NJ Real Estate Market Forecast 2011: Cloudy with a Change of Selling
I have been in the real estate sales business for 5 1/2 years. When I first started selling real estate, the market was confident. Buyers were buying and sellers were selling. Everyone in the marketplace, for the most part, was happy with the state of the market, including agents like me, but that’s not to say that I am unhappy with the current market. It just is what it is.
Real estate Market Forecast explained
It’s cloudy with a chance of selling. What we have now is the perfect storm for the savvy real estate investor, lower home prices for first time home buyers and a mixed bag of desperate homeowners mixed in with normal resale real estate transactions. Allow me to paint the picture. Picture lower prices, relatively lower interests rates (even though rates have moved up slightly within the last few weeks, dating back to Dec. 2010), distressed properties (I’ll talk about that in greater detail much later) and (REOs) Real Estate or Bank Owned homes i.e. foreclosed homes and a few normal resale homeowners. Imagine 150 houses for sale in your town. About 20% of that inventory represents normal resale, these are the non-short sale homeowners who have equity in their homes.
So why aren’t more buyers and sellers happy? Well, I blame the media for adding to the hype that the market is totally depressed, which some pundits believe the market will take another two years to rebound i.e. another 2 years for the market to normalize or for the short sale the foreclosed home inventory to essentially sell off. In some cases, I do see the gap between anticipated listing price and actual sale price growing but not for all NJ home sellers and definitely not for all NJ towns.
There are some NJ home sellers, in the market now, who are holding on to home prices of 2006 or 2007 and knowing that their home’s value peaked then and not so much now is a difficult thing for many of NJ home sellers to stomach. Even I’ve lost “some” equity in my home, 50k to be exact. But I am not too concerned with fluctuations in the market place or my home’s value as I plan to stay a few more years. Having said that, some NJ home sellers are thinking about waiting out the storm. I can appreciate their thinking, especially if they do not have a pressing need to sell. If your wait time is one year, waiting one year to sell may not be the best decision since prices are predicted to take another 5-8% drop in home prices in some NJ towns and if rates continue to rise, you’ll have less qualified buyers to negotiate with. SO, My advice is DON”T wait a year or two. Sell Now.
NJ home sellers consider this: where there is adversity, there is opportunity in the marketplace. You have the ability to trade up or down at a low prices in the same year. And, some investors have an opportunity to buy low, sell high. Despite changes in the market place, rental prices are relatively stable.
Here are some examples to help you understand what will happen in 2011:
Imagine a 4 family home bring in $3600 in monthly income. 4 Units rented for $900. That same home would have sold for $400,000 in 2005. Now, that same house in 2011 will sell for $150,000. Your buy- in i.e. your down payment (not assuming closing cost) is on average, in an extreme buyer’s market, 37.5% less than what you would have to put down in the past. In our example below that is $50,000 less money down to essentially get a ROI of $1651, which is an excellent positive cash flow situation.
|Interests Rate 30/yr Fixed||6.5%||5%|
|Principal and Interests||$2,022.62||$644.19|
|Total Operating Expenses (Including taxes)||$13,600||$15,600|
|Net Operating Income||$5328.56/year ($444/mon)||$19869/year ($1655.81/mon)|
Let’s Take A Look at Home Sales in Bloomfield NJ over the past 5 1/2 years.These statistics come from the Garden State MLS and reflect single family homes with 3 bedrooms one and a half baths to two full baths. From the chart below, you will notice that the single home affordability is growing with prices coming down. This is a good thing for a trade up or even a trade down buyer. Bloomfield, NJ happens to be a desirable town for many people who are looking to leave the urban areas for peace and quiet, more parking, less crime, better schools, easy NYC commuting, etc.
|Number ofHouses Sold||234||178||166||138||135||107||6|
There is opportunities for everyone in the market place. Talk to me about your specific buying or selling situation.
Here’s a short list of NJ Real Estate Predictions for 2011:
- The number of short sale and foreclosures will continue to plague real estate values for at least another two years.
- Home sellers who price to the market can and will sell within 30-90 days (not assuming sales that require lender approval)
- I expect to see a increase in the number of REO listings in the MLS. This in turn will increase the number of FHA 203k applications.
- Investors will continue to fix and flip, but not at the rate of years ago. We will see more people buying and holding properties for rental income.
- NJ towns with performing school districts and train stations will continue to be Hot Markets
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