It seems everyone knows a realtor… or two, or three or four… and in the pre-Covid-19 days was able to gain insight into the current market along field sidelines, at a book group meeting, attending a cocktail party, etc. But now that we are in quarantine mode and staying safe by staying home, I’m guessing many existing, or potential, buyers and sellers are uninformed as to what is currently happening in Ridgewood’s residential real estate market.
Let me try to shed some light on Where We Were, Where We Are, and Where We May Be Headed.
EARLY 2020 HAD THE MAKINGS OF A STELLAR YEAR
Although the week after Super Bowl Sunday has historically been the kick-off to the spring market, we haven’t seen that familiar trend get underway until March in recent years. This year was unique in Ridgewood, as we witnessed higher traffic levels at open houses in the first several months and increased willingness among buyers to commit to offers. We saw an almost identical number of new listings hit the market in January and February this year as compared to last (78 in ’20 vs. 81 in ’19), but 72% of the homes for sale in the first two months of this year went Under Contract compared to just 52% last year. A mild winter played a small part in the activity we experienced, but historically low interest rates and unemployment rates were the large drivers. In mid-February, I predicted a strong spring market characterized by inventory shortages across all price-points, except for the very high-end, and a notable increase in multiple offer situations.
QUARANTINE HASN'T KEPT BUYERS HOME
Gov. Murphy signed the first stay at home order on March 21, and the Ridgewood real estate market grinded to a halt. Open houses were prohibited and showings limited to one-on-one. Realtors took a few weeks to adjust to the new restrictions and turned to virtual showings, virtual tours, and Zoom open houses to market their listings. In addition, measures were implemented to keep sellers and buyers safe. i.e. mandatory masks, gloves, booties and Covid-19 Hold Harmless and Release Agreements. This turn towards technology has proven successful in a challenging climate as we saw 39 homes go Under Contract from March 21st - May 11th this year, compared to 75 for the same period last year. While this statistic represents a 40% decline in Under Contract homes, one needs to take into account our current inventory of 71 homes on the market as of May 11th compared to 130 homes last year, which is a more dramatic 46% year-over-year reduction in inventory levels. I had predicted inventory shortages in Ridgewood, but certainly not to the extremes we are experiencing due to fears of the coronavirus.
We look to absorption rates (the time it will take to sell the current number of homes on the market based on the past 12 month sales rate) as an indication of the type of market we are in… a “Buyers Market”, a “Sellers Market” or a “Balanced/Neutral Market”. Absorption rates around 6 months indicate a Balanced Market, while rates below indicate a Sellers Market and rates above a Buyers Market. I suspect one’s most optimistic guess would be that we are in a balanced market considering the economic shutdown and uncertainty. However, the graph below shows that we are in a strong sellers market across almost all price points. It’s even more interesting to compare current absorption rates to last year. Only the $1.5-$1.75 million and $2-2.5 million price ranges have higher year-over-year monthly absorption rates.
OH THE TIME TO HAVE A CRYSTAL BALL
With the Governor’s most recent executive order extended until June 5th, we can acknowledge that the spring market (in terms of absolute sales) won’t happen this year. Will we see it resurrected as a summer or early fall market? Maybe yes. Maybe no. There are so many intersecting factors right now with the health emergency, unemployment situation, and historically low interest rates. Our current situation is a health induced crisis and not necessarily comparable to the Great Recession of 2008, which led to the deterioration of our housing market. However, we’ve never experienced a complete economic shutdown so the outcome is difficult to predict, and depending on the reverberations of this pandemic, the eventual financial toll may not be seen for some time.
Experts are forecasting residential markets will perform flat, up 3-5% or down 3-5%. Take your pick. I believe Ridgewood has many attributes that should support a relatively strong residential real estate market when we exit the current health crisis. First, its buyers are predominantly white-collar workers who, with the help of modern day technology, have been able to successfully work from home. Second, its strong and recognized school system, central business district, public transportation, and commutability to the city are qualities on the top of every current buyer’s list. Its “urban feel” appeals to residents of NYC, Hoboken, Jersey City, Brooklyn, etc. who have or will be reconsidering the merits of a suburban lifestyle due to the pandemic. And finally, mortgage rates are predicted to stay at historically low levels supporting overall affordability.
But, I don’t have a crystal ball. We do know that homes in Ridgewood are currently selling and have seen competitive offer situations. We haven’t experienced price reductions except at the very high end, and inventory levels are incredibly low. So for those thinking of selling, now is the time. And for those thinking of buying, prepare to act quickly.
*Information based on data supplied by the New Jersey Multiple Listing Service (MLS) which does not guarantee its accuracy. Data may not reflect all real estate activity in a market.