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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

HOUSING MARKET SHOWS EARLY SIGNS OF STABILIZATION

April home sales increased from the March pace for the first time since 2005 in what may be a sign that market stabilization has begun. In April, New Jersey contract-sales activity increased for the 4th consecutive month and recorded a 9.3% increase above the March level. By comparison, sales activity declined during April in both 2006 and 2007.

Also significant is that number of homes for sale rose modestly as Unsold Inventory increased by only 4.5%, less than normal for the month of April. As a result of these trends the Projected Absorption of homes offered for sale now stands at it’s lowest level of the year reflecting a 10.0 month supply. By comparison, absorption stood at 12.7 months in January, 11.0 in February and 10.5 in March.

Any determination as to whether these trends actually signal the beginning of a market recovery hinges on the momentum carrying through for the remainder of the 2008. There are ,however, a growing list of positive factors for the housing market which include increased housing affordability due to lower home prices, favorably low mortgage interest rates and massive pent-up demand due to reduced purchase activity.

To keep things in the proper perspective however, it is clear that the housing market remains in the grip of a dramatic correction and will not see rising prices until Unsold Inventory levels have been reduced significantly. Until then home prices will likely drift slightly lower, although at a slower pace than the past 2 years. But a bottom to the housing downturn may be forming which would be a first step towards recovery. Potential home buyers who have been delaying their purchase in an attempt to ‘time the market’ should consider whether that time has now come. This is because the greater risk in delaying is the likelihood of higher mortgage rates in the future due to the inflationary pressures of high oil and food prices which will erase any potential savings from future price declines. Supporting this view is recent remarks by Federal Reserve Chairman Ben Bernanke indicating that future interest rate cuts are not likely due to a need to guard against inflation. Our analysis of the cost-benefit relationship of delaying a home purchase indicates that the added monthly cost attributable to rising interest rates is likely to be greater than the savings generated by any further price declines. Thus, the next 6 months will present a rare combination of low interest rates, low home 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 time to sell is when everyone else is buying, and the right time to buy is when everyone else is selling.

Tags: Jeff Otteau, Absorption, Ben Bernanke, NAR, National Association of Realtors

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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

WEAK SALES PACE CONTINUES IN FEBRUARY

February home sales turned in another weak performance erasing hopes of a housing market recovery any time soon. Following a disappointing January when contract-sales were off by 30%, February home sales were down by 21% compared to the same month last year. This leaves year-to-date contract-sales activity 25% below last year at this time, making it the worst start for home sales since the housing recession began in 2005.

Further evidence of market weakness can be found in Unsold Inventory levels which rose for the 2nd consecutive month to 65,000 standing homes on the market, excluding the pipeline of new construction homes not yet completed. All of this provides compelling evidence that falling home prices will continue for the time being. As a reference point there were fewer than 32,000 homes for sale back in 2005 when home prices were last appreciating, suggesting that unsold inventory will need to decline significantly before home prices start rising again. Our current projection is that home prices will not recover to 2005 peak levels until 2015 at the earliest.

Therefore, the advice to home sellers is to Right! Price before home prices decline further. This is because overpricing extends marketing time, leading to a lower selling price down the road.

Despite the ongoing market decline however, some brighter spots exist in the housing market. Housing demand continues to outperform the overall market in downtown redevelopment areas as well as in communities offering transit rail access. Look for this trend to intensify as transit rich communities offer tangible solutions to New Jersey’s housing affordability constraints, particularly as younger Generation-Y home buyers transition from renting to home ownership over the next 5 years.

Switching to the buyer’s perspective, the current housing market presents a unique opportunity by way of falling home prices AND low mortgage interest rates. Because the decline in home prices typically slows later in a correction cycle, the greater risk in timing the market is the potential for higher mortgage rates ahead. Thus 2008 will provide home buyers with the double bonus of lower mortgage rates and lower home prices. Also noteworthy are the increased Jumbo mortgage thresholds for loans in excess of $417,000, which are scheduled to expire at the end of this year. This, together with tax refunds later this year increase the likelihood of higher interest rates and borrowing costs in 2009. Therefore, we’re likely to look back 5 years from now and conclude that 2008 was the ‘sweet spot’ for home buying.

