The Bergen County Homes Blog

If you are a home buyer and you qualify for the first time home buyer tax credit, time is running out for you to find a home.  You must buy a home by November 30th and because getting a mortgage these days often takes 45 days, many buyers feel pressured to make a decision now.  As a result, a first time home buyer who qualifies for the $8000 Tax Credit may find himself scrambling to get into contract this week.  However, I’m wondering if some of you aren’t making a mistake.

$8000 is nothing to sneeze at but a buyer may be missing out on a home value that far exceeds the $8000 credit – short sale opportunities are still available.  There are many homes for sale with steep discounts because they are a short sale and you may find a house that is a better “fit” for you in a short sale than trying to buy a home that you really don’t love just because of the tax credit.

In the New Jersey MLS this morning, searching for short sale homes shows that of the 3,796 single family homes for sale, 352 are a short sale.  There are also many that are described as potential short sales.  For our purposes, let’s say that a bit more than 10% of the Bergen County housing market is a short sale.   This figure has been pretty constant this year.  The bottom line is that there are other opportunities out there.

Even if you can’t find a home that works in time for the tax credit, you shouldn’t go into contract on something that isn’t the right home for you and your family.  Opportunities come in many ways.

Fannie Mae and Freddie Mac buy mortgages which means that they guarantee them. Without the backing of Fannie and Freddie, mortgage lenders have to find other investors to sell their mortgage loans to and those investors charge more so interest rates are higher. Fannie and Freddie backed mortgages are called conforming; the others are called jumbo. The limit on a conforming mortgage is $417,000 but that is about to change.

There’s also an intermediate level which is a special allowance for higher cost areas like Bergen County. Such mortage loans are at $417,000 – $625,000 with moderately higher interest rates than conforming loans. This is a super conforming loan but marketing folks have coined the phrases Jumbo and Super Jumbo. You’ll see a Jumbo Mortgage at $417-625,000 and Super Jumbo above $625,000.

OK, now you should have a good basic idea of how things work. Here’s where it gets interesting:

Fannie and Freddie are increasing the conforming mortgage loan limits to $729,750 on May 4th. This came about due to the economic stimulus package which was signed into law on February 17th. Wells Fargo will start taking applications for these loans on Monday, April 27th and I’m sure other banks will begin before May 4th too.

New Jersey MLS data shows that the 2008 average sales price for a single family home in Bergen County was $570,217. Even with a 20% down payment, this put a buyer into jumbo loan territory. In several towns it was often impossible for many buyers to qualify and is part of the reason that upper mid range homes have had such a hard time.

In the upper mid range market, it’s really been tough due to the restrictions on conforming loans. Loosening up lending for these homes creates more buyers for sellers. For real estate in Bergen County this is huge. Bergen County is the 18th most affluent county in the US; many of our towns have been severely impacted by the $417,000 limit and even $625,000 didn’t quite work.

For example, Tenafly had an average sales price last year of $915,581, Old Tappan was $1,147,159 and Woodcliff Lake was $838,309 plus many other Bergen County towns have scores of homes that will benefit. If you are a home buyer who’s looking at $850,000 homes, think of how this will help you! You won’t have to pay a point and your interest rate just dropped.

Think of the impact this will have on real estate in Bergen County and across the United States. Buying a home is never an isolated transaction. Real estate is a chain of events – there are homes sold above and below your own transaction so anything that happens in one price range affects it all. This is going to have quite an impact.

What Can We Expect in 2009?

I can answer this with one word – improvement. I had projected 10% depreciation but that was before the stunning sub prime mess was revealed. While we have “Monday Morning Quarterbacks,” the truth is virtually no one knew of this growing menace. The Tenafly market for homes in 2008 ended with 25% fewer sales and 18% depreciation.

Yet Tenafly homes did better than most; our market is more resilient than you’d think. Selling a home took less time in 2008 and first quarter figures indicate we’ll do even better this year.

Appraisers are still deducting 1% per month but say this will end later in the year; Jeff Otteau, the renowned analyst of New Jersey’s housing market, announced in mid March that 2009 will end with 9% depreciation statewide. This dovetails with a second half recovery; homes in Tenafly will see it during the fourth quarter.

By recovery I do not mean that prices will go up; they won’t. They will stop going down and the market will stabilize. We’ll stay there for another year or two before any upward swing bringing us to 2012 or later.

Although unemployment will continue to increase over the next several months, it should level off by year’s end. Unfortunately unemployment will not improve quickly. For now we can only estimate how this will affect our market; its impact takes a while to be felt.

But Washington funded the FHA to continue lending and increased the tax credit to $8,000 with no payback required. This enabled first time buyers to get in the market. With the lion’s share of price depreciation done and mortgage rates so low most of us have never seen this, home buyers are back in the market. Activity has really picked up since March 1st with no signs of slowing down.

What is certain is that Tenafly real estate remains one of the most in demand markets in the NYC metropolitan area. This will not change. While we can’t escape the storms of life, the truth is that Tenafly weathers them better than most in Bergen County and the New York City area.

There has been a noticeable increase in the number of people looking at homes over the past two weeks.  We’re seeing more buyers coming out on Sundays to our open houses, more calls into our offices and more web responses to our internet postings.   The Bergen County real estate market has been very very busy.

At the same time, the real estate inventory is growing daily as more and more people are putting their homes on the market for sale now that we’re safely past the snow season.  Most homehomes owners do not want to sell their home during the winter weather so having the number of homes for sale grow significantly at winter’s end is quite normal.

The reason for home buyer activity is improved market conditions.  Prices are down substantially from 2004 (by 20 to 25% in most areas), mortgage rates tumbled over the past 2 weeks and one of the most respected analysts of New Jersey real estate,  Jeffrey Otteau, announced last week that New Jersey real estate will depreciate another 9% in 2009 and then stay at that level in 2010 as the real estate market stabilizes.  For many home buyers, this combination of factors made buying a home now a great idea. 

It will be interesting to see if this pick up in activity continues and for how long.  I have a funny feeling that the “smart money” is buying a home now.  Only a lucky person picks the market bottom but I must say that we’ve got to be pretty close to it now.

The New Jersey Association of Realtors publishes a report every year on the characteristics of people who buy and sell homes in New Jersey.  The National Association of Realtors has it’s own buyer and seller profile but naturally that’s on a national scale.

There are some very interesting facts in this report and you might just be surprised by a few.  Here are some highlights from the New Jersey Association of Realtors profile of home buyers:

• The median age of New Jersey home buyers is 36
• First time home buyers had a median age of 30
• 56% were married couples
• 21% were single females
• 10% were single males
• 49% of home buyers were first time buyers
• 64% had no children under 18 living with them
• The #1 reason to buy a home – a desire to own your own home
• The #1 reason for deciding when to do it – it was the right time in their life
• Top reason to choose the location – quality of the neighborhood
• 2nd reason to choose the location – convient to their job
• 68% of all purchases were detached single family homes
• 89% used a fixed rate mortgage
• 72% used the internet frequently to search for a home; 17% occasionally

There are two key items here ito note - 49% of all buyers in 2008 were first time home buyers and they decided to buy a home because the time was right for them.

First time home buyers are crucial to keep a market moving – without them, a real estate market will collapse because they are the first cog in the wheel that drives the real estate engine forward.  It’s also interesting to see that no matter the external factors at work (economy, interest rates, etc), it still comes down to when it’s the right time for me.  If you want a copy of the full report, just email me.