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 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 in 2021.
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 47 days on the market. Three-hundred twenty-four units went “under contract” in December, down from 389 in the prior month. Newly listed properties in the same period totaled 149, down from 237 in the preceding month.
Our total inventory number decreased from 943 this time last year to 568 units, nearly 40% less than last year. In contrast, sales were up by almost 30% in December, 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 6%.
New Jersey Residential Real Estate Market Forecast
Because of the continued move to the west (urban flight), pent-up demand, and attractive mortgage rates, we expect strong listings and sales thru the first half of 2021. As of this writing, we are not expecting to see any winter drop-off in our activity.
Looking at consumer behavior, we expect to see fewer yet slightly increasing listings and more sales than 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. We are still witnessing many homeowners facing financial and/or life uncertainty, and holding off on listing their properties. Many sellers are also 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 virtual selling model and buying and the latest methodologies and safer 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.
Somerset County Real Estate Market Inventory Breakdown By Price For Last Month:
|Condos/Town Houses *||59||117||178||2|
|Over 55 Communities*||6||12||28||2|
|$000K to $199K||10||10||21||2|
|$200K to $299K||22||55||46||1|
|$300K to $399K||29||90||92||1|
|$400K to $499K||23||56||61||1|
|$500K to $599K||14||32||61||2|
|$600K to $699K||15||22||43||2|
|$700K to $799K||8||17||41||2|
|$800K to $899K||5||9||23||3|
|$900K to $999K||5||11||29||3|
|$1,000K and Up||18||22||151||7|
|Totals for December||149||324||568||2|
|Average Days on Market||47|
|* Included in $ breakdowns|
- 65% of sales in houses < $500,000
- 28% of sales in houses > $500,000
- 07% percent of total sales (or 22 in total) in houses >$1,000,000
Somerset County Real Estate Market Inventory Breakdown By Municipality For Last Month:
|Active Listings||Under Contract||Month’s Supply|
|Far Hills Boro||11||1||11|
|Rocky Hill Boro||0||0|
|South Bound Brook||5||4||1|
Only two areas had no sales last month:
- Rocky hill
Only three areas reported 1 or 2 sales each last month:
- Far hills
- Brenards Twp./Bernardsville – 33 Sales
- Bridgewater – 43 Sales
- Franklin Twp. – 58 Sales
- Hillsbrough – 36 Sales
- Montgomery – 24 Sales
Hotspot areas equaled 63% of the sales last month. The average new listing coming on the market last month neared $601,993. The average price of a unit going “under contract” was $512,827 (15% 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 move 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 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.
- N.J. has under 23,000 units in inventory this year 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 most considerable impact and the $400K to $600K the second largest.
- 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 see 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.
- U.S. unemployment rate slowed in January, with just 225,000 jobs added. An additional 325,000 were added in February, which put the U.S. 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 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 long-term.
New Jersey Job Front:
- In 2019 NJ added 39,000 jobs once again. N.J. 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 U.S. 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 N.J. & 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 acceptable. 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. 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 fallen 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 N.Y. 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 slightly under 4.3% (which is up from 1.3% a year earlier).
- The forbearance numbers will 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, N.J. 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 saw a sharp spike in unemployment
- The GDP had been adversely affected
- Wage growth is Affected.
- Interest rates are bouncing around (but holding).
- Inventory levels are down by 35+%. 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.
- At that point, the balance of 2020 real estate was under extreme pressure as a result.
- Current Real estate values did not seem to be affected due to the lack of inventory.
- From June on:
- We saw new listings come on the market at a faster pace
- 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.
- This process has endured through December, with many listings selling as soon as they hit the market
- Many of the buyers have NY license plates or were coming from the areas in NJ close to NYC
Changes in Lifestyle (Pre Covid):
- The average age at marriage moved to 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 were already seeing a reversal of the above after the NYC area has become a COVID-19 hotspot as well as social unrest.
- This trend was surely to 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 a 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 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
Changes in Lifestyle (Post Covid):
- The movement west was exacerbated by the pandemic and civil unrest in the city
- Buyers needed a live/work/play/learn environment
- Open floor plans, the list-topper for the past twenty years was no longer important
- More emphasis on compartmentalization now topped the list
- Back yard oasis environments provided additional value
- What a difference in consumer thinking since March.
- Consumer confidence was put on pause (at best) in March and then started to fast forward in June (and has not slowed).
- The winter slowdown has never appeared in the real estate market.
- Consumers will still see homeownership as a sound investment. It is just that their shopping list as to what they want has changed.
- 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.
- A lot of these strong equity homeowners are deciding to sell in order to take advantage of the buying surge.
- Some moved to their second homes as they no longer needed to commute.
- Others pushed up their retirement plans.
- 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 have gone on (maybe even faster).
- And never before low seen interest rates plus the move west has helped this situation to reverse.
- We are hoping to see a continued substantial spike up as the vaccines are starting to become a reality and things are better understood, and people get back to a new normal life
- The effect of the COVID-19 pandemic now seems to have its ups and downs (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 -50%)
- The ability for some buyers to get a mortgage
- There could be more possible foreclosures (this is way out)
- Mortgage rates continue to hold at around 2.7% as the fed has maintained its current level of caution.
- Inventory supply will hopefully start to increase over tas we move into the late winter/early spring.
- But, as we have 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 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 people 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.
- What were once “bedroom” communities are changing to” live, work, play & 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 being 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?”.
- Jobs will surely follow the workforce and housing then follow jobs. It is a little out of logical sequence but will sort itself out as we progress.
- Local property values are forecasted to see 7% appreciation in 2020, depending on their location and price points. And, 2021 will see similar gains.
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.
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