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Heightened demand for residential real estate continued to exceed supply across North Central New Jersey during the first quarter of 2021. In most cases, especially the more popular price ranges and regions, we shifted to a seller’s market. Outbound migration from urban centers, the continuing work-from-home trend, a years-long shortage of new residential construction, and increased interest from millennial buyers are all contributing factors.
Inventory Challenges Below $1 Million
In the popular under-$1 million price segment, all but two of the 39 towns we studied had less than three month’s supply during the first quarter, and the majority had between one and two month’s supply. Several towns, including Chatham Borough, Mendham Borough, Peapack-Gladstone, and Bedminster, had well below one month’s supply of homes for sale. The result has been an increase in competing bids and a subsequent rise in prices.
Month’s Supply: For reference, month’s supply is defined as the amount of time it would take for existing inventory to be sold out, based on the current rate of sale. A balanced market has six to eight months of supply.
The Sweet Spot: $1-2 Million
During the first quarter of 2021, the $1-2 million segment was a fine example of a balanced market, where increased buyer demand was met with sufficient inventory. Many towns that previously experienced oversupply in this price range, like Chester Township, Mendham Township, Bernardsville, and Tewksbury, posted between four and eight months of inventory during the first quarter. Nevertheless, there were outliers. For example, inventory was low for homes priced between $1-2 million in Summit, Millburn-Short Hills, The Chathams, and Madison, while no town was more pressed than Maplewood, at just 0.25 month’s supply. In contrast, month’s supply was in the double digits for homes priced between $1-2 million in Boonton Township, Mendham Borough, and Berkeley Heights during the first quarter.
Improvement in the Upper End
Between January and March, higher-priced homes traded at a pace we had not seen for many years in this segment, and all signs point to a continuation of this trend. Increased volume at the upper end also gave a boost to the median sale price in most towns, as compared to the same period last year. Although that’s welcome news for the upper end, the median price increase should not be misconstrued as across-the-board appreciation.
A Word About Pricing
According to Jeffrey Otteau, of the Otteau Valuation Group, the average sale price of a home in New Jersey increased by 11.6% in 2020, which is the greatest single-year increase since 2005. Nevertheless, and as always, home values depend on local market conditions, which vary from town to town and even across price segments within a given town. Where inventory is exceedingly tight, high buyer demand leads to multiple bids and price increases. Conversely, in towns or market segments that present more supply, prices appreciate at a lower rate, and in some cases not at all.
To be sure, these are exciting times for residential real estate. Many of our communities have quickly transitioned from a buyer’s market to a seller’s market. Success in these conditions requires astute perspective and a broad-ranging skillset. At Turpin, we are focused on ensuring our team has the knowledge, training, and support to help our clients thrive in this new climate — from accurate pricing strategies in a rapidly evolving market to best practices for handling multiple bids.
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