Get ahead of the residential real estate market drivers in Somerset County, New Jersey, with Coldwell Banker Residential Broker sales associate, Joe Peters. Joe’s monthly report walks people through the economic conditions and trends that influence our local markets. You will come away knowing what is happening, and more importantly, why it is happening. As a result, you will be better informed to make home buying and selling decisions.
What’s Happening in Somerset County’s Real Estate Market?
Based on the last full month’s contract sales, statistics show a very low supply of inventory of just two months. Normal market conditions average four to six months in Somerset County. Units going under contract averaged 43 days on the market. Three hundred eighty-nine units went “under contract” in November, down from 505 in the prior month. Newly listed properties in the same period totaled 238, up from 373 in the preceding month.
Our total inventory number decreased from 1113 (last year) to 767 units, nearly 31% less than last year. In contrast, sales were up by almost 26% in November, as we saw the ongoing effect on the Real Estate market as it recovers from the COVID-19 pandemic effect. It is an optimum supply and demand curve for our sellers. At this point, we have actually sold more houses YTD in 2020 than in 2019 in Somerset county by 4%.
New Jersey Residential Real Estate Market Forecast
Because of the move to the west, pent-up demand, and extremely low mortgage rates, we expect strong listings and sales thru the balance of the fall season. As of this writing, we are not expecting to see a winter drop-off in activity.
Looking at consumer behavior, we expect to see fewer yet slightly increasing listings and more sales compared to last year. The good news is that most of the new listings are selling very quickly. So, even though we still have low inventory levels, sales are way up. And, we are still witnessing many homeowners facing financial and/or life uncertainty and as such holding off on listing their properties. Also, many sellers are restricting showings, and some are hesitant to list because they do not want people in their houses.
Some home sellers and home buyers feel safer with virtual showings. Everyone is taking time to understand and adjust to this new model of virtual selling and buying and the new methodical and safe open-houses. Time will tell if these new approaches have an impact. Thankfully, the listings that are coming on the market sell quickly due to more buyers than sellers.
Hunterdon County Real Estate Market Inventory Breakdown By Price For Last Month:
|Condos/Town Houses *||74||144||245||2|
|Over 55 Communities*||5||15||34||2|
|$000K to $199K||9||16||20||1|
|$200K to $299K||36||94||74||1|
|$300K to $399K||61||95||137||1|
|$400K to $499K||33||50||89||2|
|$500K to $599K||31||41||89||2|
|$600K to $699K||13||31||52||2|
|$700K to $799K||12||24||52||2|
|$800K to $899K||8||12||39||3|
|$900K to $999K||6||6||36||6|
|$1,000K and Up||28||20||179||9|
|Totals for November||237||389||767||2|
|Average Days on Market||43|
|* Included in $ breakdowns|
- 66% of sales in houses < $500,000
- 29% of sales in houses > $500,000
- 05% percent of total sales (or 20 in total) in houses >$1,000,000
Hunterdon County Real Estate Market Inventory Breakdown By Municipality For Last Month:
|Active Listings||Under Contract||Month’s Supply|
|Far Hills Boro||12||2||6|
|Rocky Hill Boro||0||1||0|
|South Bound Brook||9||4||2|
Only one area had no sales last month:
Only three areas reported 1 or 2 sales each last month:
- Far hills
- Rocky hill
- Brenards Twp./Bernardsville – 53 Sales
- Bridgewater – 41 Sales
- Franklin Twp. – 69 Sales
- Hillsbrough – 44 Sales
- Montgomery – 23 Sales
Hotspot areas equaled 59% of the sales last month. The average new listing coming on the market last month neared $588,521. The average price of a unit going “under contract” was $492,543 (16% less).
Note: To get a competitive price point on your property based on location and uniqueness, contact me at (908) 238-0118. Coldwell Banker’s big data technology capabilities will give you an advantage. I can show you the latest age and earnings breakdown for your particular area where people are moving into that area, and how I can market to those specific areas and demographics directly. The result is in you receiving the maximum selling price with a shorter time on the market. Houses priced and marketed accurately sell faster, especially with a real estate industry veteran and local expert helping you navigate the process.
