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.

 

 


Presented as a public service by:

Joe Peters Logo
 


Somerset County’s Real Estate Market Conditions December 2018 Warren Edition

Residential Real Estate

Real Estate Market Conditions

Somerset County’s Real Estate Market Conditions December 2018  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 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 five months. Normal market conditions average four to five months in Somerset County.  Units going under contract averaged 61 days on the market. 276 properties went “under contract” in November, down from 332 in the prior month. Newly listed properties in the same period totaled 299.

Somerset County Inventory Breakdown By Price For Last Month:

New Listings Under Contract Active Listings Month’s Supply
Condos/Town Houses * 92 103 339 3
Over 55 Communities* 16 14 37 3
$000K to $199K 22 27 86 3
$200K to $299K 77 85 225 3
$300K to $399K 65 54 201 4
$400K to $499K 26 38 155 4
$500K to $599K 28 24 130 5
$600K to $699K 25 15 112 7
$700K to $799K 9 10 77 8
$800K to $899K 12 8 84 11
$900K to $999K 9 5 54 11
$1,000K and Up 26 10 203 20
Totals for November 299 276 1327 5
Average Price $523,947 $439,979 -16.0%
Average Days on Market 61
* Included in $ breakdowns

Somerset County Sales Breakdown Overview:

  • 63% of sales in houses < $500,000
  • 28% of sales in houses > $500,000 and < $1,000,000
  • 09% percent of total sales (or 26 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 69 14 5
Bernards Twp 144 28 5
Bernardsville 71 9 8
Bound Brook 21 4 5
Branchburg Twp 64 13 5
Bridgewater Twp 150 30 5
Far Hills Boro 16 2 8
Franklin Twp 188 66 3
Green Brook 36 4 9
Hillsborough 133 32 4
Manville Boro 33 3 11
Millstone Boro 1 0
Montgomery Twp 104 9 12
North Plainfield 64 17 4
Peapack Gladstone 20 0
Raritan Boro 13 5 3
Rocky Hill Boro 4 2 2
Somerville Boro 28 8 4
South Bound Brook 15 9 2
Warren Twp 108 16 7
Watchung Boro 45 5 9
Totals 1327 276 5

Somerset County Sales Breakdown Detailed:

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

  • Millstone
  • Peapack/Gladstone

Two areas reported one or two sales each last month

  • Far Hills
  • Rocky Hill

Hotspots:

  • Bernards – 28 sales
  • Bridgewater – 30 sales
  • Franklin – 66 sales
  • Hillsborough – 32 sales
  • Montgomery – 9 sales

These hotspot areas equaled 60% of the sales last month. The average new listing coming on the market last month neared $523,947 The average price of a unit going “under contract” neared $439,979 (16% less).

Warren Township Statistics:

  • There are 108 homes for sale in Warren Township as of this writing.
  • Of the 108 homes for sale, 17 are community properties (such as town houses and condos) and eight are in our 55+ communities
  • The average list price for all listings in Warren Township is $1,009,316.
  • There were 18 new listings in Warren Township last month with an average list price of $870,089.
  • There were also sixteen homes that have gone under contract in the past 30 days with an average list price of $864,581 and 64 days on market.
  • Giving us just under 5 months of inventory
  • Call for additional details

Note: To get an accurate price point for your property, contact me. Coldwell Banker’s big data technology capabilities will put you at an advantage. Plus, we can now tell you where people are moving into your area from and market to that area directly. Houses priced and marketed accurately sell fast, 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 have 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 modest increase of 1% 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 6% decline in sales due to lack of inventory (-1,500 vs. a year ago).

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 600 homes, compared to a year ago.  Currently, ~33,000 fewer homes (-45%) are on the market compared to the 2011 peak.

Current unsold inventory in New Jersey varies widely by county with some having only four months.  No county presently has more than nine months of supply.  The average was at 4.3 months supply.

We still have an acute shortage of inventory in both Hunterdon and Somerset county in our more popular price points and locations which is the under $400k market.

Hunterdon and Somerset County have about the same 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 at the end of July rose slightly to just over  4.9 for a 30-year conventional mortgage. A fifteen-year conventional mortgage rests at just over the 4.3%  mark. Five-year arms are just under the 4.15% 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, 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 addition of 250,000 jobs in October. 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 2,250,000+ jobs a year to date and is trending towards 2.6+ 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 July, there were 7+ Million openings compared to nearly 6 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 4.1%, bolstering consumer confidence in NJ as well.  In effect, NJ is rising with the national tide of nearly full employment.

