493,468 (11% less).

Note: To get an accurate price point for your property, contact me. Coldwell Banker’s big data technology capabilities will put you at an advantage. Plus, we can now tell you where people are moving into your area from and market to that area directly. Houses priced and marketed accurately sell fast, especially with a real estate industry veteran and local expert helping you navigate the process.

Canal Walk Statistics:

  • Canal Walk offers one floor units, town houses and various models of single family units
  • There are 5 homes currently for sale in Canal Walk as of this writing with an average list price of $464,560.
  • Of the 5, one is an Enclave single floor units and one is a townhouse.
  • There were 4 new listings this month with an average list price of $490,700.
  • One unit has gone under contract in the past 30 days with an average list price of $349,900 with the average days on the market of 136.
  • Giving us a little 5 months of inventory
  • Close to 50 units changed hands over the past 12 months ranging from the low $300’s in to the low $600’s
  • The actual price per unit varies by type, model, location and upgrades
  • Call for more details…

The initial section of this Market Report reported on “What” is happening.

This section will focus on “Why” it is happening

 

New Jersey’s Economic Drivers:

New Jersey Home Sales:

An increase of 1% in home sales in NJ in Year to Date helped to record over 12,000 sales which is a record.

Activity concentrates in the <$400,000 market (which pulled back a little in June due to lack of inventory) where Millennial buyers transition into home ownership. During the same period, all housing sales showed increases across all other price points showing confidence in the changes made on taxes and deregulation. There has also been an improvement at the very high end in towns where rail service to Manhattan is available.

At the same time, the number of homes offered for sale in New Jersey remained low and had recently decreased. The supply decreased by ~ 4,000 homes, compared to a year ago.  Currently, ~30,000 fewer homes are on the market compared to the 2011 peak.

Current unsold inventory in New Jersey varies widely by county with some having only 2.7 months.  No county presently has more than eight months of supply.  The average is at 3.7 months compared to 3.9 months a year ago.

We have an acute shortage of inventory in both Hunterdon and Somerset county in our more popular price points and locations.

Hunterdon and Somerset County have 1 and 6% less inventory respectively than a year ago.  And, those counties have about 12 and 18% less inventory respectively than two years ago.

The fear of increasing interest rates based on future increases and the Fed’s slightly loosening lending standards are driving the current market activity.

 

Interest Rates:

The economy is strengthening, and Interest rates at the end of June fall slightly to around 4.53% for a 30-year conventional mortgage. A fifteen-year conventional mortgage rests at just over the 4% mark. Five-year arms are just under the 3.875% range.

Consumer fears of steadily rising interest rates and slowly rising home prices are driving the current market demand. The Fed already instituted several initial increases in rates and are talking about additional ones. Industry analysts forecast to be nearly 5% by the end of 2018, and 5.5% by the end of 2019. If the rate increases from 4% to 5%, buyers will lose 9% of their buying power and have already lost 6% with rate increases over the past few months.

Combine this with the steadily increasing prices and consumer confidence, and you have what is driving our current market activity

 

National Job Front:

US unemployment rate has risen a bit to 3.8%, the lowest it has been in eighteen years! This trend is expected to continue as a result of the recent tax reform.

On the national level, the US added nearly 1,300,000+ jobs in January thru June of 2018 and is trending towards 2.6 million added jobs by year-end.

At the end of May, there were 6.5+ Million openings compared to nearly 6 Million unemployed persons, with unemployment being the lowest since January 2001.

And the GDP is predicted to keep expanding.

Consumer confidence is the highest since 2004. Great news for the housing industry!

 

New Jersey Job Front:

The NJ unemployment rate fell slightly to 4.3%, bolstering consumer confidence in NJ as well.

NJ lost 500 jobs in June, and 32,700+ jobs have been added in NJ in the first four months of 2018 which was a significant improvement over 2017, and if it continues, NJ could add over 45,000 jobs by year-end.

The level of jobs created was at a much higher level than in the past several years (a silver lining?).

It also should be noted that these jobs are concentrated in the northern half of the state.

 

Rental Market Trends:

We still have an extremely tight rental market!

Prior restrictive mortgage standards nudged Millennials to postpone home ownership in life later than previously seen. These potential buyers live with parents or share rentals. We are starting to see them now re-enter the rental and first-time buyer markets. The average age of our first-time buyer changed from 29 to 37 years over the past five years.  Older Americans impacted by underfunded retirement plans due to the economic downturn rent houses too.

Rental prices in New Jersey rose ~ 5% in 2017, averaging nearly $1,500 per unit. Current vacancy rates in New Jersey rose to 3.8% with the in northern and southern NY and Philadelphia at 4+%.

We have seen a 2Q2018 rise in rental prices in Central NJ of 2.8% alone. With the demand being what it is, we see new construction in this sector rise almost 400%.

