How local is the Princeton area real estate?
Is Princeton NJ real estate any different then what we hear in the national press? I can’t count how many articles, blog posts and comments I read just in the past week about the doom and gloom of the real estate market. You know that the news is really bad, when even the National association of Realtors (NAR) says so (through their data).
The question is how does all of this apply to us in the Princeton area and is our real estate purely local?
The "readers digest" version of the answer: "yes" and "no". For the rest of the readers, I explain my thinking below.
I. Why Princeton Real Estate Is Local
NAR is reporting that single family median homes prices in 2007 vs. 2006 (not seasonally adjusted):
Nationally - declined 6.5%
North East Region – declined 8.9 %
Is our greater Princeton area real estate doing better or worth? The answer -it depends on where you live. There is a great variance from town to town and even within the same town. Princeton, which consists of two administrative units –Princeton Borough and Princeton Township, shows different different rate of increase. West Windsor and Montgomery, towns immediately adjacent to Princeton, show price declines but at greatly different rates: 
Princeton Township – increase 10%
Princeton Borough - increase 7 %
West Windsor – decline 19%
Montgomery Township – decline 6%
Is this the proof then that real estate is completely local? Does it mean, for example, that Princeton is immune from the national housing woes and West Windsor is in even more dire straights? My answers: not exactly. If it seems like a contradiction, let me explain.
II. Why Princeton Real Estate Is Not Completely Local
We are part of the general economy and are affected by it in many ways. Let’s start with the positive affect.
1. Our area should benefit from the interest rate cuts and the government stimulus package, which will raise the limit of the conforming loan from $417,000 to over $600,000. Buyers would be better able to afford a house and in case of the jumbo loans “save” several thousand dollars, which will also apply to people who are re-financing.
2. Now, let’s look at the not so positive affects. Local economy and employment are factors that do not exclude us. People employed by the financial institutions in New York will be affected with the bonus pools being much smaller this year. Big local employers, like Merrill Lynch are not doing so well.
With less possible relocations into the area, there could be less real estate buying. When companies are not doing well, there is less “moving up” employment opportunities for the employees. This can translate into less relocation out of the area and a smaller potential seller’s pool as a result.
3. Our market is not immune from the “bad news” syndrome. I was talking to someone yesterday who was lamenting how bad Princeton real estate market is. When I told him that the prices were up (there is a caveat which I will write about shortly) –he was very surprised. It was a good plug for my Princeton Real Estate blog –as the gentlemen immediately subscribed. The economy and the bad news affect buying by the locals, which accounts for a large part of local transactions. Buyers are waiting to see if the prices will be coming down.
III. Why life goes on regardless of the economy
People get married, babies are born, kids go away to college, people get divorced, people get downsized or laid off from their jobs -these facts of life continue regardless of the economy and what the press thinks about the real estate market. People continue to move in and out of the Princeton area for various reasons in their lives, which means real estate buying and selling will continue in any market.
In summary, Princeton area real estate is local but is not immune from the developments in the New York, New Jersey, and national economy. Press and media will continue to influence buyers’ and sellers’ psychology and behavior nationally and locally.
It is more important now to become the smart consumer, which by the way all my clients are. Get the information you can rely on (more on this in my next post) and you will be ahead compared to others. That could be considered the Good Local News.
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