Category Archives: Market trends

Whither The Market

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by James Stefanile, ABR, GRI, SRES, QSC, gCertified, REALTOR/Salesperson, Berkshire Hathaway Home Services New Jersey Properties, Montclair Office

 

Let’s take a look back year over year to get a sense of how the housing market is progressing:

Market Stats Jan-Dec- 2016 vs 2015-page-001

You will notice the number of closings has increased substantially in the last 5 years with only a couple of exceptions. This takes into account the market’s emergence from the recession and any improvement in consumers’ financial situation and confidence.  In some towns where there has been a decrease in closings it may reflect a slower market (every town is different) but in most it reflects a lack of inventory from 2015 to 2016.

Even more obvious is the drop in total listings over the same time period caused by a lack of inventory.  Whenever prices rise inventory falls.

Market Stats Jan-Dec- 2016 vs 2015-page-002

As you see, prices have risen, on average, about 3% per year over the 5 year period.  In some towns 2016 was not a great year.  That was not a banner year anywhere.  Montclair has enjoyed sustained appreciation and it was a good year there in 2016.  North Caldwell, a luxury market, had great appreciation in 2016 but not so great for the 5 year period.  Again, every town is a different market.  However, all in all, prices are trending upward and at a normal rate.  The boom years were anomalous and unhealthy with extreme appreciations leading to a major correction.  Every 5-7 years the housing market corrects up or down.  If we experience another downward correction (and I believe we have already or are in it now) it will not be as catastrophic as the one that accompanied the recession.  Some analysts have predicted we may not even notice a small correction.  I think we may have experienced that last year and was not widely reported.

The absorption rate is the amount of time it takes the local markets to exhaust the available inventory.  Essex Fells and North Caldwell had particularly bad years in 2016.  Their inventory shot up as did the time it would take to sell.  This could simply be a function of increased inventory for that year or overly ambitious pricing.  Those 2 towns have enjoyed a reduction in absorption rate over the 5 year period, as had the rest of the county.  The improvement has been quite dramatic since 2012 for most of the towns with the exception of North Caldwell.  Luxury properties sometimes take longer to sell.  The reduction, overall, in the absorption rate reflects decreasing inventory which has been prevalent in present market conditions.

We have been out of the recession for more than 6 years.  The predictions for recovery were that the housing market would rise again but at a normal pace and not the overheated pace pre-recession.  Government controls resulting from the financial crisis, tightening credit standards and the slow improvement in consumer income have all played a part in this gradual but steady growth.  The predictions for improvement in the recovery of the housing market have turned out to be accurate.  We are seeing multiple offers in many markets resulting from the lack of inventory vs. increading demand.  Some of the same rules that applied during the boom years can be applied now:  a well presented property, correctly priced will do well in a shorter period of time.  Even in the boom years if either of those conditions were not met a property would sit unsold.  That is particularly true today.  Conversly, buyers need to be motivated and disciplined in the face of likely competition.  We have slowly moved back toward a seller’s market but sellers must be disciplined also as their prospects more gradually improve.

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Year End Review

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by James Stefanile, ABR, GRI, SRES, QSC, gCertified, REALTOR/Salesperson, Berkshire Hathaway Home Services New Jersey Properties, Montclair Office

I follow the monthly residential and multi-family values of the housing market in a number of towns I serve. The data comes directly from the Garden State Multiple Listing Service.  It’s always interesting to see the changes or progression in the local markets from month to month and it’s equally interesting to see the trends at the end of the year.

I have graphed selected data which makes the year end trends even more apparent.  Here are some of them and my conclusions based on the values:

Let’s start with the total number of residential listings that were on the market, month by month, for the 3 towns shown, in 2015:

Total Residential Active 2015

What the recession brought back to real estate was the notion of real estate seasons.  During the boom it was one big season from January to December.  Now, as a result of the normalization of the market, the traditional selling seasons are back:  January to Memorial Day and then Labor Day to Thanksgiving.

You can see the run up in listings coming on the market in Montclair and Bloomfield as spring approaches.  The numbers dip in the summer and then there’s a slight up-tick at the beginning of the autumn season and then a fall off at the end of the year.  Bloomfield will have more volume because it’s a bigger town.  Glen Ridge is constant but flat.  That doesn’t imply weakness in the Glen Ridge market as we’ll see in a minute.

What’s interesting are the numbers at the beginning and end of the year for all 3 towns.  They are almost identical.  This has been the case for just about every year since the recession ended.  This tells me we are in a consistent market in contrast to the heated market from 1996 to 2006 where every value, month to month and year to year, was constantly on the rise.