NJ added 17,400 jobs in September, and 66,500+ jobs have been added in NJ year to date 2018 as compared to 41,400 for the same period in 2017, and if it continues, NJ could add over 70,000 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 rose to 3.9% 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 has a net wealth of over $230K while the same for a renter is only around $5K.  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 foreclosure rate filings. 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 3.2%, FL and MS with 2.9% (mostly hurricane-related)  LA with 2.7% and trailed by ME, FL, DE, MD, PA, and AL.  The national baseline number sits at ~ 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 11% to around 62,600 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 have been for the most part eliminated.

It would appear that the overall concern was unfounded. The SALT fears have been offset by the lower tax brackets.  It would appear that this was an unwarranted fear.

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.

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:

  • 2017 was the seventh straight year of 2 million + job gains.
  • Although improving in 2018, the NJ job situation had been declining for the past two years.
  • At 4.1% unemployment, NJ is almost 11% 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 attracting the millennials in that direction.
  • Interest rates have already risen over .75% since the first of the year are forecasted to rise another .25 by year’s end, 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.
  • 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.
  • 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 will probably 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 24% 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 2016 and early 2017 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, a slight 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 will 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+% by year-end 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 (look at the help wanted signs).
  • For the first time in memory, the US is reporting 7+ million open jobs and only 6 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.

 


Presented as a public service by:

Joe Peters Logo


Somerset County's Real Estate Market Conditions January 2019

Somerset County’s Real Estate Market Conditions November 2018 – Warren Edition

Residential Real Estate

Real Estate Market Conditions

Somerset County’s Real Estate Market Conditions November 2018 – 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 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 six months in Somerset County.  Units going under contract averaged 60 days on the market. 332 properties went “under contract” in October, up from 301 in the prior month. Newly listed properties in the same period totaled 404.

Somerset County Inventory Breakdown By Price For Last Month:

New Listings Under Contract Active Listings Month’s Supply
Condos/Town Houses * 114 107 374 3
Over 55 Communities* 10 16 34 2
$000K to $199K 31 31 84 3
$200K to $299K 81 99 232 2
$300K to $399K 75 59 214 4
$400K to $499K 52 35 172 5
$500K to $599K 53 46 149 3
$600K to $699K 22 16 121 8
$700K to $799K 22 19 94 5
$800K to $899K 24 8 91 11
$900K to $999K 11 6 70 12
$1,000K and Up 33 13 237 18
Totals for October 404 332 1464 4
Average Price $549,094 $470,429 -14.3%
Average Days on Market 60
* Included in $ breakdowns

Somerset County Sales Breakdown Overview:

  • 67 % of sales in houses < $500,000
  • 29 %of sales in houses > $500,000 and < $1,000,000
  • 4 % percent of total sales (or 13 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 67 13 5
Bernards Twp 173 34 5
Bernardsville 91 10 9
Bound Brook 23 12 2
Branchburg Twp 75 15 5
Bridgewater Twp 167 39 4
Far Hills Boro 18 1 18
Franklin Twp 208 56 4
Green Brook 33 11 3
Hillsborough 141 30 5
Manville Boro 26 15 2
Millstone Boro 1 0
Montgomery Twp 116 19 6
North Plainfield 65 26 3
Peapack Gladstone 23 2 12
Raritan Boro 14 4 4
Rocky Hill Boro 5 1 5
Somerville Boro 30 9 3
South Bound Brook 14 7 2
Warren Twp 121 26 5
Watchung Boro 53 2 27
Totals 1464 332 4

Somerset County Sales Breakdown Detailed:

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

  • Millstone

Two areas reported one or two sales each last month

  • Manville
  • S Bound Brook

Hotspots:

  • Bernards – 34 sales
  • Bridgewater – 39 sales
  • Franklin – 56 sales
  • Hillsborough – 30 sales
  • Montgomery – 19 sales

These hotspot areas equaled 54% of the sales last month. The average new listing coming on the market last month neared $549,094 The average price of a unit going “under contract” neared $470,429 (14% less).

Warren Township Statistics:

  • There are 121 homes for sale in Warren Township as of this writing.
  • Of the 121 homes for sale, 14 are community properties (such as town houses and condos) and four are in our 55+ communities
  • The average list price for all listings in Warren Township is $1,075,539.
  • There were 28 new listings in Warren Township last month with an average list price of $959,789.
  • There were also twenty-six homes that have gone under contract in the past 30 days with an average list price of $849,104 and 86 days on market.
  • Giving us just under 5 months of inventory
  • Call for additional details

Note: To get an accurate price point for your property, contact me. Coldwell Banker’s big data technology capabilities will put you at an advantage. Plus, we can now tell you where people are moving into your area from and market to that area directly. Houses priced and marketed accurately sell fast, 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 three months (but is still below what is needed).  Let’s hope that it is the beginning of a trend.