The drop in New Jersey’s homeownership contributes to rental demand.  A 12+ year trend shows a decrease from  71% to 64%.  This 7% decrease compared to an 8% national decrease contributes to the slower recovery of home prices in the state and adds over 230,000+ additional renters in our state.  Households with no children stand at 65%, reflecting the decline in our school population.

 

New Jersey Foreclosures:

New Jersey continues to face high foreclosure rate filings. Other states have begun to, or already have recovered. In a tight real estate market, these foreclosures sell at a small discount.

Note:  Figures vary by local market, especially those walloped by Hurricane Sandy three years ago and rural and urban areas. We rank #2 in the country at 3.0%, led by only FL with 4.3% (mostly hurricane-related) and followed by NY, LA, MS, ME, TX, DE, MD, and PA.  The national baseline number sits at ~ 1.7%.

2017 foreclosure filings decreased slightly to 70,150+ or -5%, putting pressure on home prices in concentrated areas.  Base on the first five months of results 2018 could fall another 6% to around 66,000 filings.

 

Real Estate Market Recap 

 

Economic conditions:

  • 2017 was the seventh straight year of 2 million + job gains.
  • Although improving in 2018, the NJ job situation had been declining for the past two years.
  • At 4.4% unemployment, NJ is almost 10% above the national average which is currently 4.0%.
  • The best paying and most attractive jobs are in NYC luring the millennials in that direction.
  • Interest rates have already risen .5% in recent months are forecasted to rise another .5% by year’s end, taking almost 10% away from buyers buying power.
  • And, house prices are rising 6+ % in the popular housing price points further exasperating the situation.
  • Baby boomers are choosing to “stay put’ and update rather than “move up” to their dream house as it is no longer considered a sound investment (and a lot of times is simply not available) which is causing most of the housing shortage.
  • And there is no entry level construction going on in our area.  Just larger homes and new rentals.
  • As a result of the previous two points, we are experiencing the current housing inventory shortage.
  • Foreclosures are on the decline and to some extent are helping to offset fewer listings.
  • Also, there is confidence that the new tax and jobs act will further stimulate the economy with more jobs.
  • The new tax rules appear only to affect our very higher-end buyers.

Changes in lifestyle:

  • Average age at marriage is now in the mid to late 30’s (up 7 years from just a decade ago).
  • Families usually have only one to two children due to costs and ability to choose.
  • 65% of all NJ homes have no children of school age.
  • 50% do not have more than 1 person in them.
  • Demand for larger houses has diminished.
  • As a result of the job situation, buyers are gravitating to areas within 15 miles of NYC with good mass transportation systems.
  • 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 4 BR center hall colonials on 1+ acre in the country.
  • Buyers are thinking luxury hi-rise close to mass transportation and work.
  • And, for the first time in history, Hunterdon County (which has been declining in population) has reported more deaths than births in 2017.

Market conditions:

  • We are starting to see some warnings of a slowdown in 2020, and this needs to be monitored.
  • But, in general, homeowners are sitting with more equity than ever and are not longer using their homes as an ATM.  So, the effect of any slowdown on housing should be minimal (if at all).
  • Consumer confidence remains extremely high nation-wide based on the job and stock market increases.
  • This confidence is reflected in buyer traffic being up at open houses.  However, with lack of inventory, there are fewer houses for sale.
  • Millennials make up 24% of our current homeowners with more room for expansion at the lower end of the market when adequate inventory supply materializes.
  • Central New Jersey’s trend for 2016 and early 2017 showed a surge in home sales but price increases only in houses clustered in < $500,000 market where the first-time buyers and Millennials are focused.
  • The >$600K market holds steady to diminishing slightly, depending on location and price.  Often when a >$600K property goes on the market, it’s competing with a >$700K that needs to sell quickly (etc.). The extreme high-end market has also seen some appreciation in 2018 so far.
  • Minimal new construction, lack of entry-level new housing and COAH restrictions add additional value to the current inventory.
  • Analysts five-year forecast indicates slow and steady price growth at an annual 3 to 4%.
  • There is an acute shortage of inventory in both Hunterdon and Somerset county. In our more popular price points and locations, this holds back sales.  In general, we have only about 50% of the inventory that we had in 2011.
  • In 2017 prices rose ~ averaging just over 3.5% and depending on price points and locations.  2018 promises to be even stronger (without factoring in any tax impact).
  • Mortgage delinquency is normalizing.

Forecast:

  • The economy will continue to prosper with no recession currently in sight for the next 18 + months.
  • Interest rates will Climb to about 5% by year-end further decreasing buying power.
  • Home prices will rise by an average of another 3% during that same period (this will depend on your price point and location).
  • Supply will remain tight in the more popular price points in the residential real estate.
  • Many new jobs seem to be resulting from the Tax and Jobs act.
  • For the first time in memory, the US is reporting 6+ million pen jobs and only 6 million unemployed.
  • We now need to match the skills of the unemployed to the job openings to prosper further.
  • The affordability index shows that there is room for much more sales, we just need the inventory.
  • Some decrease in moderate prices home ownership could result in the raising of the standard deduction.
  • Some high-end fall-out could result in the residential real estate from the SALT and mortgage interest changes in the Tax and Jobs act.
  • The commercial real estate market will flourish as a result.
  • Mid-term elections effect is a total unknown at this point.
  • People in their home > 10 years have very positive home equity built up, and a more significant portion of payments applies to principle.  Increases in selling prices should eventually motivate people to make changes in their lifestyle by investing in summer homes or even start a new business with the extra equity cash.