A quick look back at the 2014 numbers shows that the total actives for 2015 were virtually the same from month to month for Bloomfield and Montclair with Glen Ridge slightly down in volume in 2015.

Here are the total numbers of residential units sold in the 3 towns, month by month, for 2015:

Resdential Solds 2015

Here again, the seasonality of the market is apparent and, once again, the numbers at the end of the year are not much different from January, despite a small increase at the end of the year which is when many transactions close. The sales volume in the peak times in 2015 is slightly higher than 2014.

Next is the average days on market for residential sales in 2015:

Residential Days On Market 2015

Bloomfield’s days on market mid year were volatile for some reason but the same trend of decreasing days on market toward spring is still apparent as is the case with Montclair and Glen Ridge.  Residential days on market have been decreasing, overall, for the last year or two showing the resurgence of a healthy market with seasonal trends.

Here are the average sales prices, by month, rounded to the nearest hundred thousand:

Avg Sales Price Residential 2015

Glen Ridge’s numbers are skewed toward the end of the year by the lack of closings.  What’s also interesting is the similarity of prices in Montclair and Glen Ridge and the mirroring of trends in those two towns. There doesn’t seem to be any great seasonal increase in prices during 2015 although prices are on the rise, overall,  year over year in Montclair and Glen Ridge and are about the same in Bloomfield where, as you can see, prices are flat regardless of season.

Finally, here are the number of sold multi-family units for the same three towns in 2015:

Multi Solds 2015

This is, obviously, a much smaller market with Glen Ridge not participating at all.  There are only a couple of streets in Glen Ridge which contain multi-family properties and they tend not to turn over year to year. Bloomfield is, by far, the most active multi market given the size of the township and the higher proportion of renters. All of Bloomfield’s multi data reflect this: number of units, number of solds and units under contract and smaller number of expireds. Again, in the overall multi data the seasons are back with Montclair finishing a little stronger than it started.  Prices are flat as they’ve been for the last few years:  We’re in a stable, slowly improving market, overall.  The consistency of the market within years and year over year is encouraging as the market shows normalcy.

The raw numbers show that Bloomfield, overall, has an absorption rate of 4.5 months with prices increasing about 3% during 2015 with sellers getting 99%-103% of what they ask.

Montclair has an absorption rate just under 2 months with prices increasing 5%-6% in 2015 with sellers getting 100%-107% of what they ask.

Glen Ridge has an absorption rate of only 1.5 months with a small yearly appreciation of 2%-3% but sellers are getting 104%-112% of what they ask and prices, overall, in Glen Ridge are higher than either Montclair or Bloomfield which makes Glen Ridge the leading market in Essex County.

A normal market also shows that the advantage between buyers and sellers is equalizing, which has been a post-recession trend.  Some sellers see the improvement in the market as a return to the boom years when they were in control.  That is not necessarily the case given the unremarkable improvement in local markets over the post-rescession years.  Some buyers have not emerged from the recessionary mindset and are surprised when they have to compete for a property in these towns.  What makes these towns desirable: transportation, schools, ambiance, has not changed and these towns continue to be desired destinations whose appeal will increase as the market strengthens.  The market in these towns may be a bit stronger than other municipal NJ markets but, in general, though the numbers may be proportionally different, the trends are the same statewide with the exception of some markets in southern NJ which are not improving.

We are close to another periodic downturn in housing but, as has been widely predicted, the effect will be slight given the stabilization of the market. In the meantime, we continue to enjoy an anticipated, improving environment in the housing market.  2016 is predicted to be a year of continued improvement. Any interest rate increases will be slight and the US economy will continue to improve, adding more than 200,000 jobs per month.  Wages may not make dramatic gains but that is the new normal, a result of technology and globalization and less the result of recessionary forces.  The Federal Reserve will not exact any dramatic changes in 2016 since it’s an election year and the Fed doesn’t want its actions to be seen as political. If you evaluate these factors the conclusion is, again, an unremarkable but stabalizing environment.

Happy New Year!

