Hunterdon County's Real Estate Market Conditions January 2019

Hunterdon County’s Real Estate Market Conditions January 2019

Residential Real Estate

Hunterdon County's Real Estate Market Conditions January 2019

Hunterdon County’s Real Estate Market Conditions January 2019

Get ahead of the residential real estate market drivers in Hunterdon County, New Jersey with Coldwell Banker Residential Broker sales associate, Joe Peters. Joe’s monthly report walks people through the economic 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 seven months. Normal market conditions average four to six months in Hunterdon County.  Units going under contract averaged 88 days on the market. 95 properties went “under contract” in December, down from 124 in the prior month. Newly listed properties in the same period totaled 93.

Hunterdon County Inventory Breakdown By Price For Last Month:

New Listings Under Contract Active Listings Month Supply
Condos/Town Houses * 9 18 81 5
Over 55 Communities * 1 3 10 3
$000K to $199K 14 15 77 5
$200K to $299K 14 20 107 5
$300K to $399K 25 23 114 5
$400K to $499K 8 11 89 8
$500K to $599K 13 14 88 6
$600K to $699K 14 8 66 8
$700K to $799K 2 1 34 34
$800K to $899K 1 1 30 30
$900K to $999K 1 1 16
$1,000K and Up 1 1 46
Totals for December 93 95 667 7
Average Price $421,299 $397,872 -5.6%
Average DOM 88
* Included in $ breakdowns

Hunterdon County Sales Breakdown Overview:

  • 73% of sales in houses < $500,000
  • 27% of sales in houses > $500,000
  • 04% percent of total sales (or 4 in total) in houses >$700,000

Hunterdon County Inventory Breakdown By Municipality For Last Month:

Active Listings Under Contract Month’s Supply
Alexandria Twp. 47 0
Bethlehem Twp. 25 6 4
Bloomsbury Boro. 4 0
Califon Boro. 5 1 5
Clinton Town 6 2 3
Clinton Twp. 49 11 4
Delaware Twp. 32 0
East Amwell Twp. 20 4 5
Flemington Boro. 17 1 17
Franklin Twp. 17 3 6
Frenchtown Boro. 9 0
Glen Gardner Boro. 10 2 5
Hampton Boro 8 3 3
High Bridge Boro. 17 3 6
Holland twp. 20 4 5
Kingwood Twp. 24 4 6
Lambertville City 25 6 4
Lebanon Boro. 5 0
Lebanon Twp. 39 2 20
Milford Boro. 12 2 6
RaritanTwp. 95 16 6
Readington Twp. 69 15 5
Stockton Boro. 2 0
Tewksbury Twp. 78 6 13
Union Twp. 26 3 9
West Amwell Twp. 6 1 6
Totals 667 95 7

Six areas in Hunterdon County reported no sales reported in the past month:

  • Alexandria
  • Bloomsbury
  • Delaware
  • Frenchtown
  • Lebanon Boro
  • Stockton

Eight areas reported 1 or 2 sales each last month:

  • Bethlehem
  • Califon
  • Clinton Town
  • Franklin
  • Flemington
  • Hampton
  • Kingwood
  • Milford

Hotspots:

  • Clinton/Clinton Township – 13 sales
  • Raritan Township – 16 sales
  • Readington Township – 15 sales

Hotspot areas equaled 46% of the sales last month. The average new listing coming on the market last month neared $421,299. The average price of a unit going “under contract” neared $397,872 (6% less).

Note: To get an accurate price point for your property based on its location and price point, contact me. Coldwell Banker’s big data technology capabilities will put you at a unique advantage. I can show you the latest age and earnings breakdown for your particular area, show you where people are moving into that area from and how I can market to those specific areas and demographics directly. The result is in you receiving the maximum selling price with a shorter time on the market.  Houses priced and marketed accurately sell faster, especially with a real estate industry veteran and local expert helping you navigate the process.

Why it is happening

New Jersey’s Economic Drivers:

New Jersey Home Sales:

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

The still low inventory numbers lead to a bit of softening in the price appreciation on existing homes and a slowdown in growth. It could turn the tide back to a buyers market (or at least neutralize it to being a normal market).

A small decrease of 3% in home sales in NJ in November and the same remains flat year to date 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. This segment has shown a decline in sales due to lack of inventory.

