The Real Estate Corner
A GOOD TIME TO SELL?
In January, we talked about the question so many real estate consumers today must ask themselves—Is it better for me to rent or to buy? Of course the answer varies with individual circumstances, but we did outline some of the compelling factors that exist in today’s real estate environment to support a decision to purchase. Based on those factors, current buyer demand for homes is higher than we’ve seen in many years.
We all know of the basic Theory of Supply and Demand in Economics: It is more favorable to sell a product at a good price when demand for the product is high and supply is low—and that is exactly where our current real estate market indicators are trending.
Consider the following in terms of demand:
Consumer optimism is at an eleven-year high according to the University of Michigan consumer sentiment index.
Household formations are increasing as of December 2014 according to the U.S. Census Bureau.
Because of FHA fee reductions alone, 90,000-140,000 additional new home purchases will be made possible nationwide in 2015.
The most recent National Association of Realtors studies show that the number of active buyers currently in the market as of January 2015 is three times higher than the number who were in the market one year ago in January 2014.
As for Supply, according to NAR, the total number of homes for sale in the U.S. has declined for the first time in sixteen years—and is the lowest it has been in a year. Nationally, according to NAR, there is a 4.4 month supply of homes for sale. As we have previously discussed in this column, when homes inventory is less than six months, we are considered to be in a “seller’s market.”
Closer to home we can notice these same interesting trends. As of January 31, 2015, according to Otteau Appraisals Group, Bergen County as a whole has a 6.5 month supply of housing inventory. The figures for Rochelle Park showed a January housing supply of 4.3 months, and Maywood, as of January, only had a 2.9 month supply of housing stock. In Hackensack, for the same period, the housing supply was at 7.9 months and in Paramus it was 4.6 months.
The average median sale prices for our local area, according to the New Jersey Multiple Listing Service as of January 31, 2015 as compared with January 2014, one year before, showed the following: a 12% increase in Saddle Brook compared with January 2014, bringing the average median sale price to $295,000. Rochelle Park’s average price increased by 5% to $290,000. Maywood’s average median sale price for the same year-over-year period increased by 1% to $350,000.
It is also true that most homes come onto the real estate market in the second quarter of the year—April, May, and June. That is when housing inventories are expected to rise and housing supply will therefore increase. But as we know, buyers are already out. If a prospective home seller knows that this is the year for him or her to move, it may not make sense to wait for more competitive properties to come onto the market during the Spring selling season.
Over the past seven years, there has been a pent-up demand on the part of sellers who have held off putting their homes on the market. Some have worried about the economy not boding well for a successful sale. Other potential sellers deferred their decision to move because of little or negative equity based on flagging home values and a seeming avalanche of foreclosures. These conditions are beginning to lessen, improving the possibilities for a successful sale.
Whether it is time for a homeowner to sell is an extremely complicated and personal decision that should be well thought through and discussed with a trusted advisor. However, it does seem that if that decision to sell is the right one for an individual or family for any myriad of reasons, the real estate environment today will support that important decision by providing motivated buyers with access to affordable mortgages.
We hope that we have been able to put into perspective some of the available housing data and to provide some analysis to show how that data may affect you or someone you care for when it is time to make real estate decisions. It has been said that the only constant is change. Markets will change, but knowledge is power. Knowing the data is a first step. Acquiring the wisdom to analyse it is the end goal.