Some buyers went on a week’s vacation and now suddenly people think the New Jersey real estate market  is going soft!

I disagree! My new blog article below explains why. 

“How about those apples?”

You may start hearing some realtors say, “ALERT ALERT, I see a market reversal in New Jersey residential real estate!” 

But what is actually happening?

Sellers and buyers need sound advice right now as many of us have been on alert this past year for signs of an impending market reversal in residential real estate.

An uptrend running out of steam in my opinion does not mean that a downtrend is imminent. 

Nor does it mean the demand is declining. It means the new recent listing prices are using the closed sale price comps while ignoring the actual much lower price that spurred the bidding war in the first place! 

It is extremely unrealistic to expect the sharp uptrend that has been seen to continue in that same degree of increase indefinitely. 

Of course, home sales will not continue to jump 20-30% year over year! 

Whoever believed a home at $500,000. Which increased by $100,000. Over the last 20 months will increase again another $100,000 in that same incremental pattern is delusional. 

When listing agents two years ago looked at comparable sales and naturally set their price based on that, because of the sharp market demand spurred by COVID, remote work, etc that I wrote about in another article. 

This led to crazy, generous, and aggressive overbidding. It had an element of desperation yielding closed sale prices anywhere from $20,000. – $150,000 over the listing price. 

Today the “new normal” for buyers is to overbid.  But the list prices set to include the overbid money has made buyers say, “Hey, wait a minute now. We aren’t THAT CRAZY.”

Agents have mentally prepared and trained their buyers to bid HIGHER than list or they will LOSE. This now mentality annoys and discourages buyers if agents are setting new list prices to include the overbidding already! 

Buyers were reaching for juicy apples on branches at just their height and with the help of a ladder they were even able to overbid and what has been referred to as the “new normal” in real estate is that list prices were now the starting prices! 

Buyer agents prepared their buyers to know they MUST overbid (be prepared to use that ladder or the win!)  

The same buyers are very much still out there NOW (minus some summer vacationers of course), but when those same apples are hung or “listed” on much HIGHER branches (prices) that even with the ladder they can not reach, they are saying, “Forget it!” “I will wait for those darn apples to fall before even trying again.” 

This does not mean the market is slowing down. It means buyers are calling them out! It isn’t a lowball offer if it is accurate value for the property. 

Many areas still have agents beating buyers off with a stick for their new “coming soon” listings. 

The normal annual “school is starting aggression” is ceasing but buyers are still pushing hard regardless.

Encouraging Advice For Sellers:

If you list your home closer to the LIST PRICE of recent comparable sales you will STILL most likely get multiple offers! 

BUT if you go for the CLOSED PRICE as your list price, because this “new overbidding normal” is now engrained as the expectation, many buyers will become discouraged and pass. 

Pricing could never be more important for a seller. 

Encouraging Advice-For Buyers: 

If you see a home priced just right, where you can purchase without overbidding, I encourage you to not be intimidated and to GO FOR IT. 

Do not worry about not being able to overbid it because chances are, as comparable sales have now caught up, it may be listed at current value no longer warranting the mania of over-bidding. 

Better still go after the homes with price reductions so you have some possible leverage now that the seller was humbled when the expected bidding war never happened. Having a seasoned agent couldn’t be more important! 

The above hypothesis is of course a generality setting aside the usual factors of value (location, condition, age, improvements, square footage) if we are just speaking comparing apples to apples in theory. Not rotten apples, green apples, organic or worm-infested  

My observation refers to the market in general and as a trend only if interest rates continue to stay low. 

Each house needs to be analyzed separately. Not to mention who you choose as a listing agent. 

Adding extra creative marketing, target market strategies, and expertise is what I always deliver to my sellers. 

Having a keen realtor with insight during this “illusion” of a shift is crucial in being successful when selling or buying right now. 

It is possible that with inflation on everything else we see that these higher price points have indeed peaked however they may STAY at these levels. 

Perhaps these are just the new prices! It has become a reality now, as is food, lumber, and everything else.

Pricing has definitely peaked and in a much-feared but in my opinion a healthy way, demand may appear to have declined but if you perceive it in the way I described above the demand is STILL there very much there! 

If you price it higher then, of course, you won’t get a stampede of buyers. It has appeared as a startling slowdown but this is actually a healthy and NORMAL way for a market to function.

Interestingly, rental housing, on the other hand, has very different contributing factors lately, especially around college city areas. 

Colleges, in an effort to retain their average number of students admitted, have OVER accepted students for this fall, significantly MORE students with the anticipation that Covid would copy Sept 2020 admission declines. 

But they were wrong and now have many more students than there is housing. This has recently overflowed into the rental market very recently. 

In this case, OVERBIDDING is continuing its sharp uptrend. Especially lower price point purchases and rentals are continuing to surge strongly in college city areas. 

I am an active NJ realtor and welcome new clients every day. 

Sincerely,

Joanna Renner

646-296-6864