This is leading to a bit of softening in the price appreciation on existing homes.  A slowdown in growth.

A decrease of 6% in home sales in NJ in September and the same remains flat Year to Date. This is 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. During the same period, all housing sales showed 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 (and dropping slightly last month). The supply decreased by ~ nearly 200 homes, compared to a year ago.  Currently, ~31,000 fewer homes are on the market compared to the 2011 peak.

Current unsold inventory in New Jersey varies widely by county with some having only four months.  No county presently has more than nine months of supply.  The average was at 5 months compared to 4.7 months a year ago.

We still have an acute shortage of inventory in both Hunterdon and Somerset county in our more popular price points and locations which is the under $400k market.

This is leading to a bit of softening in the price appreciation on existing homes.  A slowdown in growth. It could turn the tide back to a buyers market (or at least neutralize it to being a normal market).

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 at the end of July rose slightly to around 4.86for a 30-year conventional mortgage. A fifteen-year conventional mortgage rests at just under the 4.3%  mark. Five-year arms are just under the 4.14% 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, 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 an addition of 250,000 jobs in October. 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 2,000,000+ jobs year to date and is trending towards 2.7 million added jobs by year-end (a twenty percent increase over the prior year)

At the end of July, there were 7.1+ Million openings compared to nearly 6.2 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 stayed steady to 4.2%, bolstering consumer confidence in NJ as well.  In effect, NJ is rising with the national tide of nearly full employment.

NJ added 1,000 jobs in September, and 49,100+ jobs have been added in NJ year to date 2018 as compared to 34,500 for the same period in 2017, and if it continues, NJ could add over 62,000 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 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 20’s to the mid 30’s 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 rose to 3.9% with the in northern and southern NY and Philadelphia slightly higher.

We have seen a 2Q2018 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 2000’s 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 has a net wealth of over $230K while the same for a renter is only around $5K.  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 foreclosure rate filings. 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 at 2.6%, led by NY with 3.2%, FL and MS with 2.9% (mostly hurricane-related)  LA with 2.7%, ME, DE, MD, PA and AL.  The national baseline number sits at ~ 1.7%.

2017 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 7% to around 65,000 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 are for the most part eliminated.

It would appear that the overall concern was unfounded. The SALT fears were offset by the lower tax brackets.  It would appear that this was an unwarranted fear.

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.

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:

  • 2017 was the seventh straight year of 2 million + job gains.
  • Although improving in 2018, the NJ job situation had been declining for the past two years.
  • At 4.2% unemployment, NJ is almost 12% 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 attracting the millennials in that direction.
  • Interest rates have already risen .75% since the first of the year are forecasted to rise another .25 to .5% by year’s end, taking almost 10% away from buyers buying power.
  • And, house prices are rising 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.
  • 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 30’s (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 4 BR center hall colonials on 1+ acre in the country.
  • Buyers are thinking 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 will probably be limited to curtailing the growth of appreciation and not in the 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 24% 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 2016 and early 2017 showed a surge in home sales but price increases only in houses clustered in < $500,000 market where the first-time buyers and Millennials are focused.
  • The >$600K 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%.  This is 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.
  • If we had more inventory, we could sell more houses.  It is simple.  And, we have started to see inventory increase over the past three 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 be less in % but will 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+% by year-end 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 (look at the help wanted signs).
  • For the first time in memory, the US is reporting 67.1+ million open jobs and only 6 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 may also open 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 will flourish as a result of creating more buying demand.
  • Mid-term elections effect is a total unknown at this point.
  • 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.

Subscribe to receive these newsletters monthly at:    jpeters.com/contact


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Somerset County’s Real Estate Market Conditions | August 2018 – Warren Edition

Somerset County’s Real Estate Market Conditions | August 2018 – Warren Edition

Real Estate Market Conditions

Get ahead of the real estate market economic and behavior drivers in Somerset County, New Jersey with Coldwell Banker Residential Broker sales associate, Joe Peters.

This Market Update will not only show you what is happening in your local market area, but it will also explain why it is happening and what is contributing to these results.