During the same period, all housing sales above $400,000 showed modest 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 rising slightly last month). The supply increased by nearly 2,000 homes, compared to a year ago.  Currently, ~35,000 fewer homes (-47%) are on the market compared to the 2011 peak.

Current unsold inventory in New Jersey varies widely by county with some having only 3.3 months.  No county presently has more than nine months of supply.  The average was at 4.8 months supply.

We still 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 about 10% more inventory that we had a year ago, but about 10% less 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 have fallen in recent weeks to just over 4.6 for a 30-year conventional mortgage. A fifteen-year conventional mortgage rests at just under the 4..1%  mark. Five-year arms are just under the 3.98% 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 fell a little short, 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 remained at a 49 year low of  3.7% after the addition of 155,000 jobs in November. 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 over 2,500,000+ jobs a year to date and is trending towards 2.5+ million added jobs by year-end (a twenty-seven percent increase over the prior year) and the 8th consecutive year of 2+ million job gains.

At the end of October, there were 7.1+ Million openings compared to nearly 6.1 Million unemployed persons, with unemployment being the lowest since December of 2000.

And the GDP is now just under 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 dropped to 4.0%, bolstering consumer confidence in NJ as well.  In effect, NJ is rising with the national tide of nearly full employment.

NJ lost 1,800 jobs in October, and 64,600+ jobs have been added in NJ year to date 2018 as compared to 47,100 for the same period in 2017, and if it continues, NJ could add over 60,000 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 (but improving) rental market!

And, Trulia states that on average it is 26% less expensing to own vs. rent.

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 ’20s to the mid-’30s 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 have fallen to 2.8% with the in northern and southern NY and Philadelphia slightly higher.  This rise is being assisted by a rapid increase in building in this sector.

We have seen a 2Q18 rise in rental prices in Central NJ of 4.7% 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 2000s and is actually at a good level.  Households with no children stand at 65%, reflecting the decline in our school population.

 

One article states that the average homeowner who is 65+ has an average net wealth of over $318K while the same for a renter is only just under $8K.  It also offers a stable place to live, an evident hedge against inflation and 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 but falling foreclosure rate filings at 2.6%. 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 #5 in the country holding at 2.6%, led by NY with 3.1%, MS with 3.0% (mostly hurricane-related)  LA with 2.7% and trailed by ME, FL, DE, MD, PA, and AL.  The national baseline number sits at a little under 1.7%.

Two thousand seventeen 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 13% to around 61,000+ filings.

 

Tax cuts and Jobs Act effect:

Three specific areas had appeared as concerns. State and Local Taxes (SALT), Mortgage and Interest Deductions (MID) and Home Equity Line of Credit (HELOC) Loan interest deductions.

It would appear that the overall concern was unfounded. The SALT fears were unfounded being offset by the lower tax 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.  As people start to go through preparing their 2018 tax returns, this may change.  But, most higher end probably have mere than likely done pro-formas in advance and to better understand their possible consequences of the changes to the tax code.

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 segment of the 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:

  • 2018 was the eighth straight year of 2 million + job gains.
  • Although improving in 2018, the NJ job situation had been declining for the past two years.
  • At 4.0% unemployment, NJ is almost 710% 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 pulling many or our millennials in that direction.
  • Interest rates have already risen over .5% since the first of the year are forecasted to rise another .25 by early next year, taking almost 10% away from buyers buying power.
  • And, house prices have risen 6+ % in the popular housing price points further exasperating the situation (although this appreciation now appears to be slowing).
  • 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.  This may loosen up as many new listings have come on the market over the past few months.
  • 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 still 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 high-end buyers.

 

Changes in lifestyle:

  • Average age at marriage is now in the mid to late ’30s (up seven years from just a decade ago).
  • Families usually have only one to two children due to costs and the ability to choose.
  • 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 larger 4 BR center hall colonials on 1+ acre in the country (based mostly on local building codes).
  • Buyers are thinking smaller 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 is seen to be limited to curtailing the growth of appreciation and not in any 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 a 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 about 25% 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 2017 and early 2018 showed a surge in home sales but price increases only in houses clustered in < $400,000 market where the first-time buyers and Millennials are focused.
  • The >$500K 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 (but diminishing) price growth at an annual average of 3 to 4% (depending on location and price point).  This price growth will remain 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. However, an improvement in inventory has been seen over the past four months.
  • It is simple.  We could sell more houses if we had more inventory,  And, we have started to see small inventory increases over the past four 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).  The following two years will see less in % but should still show modest growth (depending on price point and location).
  • 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+% in2019 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.
  • While improving, 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 (just look at the help wanted signs).
  • For the first time in memory, the US is reporting 7.1+ million open jobs and only 6.1 million unemployed.  We are at full employment if you consider that 3% unemployed is the normal level.
  • 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 has also opened 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 an 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 is flourishing as a result of creating more buying demand.
  • 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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Hunterdon County's Real Estate Market Conditions December 2018

