Say good-bye to 2012 a year of a new/repeat president, a fiscal cliff, several calamities beyond belief, a year of personal triumph for some and a year of personal disasters for more, a year of flux and a year of transition. None more of a transition than that in the real estate market.
The best way to discuss the year that past for homes in Madison, was to compare it to the prior year. All statistics I am reporting comes from the Garden State Multiple Listing Service, the main MLS (however, not the only) used by Morris County Realtors.
We begin by looking at the year as a whole. 2011 had a total of 999 active listings (avg asking price - $877,088) whereas, 2012 had just 822 (avg asking price - $982,142) a difference of just under 18%. The percentage difference of new listing from year to year was under 5% - 211 (’11) vs. 201 (’12). (Avg asking price $833,434 to $864,969). What I find as an interesting dichotomy is that the average sold price in Madison for 2012 was $695,242 (128 home closings; avg days on market - 68), whereas, 2011 average selling price was $698,899 (131 homes sold and closed; avg days on market - 82).
So you are saying to yourself – How is it, that homes are selling for that much less than what they are asking and at a lower sales price in 2012 than 2011? The explanation was evident in the stats as the median sales price (the price that is exactly in between all the homes that sold) averaged $518,720 for 2011 and $578,958 for 2012. In other words 50% of sold homes were under the median price and 50% were over the median price. And yet, the sold price for ’12 was slightly less than that of ’11, which leads me to surmise that the highest priced homes sold in Madison for 2012 were not as great as 2011.
Of the 128 homes sold in 2012, the majority were 4 bedroom homes averaging $710,554/median price of $624,085; followed closely by 3 bedrooms ($505,269/$492,500); far behind, 5+ bedrooms ($1,341,392/$1,294,500) then 2 bdrms and 1 bdrm (363,244/350,500 & 375,000/375,000, respectively).
One thing that has always been consistent, homes sold for 96% of asking for both years. Of coiurse this was based on homes that were priced correctly. (can't fool a buyer or yourself)
Looking at what affected the market and may have curtailed prices from rising were factors that were uncontrollable to most citizens. As every 4 years, the presidential election slows business down for approximately one month prior to the election. This was eveident in October in which there were 30% less closing than 2011. Hurricane sandy stopped all New Jersey economy for 2-4 weeks in September as there was a drop of 80% of homes placed under contract. The foreclosure and short sale market also threatens the home values. The fact that 25% of homes considered for first time home buyer homes are being bought by investors “to flip” or most to rent out, while banks and other financial institutions inability to lessen their lending constraints or appraisal practices, both slowing the natural progression of real estate’s “trickle-up” economic structure. And, I cannot tell you how the Fiscal Cliff debacle affected consumers confidence for the lasst 3 weeks of 2012.
On the positive side, mortgage rates remained at all time lows and although the last 2-3 weeks of December was difficult, consumer confidence to purchase homes has risen. The fiscal cliff was averted which kept the Mortgage Debt Relief Act to remain in place for at least another year, which allows sellers an easier out other than foreclosure; and no change in the mortgage interest deduction. (of which, by the way, was heavily influenced by the Realtor Political Action Committee)
What does all this mean? Economics 101- supply and demand. When there is less of anything available, the price goes up. The perception is the market is improving and without a doubt, it is. There is a pent-up demand for housing, especially in communities like Madison. (nice friendly town with a train line to NYC). I also believe that consumers of real estate are just sick and tired of the government’s inactions, inability, incapacitated, whatever “in” you want to use, that they will do whatever it takes for the American Dream to come true. One of Maslo’s Hierarchy of needs is shelter, simple. However, consumers housing needs have change. They are either buying smaller homes (as reflected by the selling prices) and homes that fit the sandwich generation. (multi-generation) as the buying public find less of a need for a lot of space. As long as it is enough.
In order for the economy to move forward, a strong housing market is a must. I believe we have surpassed the lowest point of the real estate market and have begun to move up even ever so slightly. Similar to an upside down bell curve in which the mark for today is a centimeter above the base. As the 2013 progresses, it will continue up that right side of the curve but at a slow steady pace. Or, as we call it, normal. By the end of the 2nd quarter of this year, prices will have risen. By how much? I cannot tell you, however, I will report to you in the first week of July and give you the lowdown.
If you are looking to buy, think about doing it now. Rates are amazing but are beginning to click up a bit. If you plan on selling, get your home prepared ASAP and list it for sale this month or early next month before the inventory gets too big and your competition is much greater than early in the year. In either case, contact more than one local Realtor in the area (you have a choice), to see who fits best with your real estate needs.