As New Jersey Mortgage Costs Fall, Housing Activity Picks Up
After months of little activity, home shoppers, lured by lower prices, are emerging from the shadows of the New Jersey housing market.
They are back searching for homes, making calls to real estate offices and showing up at open houses. And ultimately, they are buying again, leading to two months of increased sales and starting a trend that real estate experts hope will continue for the rest of 2007.
“The correction is over and the market has begun to recover,” said Jeffrey Otteau, president of The Otteau Valuation Group, in East Brunswick.
So what’s happening in the market? It started with a drop in home prices at the Jersey Shore.
In Monmouth County, the median price fell to $416,750 in the fourth quarter of 2006 from $445,000 in the fourth fiscal quarter of 2005, a 6.34 percent decline, said Otteau.
In Ocean County, the median price dropped to $320,000 in the fourth quarter of 2006 from $340,000 a year earlier, a 5.9 percent decline. The figures include new home prices.
Meanwhile, home sales in December and January increased, the first two-month period in some time in which the number of sales were higher than the period a year earlier, Otteau said.
In January, home sales rose 18 percent in Monmouth County and 11 percent in Ocean County over the same month a year earlier, as new buyers flocked to more affordable New Jersey mortgage financing.
Price drops made homes more affordable for first-time home buyers, bringing them into the market “rather strongly,” Otteau said.
“This is marketwide,” he said. “We are seeing it in Hoboken and Jersey City in the condominium market; we are seeing it in Monmouth and Ocean… in the single-family home market. We are seeing it everywhere.”
It’s a change from last year, when higher home prices, heated by years of heavy demand, reached a point where they became unaffordable for many first-time mortgage applicants.
First-time buyers are the catalyst for the real estate market. The homes they buy allow sellers to upgrade to larger homes. At the top of the ladder, seniors sell their homes and move to age-restricted communities.
The increased activity at the lower end of the housing market will continue for the entire year, Otteau forecasts.
“We are looking for 2007 to be a stronger and better version of 2006 for the entire year, with the strengths being in the lower two-thirds of the price spectrum,” he said.
The market will improve as more first-time buyers purchase homes, he said.
Prices have now hit a level where some sellers are starting to see multiple offers on a home. But unlike two years ago, when bidding wars forced prices up, negotiations are occurring below asking price.
That’s unlikely to change. Bidding wars with increasing prices would make homes unaffordable again, especially for those already stretched thin to afford their first home mortgage.
Until last fall, home buyers were looking but not buying. But as mortgage rates tumbled, interest increased from October through December.
“Now they really are buying,” a local real estate agent said. “They are signing contracts and making offers. They have a threshold, though, and they are not going to overpay.”
Spotswood resident Andrea Higley looked at houses for about three months before buying in Lacey. She expects to close at the end of the month.
She had made offers on two other houses. One seller found a buyer who would pay more. The other wanted her to close on the deal sooner.
“They gave it to someone else who could do the closing earlier,” Higley said.
The third house was priced at $299,000, and the seller accepted Higley’s offer of $275,000.
Jim Joeriman, manager of Prudential Zack Shore Properties’ office in Lacey, said 60 percent of the contracts in his office over the past six months are for homes under $275,000.
“The agents are very busy,” he said. “There are a lot more inquiries than we have had over the whole winter.”
SOURCE: Asbury Park Press