Hunterdon County’s Real Estate Market Conditions December 2018

Residential Real Estate

Hunterdon County's Real Estate Market Conditions December 2018

Hunterdon County’s Real Estate Market Conditions December 2018

Get ahead of the residential real estate market drivers in Hunterdon County, New Jersey with Coldwell Banker Residential Broker sales associate, Joe Peters. Joe’s monthly report walks people through the economic 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

  1. Clinton Township
  2. Flemington
  3. Raritan Township
  4. Readington Township
  5. Clinton

Based on the last full month’s contract sales, statistics show a supply of approximately six months. Normal market conditions average four to six months in Hunterdon County.  Units going under contract averaged 71 days on the market. 124 properties went “under contract” in November, down from 146 in the prior month. Newly listed properties in the same period totaled 141.

Hunterdon County Inventory Breakdown By Price For Last Month:

New Listings Under Contract Active Listings Months Supply
Condos/Town Houses * 30 25 107 4
Over 55 Communities * 8 4 16 4
$000K to $199K 17 20 79 4
$200K to $299K 32 25 128 5
$300K to $399K 35 25 125 5
$400K to $499K 20 27 122 5
$500K to $599K 16 18 108 6
$600K to $699K 9 6 90 15
$700K to $799K 3 1 44 44
$800K to $899K 3 2 39 20
$900K to $999K 2 0 17
$1,000K and Up 4 0 53
Totals for November 141 124 805 6
Average Price $503,652 $374,869 -25.6%
Average DOM 71
* Included in $ breakdowns

 

Hunterdon County Sales Breakdown Overview:

Active Listings Under Contract Month’s Supply
Alexandria Twp. 45 6
Bethlehem Twp. 29 2 15
Bloomsbury Boro. 5 2 3
Califon Boro. 6 2 3
Clinton Town 8 2 4
Clinton Twp. 68 13 5
Delaware Twp. 37 4 9
East Amwell Twp. 28 6 5
Flemington Boro. 14 2 7
Franklin Twp. 24 2 12
Frenchtown Boro. 11 0
Glen Gardner Boro. 13 3 4
Hampton Boro 9 2 5
High Bridge Boro. 20 6 3
Holland twp. 24 4 6
Kingwood Twp. 22 1 22
Lambertville City 34 6 6
Lebanon Boro. 5 0
Lebanon Twp. 41 9 5
Milford Boro. 14 2 7
RaritanTwp. 120 23 5
Readington Twp. 86 16 5
Stockton Boro. 1 0
Tewksbury Twp. 96 3 32
Union Twp. 34 5 7
West Amwell Twp. 11 3 4
Totals 805 124 6

 

  • 78% of sales in houses < $500,000
  • 22% of sales in houses > $500,000
  • 02% percent of total sales (or 3 in total) in houses >$700,000

Hunterdon County Inventory Breakdown By Municipality For Last Month:

Three areas in Hunterdon County reported no sales reported in the past month:

  • Frenchtown
  • Lebanon Boro
  • Stockton

Ten areas reported one or 2 sales each last month:

  • Bethlehem
  • Bloomsbury
  • Clinton Town
  • Califon
  • Franklin
  • Flemington
  • Hampton
  • Kingwood
  • Milford
  • W Amwell

Hotspots:

  • Clinton/Clinton Township – 15 sales
  • Raritan Township – 23 sales
  • Readington Township – 16 sales

Hotspot areas equaled 44% of the sales last month. The average new listing coming on the market last month neared $503,652. The average price of a unit going “under contract” neared $374,869 (26% less).

Note: To get an accurate price point for your property based on its location and price point, contact me. Coldwell Banker’s big data technology capabilities will put you at an advantage. We can show you the latest age and earnings breakdown for your particular area, show you where people are moving into that area from and market to those specific areas and demographics directly.  Houses priced and marketed accurately sell faster, especially with a real estate industry veteran and local expert helping you navigate the process.