Why it is happening
New Jersey’s Economic Drivers:
New Jersey Home Sales and inventory levels:
- After record-setting increases in January and February, we saw a more than 50% decline in sales in April and 35% in May over the same months last year.
- But, in June, a considerable rebound started to take place, and it has continued through November, where Somerset County had 31% less inventory than last year and sold 26% more houses than last year for the same month. In effect, clean housing coming on the market that is priced correctly is selling immediately.
- We are already ahead of last year’s sales numbers in both Hunterdon and Somerset counties.
- We have seen many sellers reluctant to list due to uncertainty in this troublesome time.
- The current month’s supply of inventory in Hunterdon and Somerset County is now two months. This is due to the quick sales as new inventory as it comes on the market.
- Hunterdon and Somerset County have about 45% & 31% less inventory than we had a year ago, respectively. This is a significant drop. And it is predicted to stay low ad sales outpace listings.
- NJ has under 23,000 units in inventory this year as compared to 34,000 a year prior (a 43% decline on a state-wide basis).
- Decreases in inventory have occurred in all price points, with the under $400,000 market seeing the largest impact and the $400K to $600K the second largest.
- And, we have seen increases in sales across all price points, with the under $400K range seeing the smallest gain of only 16% due to lack of inventory.
- Interest rates have been steadily declining over the past few months.
- The economy is adjusting, and average Interest rates are just over 2.7% for a 30-year conventional mortgage (we are seeing rates close to 2.6% in some cases). A fifteen-year conventional mortgage rests at just under the 2.3% mark. Five-year arms are just over the 3/1% range.
- Mortgages are becoming harder to get based on which industry you are employed in and the new stricter rules being adopted by lenders. This could affect the size of the buyer pool.
- And, mortgage forbearance is causing unforeseen issues in the mortgage market, which may cause a drop in the number of available.
- As said, rates in the last few months have been dropping. Yet, we expect the rates to fall a bit further, giving buyers a once in a lifetime opportunity to buy at rates they probably will not see again.
National Job Front:
- On the national level, the US added over 2,100,000+ in 2019 v. 2,700,000 jobs in 2018.
- US unemployment rate slowed in January, with just 225,000 jobs added. An additional 325,000 were added in February, which put the US on pace to add 3 million + jobs in 2020.
- Then COVID-19 appeared, and we saw nearly all of the jobs created in the past five years erased.
- We have had nearly 41 million unemployment claims in the last 7+ months alone, pushing unemployment numbers to a peak of just under 15%.
- The October end-of-month numbers rose slightly to show improvement, with the unemployment rate at to 6.9%. And in November it (not in as this writing)
- These numbers indicated that the recovery was indeed well underway, with over 50% of the unemployed now back in the workforce.
- The claims have been falling each week and indicating that the PPP and associated programs are starting to work.
- Fortunately, the economy was robust going into this, but the effect is devastating and will be long term.
New Jersey Job Front:
- In 2019 NJ added 39,000 jobs once again. NJ added 39,000+ jobs in 2018 as compared to 47,100 for the same period in 2017.
- The NJ unemployment numbers were at 3.5% just six months ago and now have followed the national numbers but are now a bit higher than the US at 8.2% for the last month reported, which was October.
- Construction, food services, and accommodations are again the leaders in job losses, though more states are now citing pain in retail, wholesale trade, according to the U.S. Department of Labor. Health care, social assistance, and manufacturing are shedding workers, too.
- These job losses will certainly have an impact on the buyers market in the balance of 2020.
Rental Market Trends:
- Rental prices in New Jersey rose again in 2019, averaging just over $1,750 per unit. Current vacancy rates in New Jersey have increased to around 5.5% in central NJ. & state-wide.
- The drop in New Jersey’s homeownership contributes to rental demand. A 12+ year trend shows a decrease from 71% to 66%. This 7% decrease compared to an 8% national decrease contributes to the slower recovery of home prices in the state and adds over 20,000+ additional renters in our state. However, the 71% level resulted from the lax lending standards of the early 2000s and is considered to be at an acceptable level. Households with no children stand at 65%, reflecting the decline in our school population.
