So Now What?

April 2020

Prior to the spread of Coronavirus, the NJ real estate market was still in good shape.  But let’s be real, things have changed. The good news is that agents/brokers, attorneys and lenders are still making sure their current transactions get to the closing table. However, the bad news is that the number of buyers and sellers interested in jumping in now has fallen off very significantly.

So now what?  It mostly depends on how quickly those who lost their jobs and income because of the pandemic can recover.

OVER SIX MILLION Americans filed for unemployment last week, an enormous number that is only going to grow.  According to Lawrence Yun, chief economist for the National Association of Realtors, “Housing, like most other industries, suffered from the coronavirus crisis, but once this predicament is behind us and the habit of social distancing is respected, I’m encouraged there will be continued home transactions, with more virtual tours, electronic signatures, and external home appraisals. Many of the home sales likely to be missed during the first part of 2020 may be pushed into late summer and autumn parts of the year.” 

Gov. Murphy is calling Real Estate an essential business and is now allowing the basic unit of real estate, ‘in person appointments’, or one single showing of a home link to Murphy executive order.  Open houses are still currently off the table. Murphy worked with more than 40 financial institutions, including Citi & Chase to NOT initiate foreclosure or eviction proceedings for at least 60 days.  HUD announced this month that the FHA has been authorized to implement an immediate foreclosure and eviction moratorium for single-family homeowners with FHA-insured mortgages for the next 60 days.

I’m working with several buyers and sellers who would understandably rather wait, and despite a significant number of people deciding to ‘hold off’, there are still people needing to buy or sell, but they’re nervous.   So is everyone else involved in real estate transactions.  So as mentioned above, agents, attorneys, lenders and title companies are all working hard to get the closings/settlements that were already underway completed (including yours truly in the pic above doing just that).

Technology steps into the breach.  Expect more virtual showings, videos, and zoom chats to replace or precede anything previously conducted in-person. Expect digital documents to eliminate even more paper and signature pens.  Expect attorneys to limit the number of people at the closing table to comply with new federal and the World Health Organization guidelines.

Sellers – Agents are, for now taking less listings, and are trying to reassure sellers that they will only bring through qualified buyers, instructing them not to touch anything, escorting them the entire time they are in the home and then disinfecting door handles. Check your home value here. Buyers – Those that left assets in a bear market, may wind up with less cash for down payments. Interest rates are now at rock-bottom lows, but that won’t prevent sales from slowing and prices from coming down, as the economy flips from a strong seller’s market to a buyer’s market.

As interest rates fall, the demand for refinancing seems to be skyrocketing, but is volatile. In March, 30-year fixed-rate mortgages were hovering around 3.25 percent to 3.5 percent. Then, they were at 4 percent, as investors flocked to 10-year Treasuries, and the Fed announced it would buy mortgage-backed securities. Demand for bonds won’t help mortgage interest rates or housing affordability. If you’re looking to REFI, I have contact info for excellent area lenders, so reach out.

An expanding demand is city dwellers looking to flock to the suburbs to rent for more space and an easier time social distancing as Covid spikes and urban crowding becomes too difficult for many to handle.

Stay safe and help flatten the curve.

2019 Real Estate Projections

Where is the real estate market going in 2019?

Here are a few points I’ve boiled down and expanded upon (sourced from Realtor.com) that are likely to influence and illustrate the 2019 real estate market’s performance.

To see how this will affect you personally use the quick & complimentary home value estimator here – FIND YOUR HOME’S VALUE

