If you were looking to buy a home in 2023 and it didn't happen, you may have been caught in what I would describe as a "tight housing squeeze". Home buyers, some of whom have been waiting in the wings since 2022, may have found themselves unprepared for the shift in the housing market.
The official kick-off to the 2024 Spring market is almost here. Now is the perfect time to prepare if you plan to be house hunting. So join me on a brief dive into the numbers as we look back on 2023 and gain insight that will be vital in helping you secure a great home in 2024. Get ready home buyers! The 2024 housing market is shaping up to be incredibly promising across many areas and you won't want to miss out!
The Tight Housing Squeeze of 2023
If you've been house hunting over the past several months, you know first-hand that the available homes on the market has been quite low. But how low is it? Is the low inventory staying at the same level? Is inventory rising? Or might it be decreasing?
Here in Northern New Jersey, I have been analyzing the real estate market using The Minken Housing Index. The index comprises 14 towns across 3 counties (Essex, Morris, and Union). The towns are popular suburban areas in close proximity to New York, many of which are on the commuter train line. The index is a well-balanced mix of towns, both large and small, that attract home buyers moving out of New York City, Jersey City/Hoboken, as well as those relocating for work from around the country and internationally. Did you know that New Jersey is home to 14 of the top 20 pharmaceutical companies as well as over 3000 life science companies? Many of my real estate clients, for example, are international, relocating from the Netherlands, Switzerland, UK, just to name a few.
So why did many potential home buyers not find a house in 2023? Based on the Minken Housing Index, the housing inventory was in a tight squeeze. The number of homes that came onto the market were significantly less than the prior year. When you are a home buyer, you can't really see this while you're house hunting. What buyers typically see is simply the handful of homes for sale at that moment in time, with the hope that more homes will be coming onto the market. Whether the home buyer did not find what they were looking for or the list price seemed too high, there simply weren't enough good choices. As a result, many home buyers found themselves waiting in the wings for the "right" house to come along. Let's look at what the inventory numbers tell us.
Below is a chart of the number of homes sold by town in 2023 as compared to the prior year. Next to the town name is the actual number of homes sold in 2023, and the bar chart shows the percentage change from 2022.
You only need a quick glance to see that all of the towns (with the exception of one) had a reduction in the number of homes sold in 2023. In nearly one-half of the towns comprising the Minken Housing Index, there was over a 20 percent decline in the number of homes sold in 2023. This includes 2 towns (Millburn/Short Hills and New Providence) that saw a reduction of over 30 percent! Is it any wonder that many home buyers couldn't find a house to buy in 2023?
Compounding the home buyer's challenge is that some homes never make it to the Multiple Listing Service (MLS). They get sold as a Private Exclusive. This is why some homes show up as zero days on market (DOM). "Does this happen often?", you might be thinking. For the towns in the Minken Housing Index, nearly one-half had more than 6.0% of the sold homes in 2023 that never made it onto the MLS. The highest percentage was 7.3% in the town of Summit which had 18 of the 246 homes trade in 2023 with zero days on market.
The Rise in Home Sale Prices Continues
With fewer homes trading in 2023 amidst strong home buyer demand, it is not surprising that average home sale prices have increased over the prior year. More than one-half of towns in the Minken Housing Index saw average home sale prices increase by double-digits, with Chatham Township seeing the highest average percentage increase at 16.8%. Are you curious as to why some towns may have seen a significant rise in the average sales price in 2023?
One possible explanation is the growth in new construction homes, along with the gut-renovation of existing homes by builders, which are commanding a higher price tag. There are also new homes being added to the landscape where there had previously been none. Vacant land is being transformed into brand new townhomes and luxury carriage homes, fueling the average home purchase price.
As shown in the chart below, a handful of towns in the Minken Housing Index saw a negligible percentage change in the average home sales price in 2023, and one town saw a slight decrease. Perhaps home buyers are re-thinking where they want to live and are exploring multiple towns. Are you wondering about the average price of homes sold in each of these towns? The answer might surprise you!
One possible explanation is the growth in new construction homes, along with the gut-renovation of existing homes by builders, which are commanding a higher price tag. There are also new homes being added to the landscape where there had previously been none. Vacant land is being transformed into brand new townhomes and luxury carriage homes, fueling the average home purchase price.
