Somerset County’s Real Estate Market Conditions November 2019 – Warren Edition

Residential Real Estate

Somerset County's Real Estate Market Conditions October 2019

Somerset County’s Real Estate Market Conditions November 2019 – Warren Edition

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 is happening

Based on the last full month’s contract sales, statistics show a supply of approximately three months, indicating a seller’s market. Normal market conditions average four to six months in Somerset County.  Units going under contract averaged 63 days on the market. 373 properties went “under contract” in  October compared to 420 in the prior month. Newly listed properties in the same period totaled 434.

Somerset County Inventory Breakdown By Price For Last Month:

October October Total  
Somerset County New Under Active Months’
Listings Contract Listings Supply
Condos/Town Houses * 156 129 385 3
Over 55 Communities* 20 7 67 10
$000K to $199K 24 25 41 2
$200K to $299K 78 78 189 2
$300K to $399K 73 71 203 3
$400K to $499K 66 54 185 3
$500K to $599K 36 41 137 3
$600K to $699K 33 31 105 3
$700K to $799K 25 17 98 6
$800K to $899K 25 17 87 5
$900K to $999K 20 17 66 4
$1,000K and Up 40 22 170 8
Totals for October 420 373 1281 3
Average Price $590,113 $519,172 -12.0%  
Average Days on Market 63
* Included in $ breakdowns
  • 57% of sales in houses < $500,000
  • 33% of sales in houses > $500,000 and < $1,000,000
  • 10% percent of total sales (or 13 in total) in houses >$1,000,000

Somerset County Inventory Breakdown By Municipality For Last Month:

Municipality Active Listings Under Contract in Last Month Months Supply
Bedminster Twp
75
13 6
Bernards Twp 156 40 4
Bernardsville 91 8 11
Bound Brook 18 6 3
Branchburg Twp 53 23 2
Bridgewater Twp 149 56 3
Far Hills Boro 13 0
Franklin Twp 172 58 3
Green Brook 31 6 5
Hillsborough 127 53 2
Manville Boro 27 15 2
Millstone Boro 3 3 1
Montgomery Twp 119 24 5
North Plainfield 44 19 2
Peapack Gladstone 21 4 5
Raritan Boro 11 3 4
Rocky Hill Boro 4 0
Somerville Boro 23 9 3
South Bound Brook 19 1 19
Warren Twp 80 24 3
Watchung Boro 45 8 6
Totals 1281 373 3

Only two areas in Somerset County reported no sales in the past month

  • Far Hill
  • Rocky Hill

One area reported one or two sales each last month

  • S Bound Brook

Hotspots:

  • Bernards – 40 sales
  • Bridgewater – 56 sales
  • Franklin – 58 sales
  • Hillsborough – 53 sales
  • Montgomery – 24 sales

These hotspot areas equaled 62% of the sales last month. The average new listing coming on the market last month neared $590,113 The average price of a unit going “under contract” neared $519,172 (12% less).

Warren Township Statistics:

  • There are 80 homes for sale in Warren Township as of this writing.
  • Of the 80 homes for sale, 14 are community properties (such as town houses and condos) and ten are in our 55+ communities
  • The average list price for all listings in Warren Township is $1,000,082.
  • There were 20 new listings in Warren Township last month with an average list price of $930,749.
  • There were also 24 homes that have gone under contract in the past 30 days with an average list price of $1,013,050 and 101 days on market.
  • Giving us just under 4 months of inventory
  • Call for additional details

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:

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

We saw an increase of 12% in sales in September and year to date; we are ahead of 2018 by 4%.  While this is not state-wide, 18 of the 21 counties have benefited with an increase in sales.

Increases in inventory have occurred in all price points above $400,000 with the $400,000 to $600,000 range seeing the largest jump (+4%) followed by the $600,000+ with very slight increases.

The under $400,000 range saw a 13% drop in inventory.

Activity still concentrates in the under $400,000 market where Millennial buyers are transitioning into homeownership.  But, this price point only saw an 8% increase vs. 2018 YTD due to lack of inventory.  The $400 to $600K range also saw a little under 1,500 increase in units sold YTD while dropping 13% in inventory levels.

During the same period, all housing sales above $400,000 and below $1 million showed very modest increases 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.  Houses above $1 million showed a small increase as well.

At the same time, the number of homes offered for sale in New Jersey remained low. Currently, ~31,000 fewer homes (-46%) are on the market compared to the 2011 peak.

Current unsold inventory in New Jersey varies widely by county with only 3.2 months in some and none being above 8.0.  The state is averaging just over four months.

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 5% & 16% less inventory than we had a year ago, respectively, and the inventory is 6% less in Hunterdon & 17% less in Somerset as compared to 2 years ago.

The market has changed from a seller’s to a buyer’s market above $500K market due to the additional inventory coming on to the market affecting the selling prices for those properties.

Also, we are now seeing some millennials coming back into our local markets with 26% thinking that it is the right time to buy (good news).

 

Interest Rates:

Interest rates have risen slightly over the last month.

The economy is strengthening, and Interest rates have fallen in recent weeks to just over 3.75% for a 30-year conventional mortgage. A fifteen-year conventional mortgage rests at just over the 3.18%  mark. Five-year arms are just under the 3.40% range.

Consumer fears of further rises in interest rates and slowly rising home prices are driving the current market demand. The Fed has made several downward adjustments, and more may still be in order.

The fear of increasing interest rates, coupled with steadily increases in prices, is still driving the current market activity.

 

National Job Front:

On the national level, the US added over 2,700,000+ jobs in 2018.

US unemployment rate in September came in with 136,000 jobs added.  And unemployment dropped to 3.5%.

At the end of September, there were 7.1+ million openings compared to nearly 6.0 million unemployed persons.

 

New Jersey Job Front:

NJ added 39,000+ jobs in 2018 as compared to 47,100 for the same period in 2017.

The NJ unemployment rate fell to 3.1% (the lowest it has been on over ten years), bolstering consumer confidence in NJ as well.  In effect, NJ is rising with the national tide of nearly full employment.   Based on the first nine month’s results for 2019, the state is on course to add 55,000 jobs, which would be nearly a 40% gain over 2018.