1. Home price growth will slow – perhaps down to 2%.  Many homes are still selling for a strong price, but receiving 8 or more offers as some did from 2014-2017 is becoming a much rarer occurrence.  For more info on local sales click this link – HOUSING MARKET TRENDS   for more specific HOUSING MARKET TRENDS
2. Inventory will most likely remain moderate with only small increases, except for high-priced homes which will have significant inventory increases.  LOCAL INVENTORY INFO
3. Millennials getting mortgages will slightly outpace GenerationX’ers and far outpace Boomers getting mortgages.
4. The new tax law will be good for renters (keeping more income) and a mixed bag, but mostly negative for homeowners who may keep more income but will lose the SALT deductions.  The law no longer allows taxpayers the ability to deduct state and local taxes (SALT), so we’re being taxed twice on the same income. Those deductions on property taxes, along with a deduction on mortgage interest, used to provide a strong incentive for homeownership.  Maybe the new house representative class recently elected will stick up for the suburban voters who put them there and try to pass legislation to reverse or lessen the impact of the new laws, but I’m not holding my breath.
5. Most experts are predicting that mortgage rates will most likely hit 5.5 percent by the end of the year. Some buyers will be motivated to purchase before the rates get too high and some may begin sitting on the sidelines waiting for the next dip. HOWEVER, after a recent meeting between China and the US about trade and tariffs, interest rates actually dropped. So ‘most experts’ may change their tune if the tariffs/trade wars keep putting a scare into the market.  For more about Mortgage-related questions – link instantly to expert MORTGAGE RATE, FINANCE INFO & PRE-APPROVALS  
6. Most experts don’t see an obvious buyer’s market for awhile, because of moderate inventory and prices holding steady. Buyers will have to adapt their strategies to deal with higher rates and lower inventory.  Since higher end homes will have more inventory and more stagnant prices, there are more opportunities for buyers in the higher price ranges than in the entry level price ranges which have more buyer competition and less inventory.
7. Despite remaining nominally a seller’s market, increasing competition from increased inventory will most likely bring down expectations for bidding wars, multiple offers  and getting whatever price a seller thinks he can get.. Sellers who price competitively should still be able to come away with a good amount of equity if they didn’t buy at the 2006 peak.
8. The total number of home sales declined in 2018 compared to 2017 and is expected to decline further in 2019

link to full Realtor.com projections & article

The New Tax Bill and NJ real estate. Moody’s vs Otteau

Among those of us who live in Northern NJ, there seems to be a general view that the new tax law will negatively impact our individual finances (as shown in the map using Moody’s analytics) .  While it is understandable to feel that way, there is a more optimistic (or resilient) view of the new tax law’s effect on NJ real estate, which will be covered here by real estate guru, Jeffrey Otteau.

My political tendencies may be showing here but, Paul Ryan and Donald Trump basically admitted to trying to penalize high tax states like CA, NJ and IL  (para 5,6,7 of this link  Ryan’s blue state comments  ), even though those states contribute more to the federal coffers than they receive.  Among those being rewarded by the law, MS, KY, AL and many other red states generally receive more than they contribute – New Mexico is the main state that doesn’t fit the pattern. – state contributions

So if you’re worried the new Republican tax law will crush home prices in New Jersey and you’re listening to the media coverage coming out of Washington, then you’re looking to assess impact and take appropriate action.  According to Moody’s, the tax plan will most likely hit NJ and other suburban areas of the bigger, mostly coastal cities harder than it will hit rural, southern, Rocky and Great Plains areas.

But here’s real estate guru Jeffrey Otteau’s optimistic take on the recent changes to the tax code earlier this week.  “There’s no reason to panic here,” said Otteau, president of The Otteau Group. “I heard some bold predictions about Armageddon, about house prices collapsing and losing 10 to 15 percent in value.  There’s NO basis for that.” 

Otteau believes overall NJ home prices will continue to climb in 2018, but at a slower rate than previously predicted, as would-be new homebuyers step back to assess the new law’s impact on their pocketbooks with their accountants.  From my personal view of the market, January has already begun strongly with multiple bids on a few good area listings.

Otteau has a few other reasons for (short term) optimism:

1 – The lower tax brackets will somewhat offset the elimination of deductions

2 – People buy homes for lots of reasons – schools, proximity to work, the freedom and pride home ownership provides, the vibe and culture of an area. Taxes rank lower on the ladder of reasons

3 – The economy has continued to improve (since the lows of 2009) – jobs up and unemployment still low

4 – Interest rates are forecast to rise this year and that will compel buyers to act before they rise higher.

5 – And finally Otteau believes the reduction in the corporate rate will compel more hiring.  I’m yet to be convinced of this one as I believe most of this money will end up with management and in company stocks.