- One article states that the average homeowner who is 65+ has an average net wealth of over $318K, while the same for a renter is only just under $8K. It also offers a stable place to live, an evident hedge against inflation, and a way to build wealth (a strong argument for homeownership).
- However, the number of renters has increased by 7% over the past 25 years, with the less educated leading the way. And, we were seeing more educated millennials moving east into higher rent and cost of living areas that eat into their discretionary income (including savings). It makes one wonder where this all is heading.
- However, like new home sales, this trend is also reversing. Central NJ rental vacancies have fell to 4.4% (from previous higher rates).
- The pace of new rental construction has increased by nearly fivefold to meet this demand.
New Jersey Foreclosures:
- New Jersey continues to face rising foreclosure rate filings at about 6.7% (which is up significantly from a year earlier). Other states have begun to or have already recovered. And, some sets like NY are still much higher with a 7.2% filing number. In a tight real estate market, these foreclosures sell at a discount.
- The national baseline number sits at a little under 4.3% (which is up from 1.3% a year earlier).
- The forbearance numbers will definitely affect foreclosures on that program comes to an end. But, overall the foreclosure market is down 63% unit wise vs. 2019.
- Foreclosures in NJ in 2018 were the lowest in the state in over four years. And, 2019 was even better with just under 38,000 foreclosure filings (the weakest since 2012). With the first eight months in, NJ looks to be on track for a 16,000 foreclosure number in 2020, representing a 58% decline. This could change depending on how long it takes workers to get back on their feet from the COVID-19 pandemic and how many bankruptcies we see in later 2020.
Real Estate Market Recap
Overall Economic Conditions:
- In early March:
- We were at our most prolonged economic expansion period in our country’s history with 125+ months of positive job gains.
- The GDP was still rising (although its rate of increase seems to be slowing a bit).
- And, wages are up significantly at the same time.
- Interest rates have decreased to just under 3.5%.
- Foreclosures rates have almost normalized.
- In April and May:
- We have seen a sharp spike in unemployment
- The GDP has been adversely affected
- Wage growth is Affected.
- Interest rates are bouncing around (but holding).
- Inventory levels are down by 35+%. This is due to listings are being withheld.
- Buying activity is also down about 35%
- It was as if someone had hit the “pause” button on the real estate market.
- The balance of 2020 real estate was under extreme pressure as a result.
- Current Real estate values do not seem to be affected as to the lack of inventory.
- From June on, we saw new listings come on the market at a faster pace, and sales picked up at an even higher rate. The total inventory dropped as a result, and we saw impressive sales numbers. A true seller’s market resulted.
Changes in Lifestyle:
- The average age at marriage is now in the mid to late 30s (up seven years from just a decade ago).
- Families usually have only one to two children due to costs and the ability to choose.
70% of all NJ homes have no children of school age, and 50% do not have more than one person in them. This factor minimizes the need for larger housing not only in NJ but everywhere.
- As a result of job opportunities, buyers were gravitating to areas within 15 miles of NYC with sound mass transportation systems.
- But, we are now seeing a reversal of the above after the NYC area has become a COVID-19 hotspot as well as social unrest.
- This trend will surely continue.
- 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.
- Buyers are not looking for open floor plans as in the past and are gravitating towards more compartmentalization within the home. Also back yare recreation facilities such as pools now have a preference. Work, education, and exercise or play areas are now key.
- Also, many late millennials have accelerated their home buying activities based on the last six months.
- Builders have been thinking of larger 4 BR center hall colonials on 1+ acre in the country (based mostly on local building codes).
- Buyers were thinking of smaller luxury hi-rise close to mass transportation and work in the east (truly a mismatch).
- Now, there is an open question of how many workers will continue to gravitate away from the city as they adapt to working from home and a modified live/work/play/learn lifestyle.
- The “Great American Move” is a term that we are starting to see for this new life-style.
- But, this move is primarily among the more educated and skilled workers that can adapt to a work from home environment. First responders and lower-skilled service workers are not able to work from home in most cases.