New Jersey’s Economic Drivers:

New Jersey Home Sales:

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

The still low inventory numbers lead to a bit of softening in the price appreciation on existing homes and a slowdown in growth. It could turn the tide back to a buyers market (or at least neutralize it to being a normal market).

A modest increase of 1% in home sales in NJ in November and the same remains flat year to date 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. This segment has shown a 6% decline in sales due to lack of inventory (-1,500 vs. a year ago).

During the same period, all housing sales above $400,000 showed modest 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 rising slightly last month). The supply increased by nearly 600 homes, compared to a year ago.  Currently, ~33,000 fewer homes (-45%) are on the market compared to the 2011 peak.

Current unsold inventory in New Jersey varies widely by county with some having only four months.  No county presently has more than nine months of supply.  The average was at 4.3 months supply.

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 about the same inventory that we had a year ago, but about 10% less 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 just over  4.9 for a 30-year conventional mortgage. A fifteen-year conventional mortgage rests at just over the 4.3%  mark. Five-year arms are just under the 4.15% 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 remained at a 49 year low of  3.7% after addition of 250,000 jobs in October. 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 over 2,250,000+ jobs a year to date and is trending towards 2.6+ million added jobs by year-end (a twenty-seven percent increase over the prior year) and the 8th consecutive year of 2+ million job gains.

At the end of July, there were 7+ Million openings compared to nearly 6 Million unemployed persons, with unemployment being the lowest since December of 2000.

And the GDP is now just under 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 dropped to 4.1%, bolstering consumer confidence in NJ as well.  In effect, NJ is rising with the national tide of nearly full employment.

NJ added 17,400 jobs in September, and 66,500+ jobs have been added in NJ year to date 2018 as compared to 41,400 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 (but improving) rental market!

And, Trulia states that on average it is 26% less expensing to own vs. rent.

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 ’20s to the mid-’30s 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 3.9% with the in northern and southern NY and Philadelphia slightly higher.  This rise is being assisted by a rapid increase in building in this sector.

We have seen a 2Q18 rise in rental prices in Central NJ of 4.7% 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 2000s and is actually at a good level.  Households with no children stand at 65%, reflecting the decline in our school population.

One article states that the average homeowner 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 #5 in the country holding at 2.6%, led by NY with 3.2%, FL and MS with 2.9% (mostly hurricane-related)  LA with 2.7% and trailed by ME, FL, DE, MD, PA, and AL.  The national baseline number sits at ~ 1.7%.

Two thousand seventeen 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 11% to around 62,600 filings.

 

Tax cuts and Jobs Act effect:

Three specific areas had appeared as concerns. State and Local Taxes (SALT), Mortgage and Interest Deductions (MID) and Home Equity Line of Credit (HELOC) Loan interest deductions have been for the most part eliminated.

It would appear that the overall concern was unfounded. The SALT fears have been offset by the lower tax brackets.  It would appear that this was an unwarranted fear.

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.

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 segment of the 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 4.1% unemployment, NJ is almost 11% 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 over .75% since the first of the year are forecasted to rise another .25 by year’s end, taking almost 10% away from buyers buying power.
  • And, house prices have risen 6+ % in the popular housing price points further exasperating the situation (although this appreciation now appears to be slowing).
  • 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 still 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 high-end buyers.

 

Changes in lifestyle:

  • Average age at marriage is now in the mid to late ’30s (up seven years from just a decade ago).
  • Families usually have only one to two children due to costs and the ability to choose.
  • 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 larger 4 BR center hall colonials on 1+ acre in the country.
  • Buyers are thinking smaller 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 of appreciation and not in any 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 a 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 < $400,000 market where the first-time buyers and Millennials are focused.
  • The >$500K 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 (but diminishing) price growth at an annual average of 3 to 4% (depending on location and price point).  This price growth will remain 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. However, a slight improvement in inventory has been seen over the past four months.
  • It is simple.  We could sell more houses if we had more inventory,  And, we have started to see small inventory increases over the past four 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).  The following two years will see less in % but will still show modest growth (depending on price point and location).
  • 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.
  • While improving, 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 7+ million open jobs and only 6 million unemployed.  We are at full employment if you consider that 3% unemployed is the normal level.
  • 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 has also opened 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 an 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 is flourishing as a result of creating more buying demand.
  • 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
 


