The OTTEAU Report – Market Commentary by Jeffrey Otteau
NJ Housing Market Continues to Improve
The New Jersey housing market recorded the highest number of October home sales of the past 3 years and recorded an impressive 55% increase over the same month last year. After rising at a rapid pace during the late Spring months of this year, contract-sales have defied the traditional ‘end of summer’ sales slump by averaging 7,100 monthly sales for the 5 months. For example, there were 7,100 contract-sales in October compared to 7,050 back in May. That the pace of sales is holding steady in the face of continuing job losses and rising unemployment is remarkable and highlights the opportunity value resulting from lower home prices and record low mortgage rates.
Based upon current trends it appears that home sale activity during the winter months will rise to its highest seasonal level since 2004, a time when home prices were still rising.
A parallel trend is also noteworthy whereby Unsold Inventory continues to fall due to the rising pace of sales. Since peaking at 69,000 homes on-the-market back in May, inventory has fallen to its current level of 61,000 homes. What is particularly impressive about this decline is that it is happening at a time when mortgage delinquencies and foreclosures have continued to increase wnormally cause inventory to rise. Today’s unsold inventory reflects 8.7 months of sales, down from 14.9 months one year ago and 16.9 months at the beginning of this year.
Looking ahead expect continued improvement in home sales due to the favorable effects of still low interest rates, the expansion of the Federal First Home Buyers Tax Credit to include trade-up purchasers, an improving economy and the slowing pace of job losses. All of this points toward a more robust Spring sales surge and modest home price increases in 2010.
The housing market continued to strengthen in October as the inventory of unsold homes in New Jersey reflected 8.7-months of supply, down from 14.9 months one year ago and 16.9-months at the start of the year. Given that an 8-month supply is the balance point below which home prices are inclined to stabilize, an end to 3 years of declining home prices is at hand. The graphic at left shows that 8 county submarkets now hold 8 months or less of unsold inventory with only 4 county markets carrying more than a year. Even more encouraging is an expanding list of town level submarkets with less than 4 months of supply wherein home prices have already begun rising.