The Northern New Jersey housing market surged again in the second quarter of 2017, with another sharp increase in sales coupled with some more meaningful signs of price appreciation. With inventory levels continuing to fall throughout the region, we expect that sustained buyer demand will drive a robust seller’s market through the Summer and the rest of 2017.
Sales surged throughout the region. All the Northern New Jersey markets continued their strong start to the year, with regional sales up almost 8% and transactions rising in every market in the region: up 1% for Bergen houses, 9% for Bergen condos, 8% in Passaic, 3% in Morris, 13% in Essex, and 25% in Sussex. For the rolling year, sales were up almost 8%, reaching sales levels we have not seen since the height of the last seller’s market. Indeed, regional sales are now up over 70% from the bottom of the market in 2011.
The number of available homes for sale continues to go down. We calculate the “months of inventory” in a market by measuring the number of homes for sale, and then figuring how long it would take to sell them all given the current absorption rate. The industry considers anything less than six months to be a “tight” inventory that signals the potential of a seller’s market that would drive prices up – and we’re now right at that level. Indeed, inventory was down from last year in every individual county in the Rand Report: Bergen single-family homes down 12%, and condos down 29%; Passaic down 31%; Morris down 31%; Essex down 24%; and Sussex down 26%. If inventory continues to tighten, and demand stays strong, we are likely to see more upward pressure on pricing.
With sales up and inventory down, prices are starting to show some “green shoots” of modest price appreciation. Basic economics of supply and demand would tell us that after five years of steadily increasing buyer demand, we would expect to see some meaningful price increases. And we’re starting to see some promising signs: the regional average sales price was up almost 2% from last year’s second quarter, and the average price was up in every county other than Sussex. Looking at the long-term, the rolling year average sales price was up just a tick, but was up in every county other than Passaic.
Going forward, we remain confident that rising demand and falling inventory will continue to drive price appreciation through the rest of 2017. Sales have now been increasing for five years, which has brought inventory to the seller’s market threshold in much of the region. The economic fundamentals are all good: homes are priced at 2004 levels (without even adjusting for inflation), interest rates are still near historic lows, and the regional economy is stable. Accordingly, we continue to believe the region is poised for a robust Summer market and a strong 2017.