The New Jersey Realtors has published their local markets update for February 2018. The markets look strong so far for the first Quarter of 2018. There are several key indicators which demonstrate growth and project to a strong spring season. Some of those conditions are beginning to take shape as we head into the historically strong spring real estate season. Lower inventory, increased sales prices, rising interest rates, a growing national and regional economy and less time on the market all translate to a flurry of activity this Spring. Now is the time to get ready for the robust spring market.
Lower Inventory. One of the key indicators used to forecast the real estate market is the number of properties listed. This is commonly referred to as inventory. During the month of February 2018, there were 3,378 new listings collectively in Hudson, Bergen and Essex Counties. There are now 4,701 single family homes listed in these three counties which is a drop of approximately 11 percent from this same time in 2017. Inventory of single-family homes in Bergen County is down by 25% while the inventory of townhomes on the market is down 30%. In Essex County, inventory is down 23% and 25% for single-family homes and townhomes respectively. Inventory has slipped less in Hudson County with a moderate decrease of 14% in single-family home inventory and a 1.6% drop in townhomes on the market.
Less Time on the Market. Listings were spending less time on the market throughout the region. For example, homes stayed on the market an average of 64 days. Essex County single-family homes were down 17 days to 63 days until sale. Hudson County homes were down by 10 days to 50 days until sale. Bergen County saw an increase of 6 days to an average 86 days on the market for a single-family home. Townhomes in Bergen and Essex County tumbled an average of 15 days on the market from 94 and 90 to 79 and 74 days until sale respectively.
Rising Sales Prices. With traditional market forces of supply and demand, we are seeing a general increase in the median sales price with a simultaneous drop in the number of days on the market until sale. As the amount of inventory decreases, the demand for homes has the effect of raising prices. Essex County has seen the average sales price for a single-family home increase by 14% over this same period in 2017. Meanwhile, Hudson County’s median sales price climbed by 7.6% for single-family homes. Bergen County showed a small increase in median sales price with an advance of two percent.
Improved Economy. The economy seems to be thriving in many important areas. In fact, S&P 500 corporate revenue and profits are on track to deliver the best earnings season in six years, up an estimated 8% and 15%, respectively. Earnings expectations for 2018 have surged by 19%, bolstered by the improving economy and U.S. tax reform. Additionally, we anticipate the second order effects from tax reform will be an added kicker, as new incentives encourage capital investment and the repatriation of cash from overseas. The windfall will likely deliver further stimulus at a more moderate pace, by way of employment, new plants, equipment purchases, the expansion of drug-research, mergers and acquisitions, as well as returning capital to shareholders through share buybacks or dividends.
Interest Rates are likely to Rise. Interest rates have risen slightly thanks to three small rate increases by the Federal Reserve, and the pace is likely to continue. Realtor.com and the Mortgage Bankers Association both expect the interest rate on a 30-year fixed loan to reach 5 percent during 2018 — the highest level since February 2011.
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