The level of jobs created has been at consistently higher levels than in the past several years (a silver lining as these additions to our job market will be able to 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 have seen an 11 year high in rental availability,

Rental prices in New Jersey rose nearly 5% in 2018, averaging just over $1,600 per unit. Current vacancy rates in New Jersey have held at 2.7% in central NJ.

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 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 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 are now 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.

The pace of new rental construction has increased to meet this demand and now seems to have caught up.

 

New Jersey Foreclosures:

New Jersey continues to face falling foreclosure rate filings dropped to  2.1%. 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 the local market, especially those walloped by Hurricane Sandy three years ago and rural and urban areas. We rank #5 in the country with 2.1%, led by NY with 2.7%, MS with 2.5% (mostly hurricane-related)  LA with 2.4%, ME with 2.1% and trailed by FL, DE, MD, PA, and AL.  The national baseline number sits at a little under 1.3%.

Foreclosures in NJ in 2018 were the lowest in the state in over four years.  And, 2019 looks to be even better with a forecast of under 40,000 foreclosure filings.

Real Estate Market Recap

Economic conditions:

  • Nationally, 2018 was the eighth straight year of 2 million + job gains.
  • We are now in our longest economic expansion period in America’s history with 100+ months of positive job gains.
  • The GDP is still rising (although its rate of increase seems to be slowing).
  • At 3.1% unemployment, NJ is now near to the national average, which is currently at 3.6% & leading economic indicators in NJ are now surpassing the nation by almost two-fold.
  • The best paying and most attractive jobs are in NYC, pulling many of our millennials in that direction (although this trend is diminishing).
  • And, wages are up 3.2% at the same time.
  • Interest rates have increased to just under 3.75%.
  • And, house prices have risen around 3+% in the more popular housing price points and areas further exasperating the situation (although this appreciation now appears to be slowing).
  • Baby boomers who were 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 inventory is not available) which is causing most of the housing shortage are now finding available inventory.  This situation has loosened up as many new listings have come on the market over the past few months.
  • And there is still little 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 (the shelves are empty in our starter housing price points).
  • And, some empty houses are starting to appear at out higher price points.
  • Foreclosures rates continue to decline (or normalize).
  • There is continued confidence as the new tax and jobs act further stimulates the economy with more jobs as the economy remains robust.

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 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 of smaller luxury hi-rise close to mass transportation and work in the east (truly a mismatch).
  • 60% of all new housing starts in 2018 in NJ were in the rental sector.

Market conditions:

  • We experienced a sales slump in late 2018 due to interest rate hikes. But the first half of 2019 made up for it by being the best we have seen, and the 2nd half is also promising.
  • It appears that we are now entering the next phase of the housing cycle, which is still active, just less robust in price appreciation.  Sort of a cool down from 2018. Or, maybe back to normal.
  • And, we see some warnings of an economic slowdown starting in 2020 and beyond.
  • However, these warnings are not holding back sales activity.  We may see fewer sales and less price appreciation as a result.
  • The effect on housing is seen to be limited to curtailing the growth of price appreciation and not in any loss in value.
  • But, 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.  So, the effect of any slowdown on housing should be minimal (if at all).
  • Consumer confidence remains high nation-wide based on the job and stock market increases.
  • Most consumers still see homeownership as a sound investment.
  • There is a bit of offset to this encouraging news from the discord that we see in our national politics and trade policies.
  • This confidence is reflected in buyer traffic being up at open houses.  However, with a lack of inventory in our lower price points, 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 35% 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 in early 2019 shows an increase in home sales, but price increases only in houses clustered in < $400,000 market where the first-time buyers and Millennials are focused.
  • The >$400K market holds diminishing slightly due to a lack of inventory.  We have seen additional new inventory in the $400K to $600K range.
  • Minimal new construction, lack of entry-level new housing, and COAH restrictions add additional value to the current inventory.
  • The five-year forecast indicates slow but steady price growth (but at reduced rates) at an annual average of 2 to 4% (depending on location and price point).  This price growth will remain higher in the under $400K market. And, little depreciation is being forecasted except in the higher-end inventory.
  • There is an acute shortage of inventory in both Hunterdon and Somerset County in our more popular price points and locations which is holding back even more sales.  In general, we have only about 65% of the inventory that we had in 2011 but are selling current inventory at faster rates.
  • It is simple; we could sell more houses if we had more inventory on hand,  And, as we have started to see small inventory increases over the past six months, 2019 can be a boom for resales.
  • In 2018 prices rose ~ averaging just over 3.5% and depending on price points and locations.  2019 promises to be more normalized with at least 3% growth in prices.  But it depends on your price point and location. The following two years will also see less in % but should still show modest positive growth.
  • Mortgage delinquency is normalizing.

 

Forecast:

  • The economy will continue to prosper with no recession currently in sight for the next 12  months.  And, there most likely will be only a slowdown impact on the rate of price appreciation if this happens.
  • Prime Interest rates have dropped three times already this year.
  • 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. And, the most bullish projections show at least a 7% increase over the next few years.
  • 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 7.1+million open jobs and only 6 million unemployed.  We are at full employment if you consider that 3% of 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 the economy.  In some areas, this is happening via people immigrating from outside of the US to areas with the skills needed to fill open positions.
  • The affordability index shows that there is room for much more sales; all we need an increase in inventory.  The most affordable time to buy appears to be now!.
  • Some high-end fall-out has resulted 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.
  • And, thirty-seven percent of all homes in the US have no mortgage at all.
  • Small investor activity in the market is up.  In many cases, these are flippers buying-low end unsaleable inventory and bringing it up to marketable status.

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 ask me a question or request a monthly copy of this newsletter here.

 

 

 

Somerset County’s Real Estate Market Conditions October 2019 – Warren Edition

Residential Real Estate

Somerset County's Real Estate Market Conditions June 2019

Somerset County’s Real Estate Market Conditions October 2019 – Warren Edition

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 is happening

Based on the last full month’s contract sales, statistics show a supply of approximately four months, indicating a seller’s market. Normal market conditions average four to six months in Somerset County.  Units going under contract averaged 62 days on the market. 332 properties went “under contract” in September compared to 434 in the prior month. Newly listed properties in the same period totaled 459.