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 have written the 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 2015’s post was Chapter 1  of the history of my family

https://jimstefanilesotherblog.wordpress.com/2015/10/15/saddest-of-smiles/

June’s post was Chapter 2, in the continuing history of my family:

https://jimstefanilesotherblog.wordpress.com/2015/10/15/the-sanest-one/

July’s post was Chapter 3, in the continuing history of my family:

https://jimstefanilesotherblog.wordpress.com/2015/10/15/no-real-connection/

August’s post was Chapter 4: in the continuing history of my family:

https://jimstefanilesotherblog.wordpress.com/2015/11/10/damon-runyon-redux/

September’s post was Chapter 5: in the continuing history of my family:

https://jimstefanilesotherblog.wordpress.com/2015/10/15/a-half-century/

October’s post was Chapter 6: in the continuing history of my family:

https://jimstefanilesotherblog.wordpress.com/2015/10/15/closing-chapters/

November’s post was Chapter 7: in the continuing history of my family:

https://jimstefanilesotherblog.wordpress.com/2015/11/10/orphaned/

December’s post was, as it was the end of the year, fittingly, the last chapter in the history of my family, Chapter 8:

https://jimstefanilesotherblog.wordpress.com/2015/08/19/collateral-damage/

 

 

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The Market View – 2 Ways

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by James Stefanile, ABR, GRI, SRES, QSC, gCertified, REALTOR/Salesperson, Prudential New Jersey Properties, Montclair, NJ

The following illustrations will give insight as to how the Essex County housing market fared for 2012 vs. 2013.  All information comes from the Garden State Multiple Listing Service.

The first view is a line item report showing the listing stats for the 2 years.  Click anywhere on the picture for a larger view:

Stats listings 2013

While the individual results vary from town to town, the overall averages point to an improved and more robust market.  Total listings are down (less inventory) in 2013, the average list price increased by an average of 12.3% reflecting renewed seller confidence and the absorption rate (the number of months it would take the market to absorb – sell –  the inventory for sale) fell by 32.5% to 3.6 months.  The last time we saw absorption rates that low was during the boom years which ended in 2006.

Here are the stats for number of closings, the average sale price, days on market (DOM) and the price ratio, or, what sellers got vs. what they asked:

Stats closings 2013

Again, 2013 was more robust compared to the previous year.  The total number of closings increased by 21.9%, the average days on market fell by 14.9% from 2012 and the average sales price increased, county-wide, by 8.9% – a substantial 1 year increase.  Sellers got 99% of what they asked on average as opposed to 97% in 2012.  Remember, we’re dealing with hundreds of thousands of dollars per transaction, so a 2 point increase represents real money.

Now let’s get the graphic view.  I track and graph the numbers for Montclair, Glen Ridge and Bloomfield.  This is interesting because it shows trends at a glance and, unlike the line item reports which only deal with end results, the graphs show how the market performed from month to month.  Here’s the average number of residential units for 2012 then 2013:

Graph Units Sold 2012

In 2012 the beginning of the year and the end of the year numbers were very similar, the peaks and valleys during the year notwithstanding.  You’ll also notice the seasonal increase and drop off of units for all three towns and the increases (except for Montclair in October 2012) are modest.  Now let’s look at the number of units sold for 2013:

Graph Units Sold 2013

In 2013 the numbers are larger (although not dramatically so) and the increases are more pronounced and lasting until the inevitable drop off at the end of the year.  Here again, the beginning year and end year numbers are pretty much the same showing that 2013 was a market in recovery, not transition like 2012, but still improving and not at its peak.  The seasonal aspect of the market is very pronounced in both the number of units and prices, as you will see.  During the boom years the graph lines just went up, up, up with not seasonal adjustments.  The real estate seasons are back which is more normal.  Now, let’s see how prices fared from 2012 to 2013:

Graph sold prices 2012

The 2012 prices are erratic with peaks punctuated by dips in prices as the market made its transition.  Again, prices in January were pretty close to prices in December.  Now, 2013:

Graph sold prices 2013

The peaks are more sustainable and the numbers are bigger, sometimes significantly so.  Seasonal prices are evident and the end of year lines still sink down to where they were at the beginning of the year.  Glen Ridge, interestingly enough, exhibits an almost identical trend line with slightly bigger numbers for 2013 over 2012.

The conclusions are that the market is definitely on the upswing and strengthening year over year.  All the pundits point to increases until 2016 or 2017 when the next down cycle will occur.  Remember, the real estate market for the past 50 years or so has been a wave of 5 years up and 5 years down with the exception of the 10 year rise from 1996 to 2006 which was an anomaly.  Therefore, we can expect another dip at the end of this 5 year cycle which started increasing in 2012.  The soothsayers are also saying the corrective dip at the end of our current cycle will be mild.

The advantage between buyers and sellers has evened out with neither having the sole upper hand.  As long as credit continues to flow we should see a market that will benefit all its participants for the next few years.

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