 

“What” it 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 six months in Somerset County.  Units going under contract averaged 55 days on the market. 423 properties went “under contract” in June, down from 429 in the prior month. Newly listed properties in the same period totaled 459.

Somerset County Inventory Breakdown By Price For Last Month:

New Listings Under Contract Active Listings Month’s Supply
Condos/Town Houses * 151 123 397 3
Over 55 Communities* 8 12 27 2
$000K to $199K 27 31 87 3
$200K to $299K 92 97 221 2
$300K to $399K 85 81 217 3
$400K to $499K 69 56 167 3
$500K to $599K 44 49 144 3
$600K to $699K 34 31 130 4
$700K to $799K 25 20 133 7
$800K to $899K 21 15 89 6
$900K to $999K 25 20 94 5
$1,000K and Up 37 23 265 12
Totals for July 459 423 1547 4
Average Price $551,835 $493,468 -10.6%
Average Days on Market 55
* Included in $ breakdowns

Somerset County Sales Breakdown Overview:

  • 63 % of sales in houses < $500,000
  • 32 %of sales in houses > $500,000 and < $1,000,000
  • 05 % percent of total sales (or 23 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 61 20 3
Bernards Twp 198 45 4
Bernardsville 91 13 7
Bound Brook 24 8 3
Branchburg Twp 68 21 3
Bridgewater Twp 177 64 3
Far Hills Boro 16 1 0
Franklin Twp 226 74 3
Green Brook 41 9 5
Hillsborough 138 49 3
Manville Boro 28 15 2
Millstone Boro 2 0
Montgomery Twp 139 21 7
North Plainfield 54 27 2
Peapack Gladstone 17 6 3
Raritan Boro 13 6 2
Rocky Hill Boro 6 0
Somerville Boro 26 6 4
South Bound Brook 21 4 5
Warren Twp 148 25 6
Watchung Boro 53 9 6
Totals 1547 423 4

Somerset County Sales Breakdown Detailed:

Two areas in Somerset County reported no sales in the past month

  • Millstone
  • Raritan

One area reported one or two sales each last month

  • Far Hills

Hotspots:

  • Bernards – 45 sales
  • Bridgewater – 64 sales
  • Franklin – 74 sales
  • Hillsborough – 49 sales
  • Montgomery – 21 sales

These hotspot areas equaled 60% of the sales last month. The average new listing coming on the market last month neared $551,835 The average price of a unit going “under contract” neared $493,468 (11% less).

Note: To get an accurate price point for your property, contact me. Coldwell Banker’s big data technology capabilities will put you at an advantage. Plus, we can now tell you where people are moving into your area from and market to that area directly. Houses priced and marketed accurately sell fast, especially with a real estate industry veteran and local expert helping you navigate the process.

Warren Township Statistics:

  • There are 148 homes for sale in Warren Township as of this writing.
  • Of the 148 homes for sale, 14 are community properties (such as town houses and condos) and three are in our 55+ communities
  • The average list price for all listings in Warren Township is $1,074,487.
  • There were 22 new listings in Warren Township last month with an average list price of $824,659.
  • There were also twenty-five homes that have gone under contract in the past 30 days with an average list price of $746,864 and 57 days on market.
  • Giving us just under 6 months of inventory
  • Call for additional details

The initial section of this Market Report reported on “What” is happening.

This section will focus on “Why” it is happening

 

New Jersey’s Economic Drivers:

New Jersey Home Sales:

An increase of 1% in home sales in NJ in Year to Date helped to record over 12,000 sales which is a record.

Activity concentrates in the <$400,000 market (which pulled back a little in June due to lack of inventory) where Millennial buyers transition into home ownership. During the same period, all housing sales showed 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 and had recently decreased. The supply decreased by ~ 4,000 homes, compared to a year ago.  Currently, ~30,000 fewer homes are on the market compared to the 2011 peak.

Current unsold inventory in New Jersey varies widely by county with some having only 2.7 months.  No county presently has more than eight months of supply.  The average is at 3.7 months compared to 3.9 months a year ago.

We 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 1 and 6% less inventory respectively than a year ago.  And, those counties have about 12 and 18% less inventory respectively than two years ago.

The fear of increasing interest rates based on future increases and the Fed’s slightly loosening lending standards are driving the current market activity.

 

Interest Rates:

The economy is strengthening, and Interest rates at the end of June fall slightly to around 4.53% for a 30-year conventional mortgage. A fifteen-year conventional mortgage rests at just over the 4% mark. Five-year arms are just under the 3.875% 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, 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.

