Somerset County’s Real Estate Market Conditions – as of October of 2017
Somerset County’s September sales active with 340 homes sold
Below is a market update on the real estate and property activity in Somerset County including Branchburg, Bridgewater, Somerville and Hillsborough. This information is provided by courtesy of Somerset County Realtor, Joe Peters.
In September, 340 properties went “under contract” in Somerset County, as compared to 427 reported as going “under contract” in the prior month. During that same period, 421 properties were newly listed. Based on the most current month’s contract sales, statistics show an overall current supply of about 5 months (4 to 6 months is a normal market) for Somerset County, with an average of 56 days on the market for the units that were sold.
Sales broke down as follows:
- 70 percent of sales were in houses under $500,000
- And, 25 percent of sales were in houses between $500,000 and $1 Million
- Leaving only 5 percent of sales were in houses more than $1 Million
Two areas in Somerset County reported no sales last month:
- Far Hills
And two had only 2 sales or less:
- Raritan Boro
- Rocky Hill
At the same time, there are the usual hot spots:
- Bridgewater Township with 37 sales
- Franklin Township with 78 sales
- Hillsborough Township with 33 sales
These three areas combined for 44% of total sales last month. The average new listing coming on the market last month was at nearly $461,056 while the average price of a unit going “under contract” was at nearly $462.,063 or about the same.
Note: In order to get a true picture of the status of your particular property, this needs to be done by price point within your specific town. I do this as part of my research when listing a property and can do it for you. I also can show you how the market is currently trending for your particular town. Just give me a call.
Houses that are priced properly are selling. There is a current market for them with many active buyers. But more than ever, buyers and sellers need to be working with an experienced agent who has a strong grasp of the market conditions specific to your local area. I can share information on all of these statistics with you. Just call me at 908-238-0118. I can offer you knowledgeable and proven advice based upon my more than 20 years of experience, with a special emphasis on Somerset County.
Other conditions impacting sales in our area are:
New Jersey Home Sales:
Home purchase demand increased by 3% in New Jersey during August (these numbers run a month behind), giving the state a 4th consecutive month of increases. This gives NJ a compounded growth rate of 22% over the past two years.
July’s gain was the highest number of purchase contracts in that month over the past 12 years. And, NJ sales have increased by 6% YTD.
Activity has been most widely seen in the under $400,000 market where the millennial buyers are most active as they transition in to home ownership. During the same period luxury housing sales showed an increase showing confidence in the new administration’s plans on taxes and deregulation.
At the same time, the number of homes being offered for sale in New Jersey, has remained low, and has recently decreased. The supply has decreased by some 6,500 homes as compared to a year ago or minus 13%. And, there are currently 30,000+ fewer (-41%) homes on the market in New Jersey than there were at our peak in NJ in 2011.
The current unsold inventory in New Jersey sits at just under 4.1 month vs. 4.9 months a year ago. Hunterdon County has almost 11% less inventory and Somerset County also has 11% less inventory than just a year ago.
Current increasing interest rates (combined with the fear of higher interest rates in the future) combined with the Fed’s slightly loosening lending standards seems to be driving the current market activity.
Interest rates at the end of September have recently hit another low for the year at just over the 3.8% level at 3.9% for a 30 year conventional mortgage. A fifteen year conventional mortgages is at just under the 3.14% range. Five and seven year arms are also at the 3.17% range.
The combination of the fear of steadily rising rates and slowly rising home prices is a driving factor in the current market. And, the Fed has already instituted initial increases in rates and are currently talking about more to come. Most industry experts are forecasting a 4.7% rate by the end of the year, 5% by the end of of 2018 and 5.5% by the end of 2019. If the rate merely increases form 4% to 5%, buyers will loose 9% of their buying power.
National and New Jersey Job Front:
On the national level the US reached full recovery in May of 2014 and saw an increase of 2,700,000+ in 2015. Revised figures show a gain of 2,242,000+ in 2016 . And, we are on track to add 2.,000,000 jobs in 2017 (a decrease of 6% from 2016).
The national U-3 unemployment rate stand at 4.4%. It should be noted, due to full-time and part-time jobs being counted equally by the BLS, these numbers are misleading. Actually, the US Economy still needs to create nearly an additional 2.6+ Million jobs to achieve the same employment situation that existed prior to the start of the 2007 to 2009 recession and the U-6 unemployment rate actually stand at 8.7%
NJ job growth increase by 65,000+ jobs in 2015 (the best in 15 years). At that pace, NJ was on track to recover all of its jobs lost in the recession by 2017 (3 years later than the national level) and has recovered about 96% of those jobs to date.
Finalized numbers show that this number was more in the range of 59,000 in 2016 (also good).
In March and May, NJ reported large decreases in jobs jobs resulting in a net increase of jobs in the first five months of 2017 of only 100 as compared to 15,700 over the same period in the prior year. Thru July 25,700 additional jobs were added YTD vs. 46,500 for the same period last year.
