When will New Jersey home prices start rising? Well, in some areas of the country, like Hawaii, this has already begun. Pundits expect rates to be more than a percentage point higher by the end of next year, which will put pressure on buyers who are on the edge of qualifying. We'd all like a crystal ball to predict prices, but here is what Pat Mertz Esswein of Kiplinger wrote in Yahoo Real Estate.
"The lowest mortgage interest rates in almost 60 years, plus affordable homes in cities where buyers had been priced out for years, should be turning the housing market around. But the market also labors under some heavy burdens: a glut of foreclosures that are dragging down home prices, high unemployment and tight credit. Sales fell off a cliff after the home-buyer tax credit expired. And "foreclosure-gate" -- legal squabbling about the process used to repossess many homes -- postponed the sale of many foreclosed properties and struck yet another body blow to confidence in the housing market. Although this recovery may seem unendurably long, David Stiff, chief economist at Fiserv Case-Shiller, says that five to seven years is historically a "pretty standard time frame" for prices to stabilize after a large correction.
"The home-price plunge has left 23% of mortgage borrowers (out of 53.5 million) underwater -- that is, they owe more on their mortgage than the market value of their home. Unless they can ante up the difference -- an average of $75,000, according to CoreLogic, which analyzes mortgage data -- they can't sell and they can't move. Their choices? Stick it out, ask the lender for permission to sell for less than they owe (a short sale), or default.
"Now, short sales and foreclosures are the driving force behind continued price declines. Throughout 2010, they accounted for about one-third of home sales, with an average price discount of 26%, according to RealtyTrac. Everyone agrees that more such sales are on the way, but estimates vary.
"The worst-case scenario for home prices? Slow economic growth and high unemployment drive up the foreclosure numbers, which push down home prices. Consumers refrain from spending, further dampening economic growth and job creation. Demand for homes decreases because would-be buyers either don't have a job or don't have confidence that they'll still have one in months to come. Confident buyers hold off because they expect further price declines.
"Moody's Analytics chief economist Mark Zandi thinks the job market will begin to turn around by mid to late 2011. And the Federal Reserve will ensure that mortgages stay dirt-cheap at least until employment picks up again. Zandi says that the best reason for a bit of optimism is this: With few exceptions, the market is fairly valued based on the relationship of home prices to income and apartment rents. Some markets have actually become undervalued, which will attract more buyers and investors.
"Fiserv expects the housing market to finally hit bottom in mid 2011, with another 7% decline in the U.S. median home price for the year ending June 30, 2011. The firm's forecasting model says that prices are 90% of the way back to being in line with household incomes. Stiff says that the housing market is now "bouncing along the bottom," with buyers and sellers creating price volatility as they try to match bid and ask prices. The firm predicts that in many cities, prices will begin to tick upward again in 2012."
Every community has its own variation on the price and affordability themes. I've been in real estate here in Hamilton and Mercer County NJ for more than 20 years. Call or email me and let's discuss your options.
Joe Giancarli, SA
Real Estate Advisor
Short Sale Specialist
609-658-2612
jgiancarli@remax.net
http://www.joegiancarli.com/
http://www.njhomesource.com/
http://www.newjerseynewhomes.blogspot.com/
www.activerain.com/blogs/josephgiancarli
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