Understanding the central New Jersey housing market is not an easy task as it is more volatile than before due to the Covid-19 pandemic.
But for professionals like Judson Henderson, the broker of record and managing partner at Callaway Henderson Sotheby’s International Realty, his years of experience make it easier to understand.
Henderson has been active in the real estate world since getting his license at the age of 18 and turning full-time professional four years later. His agency is based in Princeton, but their reach and presence goes beyond that to help all Central New Jersey residents find their mate in the perfect home — even if the process is disrupted by external factors like the coronavirus and a choppy economy was made difficult.
Henderson translated it for the rest of the world and shared his views on what to expect in the market, which has gone from dramatic highs to lows on a rollercoaster ride in property values.
“Not only can I talk about what’s going on in Princeton or West Windsor, but I can also look a little broader in terms of our field, which is the overall central segment of New Jersey,” Henderson said. “Markets are generally hungry for inventory and that’s certainly an issue in our area.”
Inventory refers to new listings on the market, which means potential buyers have fewer properties or buildings to choose from if houses aren’t consistently listed for sale.
“It’s no secret that living in this area is expensive. Part of that is high property taxes, high state income taxes, all those things,” Henderson continued. “But as a result, we don’t have much of our rental stock.”
According to New Jersey Realtor’s “Local Market Update for January 2022,” the stock of homes for sale is split between single family homes (-25.1%), townhouse condos (-27.4%) and adult community homes (-31.8% ) dropped dramatically. ). This is coupled with an increase in median selling prices and a huge year-on-year drop in new listings, particularly in relation to adult community housing (-61.1%).
Using Princeton as an example, Henderson recalls that people who initially had trouble selling their homes began renting them out to others as a workaround.
“In the last year or two, that hasn’t been an issue,” Henderson said, with now-profitable sales quickly depleting rental stocks. “[There’s] so much extra pressure on people who come here to buy a house or rent a house because even [with] As for rental property choices, there aren’t many plans for people at the moment. There isn’t a part of this market that hasn’t been completely transformed.”
To appeal to a range of potential owners, property structures and designs vary between condominiums, townhouses, single family homes on smaller stamp lots and large estates with equestrian facilities.
“It’s really a much more diverse housing stock than people realize, so it’s difficult to generalize about what’s going on across the board in this market in our area because it’s very specific to individual counties and even certain products within those communities is,” Henderson explained.
When a home is in “great, turnkey condition” that requires little to no work, Henderson adds, the price is likely steep. Due to the supply issues of the pandemic and the inevitable delays, people are more willing to pay a higher amount for an apartment that doesn’t have or need renovations for functionality.
The opposite of this means that residents who are able to make these improvements will have the upper hand as any successfully completed projects are likely to increase the financial value of the property.
“There’s value in people willing to do this work because there are fewer people in that position,” Henderson adds.
Outside of the pandemic and in a “normal” market, he said, trends vary over time.
“Some of these are desirable, some are not,” Henderson said, clarifying his point with details about the 2008 recession. According to Henderson, after the economic crash, people began to prefer smaller, more efficient homes with minimal walking distance into the city.
“We’re in a post-pandemic world where they’re still desirable, but there’s been a renaissance for properties that offer a little more breathing space and a little more lifestyle,” he notes.
With the ability to be “stuck at home” or work from home more relevant than ever, the pandemic has not only changed what homeowners tend to appreciate, but also minute details like “floor plan changes that have turned out” in the last few years years.
As the lockdown began, Callaway Henderson Sotheby’s International Realty, among others in the real estate world, watched as everything ground to a halt.
Then an explosion of interest revived the housing market and created a surprising, but appreciated, new reality for the field.
“We were completely dormant for a couple of months not knowing what was going to happen, and then all of a sudden the properties did almost a complete 180° turn in which we’ve been as busy, if not bigger, than we’ve ever been,” Henderson said .
The company was then tasked with managing both the dangers of a pandemic and the constant risk of Covid-19 exposure.
Kiplinger’s Daniel Bortz reported that 2021 featured “record low mortgage rates,” buoyed by the peak of stimulus checks and rising wages, sending the market thriving. “This surge in demand, coupled with the lowest home supply in more than two decades, has propelled U.S. home selling prices to stratospheric highs,” Bortz wrote in a Feb. 23 article.
But now selling prices are higher than ever, making the current market more geared towards sellers than buyers. According to estimates by website Redfin, in February 2022 there was a roughly 10 point increase in homes sold above list price to 48.3%, but a sharp 16.4% drop in the number of homes for sale to 26,723. Only 6,936 homes were actually sold with Redfin, down 17.1%.
While most of 2022 is still ahead, early forecasts suggest this year is unlikely to simulate the spring renaissance of 2021, in which the revitalized market took on a life of its own.
Going forward, Henderson notes that some market changes will be non-negotiable.
“Affordability is always key,” he claims. “If house prices are going up as much as they are, the main impact next year will be interest rate affordability.”
“It’s really starting to affect what people can afford and that’s going to be key to everything that happens this year,” Henderson said. “Last year when interest rates were so low and the market was in a rising environment, people were there to afford these houses, or at least people were there to pay higher prices.”
Henderson provided his perspective on the future at the Princeton Mercer Regional Chamber’s 2022 Central NJ Real Estate Forecast event on March 4, sharing his predictions with an audience, peers and other speakers. His predictions ultimately revolved around what renters and homeowners in New Jersey are willing to tolerate.
“How much more price increases and rising interest rates can people actually tolerate?” He asked about the trends. “People will chase affordability. They will find what they want from a housing standpoint and then move to a second tier community.”
Henderson’s conclusion is that these traditional boundaries may not matter as much as they did in the past, as residents are more apt to relocate based on their evolving needs – this would mean that markets change primarily based on movement could.
“If people don’t like what they see in a community, they will venture into a cheaper community,” he said, imagining one of the possible changes.