Combine this with the steadily increasing prices and consumer confidence, and you have what is driving our current market activity

 

National Job Front:

US unemployment rate has risen a bit to 3.8%, the lowest it has been in eighteen years! This trend is expected to continue as a result of the recent tax reform.

On the national level, the US added nearly 1,300,000+ jobs in January thru June of 2018 and is trending towards 2.6 million added jobs by year-end.

At the end of May, there were 6.5+ Million openings compared to nearly 6 Million unemployed persons, with unemployment being the lowest since January 2001.

And the GDP is 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 fell slightly to 4.3%, bolstering consumer confidence in NJ as well.

NJ lost 500 jobs in June, and 32,700+ jobs have been added in NJ in the first four months of 2018 which was a significant improvement over 2017, and if it continues, NJ could add over 45,000 jobs by year-end.

The level of jobs created was at a much higher level than in the past several years (a silver lining?).

It also should be noted that these jobs are concentrated in the northern half of the state.

 

Rental Market Trends:

We still have an extremely tight rental market!

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 29 to 37 years 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 rose to 3.8% with the in northern and southern NY and Philadelphia at 4+%.

We have seen a 2Q2018 rise in rental prices in Central NJ of 2.8% 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 64%.  This 7% decrease compared to an 8% national decrease contributes to the slower recovery of home prices in the state and adds over 230,000+ additional renters in our state.  Households with no children stand at 65%, reflecting the decline in our school population.

 

New Jersey Foreclosures:

New Jersey continues to face high foreclosure rate filings. 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 #2 in the country at 3.0%, led by only FL with 4.3% (mostly hurricane-related) and followed by NY, LA, MS, ME, TX, DE, MD, and PA.  The national baseline number sits at ~ 1.7%.

2017 foreclosure filings decreased slightly to 70,150+ or -5%, putting pressure on home prices in concentrated areas.  Base on the first five months of results 2018 could fall another 6% to around 66,000 filings.

 

Real Estate Market Recap 

 

Economic conditions:

  • 2017 was the seventh straight year of 2 million + job gains.
  • Although improving in 2018, the NJ job situation had been declining for the past two years.
  • At 4.4% unemployment, NJ is almost 10% above the national average which is currently 4.0%.
  • The best paying and most attractive jobs are in NYC luring the millennials in that direction.
  • Interest rates have already risen .5% in recent months are forecasted to rise another .5% by year’s end, taking almost 10% away from buyers buying power.
  • And, house prices are rising 6+ % in the popular housing price points further exasperating the situation.
  • 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.
  • 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.
  • Foreclosures are on the decline and to some extent are helping to offset fewer listings.
  • Also, there is confidence that the new tax and jobs act will further stimulate the economy with more jobs.
  • The new tax rules appear only to affect our very higher-end buyers.

Changes in lifestyle:

  • Average age at marriage is now in the mid to late 30’s (up 7 years from just a decade ago).
  • Families usually have only one to two children due to costs and ability to choose.
  • 65% of all NJ homes have no children of school age.
  • 50% do not have more than 1 person in them.
  • Demand for larger houses has diminished.
  • 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 4 BR center hall colonials on 1+ acre in the country.
  • Buyers are thinking luxury hi-rise close to mass transportation and work.
  • 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 a slowdown in 2020, and this needs to be monitored.
  • But, in general, homeowners are sitting with more equity than ever and are not 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 lack of inventory, there are fewer houses for sale.
  • Millennials make up 24% of our current homeowners with more room for expansion at the lower end of the market when adequate inventory supply materializes.
  • Central New Jersey’s trend for 2016 and early 2017 showed a surge in home sales but price increases only in houses clustered in < $500,000 market where the first-time buyers and Millennials are focused.
  • The >$600K 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 price growth at an annual 3 to 4%.
  • 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.
  • In 2017 prices rose ~ averaging just over 3.5% and depending on price points and locations.  2018 promises to be even stronger (without factoring in any tax impact).
  • Mortgage delinquency is normalizing.

Forecast:

  • The economy will continue to prosper with no recession currently in sight for the next 18 + months.
  • Interest rates will Climb to about 5% by year-end 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).
  • 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.
  • For the first time in memory, the US is reporting 6+ million pen jobs and only 6 million unemployed.
  • We now need to match the skills of the unemployed to the job openings to prosper further.
  • The affordability index shows that there is room for much more sales, we just need the inventory.
  • 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 will flourish as a result.
  • Mid-term elections effect is a total unknown at this point.
  • 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 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.

 

 


Presented as a public service by:

Joe Peters Logo
 


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