Housing Market: Finally On the Rise?

Home prices rose in nearly all major U.S. cities in April from March, according to the latest S&P/Case-Shiller Home Price Indices report. But experts disagree on whether we have — finally, after six years of decline — seen the market’s bottom.

“It has been a long time since we enjoyed such broad-based gains,” David Blitzer, chairman of S&P Indices’ index committee, said in that report. “While one month does not make a trend … [the news] is a good sign.”

However, Robert Shiller, co-creator of the S&P/Case Shiller index, was less convinced than some that it was a definitive sign prices have stabilized, saying in an interview with Reuters Insider that while it was encouraging it is still too soon to tell. The article quoted Shiller as saying: “They’ve been falling for six years now, and people have been asking me this question for six years, and there’s always this sense that it’s about to turn up.”

Of course, all real estate is hyperlocal. What are Baristaville real estate agents seeing?  We asked two, one based in Montclair and the other in South Orange/Maplewood.

Realtor Pauline Panza of Keller Williams NJ Metro Group, blogs at www.walkablesuburb.com:

Montclair is showing definite signs of stabilization and even modest appreciation.  Between the 2003-era prices, interest rates below 4% and pent up buyer demand, Montclair houses are moving quickly – especially when they are priced right. Last week a house listed in the 500-600 range had 10 offers, going under contract for well over the asking price.  Montclair housing inventory is down 30 % from June of last year (140 on the market this June vs 200 last June) and demand is up creating a situation that is ripe for multiple offers; With only 3 months of inventory available it has become a seller’s market in Montclair.  Still, homes that are overpriced will not sell and unrealistic sellers will be waiting years before prices are back to their 2006 peak levels.

Mark Slade, Realtor, Keller Williams Midtown Direct, www.goodhomesforgoodpeople.comHttp://lovetoliveinmaplewood.blogspot.com

We are having a really good year so far. In the combined towns of Maplewood and South Orange, we have had 180 closed sales thru June 26 v. 166 through the same period last year.  That represents approximately 8.5% more sales this year. Average Days on Market is trending 63 days to sell, down from 75 days to sell in 2011.  This represents an improvement of 16%.

And, as I often see, 31% of the homes sold thus far have sold for final asking price or greater.  This means 30% of the homes have probably had a bidding war or multiple interest. We have also seen an improvement in the ratio of overall price paid v. final asking price, 96.3% in 2012 year-to-date and 95.9% in 2011. Also great news is that we have another 152 homes Under Contract at this stage and that represents a substantial increase over the trend last year.

The only curious figure is that average prices paid so far this year is $463.6K vs $503K in 2011.  While this could be construed as a continuing weakness in the market, I would prefer to think this is a quirk in the game of statistics (flipping a coin should be 50 heads-50 tails, but often is askew early in the counting), when you pull up the details we had a 33% increase in the number of homes listed for under $300K this year vs last year and we had a decrease in the over million $ homes—more importantly a substantial decrease in the average listing price for the homes listed over $1.0M as last year they represented a total value of $5.6M and this year they only totaled $3.7M (this changes the average price paid by an average of $12,000/home).

 

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14 COMMENTS

  1. Nice article Carolyn. I think housing market will become increasingly bifurcated as time goes on with certain segments outperforming and others continuing to get crushed.

    Montclair is unique. Homes currently priced 500k to 750k will continue to be well bid given Montclair’s proximity to NYC. This price point is cheap for professionals who are looking to downgrade from their NYC condos. These homes traded north of a buck in 2006. The story is similar in other major metro markets.

    I think where we begin to see trouble is homes priced 450k and below. I see this is the cutoff between upper middle and middle class (obv different in different markets but you get the idea). I see no room for Px improvement here given a lackluster job market, leveraged consumers, and leveraged housing product itself. These Pxs are still at least 20% rich given historical median px to median HH income ratios.

    Keep in mind another point (mentioned in your article). Rates are at historic lows. For some perspective, when Greenspan lowered rates in early 2000s the ten year set the then historic low at 3.13%. The ten year is trading this morning at 1.59%. With the current yield curve one would think applications, housing starts, home px indices would be setting insane records. They are NOT. So what happens when Big Ben stops printing and rates go up increasing borrowing costs? Home Pxs should dip again absent massive job growth in this country (cart before the horse?).

    All these things should be considered before buying right now.

