Real estate agent Eileen Opatut was sizing up the market for a couple who had decided to sell after 23 years in their Montclair home. Her clients, whose two grown children had not lived in the house fulltime for five years, were finally ready to downsize. Opatut knew there was strong demand for midsize homes in Montclair, but this four-bedroom former carriage house on a side-facing lot could strike some potential buyers as offbeat.
The homeowners, Anne-Marie Nolin and Bob Adler, had imbued the house with plenty of charm. Buyers would appreciate the floor-to-ceiling shelves in the living room and a windowed wall overlooking the decorative garden. The kitchen was a bit on the cozy side and two of the bedrooms were small, but the 3,300-square-foot house had three full baths and two half baths, and it was tucked away in a neighborhood where conventional colonials can go for as much as $1 million—or more.
Opatut advised her clients to price it conservatively, at $589,000, to bring in as much traffic as possible. The tactic worked even better than she hoped.
“Buyers were flocking,” Opatut says, “and yes, they all had the down payment together.” The house garnered four offers in the first week, three of them for more than $600,000.
As Opatut’s clients discovered, in many New Jersey neighborhoods, now is a great time to sell. In today’s suddenly hot markets, there simply are not enough desirable homes available to meet the pent-up demand of potential buyers eager to pounce before mortgage rates inevitably begin to rise.
Opatut, an agent with Keller Williams NJ Metro Group, has a personal reason to be buoyed by the strengthening market. She and her spouse, Joan Garry, have themselves decided to downsize, now that their kids are out of their ample seven-bedroom, 4-½-bath Montclair home. They plan to put the house on the market this spring.
“There are clearly more strong buyers than great houses on the market right now,” Opatut says. “Every seller gets to ride that wave as long as it lasts.”
Experts concur that New Jersey real estate is recovering strongly. After years of crisis and stagnation, sales volume is sharply up, and prices are rising.
In 2013, the median home sales price rose by a projected 5 percent statewide, according to East Brunswick-based market analyst Jeffrey G. Otteau, publisher of the oft-quoted Otteau Valuation Report. The increase occurred despite Superstorm Sandy, which dragged down the selling price in devastated Shore communities by as much as 7 percent in 2013.
What’s more, the fourth quarter of 2013 was on track to be the most active sales period in the state since 2007, Otteau says. In October alone, home sales were up 19 percent compared to October 2012—and this despite the 16-day government shutdown that month.
Otteau says these positive trends—more homes selling and prices rising—should continue for at least 12 to 24 months. Still, he warns that uncertainty in the national economy and the potential reduction of federal stimulus programs could sour the marketplace.
The hottest markets the past year generally have been traditionally desirable suburban towns in North Jersey, such as Chatham, Glen Ridge, Glen Rock and West Caldwell, each of which, Otteau says, saw selling prices for homes gain an average of 8 percent for the past 12 months. At least one urban market, the condo haven of Hoboken, enjoyed a similar gain.
In all these communities, tight inventories are helping drive up prices. According to Otteau’s projections, Glen Ridge has only 1.7 months of inventory in the past year (that is, homes for sale in relation to anticipated demand). Glen Rock has 2.2 months of inventory; Chatham, 2.1; Hoboken, 2.3; and West Caldwell, 2.8. Other North Jersey towns identified by Otteau with limited inventory (2.9 months or less) include Summit, Montclair, Wyckoff, Maplewood, Midland Park and North Arlington.
Central Jersey as a whole has not been as active as North Jersey. “It’s picked up a little bit here, gotten better over the past two years,” says Charles J. Hendershot, a veteran broker in Bernardsville. “I think it will be a little longer before we see price hikes except in very, very select communities.” Hendershot, who is with Exit Realty, says the market for homes priced over $1 million is “absolutely dead” in his town, although it is showing some life in Basking Ridge. The only bidding wars in the area, he says, are for condos and town homes under $300,000.
Some Central Jersey towns did have show a healthy 7 percent average price gain in 2013, according to Otteau. They include Bedminster, Bernards Township, Fair Haven, Little Silver, Metuchen, Milltown, Plainsboro and Rocky Hill.
The marketplace is slowest in South Jersey, where unemployment has persistently run higher than the state average, which is itself higher than the national average. But even in the southern counties, certain real estate pockets are heating up, such as Mount Laurel in Burlington County and Manchester in Ocean County, where prices in 2013 rose 5 percent and 7 percent, respectively. In rural Gloucester County, Logan Township saw a 5 percent rise in home value that matched the statewide gain, according to Otteau.
In the desirable Moorestown area—a Burlington County suburb about 15 miles east of Philadelphia—bidding on choice listings is often intense, says Pam Engle of Century21 Alliance. “There has really been a turnaround in the last six months,” she says. “It is still a market where the houses need to be perfect—ready to move in—and priced right at the asking.” But in early November, when the market usually goes quiet, Engle had one buyer who had just lost out on three mid-priced houses—in Moorestown, Riverton and Haddonfield—and another buyer who was outbid on two $270,000 single-family homes in Delran.
As hot as the market is, some potential sellers are still dragging their feet, hoping to take further advantage of rising prices. Analyst Otteau says this is not always the best strategy. Currently, he says, New Jersey is in a “window of opportunity”—that is, a period when homes are affordable.
“It’s counterintuitive,” Otteau says, “but the time when a seller can capture the most value is much more likely to be now than later, when prices normalize at a higher level that is less affordable to the average buyer.”(Here are some tips to seel your home swiftly.)
At midyear 2013, Otteau calculated what he calls a “housing affordability index” of 124 percent, meaning a buyer earning the state’s median income of $66,692 could afford a house or condo priced 24 percent higher than the median home value at the time, $299,140. Later in the year, the index remained strong, although it had dropped to 114 percent as the median sales price rose to $315,693.
