Welcome to my Somerset County Market Report, where I draw on my extensive expertise to analyze the current dynamics of our local real estate market. In these monthly updates, I delve into the economic conditions and trends influencing our community’s property landscape. This report goes beyond standard data, offering hyper-local statistics that are hard to find elsewhere. By the end, you’ll not only understand the “What” of the Somerset County market but also the “Why.” With these insights, you’ll be well-prepared to make informed real estate decisions in 2024.

You can also find a version of the report covering Hunterdon County here.

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

240  Under Contract Listings      $673K Average List Price       36 Average Days on Market

“Slightly lower mortgage rates increase sales…”

November saw an estimated 15% increase in sales statewide year over year. Year-to-date sales are on par with 2023.

Unsold inventory remains low, but has increased by about 35% since the beginning of the year.

The Feds cut interest rates in October by .5%, which was anticipated. Based on the October jobs report, more rate cuts are anticipated, most likely another .25% in December.

Since July of this year, interest rates have dropped about 1%, then rose to near the July levels again in late October, and now have pulled back very slightly. 📈🏠💰

In a broader context, the real estate market shows signs of returning to a more typical state. This usually starts at higher price points and moves down from there and from east to west. Fewer offers now exceed the asking price, and bids include contingencies such as mortgage approval, home sale, and inspection. The inventory of newly listed properties has remained steady compared to previous months, contributing to an overall steadiness in total inventory. However, strong demand continues to outpace supply, leading to rising prices in our region. Price pressure exists in higher price brackets as those market segments move toward a balanced or even buyer-oriented market.

For those considering buying or selling, the answer lies within this analysis. The market strongly favors sellers due to the fast-moving inventory, which helps maintain price stability in our locality. However, there is a gradual shift toward a buyer’s market in the higher price ranges. Over the past years, prices have experienced significant increases—nearly 12% in 2020, 18% in 2021, 9% in 2022, and 11% in 2023. While a more modest 6% growth was anticipated for 2024, homes priced at $900K and above are seeing increased inventory, impacting their supply and demand dynamics.

Conversely, prices below this threshold continue to rise, although the rate of increase has decelerated. Increases will likely be more moderate in future years but still show positive growth. The fifty-year average price increase remains below 5 percent.

Let’s break it all down:

1. Rising Home Prices: Over the past four years, home prices have surged by nearly 50%, making homeownership more expensive.
2. Interest Rates Surge: Interest rates have more than doubled in the last 18 months, impacting buyers’ affordability of homes, but are now seeing some pullback.
3. Monthly Payments: Higher home prices and interest rates have significantly increased mortgage payments, making it challenging for first-time buyers.
4. Impact on Inventory: First-time buyers opt for rentals due to affordability concerns, while existing homeowners hesitate to sell, leading to a shortage of available homes.

In conclusion, increasing home prices, soaring interest rates, and affordability issues have made it harder for many to achieve homeownership. This affects both buyers and sellers, while the limited supply of available homes adds further complexity to the housing market.🏡📈

🏡📈

Market Statistics for Somerset County:

• Last month, the market saw a decrease in new inventory, with 240 new listings, compared to 299 in the previous month. This increased from the 205 new listings in the same month in 2023.
• As of the beginning of this month, the available inventory has decreased to 353 units from 434 units last month. This is higher than last year’s 315 units available in the same month.  A lot of this new inventory is in our higher price points.
• The number of units that went “under contract” last month was 240, down from the previous month’s 299 but an increase from the 205 units in the same month last year.
• Over the past month, the average number of days on the market has increased to 36 showing a seasonal slowdown in the market.
• Currently, the month’s supply of inventory remained at just over 1.47 months, indicating a strong seller’s market. This trend holds for properties priced under $1,000K

Considering the current market conditions, where the supply and demand dynamics favor sellers, postponing your sale until later in 2024/25 may not be the best choice. The market is likely nearing (or at) its peak, and it’s unlikely that prices will remain elevated for much longer. Therefore, it would be wise to capitalize on the current situation and list your property for sale now.

In summary, acting promptly in the current market could be advantageous for sellers.

New Jersey Residential Real Estate Market Forecast

The summer and fall of 2024 saw solid activity in both listings and sales.

Although inventory levels have increased, new listings continue to sell quickly, leading to strong sales and favorable prices for sellers. However, the biggest challenge in 2024/25 remains finding a more suitable home and securing an affordable mortgage.

For buyers, recent declines in interest rates (and speculation that they could drop further) have brought renewed optimism compared to a few months ago. This has also similarly impacted trade-up buyers.

However, interest rates have still left many first-time buyers out of the market, making most trade-up buyers hesitant to move. The recent fluctuations in rates provide limited hope in this area. Nevertheless, now is still a good time to buy a home, as stabilized market conditions and reduced competition create favorable terms. Additionally, refinancing remains an option if rates continue to fall.

