June 15, 2003
Home Prices Still Rising Except at the High End
By ANTOINETTE MARTIN
H, what a beautiful spring, comes the chorus from home sellers. While the rain never seemed to stop falling, prices went as high as an elephant's eye in many suburbs and some say they will keep climbing way up the sky.
Well, perhaps that is putting a bit of extra gloss on realtors' unstintingly upbeat views of the New Jersey home market. There is, many of them will concede, a cloud or two on the horizon when it comes to sales of the most expensive homes. But real estate professionals agree the trend in sales prices continues upward for homes with asking prices below about $700,000 — at least in communities with short commutes to Manhattan, at least while interest rates remain at record lows.
"We had 15 percent appreciation in sales prices across the board for homes we listed and sold last year," said Pat Hoferkamp, president of Burgdorff ERA. "This year, to date, we've again had 15 percent appreciation."
She noted that Burgdorff has 23 offices in towns along commuter train lines in northern New Jersey, which makes them "very desirable communities." Still, 30 percent appreciation is robust any way you look at it, Mrs. Hoferkamp said, and she sees no signs of slackening.
She and other residential brokers said they perceived no price bubble that will abruptly burst — even in towns where prices seem to have floated to the stratosphere.
IN Montclair, where last year one home got 22 offers and sold for $298,000 — or 42 percent — over the asking price, the average offer is running 5 to 10 percent over asking price this spring, according to local realtors, and bidding wars seem to have become virtually part of the landscape.
Last weekend, the Sunday open houses were mobbed as usual, for homes ranging from a restored and upgraded Craftsman colonial offered at $1.4 million to a spiffed-up three-bedroom Dutch colonial on the market for $429,000.
A three-bedroom, one-bath home across the street from the Dutch colonial — virtually untouched for approximately 50 years, and being sold on behalf of its 91-year-old owner with no marketing other than a sign — garnered four offers the weekend before. It sold for $366,000 — 8 percent over the asking price.
Burgdorff ERA's Montclair office manager, Carolee Jones, said there were 13 immediate offers on another home in the same Upper Montclair neighborhood, with the top bidder offering $150,000 over the asking price for a house that had been listed at more than $500,000.
"I think the rapid appreciation can continue indefinitely," said Coldwell Banker's Montclair office manager, Robert W. Norman, "primarily because interest rates are so low." Mr. Norman said that based on typical mortgage computations, buyers who could afford to pay $1,800 a month on a 30-year mortgage loan would have been able to afford a $450,000 house two years ago — and now, with interest rates a percentage point lower, could afford a $600,000 house.
Montclair was one of four New Jersey towns listed this month by Money magazine as being among places in the nation where median home values have increased the most in the last five years.
An analysis performed by a consultant for the magazine said the median value of homes increased 102.5 percent in that period in Montclair, 102.9 percent in the shore town of Rumson, 92.7 percent in Glen Ridge — which borders Montclair — and 92.5 percent in Palisades Park.
But Jacelyn Botti, president of Weichert Realtors, the largest residential firm in the state, observed that five-year figures never reflect what is happening right now, which is, as she sees it, this: "Prices are increasing more rapidly in the most affordable markets, and the rate of appreciation is beginning to slow in average and median price homes.
"You can take communities and neighborhoods with the lowest household prices in an area or a town, and they are still experiencing the highest rate of appreciation," she said. "The average and median home sale prices are being impacted by an extremely soft upper-end market, for homes priced at $2 million-plus."
In Rumson, where median home prices rose to $493,500 at the beginning of this year, the high-end market has slowed somewhat, said Coldwell Banker's office manager, Bob Kievit, who is also the president-elect of the New Jersey Association of Realtors. "Anything in decent condition priced around $500,000 is not going to last," Mr. Kievit said, "but homes selling for a million dollars and up are now taking a few months to sell, and prices are a bit lower than they would have been six months to a year ago."
The slower market for the highest priced homes is true across the state and actually began more than two years ago with the decline of the stock market and the halt in production of "under-30 millionaires," according to Jeffrey G. Otteau, who runs a New Jersey home appraisal consultancy bearing his last name. The average age of buyers in the $1 million-and-up range has gone up by about 10 years in the last couple of years, Mr. Otteau said, adding that the statement was based on information gleaned by regularly polling sales agents of newly constructed homes. "Buyers in the older age range are much more cautious," he said.
The slowing in the upper end market began at a time when the overall market was still "very very tight," he said — meaning there were many more buyers than homes available. "But it takes a couple of years of that to see an effect on price," said Mr. Otteau. "Remember that in the 1980's, when we last saw a price correction, the market began to weaken observably in '86-'87, but it was not until '89 that the supply of homes for sale swelled to the point where we saw an effect on price."
Ms. Botti of Weichert agreed with other residential specialists that there are pockets where the market continues to be "extremely strong," with price appreciation of 20 percent or more. "In those markets, there is still lack of inventory for the eight-four-two colonial," she said, meaning a limited number of ever-popular eight-room houses with four bedrooms and two baths.
But, Ms. Botti said, based on the statistics Weichert keeps — and the multiple listing services and other numbers she is privy to — the number of homes for sale across the state is sharply up. "I haven't seen listing inventory levels of this size for three and a half to four years," she said. "We see houses staying on the market longer, and more of them are `expiring,' " she said, meaning that sales agents are unable to broker a sale within the time span of a sales contract, typically six months.
She and others attributed this in part to the impact of the spate of reports about rising prices, with those reports causing more and more homeowners to put homes on the market, which will inevitably lead it to slow down.
Mr. Otteau added that many baby boomer homeowners are putting homes on the market because they have decided it is time to downsize or migrate full-time to the Jersey shore.
IN the hottest markets in the state — those with direct commuter service to Manhattan or quick access to the shore or both — sales agents said that the heat radiates out from any particular town's boundaries. For example, a renovated three-bedroom home on Parkview Drive in Bloomfield near Brookdale Park, which straddles Montclair's border with Bloomfield, was sold in March for $509,000 — $110,000, and 32 percent, over the asking price — no longer shocking in Montclair, but a first for Bloomfield, as best area realtors said they can recall.
Mr. Kievit said he bought a modestly priced house in a town near Rumson and has seen its value rise on a pace with Rumson's. "Little tiny homes in Ocean Beach — 600 square feet, on 50 by 30 foot properties — are selling for $250,000 to $300,000 right now," he said
Where might it all end? Some buyers are beginning to sour on the auction atmosphere in the Montclair market, various realtors said, and are turning to other towns in the area. "That's a big reason why we see the big hike in appreciation in Glen Ridge," Mrs. Hoferkamp said.
But Mr. Kievit said he simply cannot foresee an end to rising prices. "This area has always been strong," he said of Monmouth and Ocean Counties, both of which hug the shore. "There is only one ocean, and only one financial center to commute to in Manhattan. Short of Wall Street moving to Idaho, I think it will always be an attractive place to live."
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