 

Note:  Presented as a public service by Joe Peters of Coldwell Banker Residential Brokerage. I took reasonable precautions 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.

 

 


Presented as a public service by:

Joe Peters Logo
 


Click Here to Real Estate Market Guides

Somerset County’s Real Estate Market Conditions | July 2018 – Canal Walk Edition

 

Somerset County’s Real Estate Market Conditions | July 2018 – Canal Walk Edition

Real Estate Market Conditions

Get ahead of the real estate market economic and behavior drivers in Somerset County, New Jersey with Coldwell Banker Residential Broker sales associate, Joe Peters.

This Market Update will not only show you what is happening in your local market area, but it will also explain why it is happening and what is contributing to these results.

 

“What” it 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 Somerset County.  Units going under contract averaged 49 days on the market. 429 properties went “under contract” in June, down from 514 in the prior month. Newly listed properties in the same period totaled 561.

Somerset County Inventory Breakdown By Price For Last Month:

New Listings Under Contract Active Listings Month’s Supply
Condos/Town Houses * 137 147 383 3
Over 55 Communities* 9 16 34 2
$000K to $199K 30 29 80 3
$200K to $299K 95 110 230 2
$300K to $399K 90 73 214 3
$400K to $499K 69 57 157 3
$500K to $599K 47 47 162 3
$600K to $699K 48 32 133 4
$700K to $799K 45 21 140 7
$800K to $899K 35 22 97 4
$900K to $999K 26 15 95 6
$1,000K and Up 76 23 287 12
Totals for June 561 429 1595 4
Average Price $681,803 $504,945 -25.9%
Average Days on Market 49
* Included in $ breakdowns

Somerset County Sales Breakdown Overview:

  • 63 % of sales in houses < $500,000
  • 32 %of sales in houses > $500,000 and < $1,000,000
  • 05 % percent of total sales (or 23 in total) in houses >$1,000,000

Somerset County Inventory Breakdown By Municipality For Last Month:

Active Listings Under Contract Month’s Supply
Bedminster Twp 67 14 5
Bernards Twp 203 51 4
Bernardsville 107 8 13
Bound Brook 27 9 3
Branchburg Twp 72 26 3
Bridgewater Twp 193 68 3
Far Hills Boro 17 0 0
Franklin Twp 205 77 3
Green Brook 29 4 7
Hillsborough 140 54 3
Manville Boro 29 12 2
Millstone Boro 2 1 2
Montgomery Twp 146 33 4
North Plainfield 58 21 3
Peapack Gladstone 20 3 7
Raritan Boro 12 5 2
Rocky Hill Boro 4 1 4
Somerville Boro 19 11 2
South Bound Brook 21 7 3
Warren Twp 158 21 8
Watchung Boro 56 3 19
Totals 1585 429 4

Somerset County Sales Breakdown Detailed:

One area in Somerset County reported no sales in the past month

  • Far Hills

Two areas reported one or two sales each last month

  • Millstone
  • Rocky Hill

Hotspots:

  • Bernards – 51 sales
  • Bridgewater – 68 sales
  • Franklin – 77 sales
  • Hillsborough – 54 sales
  • Montgomery – 33 sales

These hotspot areas equaled 65% of the sales last month. The average new listing coming on the market last month neared $681,803 The average price of a unit going “under contract” neared $504,945 (26% less).

Bridgewater Township Statistics:

  • There are 183 homes for sale in Bridgewater Township as of this writing.
  • Of the 183 homes for sale, 33 are community properties (such as town houses and condos) and one is in our 55+ communities
  • The average list price for all listings in Bridgewater Township is $578,723.
  • There were 64 new listings in Bridgewater Township last month with an average list price of $515,230.
  • There were also sixty-eight homes that have gone under contract in the past 30 days with an average list price of $457,324 and 68 days on the market.
  • Giving us under 3 months of inventory
  • Call for additional details

Note: To get an accurate price point for your property, contact me. Coldwell Banker’s big data technology capabilities will put you at an advantage. Plus, we can now tell you where people are moving into your area from and market to that area directly. Houses priced and marketed accurately sell fast, especially with a real estate industry veteran and local expert helping you navigate the process.

The initial section of this Market Report reported on “What” is happening.

This section will focus on “Why” it is happening

 

New Jersey’s Economic Drivers:

New Jersey Home Sales:

An increase of 2% in home sales in NJ in May (vs. the same month last year) helped to record over 12,000 sales which is an all-time record.  YTD that number is up over 1%.

