With all of the news media reports about the ‘national’ economy, and the ‘national’ real estate market, it is very difficult to decipher exactly what that means for towns like Scotch Plains and Fanwood. There really is no such thing as a “national” real estate market, as people who purchase homes in a community often work in that community, or within commuting distance. This means that they earn money locally, and usually spend that money locally.  The national media often reports on national statistics, and while they can be helpful to uncover trends in the macro-economy, it is important to understand that the Real Estate market, and even the economy are highly localized, and can vary tremendously from one state to the next, or even one town to the next.

 

In this month’s Market News, I thought it would be helpful to share what’s happening now, while also comparing it to historical data, to illustrate how SPF real estate has performed from its peak of 2005-2006 to the present. Whether you are buying or selling, or just live in Scotch Plains or Fanwood, this information can help you better understand how the recent recession has affected the local picture.

 

**All information is taken from the Garden State Multiple Listing Service Statistics**

 

Here are some statistics:

 

Year to Date 2009 (through August 31)

 

Active Listings: 1854

Closed Transactions: 199

Average Days on Market (DOM): 78

Average Sold Price: $471,273

Sales Price to List Price Ratio: 95%

 

These statistics don’t mean much unless compared with other periods in time, to see how the market is trending. So, let’s compare with the same period 2008

 

Scotch Plains from January through August, 31 2008

 

Active Listings: 2036

Closed Transactions: 194

Average DOM: 76

Average Sold Price: $496,423

Sales Price to List Price Ratio: 96%

  

What does this mean?

 

Well in looking at the averages, here are some factual conclusions:

 

  1. Average Sales Price declined by approximately 5%
  2. Number of closed transactions remained about the same
  3. Number of active listings decreased by about 9%

 

In summary, the average sales prices in Scotch Plains declined slightly since last year. The prices dipped more in some neighboring towns, as there were declines in the number of closed sales in those towns that were not present in Scotch Plains and Fanwood. This kept supply and demand a bit more balanced, which kept average prices relatively stable. Generally speaking, the markets in 2008 and 2009 were similar in Scotch Plains Fanwood, with an actual decrease in months of supply.  Also, keep in mind that these numbers are averages only. Home prices for first time buyers ($300,000 to $450,000 on average) remained more stable than those in the “move up” ranges between $500,000 and $800,000. This is due in part to the government $8000 tax credit available for first time buyers. The higher priced homes saw steeper declines since last year, as many of the first time buyer homes were “distressed properties (short sale or foreclosure) which means the sellers of those homes were not purchasing a larger home as frequently as they might do in a more robust market.

 

Here is one more comparison. When we compare the 12 months ending August 2009 data with key data from the peak period of the market in the 12 months ending February 2006, here is how the 2009 market compares:

 

Number of Closed Transactions: Decline of 27.6% since peak

Sold Price to List Price Ratio: Decline from 99% to 95% 

Active Listings for Sale: Increase of 29.3%

Average Days on Market: up from 57 to 76 days

Average Price Declines: 12-20% (depending upon location and price range)

 

What this means for SPF is that while prices may not have dropped as rapidly or heavily as other parts of the country, the buyers have much more inventory from which to choose, and homes are staying on the market longer. Homes are still selling, and selling well, as long as they are priced correctly, and priced better than the competition. In fact, homes that are priced competitively in SPF are selling often with multiple offers. The difference between now and 2005-2006, is that if a buyer gets outbid on a home they like, or finds a seller who will not accept a fair offer, they will just move on, and wait until they see another one that is priced well, rather than make a bid on the next house available, or overpay because there is more selection, and less urgency.

 

 

Here is another very important statistic, which is number of expired listings in SPF which failed to sell:

 

2004 – 56 expired listings

 

2005- 70 expired listings

 

2006 – 155 expired listings

 

2007 – 199 expired listings

 

2008 – 165 expired listings

 

 

To help you understand what all of this means, here are some general observations when examining this data:

 

  1. SPF sellers who price their homes competitively and at today’s market value will sell their homes successfully in approximately 76 days, for approximately 95-96% of list price
  2. Sellers who overprice their homes are 3 to 4 times more likely not to sell their home than at the market peak, and will likely stay on the market much longer, and may need to reduce their asking price to within 5% of the comparable sales.
  3. These numbers are averages only. Homes for first time buyers have been selling more strongly than “move up” homes, and the price declines in homes priced from $600,000 to $900,000 have been more severe than the less expensive homes. Be sure to get an accurate market analysis or appraisal before listing your home for sale.
  4. SPF buyers will be purchasing their home today at anywhere from a 12-25% lower price than they would have had just a few years back, depending upon the price range of the home, and the neighborhood of the home they are buying. If a home is properly priced, there will likely be high interest, so offer fairly. If the home is not priced properly, use the comparable data to negotiate the best possible price.
  5. SPF has remained a stronger market than many other towns because of the strong school system, access to transportation, and limited “investment, or speculative” buying during the real estate boom. The primary driver of the market and prices going forward will be employment, both locally and along the route 22, I-78 corridor, and in New York City.