That type of buying power—and continued low interest rates—has fueled a two-year surge in home sales across the Garden State. The New Jersey Association of Realtors says sales volume for the 12 months ending September 30 was up 18 percent compared to the previous 12 months. Otteau, who issues monthly market reports to brokers and every spring and fall runs seminars on industry trends, says sales volume over the past two years increased by an amazing 43 percent over the previous two years.
Otteau warns that the window of affordability could close before the end of 2015 as prices and mortgage rates make a slow but inevitable climb. “Every 1 percent rise in the mortgage rate equates to about a 9 percent increase in purchase price,” says Otteau. “That is what it feels like to a buyer confronting the higher rate.”
Ken Baris, who runs Jordan Baris Real Estate based in West Orange, the firm founded by his father 61 years ago, predicts prices will indeed continue to rise, albeit slowly. He also thinks the next year or two will be the best time to sell—unless you can wait a really long time, five years at minimum, for prices to return to the peak level of 2006.
“The train is pulling out of the station” for buyers seeking affordable homes, Baris says. These buyers “will have to start running and try to jump on the train before it gets to full speed.” Yes, there could be some hiccups in the market—periods when prices remain static or even drop a bit—but Baris says a reversal in the upward spike is highly unlikely.
He advises buyers to dismiss any regrets they might have about not snatching up a bargain when the market tanked from 2007 to 2009. “I can tell you the bottom for prices has passed. I can tell you some people paid lower prices. But that’s a timing game. That’s just a lot of luck….If you are moving up, it is clearly better to do so now, rather than to wait. If you are buying a more expensive house, you want to do it before prices rise further.”
Otteau predicts sales prices again will rise roughly 5 percent in 2014. Slow-but-steady appreciation is a good thing, he says—it keeps the window of affordability open as long as possible. Once the average buyer can no longer afford the average-price home, Otteau explains, the marketplace becomes dependent on other factors, such as rapid economic growth and the creation of new high-paying jobs. “They’re working on it,” he says of the Christie administration, “but this is a really long, really difficult battle.”
When the market was down just a few years ago, many thought it inconceivable that price wars would ever return, but that is exactly what is happening in quite a few towns around the state.
It certainly has been so in Glen Ridge, a perennially sought-after Essex County borough of 7,500 with top-rated schools, direct train service to Manhattan and quiet streets illuminated by working gas lamps. Roberta Baldwin, a broker with Keller Williams NJ Metro Group, says the average sales price in Glen Ridge last year was $654,689. Nevertheless, multiple listing figures show that 100 percent of the homes there sold for the asking price or more.
“Gen X and Gen Y buyers are stacked six deep to buy, once one of their friends buys here and they hear about it,” Baldwin says.
Maplewood is another in-demand Essex County community. Baris says 40 percent of homes listed in the town of 23,000 in the last 12 months sold within a month for over listing price. The average sales price was $475,000. In neighboring South Orange, where average sales price was $534,000, about a third of the homes sold within the first month for full asking price, but not over.
Baris points out that in the suburban communities, the most in-demand homes tend to be in the most highly regarded school districts. Other brokers and market specialists describe a growing breed of home buyer: those without children. For these buyers, both young professionals and empty nesters, proximity to mass transit and a short commute are high priorities. The latest Nielsen/Claritas demographic report says that 65 percent of households in New Jersey have no children under 18.
That explains the strength of certain towns in Hudson County, where the commute to Manhattan is notably quick and easy—and home values rose 22 percent in 2013. There, 93 percent of sales in 2013 were townhomes and condos, including a penthouse condo at K. Hovnanian’s 77 Hudson waterfront tower in Jersey City, which went for a record-setting $2.8 million in October.
Of course, not all of New Jersey is riding the same wave. Superstorm Sandy’s arrival in October 2012 depressed much of the Shore market, particularly in hard-hit sections of Monmouth and Ocean counties. Mantoloking has recently staggered under as much as 18 months of inventory; in Loveladies, it’s 24 months, although the situation is starting to ease as buyers step up to snag bargains, Otteau says.
New Jersey’s four southernmost counties—Cumberland, Salem, Atlantic and Cape May—are still in the grip of a foreclosure crisis that is actually growing worse even as other parts of the state—and even more so, the nation—get ready to kiss that problem good-bye. Last spring, researchers from Rutgers University reported that the Vineland-Millville-Bridgeton area of Cumberland County had the highest rate of foreclosures and delinquent loans of any large metropolitan area in the country.
Unemployment in Salem and Cape May counties continues to hover above 8 percent, reflecting the statewide rate, which is 1 percentage point higher than the national rate of slightly more than 7 percent, according to the U.S. Deparment of Labor. But in Atlantic and Cumberland counties unemployment tops 11 and 12 percent, respectively.
Other nightmares could be waiting in the wings. Proposed federal tax reforms could eliminate all second-home income tax credits. (“That could finish off the Shore market,” says Otteau.) Federal stimulus programs could be halted, possibly slowing economic growth nationwide. Or another superstorm could strike; who knows? Extreme weather and flooding promise to pose escalating threats and uncertainty as the millennium unfolds.
These dark clouds could provide more reasons to sell soon. “As long as nothing crazy happens with the economy, things should continue to look up,” says Engle, the Moorestown broker. It’s an optimistic take, but in the current real estate market, it is also the prevailing wisdom.
Antoinette Martin has covered the residential and commercial real estate markets in New Jersey since 2001. She is an editor for the real estate website GlobeSt.com.Click here to leave a comment