This report is provided by Jeffrey Otteau of the Otteau Appraisal Group who also authors a series of widely followed quarterly market reports on the New Jersey real estate market. This information is collected from various sources including Boards of Realtors and Multiple Listing Systems in New Jersey.

I have known Jeff for many years and consider him one of the leaders in the real estate appraisal profession. He has taught me a lot about quantitative real estate market analysis.
…Jonathan Miller


>The slowing pace of home sales continued in November as Contract-Sales fell to the lowest level since the housing recession began in 2005 and ran 18% below the prior month’s pace. Also noteworthy is that Unsold Inventory fell for the 3rd straight month and now stands at 64,000 homes, as compared to 72,000 in August. While this inventory reduction would otherwise be a positive sign for the housing market, the current reduction is driven by weak market performance leading would-be sellers to defer their selling plans until Spring and also causing home builders to further slow the pace of new construction. Thus, the continuing decline in Unsold Inventory provides further evidence that the bottom of the current housing recession has not yet arrived.
As a result the ongoing decline in home prices will extend into 2008, suggesting that ‘waiting until Spring’ is an unwise decision for home sellers hoping to maximize selling price. Given that home prices continue to decline and that the pace of future price increases will be slow and gradual once the housing recovery begins, home prices are unlikely to recover to 2005 levels until Spring of 2014. As a result, Right Pricing! to current market levels is the smart strategy for sellers. For the next segment on our Right Pricing! Strategy, register to attend our 2008 Spring Workshop Series coming soon.

>Switching to the buyer’s perspective, Spring 2008 will present a unique opportunity that has never before occurred in the housing market,namely lower home prices AND low mortgage interest rates. This is because home purchase activity is traditionally tied to interest rate levels such that low interest rates typically increase sales pace and prices while reducing Unsold Inventory. The next 6 months will therefore present a rare combination of low interest rates, lower homes pricing and a wide selection of homes being offered by motivated sellers. We’re all likely to look back five years from now and conclude that 2008 was a time when Smart Buyers took advantage of this unique opportunity by locking in both low prices and low interest rates. I’m reminded of the axiom that the right to sell is when everyone else is buying, and the right time to buy is when everyone else is selling.


  1. Noah January 1, 2008 at 10:43 pm

    Great chart and anaylsis Jeffrey! I think your observation of:

    • sellers deferring selling until a more active spring
    • decline of inventory

    is dead on and a phenomenon occuring in the LI market as well, where my mother is trying to sell her home. I am seeing LESS inventory than 3-4 months ago, yet prices still very pressured from the utter LACK of demand.

    I think there WILL be that rare combination of more options, lower prices, and generally lower rates in early 2008, however I disagree that we can call this the eventual ‘right time to have purchased’. Lets not forget, we still do not know the effect on the economy, the extend of write downs, the effect globally, etc..

    The consumer is tapped out, MEW is dead, home prices are falling yet housing is STILL unaffordable for many buyers. And we haven’t seen the job losses that a recession may bring yet.

    Also, rates have not declined that much for lower credit borrowers and there are many fees now being charged for these borrowers/loans. I’m not sure this world is providing an incentive to borrow; as the side effect of the credit crunch consists of tighter underwriting, higher fees, and higher rates with more emphasis on credit quality and backing up with docs.

    With that said, there certainly WILL be a great longer term opportunity at some point, I just would rather wait to see the effect on the economy and severity of any recession before making a prediction on when that time is. Other than that, agreed on your other points!!

  2. Just me January 2, 2008 at 8:11 am

    Picture (chart) is worth 1,000 words . Happy New Year!!

  3. iceman January 2, 2008 at 5:35 pm

    I agree that summer 2008 will probably be the last gasp for low fixed rate mortgages. By fall 2008, these will start to move up as the bond market realize what a huge inflation mess we have on our hands due to the Fed’s printing press being on overdrive.

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