Home Prices On the Rise For Many Markets in NJ
05/23/2013 Frank Nothaft, Freddie Mac’s chief economist, spoke recently at Real Estate Connections, a informational, networking event organized by Chase Bank at Pines Manor in Edison. He said, “I have good news, good news and dismal news. I wouldn’t be an economist if I didn’t have some dismal news for you.” The crowd of 300 plus Brokers, REALTORS and agents alike laughed when he delivered his usury punchline.
The good news: home prices are at an affordable level, but we knew that already. His other good news, “Interests rates are at a 60 year low,” despite three rates changes in one day, the day after the Chairman of the Federal Reserve, Ben Bernanke, testified that the the federal government may be making a decision to scale back the monetary stimulus in the months ahead. And again, we knew that interests rates are low.
So, where does the dismal news come in? Nothaft commented, mortgage defaults, loans already underwritten, remain high and the number one reason for default, especially for loans within the Freddie Mac portfolio is unemployment.
NJ is no stranger to a high unemployment rate. The national unemployment rate average is teetering at 7.5% whereas NJ has an unemployment rate of approximately 9%.
Again, despite hearing the dismal news, the agents in the crowd were buzzing with stories of multiple offers on homes for sale and low inventory. Nothaft acknowledged the agents and confirmed for them that in many NJ markets, home prices have bottomed out. He suggested that we should see home prices rise moving forward, a trend that he predicts will continue late into 2014.
The economy is growing moderately this year. In recent months, the job market and the broader economy have shown renewed vigor. The economy has added an average of 208,000 jobs a month since November. That`s up from only 138,000 a month in the previous six months. Still, unemployment remains well above levels consistent with healthy economies.
At Wednesday congressional hearing, Bernanke said higher taxes and deep federal spending cuts are expected to slow economic growth this year. Both Nothaft and Bernanke acknowledged that the economic recovery had been slow and said the economy faced “significant headwinds”, like consumer confidence. But, low supply has pushed home prices up slightly in recent months, which is a good thing, but we should not break out the champagne bottles just yet. Home prices are not likely to rise to level of homes prices of 2006, not anytime soon.
Therefore, our advice to buyers specifically in a multiple offers situation is to bid aggressively but within reason. In a multiple offers situation, a home may sell 103% above its asking price.
Next, LOCATION, LOCATION, REALTOR. Find an agent that understand these trends, especially in HOT Markets; someone who can advise you accordingly.
Finally, in house hunting, you might lose a battle or two, but certainly not the war. Keep making offers and be patient. Some houses may come back on the market.
***Frank Nothaft is responsible for forecasts, research and analysis of the macroeconomy, housing and mortgage markets. He is also involved in affordable lending analysis and policy issues affecting the housing finance industry. He reports directly to Freddie Mac’s SVP of Economics and Strategy Ed Golding.