Despite a pandemic and subsequent economic downturn, most U.S. cities experienced so-called “seller’s market” real estate conditions during 2020. Experts, like the Home Buying Institute, have advised buyers to expect these conditions for the foreseeable future.
And not much has changed since last year. The Home Buying Institute released the following statement: “Anyone planning to buy a home in 2021 should be prepared for stiff competition. Tight supply conditions and strong demand have made the housing market highly competitive and fast-paced. Quick sales and multiple offers are the norm for many.”1
In order for you to make informed decisions, here are 5 signs of a seller’s market in northern New Jersey:
Fewer Homes for Sale Than in 2020
Pandemic-driven demand propelled 2020’s total home sales to 5.64 million, the highest level since 2006,2 according to the National Association of Realtors (NAR). The NAR’s chief economist Lawrence Yun has said, “Home sales could possibly reach 8 million if we had more inventory.”
Strong demand depleted the already low inventory of homes for sale at the beginning of 2020. By December, just 1.07 million units were available, a decrease of 23 percent from preceding years. At the current rate of purchase, that represents a 1.9-month supply.3
In New Jersey, the number of single-family homes, townhouses, condominiums and adult community properties stood at around 41,005. As of January 2021, there were only 23,011.4 An article on nj.com noted that in the early spring season in Randolph, New Jersey, there are typically 120 to 140 homes listed for sale. At the time of reporting in March, there were only 23.
Higher Prices
A recent report from the Case-Shiller Home Price Index for April showed that home prices were up 14.6 percent nationally, the highest increase since the group started collecting data 30 years ago.5 In the Greater New York metropolitan area in particular, home prices were found to have risen by 11.59 percent.6
The lack of inventory often translates to buyers paying tens of thousands of dollars over the asking price. In January 2021, the median sales price was $504,585, a 22 percent increase from the same time last year. However, the average price is $665,324.
Even when situations do not take such drastic turns, buyers of single-family homes can still expect to pay 100.2 percent of the listing price.
Frequent Bidding Wars
Another side effect of the issues outlined above is that they have sparked a wave of bidding wars. According to a survey conducted by Redfin, a stunning 56 percent of listings faced bidding wars. Redfin’s chief economist, Daryl Fairweather said, “With so few new listings hitting the market, I expect bidding wars to become more common and involve even more potential buyers.”8
Historically low mortgage rates are fueling price hikes in many areas. As of July, a 30-year fixed mortgage is 3.11 percent; 15-year fixed mortgages currently stand at 2.43 percent;7 and 5/1 ARMs are 3.25 percent.
The low cost of money has made many buyers more aggressive and willing to overpay for properties. Realtor.com’s chief economist, Danielle Hale stated, “Lower mortgage rates are making monthly payments for higher priced homes more manageable.”
A survey conducted by the National Association of Home Builders found that about 40 percent of potential buyers who have been searching for a home say they have not bought a house yet because they keep getting outbid. Last year, the primary reason cited was unaffordable prices.9
Fast-selling Properties
While the average time varies by region, the time it takes to sell one’s home has dropped significantly. In 2010, the average number of days on the market was 140 days, which included the closing period.
Now, houses spend around 25 days on the market before going under contract. Once an offer is accepted, the closing period typically takes 30 to 45 days. Overall, the average time from putting a home on the market to officially selling it is 55 to 70 days.10
In New Jersey specifically, the average time to sell is 82 days – 47 days to get an offer and an additional 35 days to close. This is approximately 8.9 percent faster than the national average. Believe it or not, the optimal selling time in the Garden State is during the late spring and summer months. In fact, July is the best month overall, because not only do properties sell quickly, but they tend to sell for higher amounts.11
Municipal Investment in Infrastructure
Population growth demands often necessitate investments in and expansions of infrastructure projects, such as highways or mass transit.
On July 4, 2021, Representative Frank Pallone, Jr. of New Jersey’s Sixth Congressional District announced that three of the transportation and infrastructure projects he requested had passed the House of Representatives. Included in the INVEST America Act, they are as follows: $5.625 million for a ferry terminal in Carteret that will run to downtown Manhattan; $13 million for the NJ Transit station in Long Branch; and $1.25 million for pedestrian improvements in Woodbridge that will ease access to the town’s Metropark.
Further north, state and local officials have sought funding for a cluster of projects collectively known as the Gateway Program. As listed on northjersey.com, the individual projects include a new tunnel under the Hudson River, rehabilitation of the existing ones, a fourth track in Newark leading to the tunnels, a new New Jersey rail yard, construction of the Bergen Loop in Secaucus, a new Portal South Bridge and assorted “soft infrastructure” like broadband.
The INVEST America Act is awaiting approval by the U.S. Senate.
All of this can be rather daunting for home buyers and home sellers alike. Current real estate market conditions can be unpredictable, requiring skill and experience to successfully negotiate a fair price and great return on investment. As a real estate agent of 23 years, I would love to be your advocate and assist you with your home buying or selling needs. Contact Victoria Carter at (973) 220-3050 or email victoria@victoriacarter.com.
Endnotes
1. http://www.homebuyinginstitute.com/news/still-a-sellers-market-in-2021/
2. https://www.nar.realtor/research-and-statistics/quick-real-estate-statistics
3. https://www.cnbc.com/2021/01/22/existing-home-sales-in-2020-were-highest-since-in-over-a-decade.html
4. https://www.nj.com/news/2021/02/housing-stock-in-nj-is-half-of-what-it-was-last-year-pushing-prices-to-500k-on-average.html
5. https://www.marketwatch.com/story/an-inflation-storm-is-coming-for-the-u-s-housing-market-11623419869
6. https://www.bloomberg.com/news/articles/2021-04-27/home-prices-in-u-s-surge-most-since-2006-with-inventory-tight
7. https://www.bankrate.com/mortgages/analysis/
8. https://www.cnbc.com/2021/02/12/bidding-wars-for-homes-are-off-the-charts-as-listings-fall-to-record-low.html
9. https://magazine.realtor/daily-news/2021/02/16/buyers-undeterred-by-increasing-bidding-wars
10. https://www.zillow.com/sellers-guide/average-time-to-sell-a-house/
11. https://listwithclever.com/real-estate-blog/average-time-to-sell-a-house-in-new-jersey/