The Spring is usually the busiest time of the year in real estate. But that’s changed a bit recently. Since last March, when the lockdown started and many sellers took their homes off the market inventory has stayed low. The reasons for that are varied: many people were wary about strangers coming into their homes and risking possible infection, there were layoffs, companies shutting down, and many other factors that figured into the equation. So, from mid-March until early-May of 2020 the number of homes on the market, as well as those going under contract (meaning that they’ve accepted an offer and agreed to all the terms) decreased at historic rates. Additionally, prior to the pandemic, inventory was low as we were already in a growing seller’s market, meaning that there are more buyers than sellers, giving the sellers the upper hand. Now we are experiencing historic lows in inventory.
But then as the weather began warming up, the great urban exodus started up. Many people, especially those living in New York City, were looking to move to the suburbs where things are more spread out. So from mid-May through the end of 2020, the local market was going crazy, with the exception of the number of homes on the market, as the inventory was still low. So, homes were coming on the market and there would be a flurry of showings and then in most cases, multiple offers would come in on the home. Great for sellers, not so great for buyers. All of this leads to bidding wars and rising prices.
Again, this is great news if you already own a home or are thinking about selling. You’ll likely be able to sell your home for more than you thought it was worth and it should sell quickly.
As there are more buyers coming on the market, statistics show that the largest percentage of buyers in New Jersey are millennials, which is a new factor in the equation. Add low inventory, a new generation of buyers and people leaving the cities in droves to come to towns like Cranford and you have the formula for a very strong seller’s market that should continue for some time.
In 2020 prices in Cranford rose by almost 6% and this year the growth in price should be around 15%! Over the last 2 years, prices have risen in town by about 20% In fact, several leading forecasters are predicting that inventory will be low and prices will continue to rise through the end of 2022. They also forecast that in 2022 prices will rise by another 5 percent! Great news if you’ve been in your home and are considering selling.
What will happen after 2022?
Several leading forecasters are predicting that there will be a correction in the market in 2023. Prices will likely drop, 1 or 2% for a year or two. After that, we should return to a normal market where prices rise 2-3% per year.
What if you want to buy?
Should you wait? With interest rates still at very low levels, buyers have more purchasing power and my advice would be to buy now. If you think about it this way, for every 1% rise in interest rates, buyers lose 9% of buying power. Let’s say that you can afford a $400,000 house with a 5% downpayment and an interest rate on your mortgage of 3%. What if the interest rate rises to 4%? Now, you’ll only qualify to buy a house for $364,000. That’s a big difference, and your monthly payment will be nearly the same for both. The chart on the right shows buying power with today’s rates, which are around 3% and how buying power would change at different price points. Buy now, it makes financial sense. Even if prices fall as predicted, the interest rates are predicted to rise. So, you’re likely to get more bang for your buck now than if you wait.
Thinking of buying? Here’s our free Buyer’s Guide.
And what about if you’re thinking about selling?
Do it! Now is an amazing time to sell your home. Many of our recent listings have had one day of showings, usually at an Open House, and are getting multiple offers and selling over list price! In this market, if homes are priced properly, they will sell quickly and in most cases above list price. As discussed above, there are more buyers than sellers, and the buyers want to buy. The market is working in your favor, if you’re ready to make a move, you’re likely to get more equity out of your home than you thought you could.
If you’re thinking about selling your home, take a look at our free Seller’s Guide.
Whether you decide to sell, buy, or just wait, know that I’m here for your real estate needs. Feel free to contact me with any questions you have. If you’d like monthly or quarterly updates on Cranford or any town in the area, just let me know.
All opinions, information and data provided are deemed reliable but are subject to errors and omissions. Not intended to solicit other Brokers’ clients. We cooperate with them fully.