  2. I think housing market will become increasingly bifurcated as time goes on with certain segments outperforming and others continuing to get crushed.

    Oh, staphyphy, I love it when you talk dirty.

    Finally, someone thought to give the housing market some Viagra.

  3. What we are seeing has to been viewed in the context of seasonality and pent up demand. While the quality of life in the city is better than we could have imagined in the 90’s, the costs of raising a growing family will always make the choice of moving to a cosmopolitan suburb alluring, or at least tolerable and economically sensible. NY is where the jobs are, and where a good size condo/co-op can fetch enough to afford the extra space that a growing family needs. That appears to be where the migration is coming from. In simplest terms it is easier to move from a high cost area to a lower cost area. Now for the bad news. The availability of mortgage credit is still stiflingly low. Many perfectly credit worthy borrowers that made this same migration a few years ago are still stuck in the bind of over-leverage. They would like to move, or refinance, but the value of their homes has barely moved off of the valuation nadir. Certainly there are buyers that have had a positive change in their circumstances that allows them to take advantage of these historically low rates that are meant to incentivize housing activity, but unfortunately that cohort is still outnumbered by those who have seen their incomes stagnate or decline as they wait for the delivery of hope and change. The good news is that affordable mortgage rates(as distinct from the availability of credit) are likely to be the norm for a while, but the bond market has a nasty habit of foiling the best laid plans. It’s summer. This is when people move, so that they can establish their children in school, etc. Suburban houses are cheap to NY apartments. This isn’t the kind of rising tide that raises all ships. Oh, and realtors just care about getting the trade done, not how much YOU make or lose when selling your home.

  4. There have been a number of homes that have sold in my area lately. Some for far more than the space or idiosyncrasies of the property would suggest relative to what else was available, although they were cosmetically appealing. On the other hand I’ve seen other properties that appeared to be listed far too low, from a curb appeal perspective, sit on the market. In any case the activity is a positive. One thing about this town is that you really need to develop knowledge of the nuances of different neighborhoods. Seems like a lot of the higher sales went to someone that knew the value of the location.

  5. Just from following Zillow, it looks like a lot of homes in Glen Ridge, at different price points are moving. Recent rankings of the school system and the direct access to NYC seem to be attracting new buyers.

  6. Despite the dirty bifurcation talk, stayhyphy, I disagree. I think the price point depends on the town. Say $450 is now the entry level point for Upper Montclair – and prices stabilize and or start to rise again. There are a lot of first time buyers who at 3.5% interest rates will want to buy into the town even if it’s a little stretch for them. The entry level house into any popular town is usually pretty attractive in a stable market.

  7. The problem I’ve found with those $450k range houses in Upper Montclair is that they tend to be the homes that back directly into the railroad, which Montclair or not, is never an ideal location.

  8. JG my point was a little more broad. I agree that the entry level house in a popular town is well bid. In a vacuum that makes a lot of sense, but my argument is that the prices of “entry level homes” are too high. 450k as an entry home px is very high (especially given montclair taxes). The northeast median home px is around 250k for comparison.

    In an economy that is not creating jobs for the middle class these prices have to drop and the median home price to median hh income ratio has to revert to historic norms.

    500k+ homes will remain well bid in Montclair due to proximity to NYC. I made the comment since the article specifically referenced this price range. Most of the country though is buying below this range.

  9. I don’t have my calculator handy, but off the top of my head I’d say that a person that buys a ~$500m house with a 3.5% mortgage would be paying close to the same in taxes every month as they are in P&I. What’s attractive about that?

  10. And, if that person/couple “stretched” to buy that home they would most likely run into AMT which makes the proposition even less appealing.

  11. Right on deadeye. Monthly pmt is $1,796.18 for annual P&I of ~21,500. The other thing when factoring rent v buy is interest and your assumed path of housing prices. Of that $1,796 monthly payment $1,166 of it is interest in month 1 and it is not until month 80 or so that your interest portion of the payment drops below $1,000. Taking your tax pmt, your interest amount of the P&I pmt, home insurance, and your assumption for the cost of annual repairs you are probably close to $3,500 per month down the drain. One can get a pretty decent rental for that px.

    In regards to stretching anyone who buys a home without putting at least 25% down in this market is insane. Ask those who took advantage of the 3.5% FHA program in 2010 and now find that their equity is completely gone.

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