These are no longer "uncertain times" in the real estate industry! What is certain is this is a NEW real estate market and we have seen unprecedented growth and opportunity in the past three months.
You may have seen articles from The Wall Street Journal, Business Insider, or The New York Times with headlines such as "Escape from New York City" or "New Yorkers flee Manhattan for the suburbs". I can assure you first hand from a realtor perspective, the exodus is real!
Many of the buyers that I am working with are renters from New York City. Many rented for the experience that included convenient commute, dining and nightlife, theater, concerts and sporting events just minutes from their doors. That experience as they knew it has changed and no longer exists. Thus many renters are looking to accelerate their move to the suburbs and purchase instead of renting (why pay down your landlord's mortgage when you can pay down your own and build equity?)
The new real estate market has presented opportunities for both sellers and buyers. While it is considered a seller's market as demand is outpacing supply, buyers are also benefiting from historically low interest rates. Add to the mix that buyers are presenting "shut down" offers, waiving inspections or appraisals in an effort to get their new home and you have an unprecedented market. Let's look at how both buyers and sellers are taking advantage of opportunity:
- Interest rates have fallen from 3.75% in January to historical lows of 2.875% per Freddie Mac.
- These low rates provide improved buying power. In January, a $700K home purchase with 20% down and a $560K mortgage at 3.75% resulted in a principal and interest payment of $2,593 per month. With a 2.875% rate today, a buyer can have a mortgage (pending qualification) of $625K and still have the same monthly payment of $2,593. In this scenario, interest rates have improved a buyer's buying power by $65,000! (Figures for illustrative purposes only)
- Inventory is well below the demand. For example, I had 35 buyers view my listing this past weekend either with agents or at my open house. That means 34 buyers are still looking as an offer was accepted.
- Homes going under contract are up 68% in the past three months compared to the prior 12 month average (based on MLS data for Union, Morris, Somerset and Essex Counties)
New Providence Market
- From June through August, 67 homes went under contract in New Providence. By comparison, the highest consecutive three month total at any other point this year before then was 32 homes going under contract.
- For June through August 2019, 48 homes went under contract (representing a 40% increase for 2020)
- Homes listed YTD through August were 170 compared to 225 in 2019. This represents a 24.5% decrease in inventory at a time when demand is at an all time high.
- Average YTD sales price for 2020 is up 13.4% to $690K compared to YTD 2019. However, it is important to understand the analytics and not just the raw data. The average number of bedrooms in the homes sold YTD are up 10.5% as well. If you sell a bigger home it will sell for more money. This is not a "Covid premium" we are seeing in the YTD sales.
Berkeley Heights Market
- From June through August 58 homes went under contract in Berkeley Heights. By comparison, the highest consecutive three month total at any other point this year before then was 39 homes going under contract
- For June through August 2019, 48 homes went under contract (thus only a 21% increase for 2020)
- Homes listed YTD through August were 219 compared to 224 in 2019. This represents only a 2.2% decrease.
- The average YTD sale price for 2020 remains flat at $618K when compared to 2019.
As you can see, the trends vary from market to market, town to town. The market continues to change on a daily basis. While we have entered the traditional fall real estate market, it is clear to see that there will be nothing traditional about this year's fall market. If you would like any additional information about the local real estate market, please contact me at email@example.com or 908-868-4800.
(All data points based on GSMLS data)