NJ still trails the nation and is on pace to add 32,600 jobs for the year vs. 59,000 being added in 2016 (a 45% decrease).
The NJ unemployment rate has increased slightly to 4.5% which is now at the overall US rate of 4.4%.
Still consumer confidence in NJ seems to remain high.
Rental Market Trends:
Prior restrictive mortgage standards have forced younger age buyers (millennials) to postpone their transition to home ownership until later in life than was previously seen. For the most part, these potential buyers have been living with mom and dad or sharing rentals with others in the same situation.
Yet, we are starting to see them now re-enter the rental and first time buyer markets.
The average age of our first time buyer is reported to have risen from 29 to 37 years over the past five years.
And, many older age households are selling their homes and moving into rentals to close their gap in underfunded retirement plans which were affected by the recent economic downturns.
The net result of these actions are continuing to cause rental prices to quickly rise in New Jersey (about +10% annually) and keeping rental inventory extremely low. We currently have a 32.3% vacancy rate in central NJ which is the lowest in both the state and nation (with the average rental price topping $1,300).
Contributing to the demand in rentals is the drop in home ownership in NJ which has dropped from 71% to 62% over the past 12+ years. This is a drop of nearly 13% in NJ as compared to a drop of nearly 8% at the national level and contributes to the slower recovery of home prices in the state. Also affecting it is the increase in 1 or 2 person households that have no children (now 65%). This is also reflected in our school population.
As a result of this shift, there are now nearly 300,000 more renters in NJ and very few rentals available.
NJ continues to face very high foreclosure rate filings while other states have begun to, or already have recovered.
This figure varies widely by local market. It is also impacted greatly in areas hit particularly hard by hurricane Sandy (which was just about three years ago). Also the rural and urban areas have the highest concentration of foreclosures.
NJ still ranks as number one in the country at 4.2% followed by NY and then LA, MS , ME, FL, MD and DE. Nationally this number is just around 1.7%.
In 2016 there was a 3% decrease over the prior year and added an additional nearly 71,100 filings as compared to 76,800 in 2015. In 2017 foreclosure filings YTD are on par with 2016 YTDand are forecasted to be in the vicinity of 74,000. These foreclosures will continue to add pressure to home prices (especially in areas where they are concentrated).
The positive news is that in a market starved for inventory, these foreclosures are now only selling at a small discount.
Consumer confidence is still at a high.
And, their attitude towards owning a home as part of the American dream is still positive in 8 out of 10 Americans.
Twenty-four percent of all homeowners are millennials and this number is growing steadily. It would be even higher if we had sufficient inventory to meet their demand o the lower end of the market.
Slow and steady growth in prices is forecasted for the next 5 years with an average annual growth rate of five percent being see.
We saw surge in home sales (but not prices) in central NJ in 2016 and early 2017. Especially in the sub $500,000 market. We are plagued my not having enough inventory in those more popular price points and these sales increases could be even better if we had more inventory. But, as inventory builds up as prices continue to rise (and people are no longer under water), this should have a positive effect on prices. In 2016 we saw a less than 1% rise in prices in NJ.
In 2017 prices have already risen by about 4% in the more popular price points (this is dependent on location and price point and location) and this should rise to 5% by end of year in NJ. We are seeing the most effect on prices in the under $400K markets where the first time buyers and millennials are shopping. The just over $600K market is holding steady to diminishing slightly depending on location and price. A lot of times when a $600K property come on the market, it is completing with a $700K that really needs to sell is and now in the $600s competing with them (and so on…). And, in the higher price points there is definite pressure on pricing.
We are also seeing people in their home over 10 years thinking about making a change. They were reluctant over the past five or so years because of the poor economy. Their equity has built back up and they now can more comfortably make a change and is now rising greatly as the portion of payments going towards principal has increased. Also, the increase in pricing is fueling this and we are seeing more equity being used to fund business startups.
There is also minimal new construction in our area which adds additional value to the current inventory.
Our foreclosures are to some extent helping to offset the fewer listings.
Net, net: As either a seller or buyer, the time could not be better to be in the market. We still have low interest rates, a pent up demand from both a buyer and seller viewpoint and a very active market with increasing prices in the more popular price points. Give me a call at 908-238-0118 to discuss your particular situation and let me put my expertise to work for you.
Note: The information presented is deemed accurate but not reliable or guaranteed. Reasonable precautions were taken in the preparation and presentation of this information to ensure accuracy, but the author assumed no liability for any actions taken based on this information. Some opinions expressed represent forecasts of economic conditions as the impact real estate values. All such information is solely conjecture and should be regarded as opinion only and not serve as the sole basis of any financial decision.
Presented as a public service by Joe Peters of Coldwell Banker Residential Brokerage
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