This week I attended a workshop with NJ real estate guru Jeffrey Otteau of Otteau Valuation Group. These seminars are a great overview of the national and local economy and housing markets.
The number of home purchases in NJ was almost at the same level in 2013 that it was in 2006. We’ve seen 5 consecutive quarters of rising home prices in NJ bringing nearly 100,000 homeowners back into positive equity. Because of this, more sellers are able to move and inventory has started to rise slightly. Inventory was tightest in the $400-600,000 range in NJ.
Here is the big takeaway: buyers and sellers should “hurry up”! Jeff predicts that by next spring interest rates will be up above 5% and by 2016 rate increases and higher home prices will cause the housing market to soften.
Here is an interesting illustration of the double whammy that rising prices and interest rates can have on purchasing power. A 1% rise in interest rates equates to a 9% decrease in purchasing power. Couple that with the 6% predicted increase in prices this year. That equates to a 15.5% decrease in buying power. So if you can afford a $750,000 house now you may only be able to afford a $635,000 house next year.
Other interesting trends to look out for…because of income stagnation in the economy, the fact that 7/10 households have no children and the increase in baby boomers retiring, demand for more modest housing types will increase, especially in areas with good access to transportation and downtown amenities. This bodes well for many of the town in my marketplace.
Do you know someone who is considering a move in the area? Please call me at 917-751-0448 so that we can connect. I will not disappoint your referrals.