Finally, and said long before Otteau was born, Owning is usually a far better long term financial strategy than renting.

link to Otteau Group website

Many locals and their municipalities have already begun taking measures to lessen the impact of this new bill.   South Orange and Maplewood among other towns have made pre-paying property taxes early simpler, but there are more ways to lessen the impact.  Below are six additional suggestions (see link – prep for new tax law – for more explanation of each measure).  Prep for the new tax law

1- increase charitable deductions

2- expenses, which include travel, professional dues, education costs, conference fees, cars and electronic equipment, can be deducted to the extent they exceed 2 percent of adjusted gross income.

3-medical

4-delay income

5-moving for work do it sooner

6-alimony

Real Estate conditions in local area

 

The Market in our area looks pretty strong.  Absorption rate is how many months it would take for the entire inventory of that town to sell given current conditions.  Inventory levels remain low and buyers are very active.

 

Essex County Property Tax Comparisons

ESSEX COUNTY TAX CHART

Below is a chart of the average tax load paid by several county towns and the percentage of that tax that goes to the municipality’s school system.

The percentage of the state budget spent on education has grown from about 33 percent to about 38 percent during Gov. Chris Christie’s term.

The Governor’s property tax cap may have helped reduce the annual increase in New Jersey’s property taxes, but unfortunately taxes are still rising faster than the rate of inflation.

The link at bottom shows more Essex county towns and gives a bit more background.

link to more info on NJ tax burdens

Year End Sales figures for nearby towns

Leaf Removal schedules in a few Essex & Union county towns

You may have already raked or blown your leaves, but mysteriously they just keep piling up anyway.

The green and less expensive thing to do is actually to use a mower to shred them and leave them on the lawn  as fertilizer.  You don’t need to mow in your garden, just leave them there as extra insulation for the  plant roots that need a bit of protection from the snow.

But if you just want them gone, here is a list and links to more detail about leaf removal schedules in a few Essex & Union Co. towns.

South Orange

all streets by December 6,  unfortunately the town map is so tiny, it’s hard to tell which streets are prior to the sixth

http://www.southorange.org/dpw.asp

Maplewood

Week of 12/01/14 – Section: 3, 4, 5, 6,7,8

Week of 12/08/14 – Section: 9, 10, 11, 12, 1, 2

http://www.twp.maplewood.nj.us/index.aspx?NID=589

West Orange

http://westorange.org/DocumentCenter/View/1754

Millburn

http://www.twp.millburn.nj.us/component/content/article/4-news-alerts/238-2014-leaf-collection-schedule.html

Montclair

http://montclairnjusa.org/index.php?option=com_content&view=article&id=300:leaves-and-vegetative-yard-waste-guidelines&catid=207:refuse-a-recycling&Itemid=465

Summit

http://www.cityofsummit.org/Leaf-Collection

Livingston

Click to access 2014-Leaf-Collection-Program-Schedule-Website.pdf

Glen Ridge

http://glenridgenj.org/leafdisp.htm

Springfield

http://springfield-nj.us/news/2014-leaf-collection-schedule-new-approach-leaf-pickup-2/

Bloomfield

http://www.bloomfieldtwpnj.com/content/environment?quicktabs_4=3

School Rankings

Many area High Schools rated in top tenth of NJ’s high schools – from a US News  & World Report survey out of 395 public high schools

Columbia moves up again from 48 to 36.

Chatham 13,

Millburn 15,

Summit 18,

Westfield 22,

Madison 27,

Livingston 29,

New Providence 34,

Columbia (S. Orange & Maplewood) 36

Governor Livingston (Berkeley Hts) 37

http://www.usnews.com/education/best-high-schools/new-jersey/rankings

Spring Market Heats Up

Please look at what’s going on in New Jersey’s bedroom communities 🙂   Homes going under contract in the month of March for South Orange have doubled from 2011 to 2013.  The vast majority of the other towns listed below have also shown significant gains.

More confidence in the economy, low prices and low interest rates have finally pushed buyers back into the market.  A lack of inventory is making for bidding wars on the best homes and shorter selling times for other homes.  Its April and if you’re thinking of selling, now’s a great time to do so.

My 2012 sales

Here are pictures of the Essex and Union County homes I guided to closing in 2012.  There were also rentals and referrals which were not included in the gallery below.