Many of us may have read the article in The Wall Street Journal this past week heralding the news that home prices had their biggest month-to-month decline in more than a decade during the month of August. This was based on the Case Shiller National Home Price Index, which “measures the average home price in major metropolitan areas across the nation.” Even more foreboding than the actual facts of the day was the prediction by experts that this should not be viewed as a one-time event but rather the beginning of a trend that could be with us for some time.
How are we (and by “we” I mean any professional in the business, all home owners and frankly anyone even thinking about purchasing a home) supposed to process all of this information? Should all of us suddenly assume a massive housing market crash is around the corner? That if we’re thinking about buying or selling our homes we should halt?
To start, it’s important to separate the broader market factors, those that impact both coasts as well as North or South from local factors impacting your specific county, your city and even your particular neighborhood. But let’s begin with the national factors, and right now there is no bigger story than the interest rate on a 30-year mortgage. According to Freddie Mac, one year ago in October the average rate for a 30-year loan was 3.09%. Now, one year later, the rate on October 20, 2022 was more than double at 6.94%.
Let’s break that down into real terms. In our immediate area of Teaneck, Bergenfield and New Milford the average home today sells for around $600,000. With a standard mortgage at an 80% loan-to-value ratio, you would be holding a $480,000 mortgage. Had you taken this loan out last year, the monthly payment would be $2,023 as opposed to $3,174—a hike of more than $13,000 a year in payments towards interest. If you are currently contemplating buying a house for over $1 million you could be paying more than $25,000 a year as compared to one year ago.
There simply is no sugarcoating this, and it should come as no surprise that the country as a whole is experiencing a decline in the prices of homes. To be sure, I have received a number of concerned calls this past week.
But this is by no means the end of the story and not what we are experiencing on a day-to-day basis here in Bergen County and in particular the towns of Teaneck, Bergenfield and New Milford. In areas across the country where prices are declining, the inventory is growing faster than the number of sales. However, in the Northern New Jersey housing market, the amount of inventory has shown little sign of recovering towards any semblance of what was considered normal a few years ago. It is quite perplexing to see that the pace of new homes coming on the market is slowing rather than gaining traction.
Why exactly this is happening and why potential sellers are opting to stay put rather than move will be the topic for another article. Suffice to say that if you currently own a home that is carrying a 3% loan because you refinanced in the last few years, the thought of selling now and buying something smaller, yet still paying the same amount on your new mortgage or even higher than your current payment, is enough to make you think twice about leaving (unless you are paying cash).
The effect this has is actually one of creating stability. While in other parts of the country where inventory is piling up the buyers are starting to feel like they have the upper hand, the same cannot be said here in Teaneck, Bergenfield and New Milford. Homes that are considered move-in ready and on popular blocks are being snatched up and yes, even with multiple buyers and over asking price. The feeling that if something good comes up you need, as a buyer, to move fast and strong still survives in this small corner of the real estate market.
Nechama Polak is the broker of record and owner of V and N Group LLC, located at 1401 Palisade Ave in Teaneck. [email protected] 201 826 8809.