NOVEMBER HOUSING MARKET UPDATE
Sellers, get your properties ready to hit the market for January as there will be a wave of buyers and a lack of inventory for the new year. With rates expected to increase throughout 2023 the earlier you can list the better.
Buyers, now is your moment! While it might not seem like it, right now is the best time for buyers to purchase. Historically, buyers get the best deals on properties that go under contract in November and December. In fact, I have seen homes that were priced reduced in the fall and didn’t sell only to be relisted at their original price in the new year and sell at or above asking. The main reason is because as people get busy with the holidays they have less time to focus on their house search. This temporarily decreases demand putting buyers in a better position. This is magnified this year as we are coming off of two years where annual events were canceled or severely limited due to Covid. As other buyers are distracted making up for lost time, this provides an opportunity for their competition.
Additionally, mortgage rates are a blessing in disguise. The bad news, rates are double what they were last year. The good news, this removed a large portion of the competition. When my clients bring up rates I ask them why they didn’t buy back when they were lower. I get one of two responses, either they tried but continuously lost out on bidding wars since they either couldn't or come up on price or they weren’t comfortable with the terms required to secure the home (partially/fully waiving appraisal, limiting inspections, offering use and occupancies, etc.). The other answer I get is that they were waiting for the market to crash as both home prices and interest rates continued to climb.
At this point, I educate them based on the data available and trends I am seeing as a professional. We don’t know what mortgages will be in the future. There are predictions we’ll see double digits in 2023, if that’s the case then 7.25% now doesn’t seem so bad. Plus since there is less competition at the moment, buyers have more power than they did in the past. If the interest rates go down you can always refinance, but if you wait for rates to drop not only is that not a guarantee, but when you return to your search so will everybody else who was waiting. At that point, you will face the same supply and demand issues as 2021.
As far as change in the market, Bergen County is not the rest of the country. Yes, a shift has begun, but while other parts of America are seeing home values plummet we are still in the midst of bidding wars. We have a scarcity issue since there just isn’t enough inventory in the area. That was compounded by the fact so many city renters became and continue to become Jersey homeowners. Additionally, most people are unaware of how many individuals and non-profits pulled their funds from the stock market and are investing in the housing market instead. These investors are cash buyers with financial teams who then use the equity from their current investments for additional purchases. The combination of the lack of inventory and the influx of investors will prevent this area from seeing a drastic change in the market for a while.
Finally, rents are at an all-time high, so with the exception of those protected by rent control laws, tenants are already paying the housing increase. If these tenants were to pay the housing increase in the form of a mortgage, they'll be building equity. However, if they continue to pay rent they are paying their landlord’s mortgage and building their landlord’s equity.