Somerset County Inventory Breakdown By Price For Last Month:

September September Total  
Somerset County New Under Active Months’
Listings Contract Listings Supply
Condos/Town Houses * 156 121 431 4
Over 55 Communities* 15 14 61 4
$000K to $199K 13 24 48 2
$200K to $299K 72 84 169 2
$300K to $399K 90 75 231 3
$400K to $499K 62 43 190 4
$500K to $599K 43 34 156 5
$600K to $699K 33 18 119 7
$700K to $799K 45 10 122 12
$800K to $899K 28 17 84 5
$900K to $999K 24 14 74 5
$1,000K and Up 49 13 199 15
Totals for September 459 332 1392 4
Average Price $608,936 $468,784 -23.0%  
Average Days on Market 62
* Included in $ breakdowns
  • 52% of sales in houses < $500,000
  • 38% of sales in houses > $500,000 and < $1,000,000
  • 10% percent of total sales (or 13 in total) in houses >$1,000,000

Somerset County Inventory Breakdown By Municipality For Last Month:

Municipality Active Listings Under Contract in Last Month Months Supply
Bedminster Twp 68 13 5
Bernards Twp 161 41 4
Bernardsville 96 8 12
Bound Brook 15 4 4
Branchburg Twp 85 13 7
Bridgewater Twp 170 50 3
Far Hills Boro 12 0
Franklin Twp 179 63 3
Green Brook 31 7 4
Hillsborough 136 43 3
Manville Boro 24 13 2
Millstone Boro 5 0
Montgomery Twp 144 18 8
North Plainfield 48 19 3
Peapack Gladstone 24 0
Raritan Boro 11 2 6
Rocky Hill Boro 4 0
Somerville Boro 23 10 2
South Bound Brook 14 11 1
Warren Twp 97 16 6
Watchung Boro 45 1 45
Totals 1392 332 4

Only four areas in Somerset County reported no sales in the past month

  • Far Hills
  • Peapack/Gladstone
  • Rocky Hill
  • Millstone

Two areas reported one or two sales each last month

  • Raritan Boro.
  • Watchung

Hotspots:

  • Bernards – 41 sales
  • Bridgewater – 50 sales
  • Franklin – 63 sales
  • Hillsborough – 43 sales
  • Montgomery – 18 sales

These hotspot areas equaled 65% of the sales last month. The average new listing coming on the market last month neared $508,936 The average price of a unit going “under contract” neared $468,784 (23% less).

Warren Township Statistics:

  • There are 97 homes for sale in Warren Township as of this writing.
  • Of the 97 homes for sale, 15 are community properties (such as town houses and condos) and ten are in our 55+ communities
  • The average list price for all listings in Warren Township is $1,004,935.
  • There were 22 new listings in Warren Township last month with an average list price of $1,059,850.
  • There were also 26 homes that have gone under contract in the past 30 days with an average list price of $818,856 and 108 days on market.
  • Giving us just under 4 months of inventory
  • Call for additional details

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:

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

We saw an increase of 6% in sales in August and year to date; we are ahead of 2018 by 3%.  And, this is not state-wide.  Only 12 of the 21 counties have benefited with an increase in sales.

Increases in inventory have occurred in all price points above $400,000 with the $400,000 to $600,000 range seeing the largest jump (+9%) followed by the $600,000+ with a slight increase.

The under $400,000 range saw a 9% drop n inventory.

Activity still concentrates in the under $400,000 market where Millennial buyers are transitioning into homeownership.  But, this price point only saw only a slight increase vs. 2018 YTD due to lack of inventory.  The $400 to $600K range also saw a nearly 900 increase in units sold YTD while dropping 22z% in inventory levels.

During the same period, all housing sales above $400,000 and below $1 million showed very modest increases 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.  Houses above $1 million showed a small increase as well.

At the same time, the number of homes offered for sale in New Jersey remained low. Currently, ~31,000 fewer homes (-45%) are on the market compared to the 2011 peak.

Current unsold inventory in New Jersey varies widely by county with only 3.0 months in some and none being above 8.0.  The state is averaging just under four months.

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 2% & 8% less inventory than we had a year ago, respectively, and the inventory is 2% more in Hunterdon & 11% less in Somerset as compared to 2 years ago.

The market has changed from a seller’s to a buyer’s market above $500K due to the additional inventory coming on to the market.

Also, we are now seeing some millennials coming back into our local markets and buying homes (good news).

 

Interest Rates:

Interest rates have risen slightly over the last month.

The economy is strengthening, and Interest rates have fallen in recent weeks to just over 3.65% for a 30-year conventional mortgage. A fifteen-year conventional mortgage rests at just over the 3.15%  mark. Five-year arms are just under the 3.38% range.

Consumer fears of further rises in interest rates and slowly rising home prices are driving the current market demand. The Fed has made several downward adjustments and more may still be in order.

The fear of increasing interest rates, coupled with steadily increases in prices, is still driving the current market activity.

 

National Job Front:

On the national level, the US added over 2,700,000+ jobs in 2018.

US unemployment rate in August came in with 130,000 jobs added.  And unemployment remained at 3.7%.

As of the end of August, the US had added a little over 1.3 million jobs vs. around 1.9 million the prior year.

At this rate, they are predicting 1.6 million jobs will be added by year-end.

At the end of August, there were 7.2+ million openings compared to nearly 6.1 million unemployed persons.

 

New Jersey Job Front:

NJ added 39,000+ jobs in 2018 as compared to 47,100 for the same period in 2017.

The NJ unemployment rate fell to 3.2% (the lowest it has been on over ten years), bolstering consumer confidence in NJ as well.  In effect, NJ is rising with the national tide of nearly full employment.   Based on the first eight month’s results, 2019 the state has added 21,000+ jobs in 2019 vs. only 14,000+ for the same period in the prior year.

The level of jobs created has been at consistently higher levels than in the past several years (a silver lining as these additions to our job market will be able to 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 have seen an 11 year high in rental availability,

Rental prices in New Jersey rose nearly 5% in 2018, averaging just over $1,600 per unit. Current vacancy rates in New Jersey have fallen to 2.7% in central NJ.

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 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 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 are now 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.

The pace of new rental construction has increased to meet this demand and now seems to have caught up.

 

New Jersey Foreclosures:

New Jersey continues to face falling foreclosure rate filings dropped to  2.1%. 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 the local market, especially those walloped by Hurricane Sandy three years ago and rural and urban areas. We rank #5 in the country with 2.1%, led by NY with 2.8%, MS with 2.6% (mostly hurricane-related)  LA with 2.4%, ME with 2.1% and trailed by FL, DE, MD, PA, and AL.  The national baseline number sits at a little under 1.3%.