Somerset County Real Estate Market Inventory Breakdown By Price For Last

Month:

• 37% of sales in houses > $500,000
• 46% of sales in the $500,000 to the $1,00,000 range
• 17% percent of total sales (or 43 in total) in houses >$1,000,000

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

Two areas had no sales last month:

• Millstone
• Rocky Hill

One area had 1 or 2 sales each last month:

• Pepack/Gladstone
• S Bound Brook

Hotspots:

• Bernardsville/Bernards Twp. – 33 Sales
• Bridgewater – 30 Sales
• Franklin Twp. – 37 Sales
• Hillsborough – 33 Sales
• Warren/Watchung -19 Sales

Approximately 63% of sales were concentrated in the hotspot areas in the past month. Here’s a breakdown of the average prices:

• New Listings Entering the Market: The average list price for these new listings was $714,920.
• Units Going Under Contract: The average list price for units that went under contract was  $673,320.
• This represents a 6% difference between the average prices of new listings and units under contract.”

In summary, understanding these price dynamics can provide valuable insights for buyers and sellers in the real estate market.

Note:

If you want to obtain a competitive price for your property based on its location and uniqueness, you can contact me at (908) 304-4660. By leveraging Coldwell Banker’s big data technology and Artificial Intelligence capabilities, you can gain a unique advantage in the market. I can demonstrate your area’s latest age and earnings breakdown, including where people are moving from and how to market directly to those specific areas and demographics. This approach will maximize the selling price while reducing the time on the market. Accurately priced and marketed homes tend to sell faster with the assistance of a seasoned real estate industry veteran and a local area expert.

“Why” is it happening…

New Jersey’s Economic Drivers:

New Jersey Home Sales and Inventory levels:

Contrary to what you see on the news, the Hunterdon and Somerset county markets remain strong.  While the network news is correct for some areas in the country (mostly those with heavy new development sales), my report focuses only on our two counties in NJ, which consists primarily of resales. Our only new construction is primarily on the high end of the market.

• YTD, sales across NJ are equal to 2023.
• Locally, we saw a seasonal decrease in sales in November in Hunterdon and Somerset County.
• There are early signs of some pullback in pricing at the higher price tiers, but the lower tiers are still seeing price increases, just not as aggressive as in the past.
• First-time buyers are cooling down considerably due to higher pricing (price resistance), inventory shortages, and interest rates. Their purchasing power has decreased for these reasons, and many have been priced out of the market for now.
• Potential sellers find it challenging to locate suitable housing in the current market and are hesitant to list until they do. They are also dismayed by higher interest rates than they currently have in place on their current homes and, for the most part, are not willing to make a move unless they have an urgent issue, such as a life event or job transfer. About the same amount diminishes their purchasing power, but their equity increases offset it.
• Current mortgages show that nearly 70% are under 4%, and 90% are under 5%.
• The current month’s inventory supply in Hunterdon County remains at 1.8 months. In Somerset County, it is around 1.4 months due to the rapid sales of new listings (velocity) as the market remains active.
• Hunterdon has less inventory, and Somerset County has more than it did a year ago. The unsold inventory in New Jersey has steadily decreased since reaching a peak of over 20,000, and it is down to about 14,300 today.
• New housing development has not kept up with population growth and is now focused on the rental market.

Interest Rates:

• Interest rates hovered around 7% again in early November, rising about 1% since September.
• The Fed cut rates by .5% in September, which was already built into the current rates as they were widely expected.
• Economic conditions since then caused the rise back to 7%.
• It is further anticipated that rates will drop further based on recent economic indicators. Time will tell.
• Many buyers consider attractive ARM rates and creative other buy-down plans as alternatives.
• Based on the current rates, first-time buyer mortgage applications have dropped, but restructuring debt and paying down high-interest items remain active.
• The Fed’s efforts to slow things down have resulted in the above.

National Job Front:

• The U.S. Bureau of Labor Statistics reported that total nonfarm payroll employment increased by a mere 12,000 in October, and unemployment remained at 4.1 percent. Employment continued growing in government, health care, social assistance, and construction.
• At the same time, job gains for August and September were revised by 81,000 and 31,000, respectively. This gets little exposure on the network news channels.
• Also, there was an annual correction of -818,000 jobs being created compared to previous reports. Some of this was blamed on the recent storm damage.
• Many of the new jobs were part-time, indicating that people are finding “side hustles” to help account for inflation.
• It’s important to note that this number includes natural job growth of about 175K per month.
• The analysts also state that many new jobs were lost as small businesses failed and those people reentered the labor force.
• The labor force participation rate held at 62.4 percent. This rate is calculated by dividing the sum of all workers employed or actively looking for a job by the working-age population. It also fluctuates due to people taking a second job to meet ends.
• Many people were resigning to pursue new career paths due to perceived health risks, the desire for more remote work, and a better work-life balance. New technology-based jobs are affecting this trend. That trend now seems to be reversing, especially the larger firms.
• For those under $50K, there is even some incentive not to work and collect benefits, contributing to the current unemployment rate.
• The lower end of the job market has benefited the most from this trend, with higher starting pay rates competing for the lack of workforce. Jobs starting in the mid to upper $20 per hour are already being offered.

