We have seen the market cool off a bit this fall. We believe this is due to a combination of forces:
- Low inventory (2018 had the lowest inventory levels in the last 14 years!) making it harder for buyers to find their first home or move-up home
- Rising interest rates that are at their highest rate in 7 years (just under 5% for a 30 year fixed rate loan)
- Home prices that have been climbing year after year (they are up over 4% in NJ YTD) and this trend has begun to erode affordability
- General anxiety over forces they cannot control including stock market volatility
On the local level, we can point to more than a few homes that sold just a couple of years ago with strong interest, that are now selling for less or sitting on the market. Buyers have lost some urgency. In our local market, this is being compounded by general anxiety over the midterm elections, problems with NJ Transit and “burn out” after months of stiff competition in the market. So some home buyers are taking their time. They’re thinking, “We have been in the 2nd longest housing upswing on record so let me wait until prices drop which has to happen soon.”
But buyers who choose to wait for prices to correct may do so at their own peril. Home prices may not be rising as much as they did, but they will still be rising. Conservative predictions are that NJ home prices will be rising about 2% per year in 2019 and 2020. This, in combination with rising mortgage interest rates will take a BIG bite out of what a buyer can afford– a double whammy for home buyers AND something that potential sellers must understand will impact prices negatively in the future.
The following charts are courtesy of The Otteau Valuation Group and illustrate well the issue buyers will be facing:
So what’s the moral of the story? Don’t wait to buy. You have a golden opportunity to afford the home you want right now because you will be able to afford much less tomorrow. If you are considering selling, take in to account how the affordability crunch will impact your future sale price and don’t miss this window. Maybe you want to accelerate your plans and consider listing sooner?
If you have any questions about the housing market, buying/selling or investing in property, we are always happy to consult with you.