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.

What their data shows us is an improving market for homes in Bergen County. The number of days it takes to sell a home has been decreasing since March. If you take a look at the NJMLS Average Days on the Market Graph you’ll see this very clearly. While it’s still taking more than 100 days to get a home sold, we’re closing in on this number and I’ll bet we’ll be under 100 days to get a home sold very shortly.

You should also take a look at the Average Sold Prices Graph which again shows a definite move up although this time it begins in April. However, this makes sense because almost all first quarter sales come from contracts written during the prior year. What this graph shows it that we’re moving toward an average home sale of $500,000 and that’s positive.

I’m not saying that house prices are going up – prices for homes are not going up. In fact they will continue to go down for a while yet but you can only get a rise in the average sales price for a home when more expensive homes are selling. That happens when the real estate market is getting better throughout all price ranges.

First time home buyers have been kept in the market by such things as the First Time Home Buyer $8,000 Tax Credit which, one week ago, was added to FHA backed loans and low mortgage rates. As everyone knows, it takes the first time home buyer to get things moving and it sure looks like this is happening. At least that’s what the New Jersey MLS data shows.

A short while after being listed, the price was reduced to $1,425,000. Only 2 weeks later, on February 23rd, an offer was accepted and the home went into the Attorney Review process. Those of us who watched the market took note of this transaction because it demonstrated the strength of the demand for new luxury homes in Tenafly.

What happened next is even more intriguing as an indicator of the real estate market for homes in Tenafly.

On May 22nd the home came back on the market for sale. I called the listing agent who happens to be a very nice person and she told me that the owners were purchasing a short sale property out of the area and that their buyer had become frustrated with the long time it was taking and wanted to close on a home within the near future so the contract fell apart. Short sale transactions can take many many months – sometimes as much as one year. If you are buying a short sale and your buyer is not prepared to wait 6-9 months, it’s not going to work in most cases.

The home went back on the market on May 22nd at the start of the Memorial Day Weekend which, I am sure you will agree, is not the best time to start marketing a house. After all, a lot of your market is on it’s way out of town. The house had multiple offers and it was in Attorney Review again in 5 days.

What this tells you is that the market for luxury homes in Tenafly is still strong and that the market is stronger now than it was at the end of February. But wait, you say, if things are so fine and dandy on the Tenafly East Hill, why are there so many homes for sale? Because they are not marketed correctly. It really IS as simple as that. It is true that upper tier properties are having a hard time in this market but it is not true that you cannot be successful. However, you have to put yourself in front of your buyer and the homes that are for sale there are marketed using traditional methods which no longer work. That is the long and short of it.

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.