Activity concentrates in the <$400,000 market (which actually pulled back a little in May due to lack of inventory) where Millennial buyers transition into home ownership. During the same period, all housing sales showed increases across all other price points showing confidence in the changes made on taxes and deregulation. There has also been an improvement at the very high end in towns where rail service to Manhattan is available.

At the same time, the number of homes offered for sale in New Jersey remained low and had recently decreased. The supply decreased by ~ 2,500 homes, compared to a year ago.  Currently, ~31,000 fewer homes are on the market compared to the 2011 peak.

Current unsold inventory in New Jersey varies widely by county with some having only 2.5 months.  no county presently has more than 8 months of supply.  The average is at 3.5 months compared to 3.8 months a year ago.

We have an acute shortage of inventory in both Hunterdon and Somerset county in our more popular price points and locations.

Hunterdon and Somerset County have 8 and 5% less inventory respectively than a year ago.  And, those counties have about 15 and 217% less inventory respectively than two years ago.

The fear of increasing interest rates based on future increases and the Fed’s slightly loosening lending standards are driving the current market activity.

 

Interest Rates:

The economy is strengthening, and Interest rates at the end of June fall slightly to around 4.57% for a 30-year conventional mortgage. A fifteen-year conventional mortgage rests at just over the 4% mark. Five-year arms are just under the 3.875% range.

Consumer fears of steadily rising interest rates and slowly rising home prices are driving the current market demand. The Fed already instituted several initial increases in rates and are talking about additional ones. Industry analysts forecast to be nearly 5% by the end of 2018, and 5.5% by the end of 2019. If the rate increases from 4% to 5%, buyers will lose 9% of their buying power and have already lost 6% with rate increases over the past few months.

Combine this with the steadily increasing prices and consumer confidence, and you have what is driving our current market activity

 

National Job Front:

US unemployment rate has dropped to 3.8%, the lowest it has been in eighteen years! This trend is expected to continue as a result of the recent tax reform.

On the national level, the US added nearly 1,00,000+ jobs in January thru May of 2018 and is trending towards 2.6 million added jobs by year-end.

And the GDP is predicted to keep expanding.

Consumer confidence is the highest since 2004. Great news for the housing industry!

 

New Jersey Job Front:

The NJ unemployment rate fell slightly to 4.4%, bolstering consumer confidence in NJ as well.

NJ gained 4,100 jobs in May, 32,000+ jobs were added in NJ in the first four months of 2018 which was a significant improvement over 2017 and, if it continues, NJ could add over 75,000 jobs by year-end.

The level of jobs created was at a much higher level than in the past several years (a silver lining?).

It also should be noted that these jobs are concentrated in the northern half of the state.

 

Rental Market Trends:

We still have an extremely tight rental market!

Prior restrictive mortgage standards nudged Millennials to postpone home ownership in life later than previously seen. These potential buyers live with parents or share rentals. We are starting to see them now re-enter the rental and first-time buyer markets. The average age of our first-time buyer changed from 29 to 37 years over the past five years.  Older Americans impacted by underfunded retirement plans due to the economic downturn rent houses too.

Rental prices in New Jersey rose ~ 5% in 2017, averaging nearly $1,500 per unit. Current vacancy rates in central New Jersey rose to 2.5% with the in northern and southern NY and Phili at 4.1%.

With the demand being what it is, we are seeing new construction in this sector rise almost 400%.

The drop in New Jersey’s homeownership contributes to rental demand.  A 12+ year trend shows a decrease from  71% to 64%.  This 7% decrease compared to an 8% national decrease contributes to the slower recovery of home prices in the state and adds over 230,000+ additional renters in our state.  Households with no children stand at 65%, reflecting the decline in our school population.

 

New Jersey Foreclosures:

New Jersey continues to face high foreclosure rate filings. Other states have begun to, or already have recovered. In tight real estate market, these foreclosures sell at a small discount.

Note:  Figures vary by local market, especially those walloped by Hurricane Sandy three years ago and rural and urban areas. We rank #2 in the country at 3.1%, led by only FL with 4.6% (mostly hurricane-related) and followed by NY, LA, MS, ME, TX, DE, MD, and PA.  The national baseline number sits at ~ 1.7%.

2017 foreclosure filings decreased slightly to 70,150+ or -5%, putting pressure on home prices in concentrated areas.  Base on the first five months of results 2018 could fall another 7% to around 65,000 filings.

 

Tax cuts and Jobs Act effect:

Three specific areas had appeared as concerns:

  1. State and Local Taxes (SALT) are now limited to a $10,000 deduction going forward.
  2. Mortgage and Interest Deductions (MID) are now limited to a maximum principal balance of $750,000.
  3. Home Equity Line of Credit (HELOC) Loan interest deductions is for the most part eliminated

Although it is too early to tell how these areas will impact total 2018 real estate values in New Jersey, they are sure to have some impact. New Jersey is one of the highest taxed states in the union, and our home values are also some of the highest. How this affects each of us on an individual basis needs to be better understood as there is some trade-off such as higher deductions and overall lower income brackets.

