How is the Market?
In short, Overall, NJ outperforms the national average: NJ Unemployment is lower than the national unemployment rate and NJ Job Creation is stronger this year than last year whereas, on a national level, it is below last year. No correction (recession) is in sight in the near term, economists say.
But real estate is local! The market depends on many factors such as whether your town has access to a train line, bus, or other public transportation to NYC. The price range is important as in some areas higher priced homes take longer to sell due to the new limits on yearly tax deductions. The market looks at your home differently if your house is “unique” on a main street or in a flood zone or if the layout is unique to the neighborhood.
I Am a Buyer – Should I Just Wait?
No, if you wait you may lose your buying power, Mortgage rates are and will remain at historic lows. But they will increase eventually and you will then lose buying power: That means, every 1%-point mortgage rate increase (from 3.5% to 4.5%, e.g.) will increase the monthly mortgage cost by about 10%. Consequently, the value of your pre-approval letter will decline by 10% as well. For example, if you have a pre-approval for 600K and rates tick up by 1%-point, the bank will reduce your pre-approved amount to 540K (-10%), while home prices overall are still rising. In addition, lending standards always tighten during a correction (recession).
I Am a Buyer – Why Should I Buy Before a Correction?
Because there is no correction yet. And the next correction will not be the “collapse” we experienced 10 years ago. We have a strong economy with very low unemployment, banks with much stronger balance sheets, and healthy lending standards (no subprime mortgages to fail). Therefore, banks will not collapse and will not drag down the housing market. The pace at which houses are selling is slowing down but our tight inventory will not allow for prices to free fall again. Economists say that the next correction is still a couple of years out in which the housing market is expected to correct itself s-l-o-w-l-y this time. And if a good school system is a reason for your purchase, your children may have graduated by the time a correction has been reached, endured, and turned around. So, buy now but buy smartly!
I Am a Buyer – What if I Try to Time My Purchase?
No one can time the market exactly. In addition, it is always a rear-view mirror event adding at least 6 months to the multi-year correction. Then you probably will buy when the market is hot and lose out to multiple offers. Prices will be lower after a correction. But predicting the end of the correction is impossible. During that time you did not buy you will lose out on tax benefits, lose out on paying down the principal for many years, not to mention that you are moving for a reason, such as more space, a better school system, a better lifestyle, etc. Owning real estate has always been beneficial in the long run. But buy smartly!
I Am a Seller – What Should I Do?
The list soon price right! As buying power diminishes, buyers get more price sensitive, resulting in a lack of urgency and fewer multiple offers. Do not “test the market” with overpricing. Statistics in NJ show that a house priced right will achieve its fair market value and possibly more because of the low inventory and multiple offers! But the same house overpriced beyond the fair market value will need to drop the asking price at least once, creating more bargaining power for the buyer, which results in lower offers. Now is the time to prepare for the sale in 2020, the time to repair, paint, declutter, and take pictures. A good listing strategy starts many months before listing the house.