By Allison Pries | NJ Advance Media for NJ.com
Homes sales have been declining for more than a year now.
Experts blame rising home prices and higher interest rates, which are making homes in New Jersey less affordable. And there’s still an historically low supply of houses for sale.
New Jersey saw huge growth in home sales during the coronavirus pandemic. They peaked in July 2020 with 15,343, according to data from the Otteau Group.
Sales normalized in 2021, despite low inventory, but were still higher than 2019 sales figures for most months. Now, in 2022, sales for most months are below 2019 numbers.
Home sales have been declining for 15 straight months, including preliminary figures for August, according to Jeffrey Otteau, a real estate economist and president of the Otteau Group.
“That’s the Federal Reserve’s plan,” he said. “When the Federal Reserve raises interest rates their intent is to stop people from spending and borrowing.”
The 2.5 percentage point increase in interest rates we’ve seen this year has increased the cost of buying a home by about 23%, Otteau said, adding that home prices have also increased about 40% since the pandemic began. That’s making homes less affordable and taking some buyers out of the game.
Inventory is up by about 7,500 homes this year, he said, although still historically low. But the decrease in buyers and rising inventory will combine to shift the market more in favor of buyers and make prices fall about 5% to 10% over the next two years.
Homes sales fell the most, 25%, in the $400,000 and under price range. And they fell the least in the $1 million to $2.5 million price range, according to data from the Otteau Group.
Home buyers in the $400,000 price tier are more sensitive to the interest rate hikes because they have less income and savings than buyers in other tiers.
But first time buyers drive the market, Otteau said.
“The entry level buyer drives the entire housing market because for each first time buyer buying a home, typically four other homes sell in the housing chain,” he said, as the seller of that $400,000 home trades up to a $600,000 home and the seller of the $600,0000 home buys an $850,000 home and the seller of that home buyers a $1 million home.
“We are seeing entry level buyers buy in fewer numbers and that erosion will progress into the higher price tiers.”
Ocean, Bergen and Monmouth counties have seen the most closed sales so far this year. And Salem, Hudson and Warren counties have seen the fewest, according to data from New Jersey Realtors.
“We’re seeing more inventory come to market in our areas and they’re not,” said Robert White, president of New Jersey Realtors and a broker with Coldwell Banker in Spring Lake, who does business primarily in Ocean and Monmouth counties.
Inventory in his office was up 17% in July, he said. But he spoke to colleagues this week in other parts of the state, including Warren County, who say there is almost nothing coming to market.
“If there’s nothing in the pipeline, no contracts are being written. So sales will decline,” he said.
The top five selling towns in New Jersey, so far, for 2022, according to New Jersey Realtors data, are:
- Toms River Township with 787 closed sales
- Brick Township with 445 closed sales
- Woodbridge Township with 444 closed sales
- Cherry Hill Township with 429 closed sales
- Trenton City with 405 closed sales
Husband and wife realty team Ari and Rivka Feferkorn of Team Ari Realtors at Caplan Realty Associates say that Toms River continues to be an attractive place for people who are relocating from Brooklyn and other parts of New York City.
They bought a home in Brooklyn for $1 million that needed about another $500,000 in work. Then they came to Toms River to visit one of their children and found a house for $750,000 that was on a half acre and needed no work — not even painting. “Our old house could fit into our pool area,” Rivka said. “This area has just become an exodus.”
Toms River also has a lot of snowbirds and 55 and older communities, Ari said.
“It’s a very nice place. Pleasant, quiet. Family oriented. People are nice to their neighbors,” he said.
Here are the number of closed sales for each New Jersey county so far this year:
Atlantic — 1,774
Bergen — 4,179
Burlington — 2,848
Camden — 3,073
Cape May — 971
Cumberland — 894
Essex — 2,664
Gloucester — 1,830
Hudson — 601
Hunterdon — 833
Mercer — 1,683
Middlesex — 3,317
Monmouth — 3,493
Morris — 2,723
Ocean — 4,181
Passaic — 1,630
Salem — 597
Somerset — 1,636
Sussex — 1,236
Union — 2,511
Warren — 710