New Jersey Job Front:

• Statewide, we saw a decrease in new jobs of 23% in 2023.
• So far in 2024, NJ has seen a decline of 69%
• The unemployment rate in NJ for September was 4.7%, still quite a bit above the national rate.
• NJ has gained about 2,700 YTD through September of 2024 compared to 67,000 the prior year.
• Job losses are still prevalent in the construction, food services, and accommodations industries. Retail and wholesale trade are also experiencing a downturn in some states. Even health care, social assistance, and manufacturing are shedding workers.
• NJ was hit harder than most states in the early months of the pandemic, but it has made a remarkable recovery since then.
• It should be noted that the numbers of jobs in New Jersey run a month behind national ones.

Rental Market Trends:

• Rental prices in New Jersey continued to increase in 2024, with a year-over-year average of just under 3%. They are currently averaging just over $2,300 per unit. However, recent data shows a slight decrease in these prices.
• The vacancy rate in central New Jersey is currently at 4.3%, indicating a limited rental supply and leading to a rise in rental prices.
• The rental market typically includes low-end buyers who opt to rent due to a shortage of available inventory. However, the recent constraints in the mortgage market have also contributed to the increase in this sector.

New Jersey Foreclosures:

• NJ’s delinquency rate (more than 90 days past due) has decreased, which is a positive development.
• NJ’s current foreclosure rate remains low at 1.1%.
• Nationally, $11 trillion in equity is needed to protect homeowners during a potential recession.
• The average FICO score of mortgage holders is over 750, higher than during the 2008 financial crisis.
• A slowdown and recession could still cause job losses and put mortgages at risk.
• A housing bust is not predicted to occur since there is a lot of positive equity in houses, thanks to recent appreciations.

Forecast:

• The COVID-19 pandemic seems to be over (with only minor flare-ups).
• Supply chain shortages have affected inflation, and concerns remain that undersupply could cause further price increases.
• The consumer price index, which rose by .2% in September, continues to cause havoc on auto, finished goods, and energy pricing and is the enemy of long-term interest rates.
• Mortgage rates have reversed their September pullback and are now back to the 7% range.
• The local inventory accumulates primarily in the more expensive price ranges, and the housing affordability index has increased slightly (based on wages, rates, and home prices). As a result, mortgage payments now have an all-time high gross percentage (which slows spending in other sectors).
• Due to COVID-19 and recent unrest in NYC, interest in living in more suburban counties such as Hunterdon and Somerset has disappeared. In fact, many companies now require more on-site presence reversing the move westward.
• Retailing and using vacant industrial space will transform to meet the new altered demands and lifestyles.
• The local market will have to adapt to the new suburban renaissance in terms of where people will work and what they need to adapt.
• The lingering question has been, “Can we keep this momentum up with low to slightly rising inventory?” as predictions for slower sales and price increases in 2024 have already been made. Price increases were about an 11% increase in 2023 in NJ. The new year sees more normalized increases (based on your price points) of 6%+ (but that is what we also said last year).
• Days on the market in our area have risen over the past month, showing that buyers are becoming less active during the summer months.
• However, change will result in a trend towards a more normalized environment if inventory continues to come onto the market and first-time buyer fatigue continues.
• Younger (millennial) buyers are coming of age in the pipeline for at least the next four to five years, which will continue to put more demand on the first-time buyer market, usually under $400K.
• Housing markets are adding much of the new inventory at higher price points, normalizing those results. Change usually happens from the top down and from east to west.
• In a nutshell, 2024 will finish much like 2023, with a little more inventory and a little bit better rates.

This is substantial information, and the situation is evolving daily. Nevertheless, it appears to be moving in a positive direction for now. If you require further clarification or have any concerns about how this could impact your circumstances, please don’t hesitate to contact me at (908) 304-4660. I’m always available to chat and assist you in gaining a better understanding.

Note: Joe Peters of Coldwell Banker Residential Brokerage presents this information as a public service. Although reasonable care has been taken to provide this information, it is advised that you seek the guidance of a professional sales agent and avoid making any decisions solely based on my views, gathered trends, and statistics. I am not responsible for any consequences of using this data.

If you have any questions or would like to talk out your situation, please call 908-304-4660

Home Prices Forecast To Climb over the Next 5 Years [INFOGRAPHIC]

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