Tags: Jeff Otteau, NAR, National Association of Realtors

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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

HOME SALES DECLINE FURTHER AT YEAR END

The pace of home sales in New Jersey declined further in December providing compelling evidence that the housing market recession has not yet reached bottom. In December, Contract-Sales activity declined 24% below the November pace and was 31% less than in December 2006. When considered against the backdrop of high Unsold Inventory levels and a looming economic recession, it appears certain that existing-home prices will continue their decline into 2008. As a result, strategies of ‘waiting until Spring’ are ill conceived as overpricing inevitably leads to extended marketing times and lower prevailing market price levels. Best-Practices for a weakening housing market is to price ‘ahead of the decline curve’ to shorten marketing time and capture a higher selling price before prices drift even lower. From the new construction persepective however, many home builders have already embraced this strategy with Right Pricing! that reflects the current market realities. For the next segment on our Right Pricing! Strategy, register to attend our 2008 Spring Workshop Series next month.

Despite the ongoing market decline, some bright spots are emerging. Unsold Inventory declined for the fourth consecutive month and now stands 16% lower than in August, reflecting 12,000 fewer homes on the market. Also encouraging is that mortgage interest rates continue their descent providing a boost to home buyers’ purchasing power and helping to close the housing affordability gap in New Jersey. According to Freddie Mac’s latest Primary Mortgage Market Survey® (PMMS®), the 30-year fixed-rate mortgage averaged 5.48 percent for the week ending January 24, 2008, down from 5.69 percent the prior week and 6.25 percent last year at this time. The last time mortgage rates were lower was March 25, 2004, a time when home buying activity was at a frenzied pace. Another positive factor is yesterday’s announcement that President Bush and House leaders have agreed on an economic stimulus package that would allow Fannie Mae and Freddie Mac to raise the limit on the loans they purchase from $417,000 to $625,500. Similarly the FHA limit would be increased from $362,000 to $725,000. The effect of such increases would be to expand the pool of money for borrowers of so-called Jumbo Mortgages thus increasing liquidity and reducing interest rates for these loans in the process.

The take-away from all of these developments is that while the market has further to fall, the bottom point is getting closer. Home buyers should take notice of these developments as 2008 presents an unusual combination of being in the ‘driver’s seat’ of price negotiations at a time of record low interest rates. Those who wait too long will eventually find this opportunity window closed when higher interest rates and firmer pricing returns to the market.

UPDATE: Here’s more commentary on the New Jersey market.

Tags: Jumbo Mortgage, FHA, Jeff Otteau, NAR, National Association of Realtors

Comments Off on State Of New Jersey: Otteau December 2007 Contracts

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

DECLINING HOME SALES CONTINUE TO BE A DRAG ON THE HOUSING MARKET

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.

Tags: Jeff Otteau, NAR, National Association of Realtors

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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

HOUSING MARKET IMPROVES SLIGHTLY, INVENTORY STOPS RISING

The decline in the housing market which began during the 2nd half of 2005 is evidenced by the rising tide of unsold homes on the market. While there are many contributing factors, the supply of competing properties is paramount as it creates a ‘mood of the market’ which determines whether home buyers feel any sense of urgency. For example, as Unsold Inventory declines and a buyer’s choices diminish they are inclined to purchase sooner rather than later driving inventory even lower and home prices higher in the process. Conversely, rising inventory extends normal marketing time causing home sellers to reduce their asking price. In this rising tide environment home buyers adopt a ‘wait & see’ stance due to concern about falling home prices, leading to further increases in Unsold Inventory and thus creating a downward spiral. Any reverse of this cycle is then predicated upon a decline in Unsold Inventory. While this is admittedly a simplistic view which does not take into account corresponding demand factors, the bottom line is that the housing market can not improve significantly until Unsold Inventory declines. And the first step toward inventory decline is for it to stop rising.

