Middlesex County NJ Market Commentary - May 2012
Active Inventory
The Active Inventory also called current supply or unsold homes as tracked in the Middlesex County Multiple Listing System (MLS).
The Active Inventory as we follow it (Active homes for sale not under contract and not under attorney reviews) in April has increased 6.1 % to 2755 homes for sale in Middlesex County NJ and keeps on following the industry seasonal effect and the local and national current trends. This number is only for residential single family homes in Middlesex County NJ and does not include condos, townhouses, multi dwellings, adult community, commercial real estate, etc…Also it does not include for sale by owners. It does not include either any type of Shadow Inventory. The inventory is 11.1% smaller than last year which is good news and has been the trend for the last few months. Typically winter months have a lower inventory due to the seasonal effect and holidays (i.e many home sellers take their homes off the market during this season and wait for the spring market to relist, etc…) and the inventory rising with the spring market.
The shadow inventory is mostly made of foreclosed homes not yet listed on the market and also includes more subtle different types such as the “Accidental Landlords” and the folks who put their plans to move (retirement, etc…) on an indefinite temporary hold.…
The oversupply and the shadow inventory especially in New Jersey are some of the concerns leading some experts to expect a continuity of the down trend in 2011 at worst and at best the beginning of home prices consolidation. In some local markets 2011 and 2012 could turn out to be the “home prices” consolidation years.
We have released the yearly stats including 2011, please see at the bottom of this webpage (Yearly Trending).
Pending Sales
Number of homes under contract, not including homes under Attorney Review. Until now we always have been focused on Sold Homes data to calculate the average/median home prices, SP/AP, DOM and DOI. However Pending Sales because they are captured 1 to 2 month in average prior the Sold time stamp they do offer a more timely view of the market.
For the month of April we had 288 homes coming under contract (as tracked in the Middlesex County MLS). It represents a significant decrease versus March but an increase versus last year (-15.3% and 9.9% respectively). There is typically a correlation between home prices and number of sales. The last 4 months have shown a substantial increase in pending sales showing that buyers who have been on the fence for the last few years are starting to pull the trigger.
Buyers per 100 Sellers
This represents the number of buyers per 100 sellers. It is calculated using the Active Inventory and the Pending Sales. For the reported period (April 2012) we had 11 buyers for every 100 home sellers in Middlesex County, NJ which is a decrease versus the previous month and an increase versus last year.
New Homes Listed
For Middlesex County NJ, the number of new homes listed in April has decreased versus new homes listed in March (-0.4%) (761 new homes listed in Middlesex County). Year over year it has decreased -7.5%. New homes listed keep on adding to the already high supply. Unfortunately the current Shadow Inventory in New Jersey is placing a potential and very real threat as well on the current Inventory. Per the Otteau Group, NJ has the second largest Shadow Inventory in the US mostly due to the foreclosures backlog.
Number of Sold Homes
In April, the number of sold homes was 252 and has decreased 1.6% versus last month and increased versus last year. The monthly number of sold homes despite some improvement still remains on the lower side and reflects the overall local slower market. One thing to remember is that this specific statistic by its nature looks at the sales activities from 2-3 months back. The Pending Sales is a timelier statistic in term of market activity and show an increase in activity with a substantial pick up in Pending Sales (Current Sales) since January.
Median Sold Price and Average Sold price
The average (mean) sold price ($307,478) has decreased versus last month (-1.7%) and year over year the average sold price has increased 1.1%.
The median sold price ($278,100) has increased versus last month and increased versus last year (2.1% and 4.9% respectively). Of course it is too early to tell if this year from a Price perspective is going to follow the downtrend of the last 5 years or start a bottom formation. See our Yearly Trending review below. Do not forget that real estate is hyper local and we are currently seeing specific neighborhoods and zip codes with an average price YTD higher than last year. Only time will tell but it is a possibility that those specific neighborhoods/zip codes will end up with home prices in 2012 being higher than in 2011.
Sold Price / Asking Price (SP/AP) Ratio
SP/AP ratio is 93.55% which is an increase versus March and a decrease versus last year. We can see very clearly the direction of the pressure on home prices. In average, sellers are negotiating and accepting offers at 93.55% of their last asking price. Please note that I mentioned "last asking price" and not "original asking price" which is very different and could take a few price reductions for sellers to get to a correct market price level generating Showings if pricing is not properly set from the start.
The 92% range is one of the lowest ranges we have witnessed since the beginning of the down trend in 2006/2007 and was a few months ago.
At the end the Sale of a home should really be considered a business transaction and as such the various business decisions such as pricing be made in a knowledgeable fashion based on current and local data and not emotions.
Days on Market (DOM)
Another real estate statistic is Days on Market or DOM which has increased at 121 days versus last month and also increased versus last year. A word of caution with this indicator as it is NOT a cumulative DOM. Meaning the clock re-starts with any new listing contract for the same home. Thus this statistic does not indicate to home sellers the average time on the market before going under contract. This is a good example of the better value of looking at those statistics, which is more in the trend analysis and local markets comparison than in a specific number at a specific given time.
Days of Inventory (DOI) or Absorption Rate
Days of Inventory (DOI) which is a derived number of the Active Inventory and Sold Homes has consequently increased. At 339 days, it means it would take less than 1 year to sell all existing inventory with no additional inventory coming on the market. A market with over 6 months supply would usually qualify as a buyer's market. A market with less than 6 months of supply would usually qualify as a seller's market. DOI does not take into consideration the NJ shadow inventory.
That’s the end of our local market commentary based on Middlesex County NJ real estate statistics. As always, contact me if any questions.
Cathy Chaudemanche Team, Saturday 05/12/2012
P.S.
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Catherine "Cathy" Chaudemanche Team
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Keller Williams Elite Realty.
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