As shown in the chart below, a handful of towns in the Minken Housing Index saw a negligible percentage change in the average home sales price in 2023, and one town saw a slight decrease. Perhaps home buyers are re-thinking where they want to live and are exploring multiple towns. Are you wondering about the average price of homes sold in each of these towns? The answer might surprise you!
Real Estate is Ultra-Local
Take a closer look at the above chart. The average 2023 sales price (shown in parentheses) ranges from $634,776 up to $1,896,601 among the towns comprising the Minken Housing Index. This wide range in home prices helps to explain the hyper-local nature of real estate. By driving just ten to twenty minutes, home prices can fluctuate dramatically! More than one-half of the towns in the Minken Housing Index had an average home sales price in 2023 that exceeded $1 million.
Thus, it is no wonder that with the reduced inventory and rising home prices, some home buyers in 2023 may have felt that they were getting "priced out" of a particular town. This may have resulted in some towns experiencing a pinch in demand as buyers opted for areas with more affordable price points. At the same time, however, some buyers were extending their home search into multiple towns for a different reason. These buyers were looking to find a greater supply of new construction/renovated homes.
In a market with low inventory, finding the "right" house may necessitate house hunting in a broader area than originally planned. The "great reshuffling", as I like to call it, which we saw during the pandemic, is happening on a ultra-local basis. Buyers are shifting their home search from one town to another. Many of my home buyer clients shifted their home search by under 10 miles, making a big difference in finding the home that was right for them! The timing of this "home search pivot" during the home buying process is critical. When house hunting, you need to recognize when it it is time to pivot as early as possible so as not to miss the market. As I frequently share with my clients, "Timing is everything in real estate!
Thus, it is no wonder that with the reduced inventory and rising home prices, some home buyers in 2023 may have felt that they were getting "priced out" of a particular town. This may have resulted in some towns experiencing a pinch in demand as buyers opted for areas with more affordable price points. At the same time, however, some buyers were extending their home search into multiple towns for a different reason. These buyers were looking to find a greater supply of new construction/renovated homes.
In a market with low inventory, finding the "right" house may necessitate house hunting in a broader area than originally planned. The "great reshuffling", as I like to call it, which we saw during the pandemic, is happening on a ultra-local basis. Buyers are shifting their home search from one town to another. Many of my home buyer clients shifted their home search by under 10 miles, making a big difference in finding the home that was right for them! The timing of this "home search pivot" during the home buying process is critical. When house hunting, you need to recognize when it it is time to pivot as early as possible so as not to miss the market. As I frequently share with my clients, "Timing is everything in real estate!
"How High is a Winning Offer
Fueling the surge in home prices is the abundant supply of buyers who descend on a particular house for sale as soon as it comes onto the market. It is the house that everyone wants and often it is "move-in ready". The result, of course, is multiple offers. A common question among home buyers is "How high do we need to bid above the list price to get the house when there are multiple offers?" Unfortunately, there is no simple answer. You will need to partner with a "rockstar" realtor (check out my article last month) to craft a winning offer strategy that works for you. Now that I've got you wondering, let me share some insights based on the results of the Minken Housing Index for Northern New Jersey.
We can compare how high a winning offer is across the different towns by looking at the Sales Price to List Price (SP/LP) ratio. Expressed as a percentage of the List Price, the highest SP/LP ratio was in the town of Montclair, New Jersey at 177%! This is actually lower than the prior year when a home buyer bid 188% of the List Price. For homes sold in 2023, nearly one-half of the towns comprising the Minken Housing Index saw home buyers bid above 140% of the List Price. It is important to recognize that where a home is priced in the market when first listed for sale will impact the potential for not only the number of multiple offers (if any), but how high a winning offer might be.
There is some good news for buyers! Not all winning offers go above the List Price! Across all the towns in the Minken Housing Index, there were homes that sold below the List Price. Out of the total number of homes sold in 2023, there were as many as 30% that did not sell at or above the List Price in one town and as few as just 11% in another town. In any market, there are windows of opportunity if you know where to look!
