by James Stefanile, ABR, GRI, SRES, QSC, gCertified, REALTOR/Salesperson, Berkshire Hathaway Home Services New Jersey Properties, Montclair Office
I will be attending Jeffrey Otteau’s Fall Market Seminar in October. He’s the most influential predictor of real estate trends in New Jersey.
In the meantime, here’s what my market in Essex County is doing at the two-thirds point in 2015. I track the numbers for multiple towns in Essex County month by month.
Probably the biggest effect The Great Recession has had on the real estate market is the return of the real estate seasons. Up until 2008 there was just one season – all year-long – and it was robust, to say the least. Traditionally, real estate is active from January to Memorial Day and then, again, from Labor Day to Thanksgiving. These so-called spring and fall real estate seasons are back thanks to the correction that started in 2007 and devolved into the crisis of 2008 through 2012.
Looking at the suburban Essex market for the last few years the numbers of listings are a bell curve with peaks in April, May and June. The number of listings on the market in January and December have been virtually the same for the last few years. This is a classic seasonal pattern with the most properties coming on the market in the spring and early summer and sometimes extending further into the summer.
So far, 2015 has conformed to this pattern. What’s different is in the actual sales activity. In the towns that I track the numbers of solds and pending contracts are on a consistent rise from the beginning of the year with no drop off in sight as of September 1st. Prices are also rising, although not dramatically for residential, single family sales. Everone is predicting single digit yearly price appreciation in the area of 4% to 6% for the most active towns in Essex County. Appreciation and market trends will vary from town to town in New Jersey. All that follows will relate to suburban Essex County where I practice.
Multi family sales are very dependent on which town you observe. Some Essex County towns have little or no multi sales or listings and those who have a larger multi presence are showing flat numbers. Listings, sales and pending contracts are consistent with no peaks to speak of and prices are rising modestly.
What’s most striking is the decrease in the days on market for all sectors. The number of days before a binding contract is consistently down from the beginning of 2015 for both single family and multi family sales. This is interesting because of the pattern of listings coming on the market and the modest rise in prices. The steady decrease in days on market does not mirror the pattern of new listings or sales. When seasonal or flat numbers sell faster it connotes, to my mind, a market trend. Buyers are taking what’s on the market more quickly as sellers become more realistic. Both buyers and sellers are adjusting to the current conditions. The market is stabilizing into a pace of sales which transcends the seasonal differences or stagnant numbers. The number of listings may go up and down or be flat but the absorption rates are decreasing in my markets.
We are teetering on the edge of interest rate hikes that will occur when the Federal Reserve changes the ratio of credit in the economy. The Fed will act when it is convinced the economy has improved in a lasting fashion. When to act is currently a bit of a debate among the members of the Fed as the economy shows better overall unemployment but flat wages and inconsistent quarterly job growth. The economy is growing at the fastest rate since the beginning of the recession but we’ve been in recovery for at least 6 years and it’s been sluggish at best. Another factor which the Fed will consider is the effect of other worldwide markets as they wax and wane, most recently the downturn of the Chinese market and currency. Bear in mind our economy emerged from the Great Recession in 2009 but the housing sector was still in the dumps until, roughly, 2012. Also, the three years since 2012 have shown inconsistent housing sector growth with steady sales and consistently lower absorption rates only becoming standard recently.
Added to these considerations is the up and down pattern of the real estate market which has had a consistent 5 year national cycle for the past 50 years with the exception of 1996-2006 (an anomalous 10 year pattern of acceleration ending with the latest correction and crash of the overall financial market).
We are now in a pattern that will see a down-turn in 2016 or 2017 at the latest. The good news is it will not be as dramatic a correction as the last one because prices and sales are not artificially inflated as they were in 2006, but rather are accelerating in a normal fashion. It’s reasonable to assume that volume and prices will go flatter or slightly decrease as supply and demand equalize. This creates the down cycle and, then, the up-turn in the cycle results from more activity spurred by lower prices, creating more demand.
The practical application of all this data should be a confidence on the part of buyers and sellers that they can enter the market when it’s right for them to do so without trying to out-guess the market trends. In a volatile market like the one we had until 2007 it’s like trying to jump on to a fast-moving merry-go-round. Will you get hurt or will you land safely? You feel the need to act so you don’t miss out but you have no comfort level. The current, consistent market allows you to get on the carousel when it’s safe to do so – in other words, when you’re ready and when it’s in your best interests.
I’ve always maintained you should buy or sell when it’s right for you, regardless of market conditions or trends. Many of my clients who bought and sold in both the boom and the bust are living happily in their new homes. Whether your home is worth exactly what you paid for it in the boom is important but you have to figure in the value of having a place you want to live for you and your family, right now. Conversely, if you bought in a declining market and your equity is only increasing slowly, you must add in the same value your house represents to you as a place to live and move your life forward. If you sold in the boom and made a profit – good for you! And, if you sold in the bust years the new home you bought cost you less than you would have paid in another time. Also, if you bought your home prior to the boom you probably did alright whenever you sold.
Real estate has always been a parcel of “what-ifs”. What if you buy the home you can afford which suits the requirements of your life when you need it? What if you sell a home you no longer need or want when you’re ready and are able to move on with your life? Those are “what-ifs” I can live with.
Can’t get enough of my opinions? Take heart. I have another (non-real estate) blog called “The World At Large by Jim Stefanile – Thoughts On Everything Else”.
I am currently writing a history of my family. You can visit the website at:
https://jimstefanilesotherblog.wordpress.com/
and scroll down to read the chapters in order or you can use the following links to jump to individual chapters. I hope you can visit:
May’s post was “Saddest of Smiles” Chapter 1 of the history of my family:
https://jimstefanilesotherblog.wordpress.com/2015/08/03/saddest-of-smiles/
June’s post was Chapter 2, “The Sanest One” in the continuing history of my family:
https://jimstefanilesotherblog.wordpress.com/2015/08/03/the-sanest-one/
July’s post was Chapter 3, “No Real Connection” in the continuing history of my family:
https://jimstefanilesotherblog.wordpress.com/2015/08/03/no-real-connection/
August’s post was Chapter 4: “Damon Runyon Redux” in the continuing history of my family:
https://jimstefanilesotherblog.wordpress.com/2015/08/03/damon-runyon-redux/
This month’s post is Chapter 5: “A Half Century” in the continuing history of my family:
https://jimstefanilesotherblog.wordpress.com/2015/09/13/a-half-century/
A Real Estate Blog by Jim Stefanile 