Obviously, the higher income luxury market is probably most at risk.  But how it affects the overall incentive to own a home is still unfolding.

There were several proposals on the new tax code, and most consumers are not up to date on what actually passed.  It will take time for this information to be digested.

It also is evident that the out-migration from New Jersey to other more affordable states has continued.

In a nutshell, these changes appear to be having little impact, but there will be some very high-end people affected, and that will, in turn, affect that market…

That effect might slow the price growth in higher priced homes NJ and even turn into a deficit in some most affluent areas.

Canal Walk Statistics:

  • Canal Walk offers one floor units, town houses and various models of single family units
  • There are 4 homes currently for sale in Canal Walk as of this writing with an average list price of $462,475.
  • Of the 4, one is an Enclave single floor units and one is a townhouse.
  • There was 1 new listing this month with an average list price of $525,000.
  • Five units has gone under contract in the past 30 days with an average list price of $404,300 with the average days on the market of 23.
  • Giving us a little under 1 month of inventory
  • Close to 50 units changed hands over the past 12 months ranging from the low $300’s in to the low $600’s
  • The actual price per unit varies by type, model, location and upgrades
  • Call for more details…

Real Estate Market Recap 

Economic conditions:

  • 2017 was the seventh straight year of 2 million + job gains.
  • Although improving in 2018, the NJ job situation had been declining for the past two years.
  • At 4.4% unemployment, NJ is almost 15% above the national average which is currently 3.8%.
  • The best paying and most attractive jobs are in NYC.
  • Interest rates have already risen .675% in recent months are forecasted to rise another .5% by year’s end, taking almost 10% away from buyers buying power.
  • And, house prices are rising 5+ % in the popular housing price points further exasperating the situation.
  • Baby boomers are choosing to “stay put’ rather than “move up” to their dream house as it is no longer considered a sound investment which is causing most of the housing shortage.
  • And there is no entry level construction going on in the area.
  • As a result of the previous two points, we are experiencing the current housing inventory shortage.
  • Foreclosures are on the decline and to some extent are helping to offset fewer listings.
  • Also, there is confidence that the new tax and jobs act will further stimulate the economy with more jobs
  • The new tax rules appear only to affect the very higher-end buyers.

Changes in lifestyle:

  • Average age at marriage is now in the late 30’s (up 7 years from just a decade ago).
  • Families are usually having only one to two children.
  • 65% of all NJ homes have no children of school age.
  • 50% do not have more than 1 person in them.
  • Demand for larger houses has diminished.
  • As a result of the job situation, buyers are gravitating to areas within 15 miles of NYC with good mass transportation systems.
  • 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 4 BR center hall colonials on 1+ acre in the country.
  • Buyers are thinking luxury hi-rise close to mass transportation and work.
  • And, for the first time in history, Hunterdon County has reported more deaths than births.

Market conditions:

  • Consumer confidence remains extremely high nation-wide based on the job and stock market increases.
  • This confidence is reflected in buyer traffic being up at open houses.  However, with lack of inventory, there are fewer houses for sale.
  • Millennials make up 24% of our current homeowners with more room for expansion at the lower end of the market when adequate inventory supply materializes.
  • Central New Jersey’s trend for 2016 and early 2017 showed a surge in home sales but price increases only in houses clustered in < $500,000 market where the first-time buyers and Millennials are focused.
  • The >$600K market holds steady to diminishing slightly, depending on location and price.  Often when a >$600K property goes on the market, it’s competing with a >$700K that needs to sell quickly (etc.). The extreme high-end market has also seen some appreciation in 2018 so far.
  • Minimal new construction, lack of entry-level new housing and COAH restrictions add additional value to the current inventory.
  • Analysts five-year forecast indicates slow and steady price growth at an annual 3 to 4%.
  • There is an acute shortage of inventory in both Hunterdon and Somerset County. In our more popular price points and locations, this holds back sales.  In general, we have only about 50% of the inventory that we had in 2011.
  • In 2017 prices rose ~ averaging just over 3.5% and depending on price points and locations.  2018 promises to be almost as strong (without factoring in any tax impact).
  • Mortgage delinquency is normalizing.

Forecast:

  • The economy will continue to prosper with no recession currently in sight for the next 18 + months.
  • Interest rates will Climb to about 5% by year-end further decreasing buying power.
  • Home prices will rise by an average of another 3 to 4+% during that same period (this will depend on your price point and location).
  • Supply will remain tight in the more popular price points in the residential real estate.
  • Many new jobs are resulting from the Tax and Jobs act.
  • The affordability index shows that there is room for much more sales, we just need the inventory.
  • Some decrease in home ownership could result in the raising of the standard deduction.
  • Some high-end fall-out could result in the residential real estate from the SALT and mortgage interest changes in the Tax and Jobs act.
  • The commercial real estate market will flourish as a result.
  • Mid-term elections effect is a total unknown at this point.
  • People in their home > 10 years have very positive home equity built up, and a more significant portion of payments applies to principle.  Increases in selling prices should eventually motivate people to make changes in their lifestyle by investing in summer homes or even start a new business with the extra equity cash.

