The Bergen County Homes Blog

Great news for home buyers! U.S. Housing and Urban Development (HUD) Secretary Shaun Donovan announced yesterday, May 29th, that the Federal Housing Administration (FHA) will allow home buyers to apply the Obama Administration’s new $8,000 first-time home buyer tax credit on FHA mortgage loans. Previously the tax credit only applied to conventional mortgages. The only catch is that the tax credit cannot be used towards the minimum 3.5% down payment. But, this is still terrific and a great help for people who need to use a FHA insured mortgage loan.

Secretary Donavan said that the FHA’s objective in doing this was to help stabilize the housing market by stimulating more home sales across the US and it certainly should do so. With the ability to apply the tax credit to purchase costs, buying a home now becomes affordable for thousands of people and affordable enough to get thousands to jump off the fence and into a house.

FHA loans are extremely popular with first time home buyers because qualifying for a FHA mortgage is a lot easier than qualifying for a conventional loan. The ratios are easier and the down payment can be as little as 3.5% although I must tell you that I do not approve of buying a home with such a low down payment. What I tell my home buyers is to wait until you’ve saved up at least a 10% down payment.

While interest rates went up this week, they also came down on Friday so we’re still in the 5-5.5% range for what most people really qualify for in a mortgage. This has been where it’s at for the past several months throughout the spring.

The reason the first time home buyer market is critical to the housing market is because this is where the housing domino chain begins – when a home buyer buys a house, he buys it from someone who often moves on to a bigger house and so on and so on. The entire chain of transactions begins with the first house that is sold and that’s your first time home buyer.

If you look at the real estate market the picture you see is a pyramid with the least expensive homes on the large bottom (mostly first time home buyers) and the most expensive at the very top. Without those large bottom rows of buyers, the real estate market will collapse. So the FHA, by accepting the $8,000 tax credit on its loans, has helped tremendously to maintain the strength and stability of real estate.

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.

Since the beginning of March the housing market for homes in Bergen County has really picked up and as we are now nearly through April, I thought that I would take a look at the MLS data to see if what I’ve been seeing is really happening. After all, most real estate agents are a pretty optimistic bunch so I just wanted to go into the New Jersey MLS and check.

Here’s what I found – things truly are picking up. Real estate is improving most definitely; it’s not dramatic but haven’t we had enough drama over the past 9 months? It’s steady and that’s good. Take a look at the figures below and you’ll see what I’m talking about. More buyers are coming out to look at homes and more homes are taking offers. Here are homes that came on the market for sale and which went under contract so far this year:

Jan – 1,232 Active/286 UC = 4.3 to 1 ratio
Feb -1,255 Active/335 UC = 3.8 to 1 ratio
Mar -1,693 Active/443 UC = 3.8 to 1 ratio
Apr -1,311 Active/413 UC = 3.2 to 1 ratio

The April figures are through today, April 23rd, and they certainly indicate continued improvement for Bergen County homes. What hasn’t been so clear are the Days on the Market figures but you really can’t get a sense of where that’s going until we’re further into the year because almost all sales in January and February originate from the previous year. But in March it took 110.64 days to sell a home and so far in April it’s been taking 103.59 days to sell a home which is a positive change.

The real estate market is always more active during the spring and early summer months and the pattern that is developing is quite normal which is excellent. For a home buyer, this is really a great time to buy a home and it seems that increasing numbers of people are sensing this and acting.

“How’s real estate and what should I do?” I am receiving so many calls and messages like this that I thought I should post some answers. It seems that real estate is on everyone’s mind lately.

Here’s something to consider: A primary motivating factor for most people is simply because it was the right time. So ask yourself this question – Is this the right time for you?

The right time to move can be due to many reasons such as getting your kids out of the city and into a backyard, you’ve outgrown your home and need more space, you’ve had it with renting and want your own place, you’re ready to move to your dream retirement, everyone’s moved to California and you’re still in Bergen County etc.

If you’re wondering how to manage things based on how the real estate market is doing in Bergen County, here are some answers to help you:

Are you thinking of buying a home? Do it now – we’re at or near the bottom with mortgage rates at historic lows; inflation, with its high interest rates, is projected for the future.

Want to move up to a larger home? Move up now – the cost of upgrading is always the cheapest when you’re around a market’s bottom which is where we are today.

Own a home and not moving? Check your mortgage rate immediately. No matter when you purchased or if you did refinance recently, do this for your own benefit.

Thinking of selling your home? Get your home on the market now – you stand to lose another 5% this year so waiting will hurt you.

Not sure if this is the right time to move? Then don’t. If you’re not sure, its always best to stay put. However, it’s also best to investigate your options fully; I suggest you do this bi-annually.

Let me know if you have any other questions about how to handle the housing market in Bergen County.

