Tune in this week to hear about the important market insights and predictions from the preeminent NJ housing expert, Jeff Otteau… spoiler alert: the market is not expected to “correct” in the near future…
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Well, hello, Bonnie.
Hi Susie. Here we are once again.
Here we are. And we’re starting with this fun graph because I wanted to share some insights that we got from Jeff Otto, who is the man, as far as real estate economics and forecasting. And we attend his seminars at least twice a year, once in the spring, one in the fall. And then in the past couple of years, he’s done a few mini sessions specifically around COVID and how that’s affecting our market. We also look at his monthly reports, which give us a lot of great data. That’s a little bit more granular than we get from a New Jersey realtors association county by county town, by town performance in terms of sales and prices and things like that. So that’s all data that we have access to that not everybody does because we subscribe to this and we’re really pouring over it.
And so if you’re one of our clients, we give you access to all of that analysis. But last week when Bonnie was relaxing wonderfully with her family in Boston, I was able to participate on this call and the main points. I mean, it did go over kind of what’s happening, you know, just more generally what the economy in New Jersey, but I thought the most timely and time-sensitive insight is the fact that we are tracking very similarly to 2019. So this line here is a 2019 home sale performance in all of New Jersey statewide. This was the green line is 2020, which obviously was not like any other year. And you can see the major dip in April and then the Slingshot effect in the second half of the year. And for example, in July, June and July, we had a huge bump up in sales that we normally don’t experience in the summer months.
And you’ll see that in 2020, this, this light blue line, we are tracking much more similarly to pre-pandemic performance with the exception, I think in the beginning part of the year, which kind of was a carry over from 2020. So having said that still in June, we have actually greater performance. And I think this wasit’s contract sales. So number of homes that went under contract in June was still a hundred, a thousand plus more, 1500 more roughly than the year prior. I’m very curious to see what the numbers will be for July because you and I have been talking about that, right. We’re seeing a lot fewer under contracts, we think.
Yeah, I would predict that it will kind of come down even closer to that gray line. If not below that, just because we really are experiencing a slow down with, we think the world opening up and just a lot of people pressing pause on the home search and just finally going on vacation, enjoying life a little more. Yeah, it’s very interesting to see how fast though that green line shot up. And also to note that we are, the market is typical, which is actually a pretty hot market still and was in 2019. It just feels so different from last year’s COVID market.
Definitely, definitely. And one of the other indicators I think of what’s going to happen in our market in the fall is that Hudson county, which is where Hoboken and Jersey city are, which has typically the greatest performance of any county in the state last year, of course, had a huge decline in sales because people were moving out of this more urban settings and away from people. And this year in June, I believe they have a 67% increase over last year. So obviously the number went way down and It’s gone back up. But yeah…
An indication certainly. And we’ve seen that too, from even our clients moving back to Jersey city that had moved out here pre-pandemic. So it would be interesting to see how that impacts people moving out of the city, moving out of Hudson county and moving into the suburbs. We are told by Jeff Otteau that we should anticipate a year or two more of a healthy market and an increase potentially of up to 9% or roughly 9% more for sale prices, which feels kind of crazy considering where we’ve gone already. And then in 2023, he’s predicting a 4% decrease. So…
Let’s unpack that a little bit because if it’s going to increase still by 5%, we do want to note that the interest rates now are historically low, continue to be low, continue to keep dropping below 3%, which is amazing, but that’s not going to last most likely…
The fed has already said, they’re going to be increasing the interest rate over the next year or so by 1%, at least we know that the interest rate doesn’t always correlate directly to the mortgage rate, but they do have some relationship. And so, you know, the fact that inflation will be going up means that most likely the sale prices will start to even out. And we have been seeing increases in home, sale prices over inflationand over income increases. And so when that happens, we’re bound to have a correction, right?
So Susie, should someone still buy, even though the house prices are still high, and if we’re forecasting a dip in you know, a couple of years, is it better to rent or is it still good to buy?
Right. So we always caveat. We don’t have a crystal ball and we’ve certainly seen Otteau be incorrect because all economists and, you know, forecasters are incorrect you know, once now and again, but if you are thinking about waiting to buy, because the prices are so high and you think you can wait this market out and wait for the prices to drop, we would advise that you don’t wait because if the prices continue to go up and then only decreased by half, then you’re not really going to save any money. And at the same time, if the interest rate does go up, even by 1%, as we always say, 1% interest rate equals roughly 9% purchasing power. So all of those numbers add up to, it’s still a good time to buy because the interest rates are so low and you can afford a lot more. Also we’ve said last time, I think between now and September, we anticipate less competition. And that’s what we’re certainly seeing a lot more of our colleagues on vacation as we are planning to do in August as well. But one of us is always here so…
There are deals to be had in August. I always say that. It always seems true except for this last summer during COVID. But when everyone’s gone, there are still homes available. So you really can either buy a house without competition or even possibly get a house that has sat a few weeks and possibly get it under list price. So if you want a deal now is the time to be shopping
That’s right. And even if it’s not really a deal, it’s still going to be better than maybe what you will face in the fall or next year or the year after. Right. Bottom line. Don’t wait. And we’re not saying that based on our own insights we’re really saying what is based on experts as well as what we’re seeing. So that’s it for today.
All right. Thanks for sharing Susie.
Sure! Give us a call and we’re happy to answer any questions. Oh, one last thing. He did talk about some of the trends in terms of what buyers are looking for. So we will leave with that teaser that we’re happy to talk to you about that. If you’re making any changes to your home planning, any renovations or thinking about, you know, sprucing things up, we’re happy to talk to you about what the buyers are looking for. So you don’t make any mistakes in judgment.
See you later. Bye-bye.