This is the first of a multi-part series looking at the housing market in Bergen County based on an article I recently came across on northjersey.com titled…Home prices coming down to earth in Bergen County, could signal turnaround.
This article represents the typical broad based view, that historically low interest rates and decreased home prices, should automatically create affordability, and thus should translate into a housing turnaround. This is the same assumption that the pundits have been touting since the housing bubble crashed in 2008 (really in 2006 in our area)…and yet have been left scratching their heads, wondering why their view of the market hasn’t come close to fruition.
Who in their right mind wouldn’t purchase a home with these numbers?
If only a recovery, or a turnaround was as easy as a simple math equation
As you can see by the table (data from njmls) few people have bought into this line of thinking, because as the data shows, home sales haven’t improved in Bergen County with 3+ years of record low rates and huge price declines.
Home sales have remained remarkably stable since the crash.
Stability is a great thing!
First some stats for single family home sale in Bergen County:
- the number of homes sold yearly in Bergen County, have declined by 20% since 2008 (national market crash)
- the number of home sold from the high point of 2004 (7631 single family homes sold) decreased in Bergen County by 41%
- The dollar volume of homes sold in Bergen County compared to 2004 decreased by the same 41%
Multi-family sales stats:
- Again, contrary to the national crash, the multi-family market in our area crashed in 2006…sales declined by 21%% from 2006 to 2007. And then sales declined even further by another 33% from 2007 to 2008. But the market has been stable since then
- As with the single family market in Bergen County, multi-family sales bottomed in 2008 and have remained at the same level of sales since then
Why didn’t the people who have all the up to date sales stats, see that the market crashed, and sound the alarm back in 2006? Why did it take another 2 years for consumers to find it out the hard way. How many of us would have sold our homes or not have bought one if we had know the big crash was coming
Stability is a great thing!
Even at a low sales volume, we should be celebrating stable sales activity, and not dwell on the fact that home sales haven’t gone back to the hyper boom day volumes…that simply isn’t going to happen again.
What the industry machine and the media are all caught up on, is that history will repeat itself, and when and if things do improve, then the market will jump back to where it once was. It’s a myopic view of reality
What everyone should start getting used to, is that this is the “new norm” for home sales looking into the future?
Buying homes is not all about a mathematical equation of price and low rates…in fact I contend that price has very little to do with the volume of home sales…and the data proves that point.
Let’s look at a few topics:
First: the demographics of today’s home buyer is dramatically different than past buyers
- a majority of buyers are first time buyers and investors (what happens when all of these investors can’t sell their units?). Buyers typically take a rather large mortgage, and investors pay cash
- people are getting married later in life…so the need to buy a home isn’t as immediate as it was in the past
- married couples are waiting longer to have kids…so the move to the suburbs will take longer…if people do in fact move to the burbs
- it takes longer to save for a down payment…creates less sales
- it takes longer to sell a home in the burbs, because there are less buyers in the market for suburban homes
- people are waiting to buy a home in the suburbs until their kids are ready to enter the school system…because of insanely high property taxes
All of this leads to a longer sales cycle, and fewer sales.
Second: the suburbs offer little in value or lifestyle needs for today’s young buyers…especially without kids. The 1950’s vision of suburban family life, doesn’t work with today’s pool of buyer…both young and old.
So who are the suburbs for? Everyone!
- Urban areas like Hoboken, Edgewater, Fort Lee, Jersey City and Weehawken will become boom towns for new rentals…and that will draw today’s younger buyers, because these projects offer a more attractive and exciting lifestyle…and a less costly and less risky place to spend their money for the next “x#” of years. These areas are rapidly replacing our existing suburbs
- See MultiHousingNews.com article outlining the pending rental boom in northern New Jersey…Robust New Jersey Development Buoying Optimism
- And even with increasing rentals rates, developers can easily lower their prices to compete against the “it’s cheaper to own” formula that this article and most others point out.
Rents can come down at a moments drop to compete with lower home prices, whereas home prices can’t. But again. we’re seeing that it’s not all about price.
All of these items will lead to less home sales in Bergen County during the next decade. And let’s not forget that New York City has proven to be a better investment for buyers, and is still the go to place to live in our region
The argument for affordability based solely on an equation (price and interest rates…and compared to increasing rental rates) is an argument that the real estate industry machine has been hammering consumers with since the market crashed. Their sales pitch has fallen flat.
There needs to be a new message and a new zoning that will allow the suburbs to compete for buyers…and tax dollars.
It is foolish to believe that things will go back to where it once was. To do that you would have to totally ignore a dramatic shift in the demographics of who today’s buyers are, and believe that their views haven’t changed AT ALL regarding life, and possession, and risk on investments
With the exception of 3+ years of unprecedented sales activity, the Bergen County housing market is fine (with the exception of a decrease in the value of our homes). Sales are steady, as are prices.
As all indicators point to, an increase in home sales is highly unlikely anytime soon.
To be continued…