We can compare how high a winning offer is across the different towns by looking at the Sales Price to List Price (SP/LP) ratio. Expressed as a percentage of the List Price, the highest SP/LP ratio was in the town of Montclair, New Jersey at 177%! This is actually lower than the prior year when a home buyer bid 188% of the List Price. For homes sold in 2023, nearly one-half of the towns comprising the Minken Housing Index saw home buyers bid above 140% of the List Price. It is important to recognize that where a home is priced in the market when first listed for sale will impact the potential for not only the number of multiple offers (if any), but how high a winning offer might be.
There is some good news for buyers! Not all winning offers go above the List Price! Across all the towns in the Minken Housing Index, there were homes that sold below the List Price. Out of the total number of homes sold in 2023, there were as many as 30% that did not sell at or above the List Price in one town and as few as just 11% in another town. In any market, there are windows of opportunity if you know where to look!
8 Essential Tips for Home Buyers in 2024 - Suzy Minken
Get Prepared for the 2024 Spring Housing Market Now
There may still be snow on the ground, but the 2024 spring housing market is underway. We are already seeing signs of pent up excitement among home buyers! Here in Northern New Jersey, some homes are attracting long lines at the public Open Houses. So how can you be ready if you plan to be house hunting in 2024? Here are 5 essential tips to help ensure the house you want doesn't pass you by.
1. Know the Home Buying Process - Take the time to become familiar with each step of the home buying process, especially if you are relocating to a different state where the process may be different. Review a blank offer contract so you are not seeing it for the first time when you are making an offer. This is especially important when there are multiple offers and you have limited time to submit your offer.
2. Obtain Your Mortgage Pre-Approval - If you are planning on obtaining a mortgage, know who your preferred lender is. Consult with different lenders and make your selection. When submitting your offer, you will need to include a copy of your mortgage pre-approval so have a copy of it ready. Most mortgage pre-approvals last for 60 to 90 days. The mortgage pre-approval is also a key step in determining what price range you can afford and are comfortable with when you begin your home search journey.
3. Choose Your Attorney - If you are in a state that uses an attorney for the purchase of a home, identify a few real estate attorneys early in the home buying process. A growing trend here in New Jersey is to specify the name of the buyer's attorney when submitting an offer if there are multiple offers. In the event the seller attorney is the same attorney who you were planning on using (yes this does happen), have the name of an alternate attorney who you would like to retain. Get your "ducks in a row" upfront rather than waiting until the offer process begins. If there are multiple offers, you will need to move swiftly!
4. Identify the Towns Where You'd Like to Live - Most home buyers have a general idea of where they want to move to, often because they have family, friends, or work colleagues living in the area. If possible, visit the towns you are considering and see how it feels to you. Each town will have its own distinct flavor or vibe. Cast a wide net for areas that you would like to consider and be receptive to a "home search pivot" as described above. Whether low inventory persists or we see inventory increase as mortgage rates trend down, you will want to be ready to move forward in 2024 to find the house that is right for you wherever that may take you.
5. Partner with a "Rockstar" Realtor - Having the expertise of a "rockstar" realtor at your side every step of your home buying journey is crucial. As I described in my earlier article (Above and Beyond Opening Doors: The Multi-Faceted "Rockstar" Realtor for Home Buyers), it is important to clarify early in the process what are the top design and lifestyle features you are seeking in your next home. This will facilitate a productive, efficient, and enjoyable home buying experience.
Working with the right realtor matters in so many facets of the home buying process. This is paramount when determining your offer strategy. One of the key strategy components I use with my buyer clients is something that I call "precision timing". A single misstep in timing potentially can cost the deal. Without a winning offer strategy, some buyers may be poised for struggle and difficulty during the home buying process.
As you prepare for house hunting in 2024, these 5 essential home buying tips hopefully will guide you to stay ahead of the competitive housing market and help you secure your dream home. However, there truly is so much more to know. The purchase of a home is one of the biggest financial decisions you will make in your lifetime. It is also one of the biggest decisions that will impact how your life unfolds for many years to come.
1. Know the Home Buying Process - Take the time to become familiar with each step of the home buying process, especially if you are relocating to a different state where the process may be different. Review a blank offer contract so you are not seeing it for the first time when you are making an offer. This is especially important when there are multiple offers and you have limited time to submit your offer.
