Has the residential real estate market in NJ peaked? Here’s what industry experts are saying.
Double-digit price growth. Low level of stocks. Inexpensive interest rate.
Residential real estate has experienced a frantic boom since the start of the pandemic. Buyers have fought for homes by waging bidding wars and driving prices tens of thousands of dollars above demand.
But, has the market finally reached its peak?
Industry experts say it depends on the angle at which you measure the peak.
âYes, it’s peaked, in terms of the number of home sales,â said Jeffrey Otteau, real estate economist and president of Groupe Otteau. âAs of now, we are seeing fewer home sales occurring, which will continue into the next year. “
Home sales have fallen for each of the last five months of 2021, according to data from the Otteau Group. It started in June with a 12% drop in contract sales and continued with a 22% drop in July, 16% in August, 20% in September, 16% in October and 7% in November.
But we haven’t seen the price spike yet. Although, says Otteau, it does happen.
âIn terms of pricing, we believe the peak won’t happen until the end of summer 2022,â he said. âThe reason is that the economy will continue to strengthen and Millennials will continue to shift from renting to owning, which will drive demand. Interest rates will rise, but they remain historically low.
Prices are up 12% statewide in 2020 and 15% statewide in 2021. They will likely gain another 5% in 2022, Otteau said.
The cooling is due to housing becoming unaffordable, despite low interest rates.
Income grows only about 4 percent per year. âHouse prices have gone up faster than wages,â Otteau said, adding that there comes a time when the banks say the house may be worth that much, but you don’t have the income for that mortgage. be approved.
Real estate agents are already seeing the frenzy subside.
âThe summer has been a long, long time to be crazy,â said Beth Kimmick of ERA Central Realty in Cream Ridge. âAs soon as a house was on the market, people would jump on it and go overboard. Then people were afraid to make an offer because they were afraid it was not enough.
“This frenzy is over,” she said. “But I think we’re going to see specific houses get a lot of activity and great deals on them keep coming in.”
In Montclair, one of the state’s hottest markets, the âtsunamiâ is over, said Karin Diana of Compass. But she already has clients lined up for the spring. And she closed two homes this month that each sold for $ 60,000 above demand.
âMontclair is its own island,â said Diana. âThere will always be a fairly intense demand. “
The sense of urgency is slowing as more homes hit the market than a year ago.
âIt’s going to take a while to get back to where it was four or five years ago,â said Robert White of Coldwell Banker in Spring Lake and president of New Jersey Realtors. “It gives relief to buyers who are fighting for a property.”
Kimmick said some of those homes that are currently listed are from people who bought during the most chaotic time.
âI have been told by agents that a person has bought a house since the pandemic re-enrolled them,â she said. “They bought it because they felt the pressure of needing a place and now they’re a little worried that they’ve paid too much and if they stay there they’re going to lose.”
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Allison Pries can be reached at [email protected].