Call me at 908-238-0118 to discuss your situation, and I’ll put my expertise and access to big data to work for you.

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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Somerset County’s Real Estate Market Conditions | June 2018 – Canal Walk Edition

 

Somerset County’s Real Estate Market Conditions | June 2018 – Canal Walk Edition

Real Estate Market Conditions

Get ahead of the real estate market economic and behavior drivers in Somerset County, New Jersey with Coldwell Banker Residential Broker sales associate, Joe Peters.

This Market Update will not only show you what is happening in your local market area, but it will also explain why it is happening and what is contributing to these results.

 

“What” it is happening

Somerset County New Jersey Real Estate Market Conditions (including):

  1. Branchburg
  2. Bridgewater
  3. Somerville
  4. Hillsborough 
  5. Warren
  6. Watchung

Based on the last full month’s contract sales, statistics show a supply of approximately three months. Normal market conditions average four to six months in Somerset County.  Units going under contract averaged 43 days on the market. 514 properties went “under contract” in April, up from 423 in the prior month. Newly listed properties in the same period totaled 574.

Somerset County Inventory Breakdown By Price For Last Month:

New Listings Under Contract Active Listings Month’s Supply
Condos/Town Houses * 171 171 398 2
Over 55 Communities* 18 15 40 3
$000K to $199K 27 43 78 2
$200K to $299K 104 118 242 2
$300K to $399K 86 103 195 2
$400K to $499K 66 74 156 2
$500K to $599K 71 44 171 4
$600K to $699K 45 38 115 3
$700K to $799K 42 31 134 4
$800K to $899K 30 16 100 6
$900K to $999K 33 17 88 5
$1,000K and Up 70 30 270 9
Totals for May 574 514 1549 3
Average Price $621,410 $486,330 -21.7%
Average Days on Market 43
* Included in $ breakdowns

Somerset County Sales Breakdown Overview:

  • 66 % of sales in houses < $500,000
  • 28 %of sales in houses > $500,000 and < $1,000,000
  • 06 % percent of total sales (or 30 in total) in houses >$1,000,000

Somerset County Inventory Breakdown By Municipality For Last Month:

Active Listings Under Contract Month’s Supply
Bedminster Twp 55 25 2
Bernards Twp 196 56 4
Bernardsville 99 11 9
Bound Brook 25 12 2
Branchburg Twp 67 22 3
Bridgewater Twp 194 78 2
Far Hills Boro 17 1 17
Franklin Twp 198 87 2
Green Brook 31 10 3
Hillsborough 141 68 2
Manville Boro 33 17 2
Millstone Boro 3 1 3
Montgomery Twp 163 38 4
North Plainfield 66 24 3
Peapack Gladstone 18 3 6
Raritan Boro 7 13 1
Rocky Hill Boro 3 1 3
Somerville Boro 22 10 2
South Bound Brook 18 7 3
Warren Twp 147 19 8
Watchung Boro 46 11 4
Totals 1549 514 3

Somerset County Sales Breakdown Detailed:

No area in Somerset County reported no sales in the past month

Three areas reported one or two sales each last month

  • Far Hills
  • Millstone
  • Rocky Hill

Hotspots:

  • Bernards – 56 sales
  • Bridgewater – 78 sales
  • Franklin – 87 sales
  • Hillsborough – 68 sales
  • Montgomery – 38 sales

These hotspot areas equaled 64% of the sales last month. The average new listing coming on the market last month neared $621,410 The average price of a unit going “under contract” neared $486,330 (22% less).

Canal Walk Statistics:

  • Canal Walk offers one floor units, town houses and various models of single family units
  • There are 6 homes currently for sale in Canal Walk as of this writing with an average list price of $422,050.
  • Of the 6, four are Enclave single floor units
  • There was 3 new listing this month with an average list price of $387,467.
  • Five units has gone under contract in the past 30 days with an average list price of $377,920 with the average days on the market of 43.
  • Giving us a little over 1 month of inventory
  • Close to 50 units changed hands over the past 12 months ranging from the low $300’s in to the low $600’s
  • The actual price per unit varies by type, model, location and upgrades
  • Call for more details…

Note: To get an accurate price point for your property, contact me. Coldwell Banker’s big data technology capabilities will put you at an advantage. Plus, we can now tell you where people are moving into your area from and market to that area directly. Houses priced and marketed accurately sell fast, especially with a real estate industry veteran and local expert helping you navigate the process.

 

The initial section of this Market Report reported on “What” is happening.