Hunterdon County's Real Estate Market Conditions November 2018

Hunterdon County’s Real Estate Market Conditions November 2018

Residential Real Estate

Hunterdon County's Real Estate Market Conditions October 2018

Hunterdon County’s Real Estate Market Conditions November 2018

Get ahead of the residential real estate market drivers in Hunterdon County, New Jersey with Coldwell Banker Residential Broker sales associate, Joe Peters. Joe’s monthly report walks people through the economic 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

  1. Clinton Township
  2. Flemington
  3. Raritan Township
  4. Readington Township
  5. Clinton

Based on the last full month’s contract sales, statistics show a supply of approximately six months. Normal market conditions average four to six months in Hunterdon County.  Units going under contract averaged 63 days on the market. 146 properties went “under contract” in October, down from 149 in the prior month. Newly listed properties in the same period totaled 202.

Hunterdon County Inventory Breakdown By Price For Last Month:

New Listings Under Contract Active Listings Month’s  Supply
Condos/Town Houses * 42 35 107 3
Over 55 Communities * 5 5 15 3
$000K to $199K 24 23 80 3
$200K to $299K 27 19 117 6
$300K to $399K 41 36 140 4
$400K to $499K 36 32 142 4
$500K to $599K 28 22 136 6
$600K to $699K 11 8 93 12
$700K to $799K 10 0 50
$800K to $899K 11 1 41 41
$900K to $999K 7 0 24
$1,000K and Up 7 5 61 12
Totals for October 202 146 884 6
Average Price $526,939 $457,533 -13.2%
Average DOM 64
* Included in $ breakdowns

Hunterdon County Sales Breakdown Overview:

  • 75% of sales in houses < $500,000
  • 25 % of sales in houses > $500,000
  • 04 % percent of total sales (or 6 in total) in houses >$700,000

Hunterdon County Inventory Breakdown By Municipality For Last Month:

Active Listings Under Contract Month’s Supply
Alexandria Twp. 47 0
Bethlehem Twp. 30 6 5
Bloomsbury Boro. 7 2 4
Califon Boro. 8 1 8
Clinton Town 10 3 3
Clinton Twp. 79 21 4
Delaware Twp. 46 5 9
East Amwell Twp. 28 5 6
Flemington Boro. 17 4 4
Franklin Twp. 29 0
Frenchtown Boro. 10 0
Glen Gardner Boro. 9 3 3
Hampton Boro 10 1 10
High Bridge Boro. 20 3 7
Holland twp. 26 8 3
Kingwood Twp. 22 5 4
Lambertville City 38 6 6
Lebanon Boro. 4 2 2
Lebanon Twp. 51 7 7
Milford Boro. 16 1 16
RaritanTwp. 130 31 4
Readington Twp. 88 18 5
Stockton Boro. 1 0
Tewksbury Twp. 105 7 15
Union Twp. 39 5 8
West Amwell Twp. 14 2 7
Totals 884 146 6

Four areas in Hunterdon County reported no sales reported in the past month:

  • Alexandria
  • Franklin Twp.
  • Frenchtown
  • Stockton

Six areas reported one or 2 sales each last month:

  • Bloomsbury
  • Califon
  • Hampton
  • Lebanon Boro.
  • Milford
  • W Amwell

Hotspots:

  • Clinton/Clinton Township – 24 sales
  • Raritan Township – 31 sales
  • Readington Township – 18 sales

Hotspot areas equaled 50% of the sales last month. The average new listing coming on the market last month neared $526,939. The average price of a unit going “under contract” neared $457,533 (13% 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.

“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 over the past three months (but is still below what is needed).  Let’s hope that it is the beginning of a trend.

This is leading to a bit of softening in the price appreciation on existing homes.  A slowdown in growth. It could turn the tide back to a buyers market (or at least neutralize it to being a normal market).