The New Jersey housing market provided a glimmer of hope in July as Unsold Inventory declined for the first time since January. That this decline accounted for less than a 1% reduction in Unsold Inventory makes it clear that the housing recession is far from over and will continue into 2008. However, should inventory hold at its present level would signal the ‘beginning of the end’ for the housing recession.

The July housing market also saw an increase in contract-sales activity on a seasonally adjusted basis. As demonstrated in the NEW JERSEY CONTRACT-SALES ACTIVITY chart, July sales were higher than one year ago confirming that while the housing market is weak it still has life. No surprise here as despite the decline in sales activity over the past 2 years the underlying demand for housing is still bubbling beneath the surface. This is because life goes on with continuing household formation, marriages, the birth of children, job promotions, divorce and retirement all leading to changing housing needs which translates into housing demand. Thus, the stage is being set for a rebound in the housing market once the current challenges sort themselves out.

From a market absorption perspective, the Unsold Inventory presently reflects a 9.0 month inventory of homes as compared to 8.9 months in June. This however compares to a 4.0 month supply in July 2005 suggesting that inventory is currently about double where it needs to be before home prices will start rising again. This is important to would-be home sellers who are considering waiting things out before selling their present homes as any rise in home prices is likely several years off.

Tags: Jeff Otteau, Absorption, NAR, National Association of Realtors

Comments Off on State Of New Jersey: Otteau July 2007 Contract Report

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

NEW JERSEY HOUSING MARKET STILL STRUGGLING TO FIND BALANCE POINT

The results of our latest analysis indicate that contract-sales activity declined by 5% in June, continuing a pattern of inconsistent sales pace. Following 3 consecutive months of increasing sales activity in January, February and March, sales declined in April, then increased in May, only to decline again in June. This uneven performance is evidence that the market has yet to regain its balance and continues to struggle with the effects of diminished affordability following the unprecedented home price increases that occurred between 1992 and 2005.

From an inventory perspective, while the number of unsold homes continued to rise in June, that increase occurred at a slower pace than in the 4 preceding months. Unsold Inventory increased in June by only 1% suggesting that inventory growth may be approaching the high-water mark. Statewide Unsold Inventory now represents an 8.5 month supply, as compared to 8.1 months in May and 7.7 months one year ago.

Despite this uneven performance, there are emerging signs that the housing market may be nearing the bottom of its current recession which began in September 2005. The most compelling evidence is based upon submarket trends in northeastern New Jersey that are within commuting range of Manhattan. In these markets, which include the counties of Bergen, Essex, Hudson, Middlesex, Monmouth, Morris, Somerset and Union, contract sales declined by only 1.7% from May to June (as compared to 5% statewide) and actually ran higher than the June 2006 level. Most notable in this group is Hudson County where year-to-date sales activity is running 12% ahead of last year. The stronger market conditions in northeastern New Jersey serve as a reminder that the strength of the Manhattan real estate market, which continues to experience strong demand levels, is generating overflow demand to nearby suburban locations. Expect this to be a long term trend as communities near to direct Manhattan rail access will see the strongest price increases once the market recovers.

Looking ahead the housing market still faces significant challenges as sales pace will likely slow during the approaching fall and winter seasons. Given this probability, home prices will be challenged to hold at current levels considering there are presently more than 72,000 homes for sale in New Jersey as compared to only 39,000 in June 2005.

Tags: Jeff Otteau, NAR, National Association of Realtors

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This monthly market 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

HOUSING RECOVERY SLOWS

Following 3 consecutive months of rebounding sales activity, the New Jersey housing market down-shifted in March to a slower pace raising concerns about the much anticipated spring selling season. Of particular concern is the market’s ability to absorb record high unsold inventory levels in the face of weakening demand. Prior to this slowdown, the housing market was enjoying increasing sales activity due largely to gains in housing affordability resulting from a market correction in 2006 which caused a slight decline in home prices . Other reasons for the rebound include lower mortgage interest rates and a strong job market that drove salaries higher. As a result, housing became more affordable by the end of 2006 and sales activity rebounded.