Foreclosures in NJ in 2018 were the lowest in the state in over four years.  And, 2019 looks to be even better with a forecast of under 41,700 foreclosure filings.

Real Estate Market Recap

Economic conditions:

  • Nationally, 2018 was the eighth straight year of 2 million + job gains.
  • We are now in our longest economic expansion period in America’s history with 100+ months of positive job gains.
  • The GDP is still rising (although its rate of increase seems to be slowing).
  • At 3.3% unemployment, NJ is now near to the national average, which is currently at 3.5% & leading economic indicators in NJ are now surpassing the nation by almost two-fold.
  • The best paying and most attractive jobs are in NYC, pulling many of our millennials in that direction (although this trend is diminishing).
  • And, wages are up 3.2% at the same time.
  • Interest rates have dropped to surprising lows of under 3.65% since the first of the year.
  • And, house prices have risen around 3+% in the more popular housing price points and areas further exasperating the situation (although this appreciation now appears to be slowing).
  • Baby boomers who were 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 inventory is not available) which is causing most of the housing shortage are now finding available inventory.  This situation has loosened up as many new listings have come on the market over the past few months.
  • And there is still little entry-level construction going on in our area, just larger homes and new rentals (only 50% of what it was in 2005).
  • As a result of the previous two points, we are experiencing the current housing inventory shortage (the shelves are empty in our starter housing price points).
  • And, some empty houses are starting to appear at out higher price points.
  • Foreclosures rates continue to decline (or normalize).
  • There is continued confidence that the new tax and jobs act will further stimulate the economy with more jobs as the economy remains robust.

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 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 of smaller luxury hi-rise close to mass transportation and work in the east (truly a mismatch).
  • 60% of all new housing starts in 2018 in NJ were in the rental sector.

Market conditions:

  • We experienced a sales slump in late 2018 due to interest rate hikes. But the first half of 2019 made up for it by being the best we have seen, and the 2nd half is also promising.
  • It appears that we are now entering the next phase of the housing cycle, which is still active, just less robust in price appreciation.  Sort of a cool down from 2018. Or, maybe back to normal.
  • And, we see some warnings of an economic slowdown starting in late 2020 and beyond.
  • However, these warnings are not holding back sales activity.  We may see fewer sales and less price appreciation as a result.
  • The effect on housing is seen to be limited to curtailing the growth of price appreciation and not in any loss in value.
  • But, 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.  So, the effect of any slowdown on housing should be minimal (if at all).
  • Consumer confidence remains high nation-wide based on the job and stock market increases.
  • Most consumers still see homeownership as a sound investment.
  • There is a bit of offset to this encouraging news from the discord that we see in our national politics and trade policies.
  • This confidence is reflected in buyer traffic being up at open houses.  However, with a lack of inventory in our lower price points, 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 35% 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 in early 2019 shows an increase in home sales, but price increases only in houses clustered in < $400,000 market where the first-time buyers and Millennials are focused.
  • The >$400K market holds diminishing slightly due to a lack of inventory.  We have additional new inventory in the $400K to $600K range.
  • 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 but steady price growth (but at reduced rates) at an annual average of 2 to 4% (depending on location and price point).  This price growth will remain higher in the under $400K market. And, little depreciation in pricing is being forecasted except in the higher-end inventory.
  • There is an acute shortage of inventory in both Hunterdon and Somerset County in our more popular price points and locations holding back even more sales.  In general, we have only about 65% of the inventory that we had in 2011 but are selling current inventory at faster rates.
  • It is simple; we could sell more houses if we had more inventory on hand,  And, as we have started to see small inventory increases over the past six months, 2019 can be a boom for resales.
  • In 2018 prices rose ~ averaging just over 3.5% and depending on price points and locations.  2019 promises to be more normalized with at least 3% growth in prices.  But it depends on your price point and location. The following two years will also see less in % but should still show modest positive growth.
  • Mortgage delinquency is normalizing.

 

Forecast:

  • The economy will continue to prosper with no recession currently in sight for the next 18  months.  And, there most likely will be only a slowdown impact on the rate of price appreciation if this happens.
  • Prime Interest rates will probably drop further in 2019.  And, we have just seen a slight drop and are anticipating another.
  • 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. And, the most bullish projections show at least a 7% increase over the next few years.
  • 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 7.2+million open jobs and only 6. million unemployed.  We are at full employment if you consider that 3% of 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 our the economy.  In some areas, this is happening via people immigrating from outside of the US to areas with the skills needed to fill open positions.
  • The affordability index shows that there is room for much more sales; all we need an increase in inventory.  The most affordable time to buy appears to be now!.
  • Some high-end fall-out has resulted 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.
  • And, thirty-seven percent of all homes in the US have no mortgage at all.
  • Small investor activity in the market is up.  In many cases, these are flippers buying-low end unsaleable inventory and bringing it up to marketable status.

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 ask me a question or request a monthly copy of this newsletter here.

 

 

 

Somerset County’s Real Estate Market Conditions August 2019 – Warren Edition

Residential Real Estate

Somerset County's Real Estate Market Conditions June 2019

Somerset County’s Real Estate Market Conditions August 2019 – Warren Edition

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.

What is happening

Based on the last full month’s contract sales, statistics show a supply of approximately fourmonths indicating a seller’s market. Normal market conditions average four to six months in Somerset County.  Units going under contract averaged 62 days on the market. 436 properties went “under contract” in June compared to 430 in the prior month. Newly listed properties in the same period totaled 442.