Simply put, a short sale occurs when a home that is sold is worth less than the mortgage amount and the homeowner cannot make up the difference.  For example, you sell a home for $75,000 but the mortgage is $100,000; you’re short $25,000.  The bank enables the homeowner to sell the house by forgiving the $25,000 difference.  So while the bank doesn’t own the house, the owner can’t sell it without the bank’s cooperation.   Of course, in an actual short sale, the bank would be forgiving the mortgage amount, any other liens and the closing costs. 

If you are interested in pursuing a short sale in Bergen County, please contact an attorney who specializes in real estate before you do anything.  It is always best if you begin by being fully informed.

To get the bank to allow a short sale, a homeowner completes a “workout package” for the bank’s approval including a ”hardship letter” in which the circumstances of the homeowner’s difficulties must be explained along with supporting documentation (pay stubs, account statements, etc).   

Why would a bank do this?  Because the other alternative is a foreclosure which will cost the bank much more in time and money. 

Why would a homeowner do this?  A short sale erases the debt – most of the time the bank forgives everything; infrequently it may insist on a promissory note for part of the loss but that’s still much better than a foreclosure.  In a foreclosure, the debt is still owed so creditors can take your vehicles, garnish your wages, clean out your checking account etc.  This can last for years until the debt is paid off.  A foreclosure ruins your credit for about 10 years – this is a disaster like the Titanic.  You can recover your credit in a few years with a short sale plus the IRS does not consider the forgiven debt as income.

In Bergen County we have 3,703 single family homes for sale according to the New Jersey MLS today; 346 are short sales.  That’s 9.3% of all homes for sale.  Real estate can be negatively impacted by foreclosures; it’s not nice to drive down your street and see a boarded up house with a “Sheriff’s Sale” sign on it so there are many reasons why a short sale is a better idea; it helps the bank, the homeowner and real estate in Bergen County.

In the world of Bergen County real estate, one of the most popular style of homes is the split level.  It’s efficient design, open floor plan, bright sunlit interior and uncomplicated mechanical systems makes these homes highly sought after by buyers.  Bergen County saw an explosion of split level home construction from 1960 through the mid 1970′s.  A wonderful example of the split level design is found in my listing at 18 Ridge Road which is offered at $795,000:

     It’s easy to see the multi level feature of this style: 

    To the right is the upper level where you’ll find all 4 bedrooms.  The lower level of the left is the entry level where there is a formal entry hall, the living room, dining room and kitchen.  One level down on the ground level is the family room, power door with laundry and entrance to the 2 car garage.  There’s also a basement with a rec room and separate storage/utility room.  All in all, you get a lot of living space in these mutli level homes.

The present owner renovated and expanded the home in 2004 – take a look at how well done it is:                                                               

The living and dining rooms are filled with light.  The open floor plan allows for tremendous light to enter the house through the large window at front and sliding glass door across at the end of the dining room leading to the outdoor deck.

 There was a lot of planning that went into this beautiful kitchen renovation and it shows.

This is the family room  on the left and the rec room is one level below – it’s a perfect set up because the adults can relax in the family room while the children are playing in the rec room.   

These 2 rooms in particular demonstrate the versatility of the split level home.

18 Ridge Road was constructed around 1960 and has only had 2 owners but that isn’t all that unusual.  People tend to stay here once they’ve moved in.  Cresskill is a highly prized location – it has an excellent school district, robust business district, terrific town services and a very strong community spirit.  It’s large enough to support it’s own school district but still very much a small town where one easily feels at home.  A classic Bergen County home located in a quiet family neighborhood with an easy commute to NYC, 18 Ridge Road is simply a wonderful home.

The spring market for real estate in Bergen County arrived in February.  We’ve noticed an increase in the number of buyer inquiries and in the number of people coming out on weekends to look at homes on Sunday afternoons which is pretty much what we expect every year.

Below is a quick study of how the market is doing as of February 17th based on New Jersey MLS data.  Over the years, I’ve found that it’s important to see the relationship between the number of homes for sale (A for Active Listings) and under contract (UC).  In a strong seller’s market, this ratio is at 2 to 1.  How long a home is on the market is also important and I’ve put this in the same order for you (A/UC).   I feel that this is a result of over pricing.  It’s pretty tough in any market to get an offer on an over priced home; it just doesn’t make sense to  a buyer.

For a more in depth look at the real estate market go to my market trends report which I’ll be updating monthly at  http://bergencountyhomes.com/market.htm

                                    A/UC                Ratio                Days on the Market

Alpine                          43/1                 43 to 1             257/298

Closter                         74/10               7.4 to 1            136/224

Cresskill                       69:7                 10 to 1             132/128

Dumont                        44/12               3.7 to 1            117/81

Englewood                   123/16             7.7 to 1           155/110

Englewood Cliffs          45/1                 45 to 1             132/221

Harrington Park            18/3                 6 to 1                92/51

Haworth                       35/1                 35 to 1             122/83

Paramus                       114/25             4.5 to 1            146/103

Ridgewood                   98/14               7 to 1                94/105

River Edge                   34/11               3 to 1                73/95

Tenafly                         93/19               5 to 1              118/150