- 60% of all new housing starts in 2020 in NJ were in the rental sector, and, the 2020 numbers will surpass that. This is contributing to the lack of new construction and inventory
- What a difference 8+ months make!
- Consumer confidence was put on pause (at best) until the total effect of the COVID-19 pandemic plays out and is better understood.
- And, now we are seeing a resurgence in Covid-19 cases in our area.
- The recent civil unrest issue in our major cities has further affected this.
- The above items have affected how many listings and new buyers we see during the next few months.
- Beginning in June, we saw a total reversal on the sales side and supply and demand effect as the lack of inventory and high buyer demand keep prices at rising levels.
- Most consumers will still see homeownership as a sound investment.
- And, in general, homeowners are sitting with more equity than ever (NJ reports 95+% with positive equity) and are no longer using their homes as an ATM.
- The total effect was helped by our having such a strong economy and real estate going into the pandemic.
- The current seller’s market has resulted as we currently have more buyers than sellers.
- People usually buy and sell homes based on life events. This will not change. Life events will go on.
- And never before low seen interest rates and the move west has helped this situation to reverse.
- We are hoping to see a continued substantial spike up moving forward as things are better understood, and people get back to a normal life.
- The latest unemployment dips should surely have an effect on the market, and we are starting to see more listings coming on to the market.
- It does not appear that we will see the normal winter slowdown this year due to the above-mentioned activities.
- Naturally, this all depends on not seeing the current pronounced spike-up in the virus continue.
- The effect of the COVID-19 pandemic now seems to be spiking up (at least in our area).
- The economy is continuing to recover (but at a slower pace) from the recent drops in the unemployment numbers.
- It has been predicted by most that the balance of the recovery is going to be a long multi-year effort. In effect, we have put the easy part of the workforce back to work and the hard part remains in front of us.
- And this will affect the following:
- Current and future real estate values (including any appreciation in the foreseeable future)
- The amount of inventory available (hopefully we are starting to bottom out at -35%)
- The ability for some buyers to get a mortgage
- There could be more possible foreclosures (this is way out)
- Mortgage rates continue to hold the current low rates as the fed has maintained its current level of caution.
- Inventory supply will hopefully start to increase as we go into the winter months.
- But, as we gain a more substantial confidence level in having things under control, the housing market should have a strong continued bounce-back or upward spike due to:
- The economy and housing market both being very strong going into the current COVID-19 issue.
- Pent up demand, the move west, and the spring market was pushed out till further in 2020.
- Life events (as mentioned earlier) will still happen and will surely drive the pent up demand.
- Lower than ever (but slightly rising) mortgage rates.
- Due to the COVID-19 and recent unrest in NYC, we are starting to see more interest in living in more suburban counties such as Hunterdon and Somerset.
- Also, many skilled professionals have found that working from home is a reality, and we will probably see less commuting in general as things start to open up once again.
- It should be noted that there are a lot of professions that will never be able to work from their homes such as our first responders and the service industry sectors including hospitality, retail, and many other services.
- What were once “bedroom” communities are changing to” live, work, play and learn” communities bringing lots of change to our local economies.
- Space and facility for home education is still a factor in most areas.
- More attention is now given to horses with pools and less open areas which lend themselves to working and studying at home.
- And’ the local market will have to adapt to the new suburban renaissance of where people will be working from and what they will need to adapt to this.
- The lingering question is “Can we keep this momentum up with falling inventory?”. For now, the answer is yes due to fast selling new inventory.
- Jobs follow the workforce and housing then follow jobs. It is a little out of logical sequence, by will sort itself out as we progress.
- Local property values are forecasted to see near flat to plus 5% appreciation over the next year, depending on their location and price points.
Wow. That is a lot to digest. And it is changing daily, but seems to be heading in the right direction for now. For clarity and understanding, I am always available if you want to talk and better understand how this might affect your particular situation.
Note: Presented as a public service by Joe Peters of Coldwell Banker Residential Brokerage. I took reasonable precautions in presenting this information. Please consult with a professional sales agent and take no actions based on my opinions, gathered trends, and statistics. I assume no liability. You can contact me at (908) 238-0118.
You can ask me a question or request a monthly copy of this newsletter here.