Somerset County Inventory Breakdown By Price For Last Month:

New Listings Under Contract Active Listings Month’s Supply
Condos/Town Houses * 146 157 454 3
Over 55 Communities* 16 12 64 5
$000K to $199K 20 37 66 3
$200K to $299K 87 92 187 2
$300K to $399K 88 96 234 3
$400K to $499K 67 37 191 3
$500K to $599K 52 44 181 3
$600K to $699K 38 38 130 3
$700K to $799K 25 28 135 5
$800K to $899K 27 22 107 4
$900K to $999K 13 9 87 7
$1,000K and Up 25 33 210 8
Totals for July 442 436 1528 4
Average Price $527,722 $514,937 -2.4%  
Average Days on Market 62
* Included in $ breakdowns
  • 50% of sales in houses < $500,000
  • 35% of sales in houses > $500,000 and < $1,000,000
  • 06% percent of total sales (or 33 in total) in houses >$1,000,000

Somerset County Inventory Breakdown Location For Last Month:

New Listings Under Contract Active Listings Month’s Supply
Condos/Town Houses * 146 157 454 3
Over 55 Communities* 16 12 64 5
$000K to $199K 20 37 66 3
$200K to $299K 87 92 187 2
$300K to $399K 88 96 234 3
$400K to $499K 67 37 191 3
$500K to $599K 52 44 181 3
$600K to $699K 38 38 130 3
$700K to $799K 25 28 135 5
$800K to $899K 27 22 107 4
$900K to $999K 13 9 87 7
$1,000K and Up 25 33 210 8
Totals for July 442 436 1528 4
Average Price $527,722 $514,937 -2.4%  
Average Days on Market 62
* Included in $ breakdowns

Only one area in Somerset County reported no sales in the past month

  • Millstone

Two areas reported one or two sales each last month

  • Far Hills
  • Rocky Hill

Hotspots:

  • Bernards – 44 sales
  • Bridgewater – 59 sales
  • Franklin – 81 sales
  • Hillsborough – 54 sales
  • Montgomery – 32 sales

These hotspot areas equaled 62% of the sales last month. The average new listing coming on the market last month neared $527,722 The average price of a unit going “under contract” neared $514,937 (2% 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.

Warren Township Statistics:

  • There are 126 homes for sale in Warren Township as of this writing.
  • Of the 126 homes for sale, 19 are community properties (such as town houses and condos) and twelve are in our 55+ communities
  • The average list price for all listings in Warren Township is $948,215.
  • There were 23 new listings in Warren Township last month with an average list price of $803,795.
  • There were also 27 homes that have gone under contract in the past 30 days with an average list price of $981,811 and 88 days on market.
  • Giving us just under 5 months of inventory
  • Call for additional details

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 seven months (but is still far 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 is turning the tide back to a buyers market (or at least neutralize it to being a normal market).

After an increase in sales for the past three months, we saw a decrease of 2% in June. . Year to date we are slightly ahead of 2018.  And, this is not state-wide.  Only 12 of the 21 counties have benefited with an increase in sales.

Increases in inventory have occurred in all price points above $400,000 with the $400,000 to $600,000 range seeing the largest jump (+12%) followed by the $600,000+ with a 3% increase.

The under $400,000 range saw a 6% drop n inventory.

Activity still concentrates in the under $400,000 market where Millennial buyers are transitioning into homeownership.  But, this price point only saw a slight increase vs. 2018 YTD due to lack of inventory.  The $400 to $600K range also saw a 13% increase YTD due to additional inventory coming on the market in that price range.

During the same period, all housing sales above $600,000 and below $1 million showed very modest increases 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.  Houses above $1 million showed a small increase as well.

At the same time, the number of homes offered for sale in New Jersey remained low (but rose by 7% last month). Currently, ~30,000 fewer homes (-41%) are on the market compared to the 2011 peak.

Current unsold inventory in New Jersey varies widely by county with only 2.8 months in some and none being above 8.0.  The state is averaging 3.8 months.

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 2% & -1% more inventory than we had a year ago respectively, but about the sales in 1% more in Hunterdon & 7% less in Somerset as compared to 2 years ago.

The market has changed from a seller’s to a buyer’s market above $500K due to the additional inventory coming on to the market.

Also, we are now seeing some millennials coming back into our local markets and buying homes (good news).

 

Interest Rates:

Interest rates have dropped slightly further over the last month.

The economy is strengthening, and Interest rates have fallen in recent weeks to just over 3.75% for a 30-year conventional mortgage. A fifteen-year conventional mortgage rests at just over the 3.18%  mark. Five-year arms are just under the 3.47% range.

Consumer fears of further rises in interest rates and slowly rising home prices are driving the current market demand. The Fed appears to have interest rates on hold for the first two quarters (and maybe the year). We might even see a downward adjustment.

The fear of increasing interest rates, coupled with steadily increases in prices, is still driving the current market activity.

 

National Job Front:

On the national level, the US added over 2,700,000+ jobs in 2018.

US unemployment rate in June came in with 224,000 jobs added.  And unemployment rose slightly to 3.7%.

As of the end of June, the US had added a little over 1 million jobs vs. around 1.4 million the prior year.

At the end of May, there were 7.3+ million openings compared to nearly 5.9 million unemployed persons.

 

New Jersey Job Front:

NJ added 39,000+ jobs in 2018 as compared to 47,100 for the same period in 2017.

The NJ unemployment rate fell to 3.5% (the lowest it has been on over ten years) bolstering consumer confidence in NJ as well.  In effect, NJ is rising with the national tide of nearly full employment.   Based on the first six month’s results, 2019 the state has added 25,000+ jobs in 2019 vs. only 17,000+ for the same period in the prior year.

The level of jobs created was at a much higher level than in the past several years (a silver lining as these additions to our job market will be able to 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 have seen an 11 year high in rental availability,

Rental prices in New Jersey rose nearly 5% in 2018, averaging just over $1,600 per unit. Current vacancy rates in New Jersey have fallen to just under 4% statewide and 2.7% in central NJ.  This rise resulted in part by a rapid increase in building in this sector.

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 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 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 are now seeing more educated millennials moving east into higher rent and cost of living areas that eat into their discretionary income (including savings).  Makes one wonder where this all is heading.

The pace of new rental construction has increased to meet this demand and now seems to have caught up.

 

New Jersey Foreclosures:

New Jersey continues to face high, but falling foreclosure rate filings dropped to  2.1%. 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 the local market, especially those walloped by Hurricane Sandy three years ago and rural and urban areas. We rank #6 in the country with 2.1%, led by NY with 2.7%, MS with 2.4% (mostly hurricane-related)  LA with 2.4%, ME with 2.1% and trailed by FL, DE, MD, PA, and AL.  The national baseline number sits at a little under 1.3%.

Foreclosures in NJ in 2018 were the lowest in the state in over four years.  And, 2019 looks to be even better with a forecast of under 42,500 foreclosure filings.