2. Obtain Your Mortgage Pre-Approval - If you are planning on obtaining a mortgage, know who your preferred lender is. Consult with different lenders and make your selection. When submitting your offer, you will need to include a copy of your mortgage pre-approval so have a copy of it ready. Most mortgage pre-approvals last for 60 to 90 days. The mortgage pre-approval is also a key step in determining what price range you can afford and are comfortable with when you begin your home search journey.
3. Choose Your Attorney - If you are in a state that uses an attorney for the purchase of a home, identify a few real estate attorneys early in the home buying process. A growing trend here in New Jersey is to specify the name of the buyer's attorney when submitting an offer if there are multiple offers. In the event the seller attorney is the same attorney who you were planning on using (yes this does happen), have the name of an alternate attorney who you would like to retain. Get your "ducks in a row" upfront rather than waiting until the offer process begins. If there are multiple offers, you will need to move swiftly!
4. Identify the Towns Where You'd Like to Live - Most home buyers have a general idea of where they want to move to, often because they have family, friends, or work colleagues living in the area. If possible, visit the towns you are considering and see how it feels to you. Each town will have its own distinct flavor or vibe. Cast a wide net for areas that you would like to consider and be receptive to a "home search pivot" as described above. Whether low inventory persists or we see inventory increase as mortgage rates trend down, you will want to be ready to move forward in 2024 to find the house that is right for you wherever that may take you.
5. Partner with a "Rockstar" Realtor - Having the expertise of a "rockstar" realtor at your side every step of your home buying journey is crucial. As I described in my earlier article (Above and Beyond Opening Doors: The Multi-Faceted "Rockstar" Realtor for Home Buyers), it is important to clarify early in the process what are the top design and lifestyle features you are seeking in your next home. This will facilitate a productive, efficient, and enjoyable home buying experience.
Working with the right realtor matters in so many facets of the home buying process. This is paramount when determining your offer strategy. One of the key strategy components I use with my buyer clients is something that I call "precision timing". A single misstep in timing potentially can cost the deal. Without a winning offer strategy, some buyers may be poised for struggle and difficulty during the home buying process.
As you prepare for house hunting in 2024, these 5 essential home buying tips hopefully will guide you to stay ahead of the competitive housing market and help you secure your dream home. However, there truly is so much more to know. The purchase of a home is one of the biggest financial decisions you will make in your lifetime. It is also one of the biggest decisions that will impact how your life unfolds for many years to come.
Looking Ahead
Earlier this month, Fannie Mae economists revised their prediction of mortgage rates falling to an average of 5.8% (instead of 6.5%) by year-end 2024. Might this just be the compelling message needed for potential home buyers to get off the sidelines?
Likewise, many homeowners may find this news attractive as well. Homeowners who are sitting with a low mortgage rate of under 4 and 5 percent might be motivated to trade in their homes. This could ease the "tight housing squeeze" if more inventory comes onto the market as a result. In addition, we might even see some new buyers who are enticed to accelerate their home buying plans and start their journey sooner!
2024 appears to be primed to have more inventory along with lower mortgage rates, thereby igniting a longer term trend toward alleviating much of the "housing gridlock". Don't miss the chance to take advantage of the window of opportunity in the 2024 Spring housing market! Are you prepared?
Likewise, many homeowners may find this news attractive as well. Homeowners who are sitting with a low mortgage rate of under 4 and 5 percent might be motivated to trade in their homes. This could ease the "tight housing squeeze" if more inventory comes onto the market as a result. In addition, we might even see some new buyers who are enticed to accelerate their home buying plans and start their journey sooner!
2024 appears to be primed to have more inventory along with lower mortgage rates, thereby igniting a longer term trend toward alleviating much of the "housing gridlock". Don't miss the chance to take advantage of the window of opportunity in the 2024 Spring housing market! Are you prepared?
How Ready are You for the 2024 Spring Market?
As a courtesy for a limited time, I am offering a complimentary "Get Ready, Get Set, Go!" home buyer preparation consultation. To reserve your individual session, simply click on the link to register:
Complimentary "Get Ready, Get Set, Go!" Consultation with Suzy Minken
Complimentary "Get Ready, Get Set, Go!" Consultation with Suzy Minken
Share:
