6 Signs of a Healthy NJ Real Estate Market
Indicators of a recovering NJ real estate market
Investors, economists and homeowners alike are eagerly anticipating the return of a booming NJ real estate market like in years past. Even prospective homebuyers speculate and are eager for a market shift so that they can make their move into homeownership at the right time. A number of factors such as home prices, sales volume of new and existing homes, and the amount of foreclosures can all be used to determine the condition of the real estate market. However, consumers need to keep in mind that real estate is local, and prices can vary greatly depending on which part of the country you are in. With that, read on to learn of factors that should be considered in determining whether there is growth in the real estate market.
Prices and Affordability
The Standard & Poor's/Case-Shiller National Home Price Index is considered to be the most reliable report on home prices nationwide. Data released in February 2011 for the fourth quarter of 2010 showed a decline of 4.1% over the fourth quarter of 2009. This is the fifth straight month of national price declines nationally. A strong market would need, at a minimum, stability regarding prices. On the other hand, affordability also plays a significant part in market strength. On the flip side of the price issue, however, is affordability. The National Association of Realtors Housing Affordability Index for December 2010 was 185, indicating that the average family earning the median income has 185% of the income needed to qualify for a conventional loan for a median-priced single family home, with 20% down.
Inventory
Many top NJ real estate experts say that a 6-month supply of homes is an indication of a healthy market. According to the National Association of Realtors, the 3.38 million existing homes on the market as of February 2011 represent a 7.6-month supply of homes. Yet another sign of a strong NJ real estate market is the sale of about 6 million homes each year.
Under Contract Home Sales
The National Association of Realtors Pending Home Sales Index is a leading real estate gauge that considers the sale contracts on existing homes, with an index of 100 typically signifying a healthy market. As of January 2011, this index declined to 88.9%, approximately 20% above cyclical low of June 2010, according to the NAR.
Foreclosures
Foreclosed homes are one of the biggest plagues to the NJ real estate market because they can usually be found at fire sale prices, ultimately bringing down the rest of the home prices in that general area. According to RealtyTrac, approximately 26% of all homes sold in 2010 were foreclosures, a decrease over 2009. Part of a strong real estate market is dependent upon a small amount of foreclosed homes.
Investors
Many NJ real estate experts track the activities of investors in the market, especially when home prices decrease steadily. Due to the recent market conditions, investors are aggressively getting back into the market in search of the best bargains they can get, many times purchasing with cash in order to avoid the extensive loan process. All cash transactions accounted for 32% of all home sales in January 2011.
Mortgage Delinquent Homeowners
According to the Mortgage Bankers Association, delinquency rates have declined to the lowest levels seen since 2008, a future indicator of fewer foreclosures. In addition, the lower the level of mortgage delinquencies, the more robust the market. Another possible sign of foreclosure can be an underwater homeowner, owing more on the mortgage than the value of the home. These homeowners, who represent almost 30% of homeowners, have fewer options for refinancing or selling in the event they need to relocate. In a healthy market, very few homeowners will owe more on their NJ real estate property than what it is valued at.
The real estate market is changing rapidly and expanding into new avenues almost daily. Sometimes it can be very difficult to find the answers you need on a specific topic or issue. In times like these, you need a real estate professional who will provide valuable information and trustworthy advice. For more information on NJ real estate, call us today or click here to be connected with one of our top real estate specialists.