 

Real Estate Market Recap

Economic conditions:

  • Nationally, 2018 was the eighth straight year of 2 million + job gains.
  • We are now in our longest economic expansion period in America’s history with 100+ month’s of positive job gains.
  • The GDP is still rising (although its rate of increase seems to be slowing).
  • At 3.5% unemployment, NJ is now near to the national average, which is currently at 3.7% & leading economic indicators in NJ are now surpassing the nation by almost two-fold.
  • The best paying and most attractive jobs are in NYC, pulling many of our millennials in that direction.
  • And, wages are up 3.2% at the same time.
  • Interest rates have dropped to surprising lows of under 3.75% since the first of the year.
  • And, house prices have risen around 3+% in the more popular housing price points and areas further exasperating the situation (although this appreciation now appears to be slowing).
  • Baby boomers who were 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 inventory is not available) which is causing most of the housing shortage are now finding available inventory.  This situation has loosened up as many new listings have come on the market over the past few months.
  • And there is still little 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 (the shelves are empty in our starter housing price points).
  • And, some houses are starting to appear as empty at out higher price points.
  • Foreclosures are on the decline.
  • There is continued confidence that the new tax and jobs act will further stimulate the economy with more jobs as the economy remains robust.

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 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 in the east (truly a mismatch).
  • 60% of all new housing starts in 2018 in NJ were in the rental sector.

Market conditions:

  • We experienced a sales slump in late 2018 due to interest rate hikes. But the first half of 2019 made up for it, and the 2nd half also looks promising.
  • It appears that we are now entering the next phase of the housing cycle, which is still active, just less robust in price appreciation.  Sort of a cool down from 2018. Or, maybe back to normal.
  • And, we see some warnings of an economic slowdown starting in late 2020 and beyond as the fed might adjust interest rates to curb inflation.
  • However, these warnings are not holding back sales activity.  We may just see a fewer sales and a little lower price appreciation as a result.
  • The effect on housing is seen to be limited to curtailing the growth of price 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 high nation-wide based on the job and stock market increases.
  • Most consumers still see homeownership as a sound investment.
  • There is a bit of offset to this encouraging news from the discord that we see in our national politics.
  • This confidence is reflected in buyer traffic being up at open houses.  However, with a lack of inventory in our lower price points, 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 35% 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 in early 2019 shows an increase in home sales but price increases only in houses clustered in < $400,000 market where the first-time buyers and Millennials are focused.
  • The >$400K 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.).
  • 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 but steady price growth (but at reduced rates) at an annual average of 2 to 4% (depending on location and price point).  This price growth will remain higher in the under $400K market. But, no depreciation in pricing is being forecasted except in the higher end inventory.
  • There is an acute shortage of inventory in both Hunterdon and Somerset County in our more popular price points and locations holding back even more sales.  In general, we have only about 40% of the inventory that we had in 2011 bu are selling current inventory at faster rates.
  • It is simple; we could sell more houses if we had more inventory on hand,  And, as we have started to see small inventory increases over the past six months, 2019 can be a boom for resales.
  • In 2018 prices rose ~ averaging just over 3.5% and depending on price points and locations.  2019 promises to be more normalized with at least 3% growth in prices.  But it depends on your price point and location. The following two years will also see less in % but should still show modest positive growth.
  • Mortgage delinquency is normalizing.

 

Forecast:

  • The economy will continue to prosper with no recession currently in sight for the next 18 to 24 months.  And, there most likely will be only a slowdown impact on the rate of price appreciation if this happens.
  • Prime Interest rates will probably not climb too much further in 2019.  And, we have just seen a slight drop.
  • 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. And, the most bullish projections show at least a 7% increase over the next few years.
  • 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 7.3+million open jobs and only 5.9 million unemployed.  We are at full employment if you consider that 3% of 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 just need an increase in inventory.  The most affordable time to buy appears to be now!.
  • Some high-end fall-out has resulted 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.
  • Small investor activity in the market is up.  In a lot of cases these are flippers who are buying low end unsaleable inventory and bringing it up to marketable status.

 

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.

You can ask me a question or request a monthly copy of this newsletter here.

 

Somerset County’s Real Estate Market Conditions June 2019 – Warren Edition

Residential Real Estate

Residential Real Estate

Somerset County’s Real Estate Market Conditions June 2019 –  Warren Edition

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.

 

What is happening

Based on the last full month’s contract sales, statistics show a supply of approximately three months. Normal market conditions average four to five months in Somerset County.  Units going under contract averaged 51 days on the market. Five hundred properties went “under contract” in May compared to 435 in the prior month. Newly listed properties in the same period totaled 621.

 

Somerset County Inventory Breakdown By Price For Last Month:

May May Total  
Somerset County New Under Active Months’
Listings Contract Listings Supply
Condos/Town Houses * 174 173 431 2
Over 55 Communities* 20 18 59 3
$000K to $199K 23 38 54 1
$200K to $299K 78 116 178 2
$300K to $399K 106 94 229 2
$400K to $499K 60 69 153 2
$500K to $599K 93 63 186 3
$600K to $699K 61 35 146 4
$700K to $799K 45 26 139 5
$800K to $899K 54 19 116 6
$900K to $999K 29 18 95 5
$1,000K and Up 72 22 282 13
Totals for May 621 500 1578 3
Average Price $654,103 $493,305 -24.6%  
Average Days on Market 51
* Included in $ breakdowns
  • 63% of sales in houses < $500,000
  • 32% of sales in houses > $500,000 and < $1,000,000
  • 04% percent of total sales (or 22 in total) in houses >$1,000,000

Somerset County Inventory Breakdown Location For Last Month:

       Here is that May activity by municipality:
Municipality Active Listings Under Contract in Last Month Months Supply
Bedminster Twp 73 23 3
Bernards Twp 225 68 3
Bernardsville 103 17 6
Bound Brook 15 11 1
Branchburg Twp 63 25 3
Bridgewater Twp 189 58 3
Far Hills Boro 12 2 6
Franklin Twp 192 98 2
Green Brook 36 7 5
Hillsborough 149 65 2
Manville Boro 22 18 1
Millstone Boro 3 2 0
Montgomery Twp 166 34 5
North Plainfield 42 23 2
Peapack Gladstone 15 2 8
Raritan Boro 12 2 6
Rocky Hill Boro 4 0
Somerville Boro 40 13 3
South Bound Brook 12 4 3
Warren Twp 143 19 8
Watchung Boro 62 9 7
Totals 1578 500 3

Only one area in Somerset County reported no sales in the past month

  • Rocky Hill

Four areas reported one or two sales each last month

  • Far Hills
  • Millstone
  • Peapack/Gladstone
  • Raritan

Hotspots:

  • Bernards – 68 sales
  • Bridgewater – 58 sales
  • Franklin – 98 sales
  • Hillsborough – 65 sales
  • Montgomery – 34 sales

These hotspot areas equaled 64% of the sales last month. The average new listing coming on the market last month neared $654,103 The average price of a unit going “under contract” neared $493,305 (25% less).

