The year 2020 has been a roller coaster of a year for families and businesses, especially the real estate market. There have been many dynamic shifts happening which is causing all-time price increases in neighborhoods across New Jersey. In this article, I want to touch on the state of the current New Jersey real estate market as we head into Spring of 2021.
The Growing Wave
Like a wave rolling in from the 2008 national trend of slowing new housing production, the backlog of completed units has yet to be met, and COVID has only further increased buyer demand. The Federal Reserve has also held down interest rates which have pushed buyers into the market to take advantage of these once-in-a-lifetime low mortgage rates. There is also a migration of buyers from high-tax states brought on by changes in federal tax guidelines, which means they can no longer write off their property taxes.
The National Association of Realtors reported in October of 2020 that there were fewer homes for sale now than ever. As we approach the Spring Market, the problem of low inventory is only getting worse. There has also been a stall in the number of homes listed by sellers that would typically be making an upward move in housing, such as moving up from a starter home. Many homeowners have decided to stay in place to see how the dust settles with the pandemic. These factors have combined to create an unbelievably hot seller’s market, with the surge in demand and shortage of housing units available, causing prices to soar.
Let the Bidding Wars Begin
While a seller’s market may sound like a perfect opportunity for New Jersey, home sellers should know that bidding wars can also be problematic for a few reasons. First, bidding wars in this type of market can drive prices so high that the home may not appraise by the bank. Unless the potential buyer is willing to waive their appraisal contingency, there is a potential to lose buyers due to their financing not coming through. They may not have the finances to afford the higher monthly payments and a higher principle, let alone the additional cost of mortgage insurance. Also, they may not have enough cash on hand to cover the shortage between the appraisal and the purchase price. Another thing to keep in mind as a seller, is that for many home sellers, when you sell a home, you also need to buy another. You are going to face the same problem like all the other buyers in the market, which are few houses to choose from and having to overpay in order to buy the home you want.
The Bigger They Are, The Harder They Fall (Market)
All good things must come to an end. Housing prices had already begun to trend upward before the pandemic and still continue to rise as we find ourselves in 2021. In these current market conditions, most first-time homebuyers facing the rapid jump in listing prices cannot afford the average home. New Jersey home sellers should be acutely aware that the current rising price trend on the real estate market in New Jersey cannot continue indefinitely, and the real estate market will eventually have to stabilize (aka the prices will need to drop). Indicators are that foreclosures, which are on hold now, will rise among lower-income households. Around 2.75 million mortgages are in forbearance under the CARES act’s protection at this time, with approximately 10 percent of all FHA-backed mortgages more than three months behind on payments. This is some scary stuff brewing.
Don’t Miss the Boat
Avoiding selling for too long may mean that sellers miss out on this rare opportunity to strike while the market is at or near its all-time peak. When it comes to traditional listings, a significant number of people simply do not want to take the risks of meeting with strangers to negotiate or do business. Many would prefer not to have showings during the pandemic because of potentially ill buyers walking through their homes. With stress already at an all-time high for many, the mere thought of the additional pressures of selling a home, especially when school and work are home-based, is too much to consider. New Jersey home sellers should know that there is another way to sell their home on the real estate market in New Jersey, by selling to a direct buyer like Halo Homebuyers.