That rebound has now stalled due to the ripple effects of Sub-prime mortgage delinquencies, which for the most part is a misunderstood topic. Most of the confusion stems from counting the number of foreclosures, which is being overstated in most media reporting. Don’t get me wrong – this is a serious problem that will continue to worsen between now and the end of 2008! But to date the actual pass-through rate of foreclosures into the housing supply has been minimal. For example, the national pace of actual foreclosures has been running around 22,000 per month while the reported figures have been 125,000 per month. Similarly, it was widely reported that national foreclosures topped 1.2 million in 2006 while the actual number was less than 1/5 of that.

The New Jersey figures are similarly overstated with actual foreclosures averaging about 200 homes monthly as compared to reports of nearly 5,000 per month. The error lies in the standard counting methods which include both actual foreclosures as well as all home mortgages that are in some stage of delinquency. And to make things worse, some of the same homes are being counted multiple times as they pass through various stages of the foreclosure process. Given that only a small percentage of delinquent loans actually reach the final stage of foreclosure, the reported figures are not what they appear to be.

To put this into perspective, consider that there were 270 foreclosures in New Jersey during the month of March against a backdrop of 70,000 homes on the market. In that context, foreclosures have thus far been insignificant in terms of any real effect on housing supply. However, concerns about the depth of this problem have translated into slower home sales due to widespread misreporting of the facts. In New Jersey, it was widely reported that there were 4,780 foreclosures in March when the actual number was 270. Another wrinkle resulting from the Sub-Prime issue is that mortgage lenders have begun tightening their loan approval standards in order to limit the number of new high-risk loan originations. This tightening has had the effect of either increasing the required minimum down payment ..or.. Increasing the monthly mortgage payment, which in turn reverses the gains in housing affordability realized last year. This is rapidly developing into a watershed issue as it transfers to all home price segments in the housing market. This is due to the fact that first-home purchase activity generates ripple effects all the way up to the luxury home market due to the trade-up activity it generates. Or more importantly, a decline in first-home purchase activity makes it less likely that luxury priced home can be sold.

And last but not least, the concerns about the implications of the Sub-prime problem are causing home buyers to rethink whether or not now is the right time to buy. That the current slowdown is occurring at a time when mortgage rates are at 40-year lows, home prices have declined, employment is at record high levels and an expanding economy is continuing to create new jobs reminds us that public-perception usually translates into market-reality housing.

At this point, the big question is whether the surge in sales activity that normally occurs in a spring market has been lost or delayed. Best indications are that there will be a 2nd leg to the spring market that will occur in late May and June as the basics of affordability, pent-up demand and possible interest rate cuts eventually take control. Supporting this scenario is the declining frequency of negative new stories concerning the both the overall housing market and Sub-prime foreclosures, as well as the significantly reduced pace of new construction starts which will result in less housing inventory. However, history has taught us that public perception can become a self-fulfilling prophecy given enough duration in time. So, it seems that the market is once again in a ‘wait & see’ position. Stay tuned for our next eNewsletter release later this month updating the housing market.

Tags: Jeff Otteau, Sub-Prime, NAR, National Association of Realtors

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[This monthly market report is provided by Jeffrey Otteau of the [Otteau Appraisal Group](http://www.otteau.com/) who also authors a series of widely followed quarterly [market reports](http://www.otteau.com/The_Otteau_Report/the_otteau_report.html) 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

DECEMBER SALES END YEAR WITH CONTINUED IMPROVEMENT

In the most positive sign for the New Jersey housing market in more than a year, contract-sales activity in December moved into positive territory for the 1st time since August 2005. In December, contract-sales activity ran 2% higher than December 2005 providing solid evidence that home buyers are beginning to reenter the housing market in response to lower home prices and continued low mortgage interest rates. The December performance follows lesser improvements in year-on-year home sales in October and November, and marks the first time in 16 months that the housing market experienced a higher volume of monthly sales activity than the prior year.