A decrease of 6% in home sales in NJ in September and the same remains flat Year to Date. This 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 dropping slightly last month). The supply decreased by ~ nearly 200 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 four months.  No county presently has more than nine months of supply.  The average was at 5 months compared to 4.7 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 about the same inventory that we had a year ago, but about 10% less 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 4.86for a 30-year conventional mortgage. A fifteen-year conventional mortgage rests at just under the 4.3%  mark. Five-year arms are just under the 4.14% 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 remained at a 49 year low of  3.7% after an addition of 250,000 jobs in October. 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 over 2,000,000+ jobs year to date and is trending towards 2.7 million added jobs by year-end (a twenty percent increase over the prior year)

At the end of July, there were 7.1+ Million openings compared to nearly 6.2 Million unemployed persons, with unemployment being the lowest since December of 2000.

And the GDP is now just under 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 1,000 jobs in September, and 49,100+ jobs have been added in NJ year to date 2018 as compared to 34,500 for the same period in 2017, and if it continues, NJ could add over 62,000 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!

And, Trulia states that on average it is 26% less expensing to own vs. rent.

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 3.9% with the in northern and southern NY and Philadelphia slightly higher.

We have seen a 2Q2018 rise in rental prices in Central NJ of 4.7% 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 #5 in the country at 2.6%, led by NY with 3.2%, FL and MS with 2.9% (mostly hurricane-related)  LA with 2.7%, ME, DE, MD, PA and AL.  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. State and Local Taxes (SALT), Mortgage and Interest Deductions (MID) and Home Equity Line of Credit (HELOC) Loan interest deductions are for the most part eliminated.

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

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.

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 segment of the 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 (although this appreciation now appears to be slowing).
  • 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 still 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 high-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 of appreciation and not in the 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 a 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 (but diminishing) 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 three 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).  The following two years will be less in % but will still show modest growth (depending on price point and location).
  • 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.
  • While improving, 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 67.1+ million open jobs and only 6 million unemployed.  We are at full employment if you consider that 3% unemployed is the normal level.
  • 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 an 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.

Subscribe to receive these newsletters monthly at:    jpeters.com/contact

 


Presented as a public service by:

Joe Peters Logo
 


 

Hunterdon County's Real Estate Market Conditions November 2018

Hunterdon County’s Real Estate Market Conditions October 2018

Residential Real Estate

Hunterdon County's Real Estate Market Conditions October 2018

Hunterdon County’s Real Estate Market Conditions October 2018

Get ahead of the residential real estate market drivers in Hunterdon County, New Jersey with Coldwell Banker Residential Broker sales associate, Joe Peters. Joe’s monthly report walks people through the economic 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

  1. Clinton Township
  2. Flemington
  3. Raritan Township
  4. Readington Township
  5. Clinton

Based on the last full month’s contract sales, statistics show a supply of approximately six months. Normal market conditions average four to six months in Hunterdon County.  Units going under contract averaged 72 days on the market. 149 properties went “under contract” in September, down from 173 in the prior month. Newly listed properties in the same period totaled 212.

Hunterdon County Inventory Breakdown By Price For Last Month:

New Listings Under Contract Active Listings Months Supply
Condos/Town Houses * 42 34 118 3
Over 55 Communities * 5 4 17 4
$000K to $199K 19 30 82 3
$200K to $299K 35 31 119 4
$300K to $399K 35 43 132 3
$400K to $499K 39 19 145 8
$500K to $599K 33 14 162 12
$600K to $699K 21 6 107 18
$700K to $799K 5 4 46 12
$800K to $899K 10 1 40 40
$900K to $999K 3 1 25 25
$1,000K and Up 12 0 67
Totals for September 212 149 925 6
Average Price $502,069 $351,814 -29.9%
Average DOM 72
* Included in $ breakdowns

Hunterdon County Sales Breakdown Overview:

  • 83% of sales in houses < $500,000
  • 17 % of sales in houses > $500,000
  • 04 % percent of total sales (or 6 in total) in houses >$700,000

Hunterdon County Inventory Breakdown By Municipality For Last Month:

Active Listings Under Contract Month’s Supply
Alexandria Twp. 45 11 4
Bethlehem Twp. 30 7 4
Bloomsbury Boro. 11 3 4
Califon Boro. 7 1 7
Clinton Town 8 6 1
Clinton Twp. 92 14 7
Delaware Twp. 45 3 15
East Amwell Twp. 30 4 8
Flemington Boro. 14 7 2
Franklin Twp. 26 4 7
Frenchtown Boro. 11 0
Glen Gardner Boro. 15 5 3
Hampton Boro 10 1 10
High Bridge Boro. 16 3 5
Holland twp. 34 5 7
Kingwood Twp. 30 7 4
Lambertville City 29 6 5
Lebanon Boro. 3 2 2
Lebanon Twp. 47 5 9
Milford Boro. 15 2 8
RaritanTwp. 151 20 8
Readington Twp. 94 15 6
Stockton Boro. 2 0
Tewksbury Twp. 103 5 21
Union Twp. 44 8 6
West Amwell Twp. 13 5 3
Totals 925 149 6
Two areas in Hunterdon County reported no sales reported in the past month:
  • Frenchtown
  • Stockton

