The State of the Market in Essex County

The State of the Market in Essex County
Hello Stranger,
 First, I hope this blog entry finds you and your family healthy and safe, practicing physical distancing, still working (and working smart), and being good to yourself. “Adjustments” has been the new theme to our daily lives. Since COVID-19 set in, in addition to practicing full-time real estate, I became a chef for four adults, director of housekeeping, event planner (my kids can’t spend all their time gaming and baking), and facility manager. While we, as caregivers, play these roles to some degree already, the pandemic has required us to soldier on with our existing jobs but now with more full-time dependents and less help. Now, after recalibrating, I want to provide you with a real estate update.
 If you need any indication of how the market is going, my failure to send out my monthly newsletter should tip you off. The market in March through April, while slower due to low inventory during the shutdown, never stopped. Now, with the market adjusted to our new reality, inventory is rising.  
What we are seeing in Montclair and other “brand-name towns” are multiple offer situations, especially in the $600k-$900k range. The market is VERY active and VERY aggressive. We are starting to see offers with contingencies waived (both mortgage and inspections in some cases). Some buyers are making offers only after virtual showings. Accepted real estate etiquette has also changed. Traditionally, once a property has an accepted offer, the unsuccessful buyers move on to the following week’s listings. Post-coronavirus, buyers are sending offers in during the attorney review period upsetting – and in some cases scuttling – the current deals. 
As you know, inventory is perennially low in Essex and Bergen Counties, now with increased demand from urban areas, the absorption rate for the month is at a historically low level of .75 for homes under 1M and 1.67 for homes over 1M for an overall rate of .92 (last year around this time we were at 3.5-4.0 overall). In similar towns like Ridgewood, the absorption rate is 2.4. So, what’s going on? 
The virus has altered timelines for both buyers and sellers. Buyers’ timelines tended to get pushed up. Canceled schools and camps along with tight living conditions contracted timelines for many families as well as buyers without kids. A locked-down city ended the party abruptly, and the once-distant plans to move to the suburbs were expedited. Buyers who were poised to buy larger apartments are taking their money (cash) to the suburbs making the bidding process much more competitive and aggressive. 
For sellers, those who already had a plan in place to move, and had another property to move to, their plan was delayed only a few weeks while the market adjusted to the new safety requirements. In other cases, sellers who are older or those who had kids suddenly return from college or urban rentals had house sales put on hold indefinitely. This has reduced inventory even more, so sellers still control the market.

Advice for Buyers

The market is highly competitive.
Be prepared to put your best foot forward, this is not a time to bargain, don’t think about trying to save 10 or 20k (which is only about $50 a month on the average mortgage). Every dollar counts. Also, consider how to make your offer more attractive – above and beyond the offer price. This includes:

  • Paying Cash or at Least Increasing the Cash Down. Interest rates may be at their lowest, but banks are being super conservative about lending money and are concerned about job security given the looming recession. Larger mortgages are harder to get approved. Sellers are aware of this, as signaled by the offer instructions from listing agents who are asking for considerably more information about the buyers, such as current occupation and length of time employed.
  • Waiving Mortgage Contingency. This allows your offer to compete with cash. I DO NOT recommend this unless you are prepared to meet any deficit if the house does not appraise.
  • Pre-approval Is Required but Pre-commitment Is Better. Ask your mortgage broker about this. It means getting all the paperwork to your broker before you find a house and have the bank clear you for a loan. It’s a way to compete with the many cash offers.
  • Waiving Up to a Certain Amount of Money for Inspections. We have seen people waiving up to 15k in credits to sellers for inspection items. This is not for the faint of heart or if you are averse to renovation, but if you plan to do construction anyway, it’s a good option. However, if the condition of the house is mint or close to mint, it’s a good option as well.
  • Consider Expanding Your Search if You Are Not Finding What You Like. For several buyers, we have expanded out to other towns that have more inventory. If you are no longer required to be in an office in the city 5 days a week, you may want to consider towns without direct NYC access or a slightly longer commute.
  • If You Feel Unsure About Committing to a Town, I suggest renting for a year to acclimate to your new environment. This could also save you some money in the end as you are not paying for the COVID Premium. Some “experts” are forecasting falling real estate prices in the coming years.

The New Showing Process

  • Some owners are permitting Open Houses. Attendance is limited and not wholly advisable by health experts.
  • Private showings require appointments whether they be in person or via FaceTime.
  • Appointments for private showings fill up quickly so if there is a property you want to see, please inform me as soon as possible so we can schedule.
  • Masks, gloves, and booties are required to enter the property (often these are provided at the listing, however, I advise you to bring your own mask).
  • Visits are limited, in most cases to 15-30 minutes.
  • All parties must sign a COVID Rider. This is a hold-harmless form to protect the owners.

Advice for Sellers

Right now, it’s not about IF your house will sell, but for how much MORE can it sell for. We are seeing prices finally meet or surpass those of 2005. As far as what will happen in the next year, some publications and forecasts expect home prices to drop. However, our uniquely low inventory should help to stabilize price drops in "brand-name" towns with NYC access. 
  • You Could Not Ask for a Better Seller’s Market. We are finally reaching if not surpassing selling prices of 2005. Homes that are updated and priced in the $500k-$999k range sell fast and significantly above ask. After speaking to several of my colleagues, in Montclair we are seeing 7-10% above the expected sale price.
  • As Far as Staging, I still encourage prepping the home for sale to get the highest price possible. Buyers, while highly motivated, are still averse to renovations so the more you can freshen the home, the better the buyers will be able to envision themselves in your home.
  • Is It Safe to Show My Home? Yes. Health-wise, we take every precaution. Buyers are required to fully suit up (mask, gloves, booties) and we sanitize surfaces and high touch points in your house after showings. If you don’t want an Open House, we will not hold any. To legally protect you, every potential buyer must sign a hold-harmless form.
  • If You Really Want to Capitalize on This Market, Consider Renting. While rentals are also popular (I have had bidding wars for 2 so far), if you are downsizing, 2BR apartments are less competitive as families are looking for larger units.
  • Consider a Longer Close. Given the limited supply, buyers may consider a longer close time and allow you to make plans.

What’s Going to Happen?

Given the unpredictability of the government and human nature, no one can say for sure. I do feel that you should be wary of anyone who professes to know what will happen given these unprecedented times. With the high unemployment rates, we do know that a depressed market is on the horizon. So we don't expect high market activity to continue indefinitely.
Articles speculating the state of the real estate market are numerous. I have included some good ones at the bottom of this newsletter. Montclair has been a favorite destination for many so of course, it pops up in many articles. It’s been nice to see my colleagues highlighted in some of these publications.
And if you know a Realtor® who has been working during this time, give them a little elbow bump. It’s been a long 7 months and we do not expect things to settle down anytime soon. Be safe. Be vigilant of your personal space. Do not hesitate to reach out to me with any questions. I am here for you.

Ready for Your Next Adventure?