A more sobering view however comes from Unsold Inventory which actually increased in December by 1% or about 800 homes. While this increase is not significant from a statistical perspective, it does send a clear message that greater increases in home sale activity will be needed to reduce current inventory levels and restore balance to the housing market. At the December sales pace, Unsold Inventory represents a 10.6 month supply which far exceeds the balance point at which home prices will rise. By comparison, there was a 7.8 month supply one year ago. Therefore, while recent market improvements may signal the end of the housing decline, it should not yet be interpreted as a return to higher prices. Also keep in mind that these improvements have been fueled primarily by lower home prices suggesting that Right-Pricing! remains the key to successful home marketing.

Tags: Jeff Otteau, NAR, National Association of Realtors

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[This monthly market report is provided by Jeffrey Otteau of the [Otteau Appraisal Group](http://www.otteau.com/) who also authors a series of widely followed quarterly [market reports](http://www.otteau.com/The_Otteau_Report/the_otteau_report.html) 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

NOVEMBER SALES SUGGEST HOUSING MARKET BEGINNING TO STABILIZE

November home sales declined only slightly from the October pace reflecting more of a seasonal trend than a slump for the New Jersey housing market. In November, contract-sales declined by 10% from the prior month suggesting that the housing market is beginning to gain traction and may be nearing the end of its current slide. By comparison, the month-to-month decline in contract-sales one year earlier in November 2005 was 17% which went beyond a normal seaonal decline and reflected the housing slump that has been gripping the market for the past year.

Upon comparing the November sales pace to November 2005, contract-sales were off by only 6% which is the lowest decline for all of 2006. By comparison, monthly home sales were off by 19% from January through October and a whopping 23% during April through September, which were the worst months of the market correction.

From an Unsold Inventory perspective, the number of homes being offered for sale declined for the 3rd straight month with a reduction of 5,000 homes in November alone. Despite these encouraging signs however, Unsold Inventory now stands at 9.1 months based upon the November sales pace, indicating that home prices will not increase any time soon. By comparison, there were 6.3 months of Unsold Inventory one year ago and 10.4 months in September 2006. Therefore, the improvements in the housing market over the past two months signal more ‘bottoming-out’ than ‘recovery’.

There is however cause for cautious optimism as continuing low mortgage rates, new job creation and rising salaries are creating additional demand for home sales. Based upon these factors, coupled with the improved market performance of the past two months, it appears that the adjustment in the housing market will be more Correction than Crash. However, new home-builders and home-sellers alike would be wise to recognize that recent improvements are driven primarily by lower home prices which have restored a measure of affordability for home buyers. Thus, any attempts to increase prices during the early phases of market recovery will likely be unsuccessful. Therefore, Right-Pricing! will remain essential to successful home marketing.

Here are 2005 annual stats.

Tags: Jeff Otteau, NAR, National Association of Realtors

Comments Off on From The Garden State: The Otteau Report: November 2006

[This monthly market report is provided by Jeffrey Otteau of the [Otteau Appraisal Group](http://www.otteau.com/) in their November eNewsletter. Jeff also authors a series of widely followed quarterly [market reports](http://www.otteau.com/The_Otteau_Report/the_otteau_report.html) 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

OCTOBER SALES TREND HIGHER

The New Jersey housing market improved in October as home buyers took advantage of recent declines in home prices and lower mortgage rates. In October, contract-sales jumped 10% after being down by 20% through the first 9 months of 2006. That this improvement occurred at a time when seasonal trends traditionally bring a decline in purchase activity is significant. Also, the number of unsold homes on the market declined by more than 4,300 houses in October, reflecting a 6.4% decline overall from the September inventory level.

