The Bergen County Homes Blog

My projection for Bergen County real estate is right on target - our housing market is improving.  New Jersey MLS data, bank appraisers and housing reports all say the same thing:  We have clearly bottomed out and are in a period of stabilization.

Today’s ratio of homes for sale to under contract is 4 to 1; early in the year it was in double digits.  Last spring Bergen County was classified by the mortgage industry as an “area in decline” meaning that values were falling.  Appraisers were deducting 1% per month of value; if a home appraised at $200,000 and was closing 2 months later, the appraisal was fixed at  $196,000.  Bergen County’s housing market is no longer classified as “in decline” and a Valley National Bank appraiser on Monday told me that price depreciation has ended.

Jeff Otteau in his latest real estate newsletter termed the NJ real estate market’s performance “remarkable” and forecast continued improvement.  The monthly Credit Suisse agent survey said that for the first time in a long time a majority of agents reported positive home buyer traffic and houses selling quicker.

With all time low interest rates, prices no longer dropping and falling inventory levels, there should be no surprise to find stability in the Bergen County real estate market.

When the Home Valuation Code of Conduct went into effect by Fannie Mae and Freddie Mac on May 1st, appraisal protocols for mortgage loans changed. To protect consumers, loan officers, mortgage brokers and real estate agents can no longer choose appraisers.

Why is this so important? Because the mortgage bank and the home buyer rely on an appraiser’s determination of value; a lot of abuse and fraud has been uncovered. If, for example, an appraiser sets a home value to fit the sales price, that’s obviously wrong.

I just had a short sale listing close; the bank took nearly a 50% loss on a $1.8 million loan. The homeowner had been building a new home for himself. When he gave me his loan amount, I was stunned. There was no way to justify that mortgage loan and yet it happened.

To comply, banks no longer have their own appraisers; they use real estate appraisal services with pools of appraisers from which appraisers are randomly selected. This creates an added expense for the mortgage process and increasingly results in appraisers valuing homes who’ve never been to the area before and aren’t members of the local MLS. Recently my office experienced this.

An office listing had an appraisal that was ridiculously low. Both buyer and seller knew this but the bank, which had to use the appraisal, could no longer justify the mortgage. The appraiser had never been to the area before and used the wrong MLS. Bergen County homes are listed in the New Jersey MLS; the appraiser used the Garden State MLS which has only a few Bergen County listings. Without expert knowledge of the local inventory and no access to all the data, he wasn’t able to do a correct valuation.

Eventually things will straighten out but until it does, there will be higher costs to obtaining a mortgage for home buyers and for both buyers and sellers, there will be appraisals that unfairly cancel mortgages.

When people decide to buy a home they naturally start to look at the real estate market, do some number crunching and find statistics which explain the market trends. Lately, a statistic on homes that’s been quite popular is the absorption rate.

Absorption rates simply put tell you how long it will take to sell off the existing inventory of homes. This shows you how properties are selling; it’s measured in months as in how many months it will take to sell all the homes for sale. Understanding market activity is important but I think that looking at absorption rates this early in the year can be misleading.

No matter the economy, the housing market has a unique rhythm of it’s own. Most homes for sale go on the market during the early part of the year and are sold during the summer so statistics for the first few months of the year that track the relationship between sales and available inventory can be tilted in the wrong direction. In fact, absorption rates at this point can be very confusing if you look at the report appraisers use when they do an appraisal on a house. This is the 1004MC Report.

Let’s look at Tenafly, NJ. If you go back 12 months from today, the Tenafly real estate market for homes really looks weird. For example, take a look at the number of Active Listings – it looks terrible doesn’t it? Well, what would you expect for this time of year? It’s always larger now because more houses are on the market between March and June. At the same time, how long a home is on the market for sale is currently half what it was previously. That is extremely important. In truth, Tenafly houses are selling very well. Tenafly homes are always in strong demand. The New Jersey MLS 1004MC Appraisal Report for Tenafly can be found at tenafly-1004mc-report