Warren Township Statistics:

  • There are 143 homes for sale in Warren Township as of this writing.
  • Of the 143 homes for sale, twenty are community properties (such as town houses and condos) and fifteen are in our 55+ communities
  • The average list price for all listings in Warren Township is $1,042,496.
  • There were 46 new listings in Warren Township last month with an average list price of $1,031,017.
  • There were also nineteen homes that have gone under contract in the past 30 days with an average list price of $744,258 and 67 days on market.
  • Giving us just under 8 months of inventory

Call for additional details

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 an improvement in the inventory situation over the past six months (but is still far 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 is turning the tide back to a buyers market (or at least neutralize it to being a normal market).

We saw an increase of 7% in home sales in NJ in April.  Year to date we are 4% above 2018.  It should be noted that this is not statewide.  Only 12 of the 21 counties have benefited with an increase in sales.

Increases in inventory have occurred in all price points above $400,000 with the $400,000 to $600,000 range seeing the largest jump followed by the $600,000 to $1,000,000 range.

The under $400,000 range saw a 4% drop n inventory.

Activity still concentrates in the under $400,000 market where Millennial buyers are transitioning into home ownership.  But, this price point only saw a slight increase vs. 2018 YTD due to lack of inventory.  The $400 to $600K range also saw a small increase YTD due to additional inventory coming on the market in that price range.

During the same period, all housing sales above $600,000 and below $1 million showed very modest increases 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.  Houses above $1 million showed a small decrease.

At the same time, the number of homes offered for sale in New Jersey remained low (but rose by 7% last month). Currently, ~31,000 fewer homes (-43%) are on the market compared to the 2011 peak.

Current unsold inventory in New Jersey varies widely by county with only 2.6 months n some and none being above 8.0.

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 & 2% more inventory that we had a year ago respectively, but about 4% more sales in Hunterdon  & 4% less in Somerset.

The market has changed from a seller’s to a buyer’s market above $500K due to the additional inventory coming on to the market.

Also, we are now seeing some millennials coming back into our local markets and buying homes (good news).

 

Interest Rates:

Interest rates have dropped slightly further over the last month.

The economy is strengthening, and Interest rates have fallen in recent weeks to just under 4 for a 30-year conventional mortgage. A fifteen-year conventional mortgage rests at just over the 3.45%  mark. Five-year arms are just under the 3.6% range.

Consumer fears of further rises in interest rates and slowly rising home prices are driving the current market demand. The Fed appears to have interest rates on hold for the first two quarters (and maybe the year). We might even see a downward adjustment.

The fear of increasing interest rates, coupled with steadily increases in prices is still driving the current market activity.

 

National Job Front:

On the national level, the US added over 2,700,000+ jobs in 2018 (an improvement over the initial reports).

US unemployment rate in April came in with 263.000 jobs added.  And unemployment remained at 3.6%.

This gives us 103 consecutive months of job gains.

At the end of January, there were 7.5+ million openings compared to nearly 6.2 million unemployed persons.

Consumer confidence is the highest since 2004.

 

New Jersey Job Front:

NJ added 39,000+ jobs in 2018 as compared to 47,100 for the same period in 2017.

The NJ unemployment rate rose slightly to 3.9% (the lowest it has been on over ten years) bolstering consumer confidence in NJ as well.  In effect, NJ is rising with the national tide of nearly full employment.  We added jobs in January, but lost jobs in February and then added 3,600 in March.  April added 11,800 more jobs.  Based on these four month’s results, 2019 the state has added 25,000+ jobs in 2019 vs. only 8,300 for the same period in the prior year.

The level of jobs created was at a much higher level than in the past several years (a silver lining as these additions to our job market will be able to 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.

Rental prices in New Jersey rose nearly 5% in 2018, averaging just over $1,600 per unit. Current vacancy rates in New Jersey have fallen to just under 4% statewide and 2.8% in central NJ.  This rise resulted in part by a rapid increase in building in this sector.

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 a 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 their discretionary income (including savings).  Makes one wonder where this all is heading.

The pace of new rental construction has increased to meet this demand.

 

New Jersey Foreclosures:

New Jersey continues to face high, but falling foreclosure rate filings remained at 2.3%. 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 the local market, especially those walloped by Hurricane Sandy three years ago and rural and urban areas. We rank #4 in the country, led by NY with 2.8%, MS with 2.8% (mostly hurricane-related)  LA with 2.6% and trailed by ME, FL, DE, MD, PA, and AL.  The national baseline number sits at a little under 1.4%.

Foreclosures in NJ in 2018 were the lowest in the state in over four years.  And, 2019 looks to be even better with a forecast of under 44,600 foreclosure 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.

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 in NJ and even turn into a deficit in some most affluent areas.

The initial findings after people are returning from their accountants is promising with many low to moderate income bracket taxpayers finding that they have more money in their pocket that they expected.  Let’s see how this plays out.

 

Real Estate Market Recap 

Economic conditions:

  • Nationally, 2018 was the eighth straight year of 2 million + job gains.
  • We are now in our longest economic expansion period in America’s history with 103 month’s of positive job gains.
  • The GDP is still rising (although its rate of increase seems to be slowing).
  • At 3.9% unemployment, NJ is now near to the national average, which is also currently at 3.6% & leading economic indicators in NJ are now surpassing the nation by almost two-fold.
  • The best paying and most attractive jobs are in NYC, pulling many or our millennials in that direction.
  • And, wages are up 3.2% at the same time.
  • Interest rates have dropped to surprising lows of just under 4% since the first of the year.
  • And, house prices have risen around 3+% in the more popular housing price points and areas further exasperating the situation (although this appreciation now appears to be slowing).
  • Baby boomers who were 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 inventory is simply not available) which is causing most of the housing shortage are now finding available inventory.  This situation has loosened up as many new listings have come on the market over the past few months.
  • And there is still little 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 (the shelves are empty in our starter housing price points).
  • And, some houses are starting to appear as empty at out higher price points.
  • Foreclosures are on the decline.
  • There is continued 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.  We see a lot of smiles on the faces of those that have done their taxes already.

