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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.

  2005 2011
Purchase Price $400,000 $150,000
Down Payment $80,000 $30,000
Interests Rate 30/yr Fixed 6.5% 5%
Principal and Interests $2,022.62 $644.19
Taxes $8,000 $10,000
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.

  2005 2006 2007 2008 2009 2010 2011
AverageSales Price $373,244 $383,671 $379,430 $348,815 $316,616 $303,526 $288,833
Number ofHouses Sold 234 178 166 138 135 107 6
DOM 51 63 61 76 79 76 82
High $610,000 $580,000 $535,000 $530,000 $465,000 $450,000 $355,000
Low $181,599 $244,000 $170,000 $175,000 $116,000 $165,000 $227,000
ALP $369,501 $386,203 $387,735 $356,880 $325,496 $313,080 $298,950

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

Post By Audeliz Angie Perez (160 Posts)

Angie Perez is a NJ Circle of Excellence award winning real estate agent for Re/Max Select in Westfield NJ. She sells anywhere from 12-25 houses per year on a consistent basis since 2005. Ms. Perez is primarily a buyer's agent on 60% of her real estate sales where she represents rental income investors, first time home buyers & trade up home buyers of 1-4 family homes within specific towns encompassing 4 NJ counties: Union, Essex, Middlesex and Somerset County. Many of Ms. Perez's clients appreciate her ability to negotiate favorable real estate deals for them. Many of her clients commented that her research abilities, her honesty, her knowledge of local market trends and her proficiency to manage multiple real estate transactions from start to close are some of the reasons why she was hired as their agent of choice. Please call, text or email Angie Perez to ask if she lists or sell in your town. If she can not help you, Ms. Perez would be more than happy to help or refer you to someone who can.

Website: → NJ Real Estate For Sale

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5 Responses to 2011 NJ Real Estate Market Forecast and Predictions

  1. So like i saw your blog and it like totally told me whats up thanks for your input. One love.

  2. Buy nj Homes says:

    S&S Property Development is a group of experienced local investors looking to purchase houses right now. We buy NJ homes Size, location, condition and price doesn’t matter-we can make you a cash offer TODAY and close quickly!

  3. gayle says:

    my house two years ago was worth 133K (as is, with 20 years old carpets and unmatched bathrooms). i have plans on selling it for 143K since i upgraded with wood floors, and upgraded all matching bathroom toilets, vanity, tub, etc) for all bathrooms. now this woman in my community is stating she is selling her unit (townhouse condos) for 30K. i find it almost impossible, but i guess it might be because it’s paid off, and she lives somewhere else. this will most definately kill my appraised value. her unit of course is smaller, much smaller. probably one or two bedrooms, and one full bath, whereas mine is 3 bedrooms, two 1/2 baths, with den on a corner. (plus a new kitchen). will her sale really depreciate my appraised value and bring down all the comps in my area??

    • Gayle,

      It’s Angie Perez of Weichert, Realtors. I run njretoday.com I saw your comment today.

      The best answer for me to give at this time is: it depends.

      What your home was worth two years ago is not a good indicator of what it is worth now. That’s the first thing I would say to you. I can only assume by your comments that your home is also a condo/townhouse community of which I am making the assumption that there is an association.

      If in fact the unit that is selling for 30k, closes at 30k, it may not influence your value because you are a much larger unit based on your comments below. Appraisers are trained to look for 3 minimum comparable sales which have closed in the previous 3-6 months from the date of your appraisal. 6 comparable sales is customary of which 1-2 might be active or under contract. Most appraisers will try not to include pre-foreclosed, foreclosed, or private sales that might occur between family members for example, unless that is the only thing they can choose from.

      What can in fact affect your value could be other factors:

      a. Market absorption rate (the rate at which it would take to sale off all of the current inventory if status quo did not change).
      b. Your association’s FHA status and overall financial well-being of your association. An association that does not qualify for FHA financing decrease the pool of buyers for your unit.
      c. Market Trends (Some NJ Towns – I am not sure which NJ town you live in – but some NJ towns have already hit bottom of the market and are slowly on the rise).

      If I or any member of my team might be of any other assistance, (we can offer you a free CMA) please let me know.

  4. Devinder says:

    We are looking for Duplex/Trilplex and 4- Multifamily Apartments in Jersey City, Newark and Edison in NJ

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