This section will focus on “Why” it is happening

 

New Jersey’s Economic Drivers:

New Jersey Home Sales:

Home purchase demand in the first two months of 2018 in New Jersey reached a new record and representing a 2% increase over the prior year. In March they went down by 6% netting a break even for the quarter. In April an additional 11,000 purchases were recorded putting NJ at about even for the year so far.

The effect of the new Tax and Jobs Act seems to be minimal.

Activity concentrates in the <$400,000 market (which actually pulled back a little in March due to lack of inventory) where Millennial buyers transition into home ownership. During the same period, all housing sales showed increases across all other price points showing confidence in the changes made on taxes and deregulation. There has also been an improvement at the very high end in towns where rail service to Manhattan is available.

At the same time, the number of homes offered for sale in New Jersey remained low and had recently decreased. The supply decreased by ~ 3,700 homes, compared to a year ago.  Currently, ~32,000 fewer homes are on the market compared to the 2011 peak.

Current unsold inventory in New Jersey varies widely by county with some having only 2.5 months.  no county presently has more than 8 months of supply.  The average is at 3.7 months compared to 4.2 months a year ago.

We have an acute shortage of inventory in both Hunterdon and Somerset county in our more popular price points and locations.

Hunterdon and Somerset County have 6% less inventory respectively than a year ago.  And, those counties have about 17 and 20% less inventory respectively than two years ago.

The fear of increasing interest rates based on future increases and the Fed’s slightly loosening lending standards are driving the current market activity.

 

Interest Rates:

The economy is strengthening, and Interest rates at the end of April rose slightly to around 4.675% for a 30-year conventional mortgage (highest since 2014). A fifteen-year conventional mortgage rests at just over the 4% mark. Five-year arms are just under the 3.875% range.

Consumer fears of steadily rising interest rates and slowly rising home prices are driving the current market demand. The Fed already instituted initial increases in rates and are talking about additional ones. Industry analysts forecast to be nearly 5% by the end of 2018, and 5.5% by the end of 2019. If the rate increases from 4% to 5%, buyers will lose 9% of their buying power and have already lost .6% with rate increases over the past few months.

Combine this  with the steadily increasing prices and consumer confidence, and you have what is driving our current market activity

 

National Job Front:

US unemployment rate has dropped to 3.8%, the lowest it has been in over eighteen years! This trend is expected to continue as a result of the recent tax reform.

On the national level, the US added nearly 800,000 jobs in January thru April of 2018 and is trending towards 2.5 million added jobs by year-end.

And the GDP is predicted to keep expanding.

Consumer confidence is the highest since 2004. Great news for the housing industry!

 

New Jersey Job Front:

NJ unemployment rate rose slightly to 4.6%, bolstering consumer confidence remains high in NJ as well.

Although NJ lost 7,200 jobs in April, 27,000+ jobs were added in NJ in the first four months of 2018 which was a significant improvement over 2017 and if it continues, NJ could add nearly 100,000 jobs by year-end.

The level of jobs created was at a much higher level than in the past several years (a silver lining?).

It also should be noted that these jobs are concentrated in the northern half of the state.

 

Rental Market Trends:

We still have an extremely tight rental market!

Prior restrictive mortgage standards nudged Millennials to postpone home ownership in life later than previously seen. These potential buyers live with parents or share rentals. We are starting to see them now re-enter the rental and first-time buyer markets. The average age of our first-time buyer changed from 29 to 37 years over the past five years.  Older Americans impacted by underfunded retirement plans due to the economic downturn rent houses too.

Rental prices in New Jersey rose ~ 5% in 2017, averaging nearly $1,500 per unit. Current vacancy rates in central New Jersey rose to 3.6% with the nation at 4.7%.

The drop in New Jersey’s homeownership contributes to rental demand.  A 12+ year trend shows a decrease from  71% to 64%.  This 7% decrease compared to an 8% national decrease contributes to the slower recovery of home prices in the state and adds over 230,000+ additional renters in our state.  Households with no children stand at 65%, reflecting the decline in our school population.

 

New Jersey Foreclosures:

New Jersey continues to face high foreclosure rate filings. Other states have begun to, or already have recovered. In tight real estate market, these foreclosures sell at a small discount.

Note:  Figures vary by local market, especially those walloped by Hurricane Sandy three years ago and rural and urban areas. We rank #2 in the country at 3.3%, led by only FL with 5% (mostly hurricane-related) and followed by NY, LA, MS, ME, TX, DE, MD, and PA.  The national baseline number sits at ~ 1.7%.

2017 foreclosure filings decreased slightly to 70,150+ or -5%, putting pressure on home prices in concentrated areas.  Base on the first three months of results 2018 could fall another 8% to around 64,000 filings.

 

Tax cuts and Jobs Act effect:

Three specific areas had appeared as concerns:

  1. State and Local Taxes (SALT) are now limited to a $10,000 deduction going forward.
  2. Mortgage and Interest Deductions (MID) are now limited to a maximum principal balance of $750,000.
  3. Home Equity Line of Credit (HELOC) Loan interest deductions is for the most part eliminated

Although it is too early to tell how these areas will impact total 2018 real estate values in New Jersey, they are sure to have some impact. New Jersey is one of the highest taxed states in the union, and our home values are also some of the highest. How this affects each of us on an individual basis needs to be better understood as there is some trade-off such as higher deductions and overall lower income brackets.

