There is no doubt that you have noticed an increase in homes on the market - many sellers waited out the spring market to gauge recovery, and because of the home buyer tax credit, etc., we had a bit of a false positive on the state of market recovery. So many would-be sellers, anticipating a good summer/fall season, put their homes on for sale. The result was a mini-glut of homes, some priced to sell, others priced to sit...some priced to sit until they became as stale as last week's bread.
Increased home inventories in our local towns seem to have had a strange effect on the local buyers as well - with so many homes on the market, all sense of urgency to buy is gone. The few buyers that are qualified to buy are reveling in towns with inventories of 4 to 8 months worth of homes for sale - nearly double the amount of inventory as we are accustomed to. So...the result? Buyers take twice as long to wade through the inventory...and even then, they seem to be suffering a little of the "gotta be a cheaper gas station at the next rest stop" syndrome. Without any sense of urgency, they pass on beautiful, lovely homes in the elusive search for the "PERFECT" home (I know I can get a 2 car garage, master suite AND a full finished basement if I just look hard enough...I can wait...).
Now, I, as a real estate agent, am all for buyers getting what they want - I myself stalked my current house for 6 months before making a move, so I know the impulse. But there are a few caveats to this strategy that will help us to balance the delicate need to find a home we love, as well as "play the game" to our advantage in price:
1) Do not let "PERFECT" become the enemy of the "GOOD" - buyers remember, this part of NJ is full of sturdy older homes - if you are looking for a house with a master suite walk-in closet, unless someone has chewed up a second bedroom to make it, it probably doesn't exist. When these houses were built, no one had 50 pairs of designer sandals, so you aren't going to find the storage for them in your room. Temper your expectations in a reasonable fashion in relation to the kinds of homes in the area, and if you choose to live this close to NYC, you might have to choose between a family room and a 5 minute stroll to the train station.
2) Record LOW interest rates not appealing enough for you? Conventional wisdom says that they will stay low through the November elections, after which, historically, there is a bump in rates. While a quarter of half point bump doesn't do a lot of damage to your buying bottom line, for first time home buyers, it can seriously affect what you can afford. Remember, a 1% increase in interest rates means a reduction in your home buying power by 9%. And with interest rates already well below 5% for most qualified buyers, this is the time to borrow - money has never been cheaper, and no, I don't see them dropping further.
3) Oh, let's not forget the record low home prices. In this area, we thank our lucky stars for the proximity to NYC because we know that we didn't lose value like Nevada or Florida or Michigan. Homes have lost on average between 10%-25% of their values from the height of the market, and if you want to get a good price on a home, offer strategically and make an evaluation of why the seller is doing so. It will help you to get the best price for a home - of course, that is why you work with a realtor, too - to help you make these decisions and negotiations. And please note, around here in northern NJ, there are towns that still have bidding wars on homes, so don't think we aren't still somewhat strong as far as housing markets go. Oh, and all the experts (Case-Schiller index for instance reported that prices were up slightly in September in the top metro areas, which does include north NJ), say that prices are trending back up - the overall national average for September is up 4.2% over this same time last year.
4) Motivated sellers - enough said. It's a buyers market. We all know this.
5) Motivated lenders - underwriting standards seem to finally be settling down from the subprime disaster, and fund are available. If you have a job (with decent credit) and can afford the payments, chances are, you can afford a mortgage.
Have you ever noticed that when there is a table of shirts for sale, no one seems interested unless you see another shopper thumbing through them with a stack of shirts that they are considering buying? And then all of the sudden, that microfiber lightweight windbreaker that woman has in her hand is "just what you were looking for, too...oh, and it's the last one..." We all understand the law of supply and demand - if the demand goes up as it does in the spring, supply will go down, and prices will start to inch up. Don't miss the clearance sales going on right now!
We shall see what this fall brings - I have a handful of hardy, intrepid buyers that see the value of buying now, not only because of the rates and prices, but because they see the market over the next few months being especially fruitful as sellers may look to get out before the holidays and winter. I know these buyers are going to get a great deal on a home...and I am going to make sure they get the most for their money. Because in the spring, as always, there will be a bump in prices - small or not, a bump is a bump. Come check out the sale table while you can...