 

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.
  • Demand for larger houses has diminished not only in NJ but everywhere.
  • As a result of job opportunities, 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 in the east (truly a mismatch).
  • 60% of all new housing starts in 2018 in NJ were in the rental sector.

 

Market conditions:

  • We experienced a sales slump in late 2018 due to interest rate hikes.
  • It appears that we are now entering the next phase of the housing cycle which is still active, just less robust.  Sort of a cool down from 2018. Or, maybe back to normal.
  • And, we are starting to see some warnings of an economic slowdown starting in late 2020 and beyond as the fed might adjust interest rates to curb inflation.
  • However, these warnings are not holding back sales.  We might just see  fewer sales and a little less price appreciation as a result.
  • The effect on housing is seen to be limited to curtailing the growth of price 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 high nation-wide based on the job and stock market increases.
  • Most consumers still see home ownership as a sound investment.
  • There is a bit of offset to this encouraging news from the discord that we see in our national politics.
  • This confidence is reflected in buyer traffic being up at open houses.  However, with a lack of inventory in our lower price points, 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 35% 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 in early 2019 shows an increase in home sales but price increases only in houses clustered in < $400,000 market where the first-time buyers and Millennials are focused.
  • The >$400K 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.).
  • 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 but steady price growth (but at reduced rates) at an annual average of 2 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 holding back sales.  In general, we have only about 40% of the inventory that we had in 2011.
  • It is simple; we could sell more houses if we had more inventory on hand,  And, as we have started to see small inventory increases over the past six months, 2019 can be a boom for resales.
  • In 2018 prices rose ~ averaging just over 3.5% and depending on price points and locations.  2019 promises to be more normalized with a 2 to 3% growth in prices.  But it depends on your price point and location. The following two years will also see less in % but should still show modest growth.
  • Mortgage delinquency is normalizing.

 

Forecast:

  • The economy will continue to prosper with no recession currently in sight for the next 24 to 36 months.  And, there most likely will be only an impact on the rate of price appreciation if this happens.
  • Interest rates will probably not climb too much further in 2019.  They could even drop.
  • Home prices will rise by an average of another 2 to 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 7.5+million open jobs and only 6.2 million unemployed.  We are at full employment if you consider that 3% of 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 just need an increase in inventory.  The most affordable time to buy appears to be now!.
  • Some high-end fall-out has resulted 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.

 

You can ask ne a question or request a monthly copy of this newsletter here.

 

Somerset County’s Real Estate Market Conditions January 2019 – Warren Township Edition

Residential Real Estate

Somerset County's Real Estate Market Conditions January 2019

Somerset County’s Real Estate Market Conditions January 2019 – Warren Township Edition

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 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 four months. Normal market conditions average four to five months in Somerset County.  Units going under contract averaged 64 days on the market. 256 properties went “under contract” in December, down from 275 in the prior month. Newly listed properties in the same period totaled 190.

Somerset County Inventory Breakdown By Price For Last Month:

New Listings Under Contract Active Listings Month’s Supply
Condos/Town Houses * 56 87 277 3
Over 55 Communities* 6 9 28 3
$000K to $199K 16 40 70 2
$200K to $299K 43 66 183 3
$300K to $399K 30 47 162 3
$400K to $499K 21 28 129 5
$500K to $599K 16 30 98 3
$600K to $699K 14 10 82 8
$700K to $799K 11 9 59 7
$800K to $899K 10 11 70 6
$900K to $999K 7 6 48 8
$1,000K and Up 22 9 163 18
Totals for December 190 256 1064 4
Average Price $633,306 $433,543 -31.5%
Average Days on Market 64
* Included in $ breakdowns

Somerset County Sales Breakdown Overview:

  • 70% of sales in houses < $500,000
  • 26% of sales in houses > $500,000 and < $1,000,000
  • 04% percent of total sales (or 9 in total) in houses >$1,000,000

Somerset County Inventory Breakdown By Municipality For Last Month:

Active Listings Under Contract Month’s Supply
Bedminster Twp 50 13 4
Bernards Twp 114 16 7
Bernardsville 58 8 7
Bound Brook 20 5 4
Branchburg Twp 57 11 5
Bridgewater Twp 125 26 5
Far Hills Boro 13 3 4
Franklin Twp 154 53 3
Green Brook 28 4 7
Hillsborough 96 44 2
Manville Boro 27 8 3
Millstone Boro 2 0
Montgomery Twp 78 15 5
North Plainfield 45 20 2
Peapack Gladstone 17 2 9
Raritan Boro 13 0
Rocky Hill Boro 4 0
Somerville Boro 26 6 4
South Bound Brook 10 4 3
Warren Twp 91 13 7
Watchung Boro 36 5 7
Totals 1064 256 4

Somerset County Sales Breakdown Detailed:

Only three areas in Somerset County reported no sales in the past month

  • Millstone
  • Raritan
  • Rocky Hill

One area reported one or two sales each last month

  • Peapack/Gladstone

Hotspots:

  • Bernards – 16 sales
  • Bridgewater – 26 sales
  • Franklin – 53 sales
  • Hillsborough – 44 sales
  • Montgomery – 15 sales

These hotspot areas equaled 60% of the sales last month. The average new listing coming on the market last month neared $633,306 The average price of a unit going “under contract” neared $433,543 (31% less).

Warren Township Statistics:

  • There are 91 homes for sale in Warren Township as of this writing.
  • Of the 91 homes for sale, 17 are community properties (such as town houses and condos) and nine are in our 55+ communities
  • The average list price for all listings in Warren Township is $1,015,507.
  • There were 14 new listings in Warren Township last month with an average list price of $990.128.
  • There were also twelve homes that have gone under contract in the past 30 days with an average list price of $696,467 and 64 days on market.
  • Giving us just under 8 months of inventory
  • Call for additional details

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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