Three areas reported one or 2 sales each last month:

  • Califon
  • Hampton
  • Lambertville

Hotspots:

  • Clinton/Clinton Township – 20 sales
  • Raritan Township – 20 sales
  • Readington Township – 15 sales

Hotspot areas equaled 37% of the sales last month. The average new listing coming on the market last month neared $502,069. The average price of a unit going “under contract” neared $351,814 (30% 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.

“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 .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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Hunterdon County's Real Estate Market Conditions September 2018

Hunterdon County’s Real Estate Market Conditions September 2018

Residential Real Estate

Hunterdon County's Real Estate Market Conditions September 2018

Hunterdon County’s Real Estate Market Conditions September 2018

Get ahead of the residential real estate market drivers in Hunterdon County, New Jersey with Coldwell Banker Residential Broker sales associate, Joe Peters. Joe’s monthly report walks people through the economic 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

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

  1. Clinton Township
  2. Flemington
  3. Raritan Township
  4. Readington Township
  5. Clinton

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 Hunterdon County.  Units going under contract averaged 65 days on the market. 173 properties went “under contract” in August, up from 156 in the prior month. Newly listed properties in the same period totaled 212.

Hunterdon County Inventory Breakdown By Price For Last Month:

New Listings Under Contract Active Listings
Condos/Town Houses * 45 44 120
Over 55 Communities * 4 2 20
$000K to $199K 23 31 100
$200K to $299K 26 31 106
$300K to $399K 48 35 152
$400K to $499K 34 25 134
$500K to $599K 30 26 152
$600K to $699K 24 15 115
$700K to $799K 8 5 50
$800K to $899K 7 1 36
$900K to $999K 6 1 26
$1,000K and Up 6 3 63
Totals for August 212 173 934
Average Price $477,250 $402,470 -15.7%
Average DOM 65
* Included in $ breakdowns

Hunterdon County Sales Breakdown Overview:

  • 71% of sales in houses < $500,000
  • 29 % of sales in houses > $500,000
  • 06 % percent of total sales (or 10 in total) in houses >$700,000

Hunterdon County Inventory Breakdown By Municipality For Last Month:

Active Listings Under Contract Month’s Supply
Alexandria Twp. 52 9 6
Bethlehem Twp. 32 7 5
Bloomsbury Boro. 11 4 3
Califon Boro. 6 0
Clinton Town 14 5 3
Clinton Twp. 94 21 4
Delaware Twp. 37 2 19
East Amwell Twp. 31 3 10
Flemington Boro. 14 3 5
Franklin Twp. 24 1 24
Frenchtown Boro. 9 0
Glen Gardner Boro. 13 4 3
Hampton Boro 13 0
High Bridge Boro. 18 5 4
Holland twp. 30 7 4
Kingwood Twp. 33 3 11
Lambertville City 27 7 4
Lebanon Boro. 4 1 4
Lebanon Twp. 45 9 5
Milford Boro. 14 1 14
RaritanTwp. 149 35 4
Readington Twp. 97 25 4
Stockton Boro. 3 1
Tewksbury Twp. 99 6 17
Union Twp. 48 10 5
West Amwell Twp. 17 4 4
Totals 934 173 5

Three areas in Hunterdon County reported no sales reported in the past month:

  • Califon
  • Frenchtown
  • Hampton

Four areas reported one or 2 sales each last month:

  • Delaware
  • Lebanon Boro.
  • Milford
  • Stockton

Hotspots:

  • Clinton/Clinton Township – 26 sales
  • Raritan Township – 35 sales
  • Readington Township – 25 sales

Hotspot areas equaled 55% of the sales last month. The average new listing coming on the market last month neared $477,250. The average price of a unit going “under contract” neared $402,470 (16% 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.

“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.

 

 


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