by James Stefanile, ABR, GRI, SRES, QSC, gCertified, REALTOR/Salesperson, Berkshire Hathaway Home Services New Jersey Properties, Montclair Office
It has been said that whatever you read or see or hear about real estate in the media has already happened – it’s history.
The following article in the September 29th edition of The New York Times is an example of this.
The Times reports (on its front page, in the prime position right hand column) that the housing market has slowed. Click on the following picture to read the entire article.
Jeffrey Otteau, the northern New Jersey real estate expert, had predicted months ago that rising prices, rising mortgage rates and stagnant wages were creating a disconnect between buyers and the housing market. Also, sellers may not be selling because, in order to buy again, new mortgage money will be much more expensive than the cheaper mortgages they are currently holding.
This has contributed to the lack of inventory and the slight slump we have seen in the market lately. As always, different areas in New Jersey experience market forces differently when it comes to housing. Montclair, Glen Ridge and transit towns like them have not seen a noticeable sales slump and inventory is very tight. Other localities may be experiencing more price reductions and longer days on market. The statewide number of sales, year over year between this year and last is only up a fraction of a percent which only translates to about 600 transactions statewide. Nationally, existing home number of sales are down 1.5% year over year. Prices are, nationally, only up 5.5% year over year which is the slowest increase in 2 years, even with consumer confidence at high levels and the unemployment rate the lowest in many years.
Housing starts (new construction), however, is up over 9% year over year which is an encouraging factor in inventory supply. The lack of housing starts during the recession recovery period was a huge contributor toward the paucity of choice for buyers. Going forward, tariffs may dampen the growth of new housing as material prices jump and builders lose the economic incentive to start construction.
There are many conflicting trends which are competing to affect the housing market. The large pool of buyers vs. the lack of choices to buy; the strong economy vs. the slower rate of wage increases; the strong trend of housing starts vs. the possible increase in materials cost; the recent reduction of the Consumer Price Index rate of inflation vs. the increase in mortgage rates. The increase in multiple income households vs. the rise in housing prices, Pent up demand vs. the disconnect caused by wages and rising prices, long time owners wishing a change vs. higher mortgage rates than their existing loans, the demand in cities with bustling business growth vs. high prices and low inventory and, weirdly conversely, sales slumps and price reductions vs. cities and towns in high demand.
All that being said, now, as always, the life events of the consumer are the major driving force for buying and selling, market conditions notwithstanding. Buyers and sellers will (and should) act when they need to (or want to). To sit on the fence while analyzing the conflicting housing trends benefits no one.