Obviously, the higher income luxury market is probably most at risk.  But how it affects the overall incentive to own a home is still unfolding.

There were several proposals on the new tax code, and most consumers are not up to date on what actually passed.  It will take time for this information to be digested.

It also is evident that the out-migration from New Jersey to other more affordable states has continued.

In a nutshell, these changes seem to be having little impact, but there will be some very high-end people affected, and that will, in turn, affect the market…

This effect might slow the price growth in NJ and even turn into a deficit in some more affluent areas.

 

Real Estate Market Recap 

Economic conditions:

  • 2017 was the seventh straight year of 2 million + job gains.
  • Although improving in 2018, the NJ job situation had been declining for the past two years.
  • At 4.6% unemployment, NJ is almost 15% above the national average which is currently 3.8%.
  • The best paying and most attractive jobs are in NYC.
  • Interest rates have already risen .675% in recent months are forecasted to rise another .5% by year’s end, taking almost 10% away from buyers buying power.
  • And, house prices are rising 3+ % in the popular housing price points further exasperating the situation.
  • Baby boomers are choosing to “stay put’ rather than “move up.”
  • And there is no entry level construction going on in the area.
  • Foreclosures are on the decline and help to offset fewer listings.
  • Also, there is confidence that the new tax and jobs act will further stimulate the economy with more jobs
  • The new tax rules appear only to affect the very higher-end buyers.

Changes in lifestyle:

  • Average age at marriage is now in the late 30’s (up 7 years from just a decade ago).
  • Families are usually having only one to two children.
  • 65% of all NJ homes have no children of school age.
  • 50% do not have more than 1 person in them.
  • Demand for larger houses has diminished.
  • As a result of the job situation, buyers are gravitating to areas within 15 miles of NYC with good mass transportation systems.
  • 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 4 BR center hall colonials on 1+ acre in the country.
  • Buyers are thinking luxury hi-rise close to mass transportation and work.
  • And, for the first time in history, Hunterdon County has reported more deaths than births.

Market conditions:

  • Consumer confidence remains extremely high nation-wide based on the job and stock market increases.
  • This confidence is reflected in buyer traffic being up at open houses.  However, with lack of inventory, there are fewer houses for sale.
  • Millennials make up 24% of our current homeowners with more room for expansion at the lower end of the market when adequate inventory supply materializes.
  • Central New Jersey’s trend for 2016 and early 2017 showed a surge in home sales but price increases only in houses clustered in < $500,000 market where the first-time buyers and Millennials are focused.
  • The >$600K market holds steady to diminishing slightly, depending on location and price.  Often when a >$600K property goes on the market, it’s competing with a >$700K that needs to sell quickly (etc.). The extreme high-end market has seen some appreciation in 2018 so far.
  • Minimal new construction, lack of entry-level new housing and COAH restrictions add additional value to the current inventory.
  • Analysts five-year forecast indicates slow and steady price growth at an annual 3 to 4%.
  • There is an acute shortage of inventory in both Hunterdon and Somerset county (both sitting with about 20% less inventory than just two years ago and 6% less than last year). In our more popular price points and locations, this holds back sales.  In general, we have only about 50% of the inventory that we had in 2011.
  • In 2017 prices rose ~ averaging just over 3.5% and depending on price points and locations.  2018 promises to be almost as strong (without factoring in any tax impact).
  • Mortgage delinquency is normalizing.

Forecast:

  • The economy will continue to prosper with no recession currently in sight.
  • Interest rates will Climb to about 5% by year-end further decreasing buying power.
  • Home prices will rise by an average of another 3 to 4+% during that same period (this will depend on your price point and location).
  • Supply will remain tight in the more popular price points in the residential real estate.
  • Many new jobs could result from the Tax and Jobs act.
  • The affordability index shows that there is room for much more sales, we just need the inventory.
  • Some decrease in home ownership could result in the raising of the standard deduction.
  • Some high-end fall-out could result in the residential real estate from the SALT and mortgage interest changes in the Tax and Jobs act.
  • The commercial real estate market will flourish as a result.
  • Mid-term elections effect is a total unknown at this point.
  • People in their home > 10 years have very positive home equity built up, and a more significant portion of payments applies to principle.  Increases in selling prices should eventually motivate people to make changes in their lifestyle by investing in summer homes or even start a new business with the extra equity cash.

Call me at 908-238-0118 to discuss your situation, and I’ll put my expertise and access to big data to work for you.

Note:  Presented as a public service by Joe Peters of Coldwell Banker Residential Brokerage. I took reasonable precautions 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.


Presented as a public service by:

Joe Peters Logo
 


Click Here to