According to Freddie Mac’s Primary Mortgage Market Survey® (PMMS®), the 30-year fixed-rate mortgage (FRM) averaged 6.14 percent for the week ending November 30, 2006, which is lower than the 6.26 percent rate of one year ago. Also contributing to the October sales performance was continued job creation with more people now working in New Jersey than at any time in history, falling energy prices which affect both home heating and commuting costs, and rising wages resulting from the tight employment market.

A closer look at Unsold Inventory indicates an overall supply of 8.9 months, down from 10.4 months in September. One year ago, Unsold Inventory reflected a 5.5 month supply. When analyzed by home price, the market continues to show the greatest strength below $600,000 with a 7.9 month supply as compared to 19.4 months above $1 million and 45.2 months above $2.5 million (see table at right).

The improvement in the housing market is a direct result of the gain in housing affordability outlined above and makes a strong argument that the current housing slump is more correction than crash. Housing affordability suffered greatly from 2000 to 2005 during which time salaries in New Jersey rose only 16% as compared to an 87% increase in home prices. Given the recent gains in housing affordability outlined above it appears that the market may be approaching the balance point at which recovery will begin. Look for first-time buyers purchasing starter-homes to be the first segment to recover, following which the recovery will spread to the other market segments. However, the current sensitivity to both home pricing and housing affordability will prevail well into the recovery cycle ensuring that home prices will remain relatively flat once the decline subsides. Therefore, Right-Pricing! will remain essential to successful home marketing well into 2008.

Here are 2005 annual stats.

Tags: Jeff Otteau, NAR, National Association of Realtors

1 Comment

[In addition to Jeff’s [monthly email blasts](http://matrix.millersamuel.com/?p=889), [Otteau Appraisal Group](http://www.otteau.com/) authors a a series of widely read quarterly market reports using charts that track both inventory and contracts as well as tables that break out other useful market information. This information is collected from various sources including Boards of Realtors and Multiple Listing Systems in New Jersey and is a must-read for real estate brokers and consumers in New Jersey.]

[You can download the reports by county [Otteau]](http://www.otteau.com/The_Otteau_Report/the_otteau_report.html).

Here’s a sample of one submarket in one county:

Tags: Jeff Otteau, NAR, National Association of Realtors

1 Comment

[This monthly market report is provided by Jeffrey Otteau of the [Otteau Appraisal Group](http://www.otteau.com/) in their September eNewsletter. Jeff also authors a series of widely followed quarterly [market reports](http://www.otteau.com/The_Otteau_Report/the_otteau_report.html) 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

AUGUST SALES TREND HIGHER

The residential market rebounded slightly in August as buyers took advantage of softening prices and declining mortgage rates. August contract-sales activity ran 6% higher than July, suggesting the overall market deterioration is beginning to slow. Also noteworthy is that the Unsold Inventory of homes on the market increased by only 1% in August, as compared to a 47% increase over the 1st 6 months of 2006.

Also contributing to the August sales performance are declining mortgage rates and unemployment rates as the Economy continues to create new jobs. According to Freddie Mac’s Primary Mortgage Market Survey® (PMMS®), the 30-year fixed-rate mortgage (FRM) averaged 6.31 percent for the week ending September 28, 2006, down from last week when it averaged 6.40 percent. Rates have declined for 8 of the last 9 weeks and are at their lowest since March 2, 2006, when they averaged 6.24 percent. Last year at this time, the 30-year FRM averaged 5.91 percent.

A closer look at Unsold Inventory indicates an overall supply of 8.5 months, down slightly from 9 months in July. One year ago, Unsold Inventory reflected a 4 month supply. When analyzed by home price, the market continues to show the greatest strength below $600,000 with a 7.5 month supply as compared to 23.6 months above $2.5 million (see table above).

Next months report will be a key indicator of future trends as September marks the one-year anniversary of the current market cycle when home sales began to decline and Unsold Inventory started rising.

Here are 2005 annual stats.

Tags: Jeff Otteau, NAR, National Association of Realtors

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