You do not have to be a realtor to know that the inventory of homes on the market is not plentiful. Pick up any newspaper or click on your favorite online news platform and a myriad of housing stats readily appear.
But if you are a home buyer looking to begin your home ownership journey in 2022, a look behind the numbers is essential. As a long-time realtor in Northern New Jersey, I wanted to know what is actually trending across multiple towns. I needed a local barometer of the housing market in order to identify opportunities for my home buyers and sellers. There’s always an opportunity in any housing market, but you need to know where to look.
It is for this reason that I developed the Minken Housing Index. It is a hyper-local housing index of 14 top New Jersey towns spanning three counties (Essex, Morris and Union).
Let’s look first at a comparison of housing activity in the First-Half of 2021 versus the Second-Half of 2021. The housing stats that emerged were incredibly consistent, leading the way for what I believe to be the unique housing trends of 2022.
A Housing Tale of 2 Halves – First vs. Second Half of 2021
In the first 6 months of 2021, there was a tremendous surge in inventory of homes sold compared to the same period in 2020. Out of the gate, 2021 began the year with a robust number of home sales.
The percent change in the number of homes sold during January through June of 2021 ranged from an increase of 10.4% in Mountainside up to an impressive 87.7% increase in Berkeley Heights. The top five (5) towns with the biggest gains in number of home sales during the First-Half of 2021 vs. the same period in 2020 are below.
The inventory of homes during the First-Half of 2021 was on the upswing compared to the same period in the prior year. And with the Spring market being the traditional time of year for buyers to be shopping for a home, these results are not too surprising.
Let’s examine what happened during the Second-Half of 2021. If the First-Half of 2021 outpaced the prior year, what about the Second-Half of 2021? Might we expect to see the same trend continue? Spoiler alert! The Second-Half of 2021 does not echo the First-Half with respect to the number of homes sold.
The Tale of “Vanishing” Inventory
Every town in the Minken Housing Index showed a double-digit decline in the number of homes sold during July through December 2021 compared to the same period of the prior year. Here are the five (5) towns that showed the sharpest percentage declineduring the Second-Half of 2021.
Thus the “vanishing” housing inventory, as I like to call it, was clearly happening as we entered the Second-Half of 2021.
Let’s turn now to the housing stat that has everyone shouting from the rooftops that the sales prices are the highest we have seen in years. What did all these homes sell for? Were home prices higher in the First-Half of the year compared to the prior year? What about the Second-Half of year when there was a big drop in the number of homes that sold? The Minken Housing Index has produced some very interesting results, so let’s dig into the data for Average Home Sales Prices.
Rising Home Sale Prices
Across the board, all 14 towns in the Minken Housing Index experienced a rise in the average home sale price in the First-Half of 2021. Many of the gains were double-digits, with Chatham Borough ranking highest with +30.4% increase in average home sale price during January through June in 2021. Here are the five (5) towns that experienced the highest percentage growth in home prices.
As we saw with the comparison of the inventory of homes that sold during the First-Half vs. Second-Half of 2021, the months January through June were also stronger for home prices. The First-Half of 2021 was an excellent time for sellers who made the decision to list their home early in 2021.
In contrast, the Second-Half of 2021 saw only modest gains in home prices compared to the same period in 2020. One town in the Minken Housing Index saw a small decrease in the average home sale price (Berkeley Heights at -1.7%) and another town experienced zero change (Madison). Here are the five (5 ) towns that saw the largest increase in average home sale prices during July through December.
Which is the More Favorable Housing Market – 1st Half vs. 2nd Half of the Year?
Based on the homes that sold during 2021 compared to the prior year, the Minken Housing Index shows that the First-Half of the year has greater inventory as well as higher gains in home prices. With more inventory and thus more choices, home buyers are motivated to actively search for a home. And when the home “checks all the boxes” and delivers perceived value in the eyes of the buyers, multiple offers will follow and potentially push up the sales price. For sellers, the First-Half of the year can be an ideal time to sell.
On the other hand, for home buyers who have flexibility with the timing of their home purchase, the Second-Half of the year might be more favorable when home prices trended lower than during the first six months of the year. The Second-Half of the year tends to have less inventory and fewer buyers actively competing for homes.
So What are the Housing Trends in 2022?
With the 1st Quarter of 2022 just completed, are we seeing a repeat of 2021? Based on the early results of the Minken Housing Index, here is what’s trending in 2022.
Housing Inventory – 1st Quarter of 2022
We are midway through the First-Half of 2022 and the number of homes sold is trending well below the inventory level observed during the same period in 2021. With the exception of two (2) towns in the Minken Housing Index, all towns saw a decline in inventoryof homes sold in the 1st Quarter of 2022. This decrease in the number of homes sold appears to have been carried over from the Second-Half of 2021, thereby continuing the trend of “vanishing” inventory.
The only town in the Minken Housing Index enjoying a rise in inventory levels is Livingston which saw a gain of 8.2% homes sold in the 1st quarter of 2022 compared to the prior year. And New Providence saw the same number of homes sold in the 1st quarter of both 2022 and 2021 Here are the five (5) towns in the Minken Housing Index that saw the steepest percentage decline in inventory.
With the start of 2022 continuing the trend of low inventory, what does this mean for home prices? Are homes selling for more in 2022 than in the prior year? Let’s take a look.
Home Sale Prices – 1st Quarter of 2022
During the First-Half of 2021, all but two (2) towns in the Minken Housing Index saw a double-digit rise in home sale prices. And with inventory declining in 2022, we might expect to see similar gains in home sale prices during January through March of 2022 as buyers compete for these fewer homes.
However, when we examine the housing data, the gains in home prices during the 1st Quarter of 2022 are relatively more modest than what we saw in the First-Half of 2021. In fact, two (2) towns saw a percentage decline in home prices: South Orange (-6.0%) and Chatham Borough (-22.2%). Here are the five (5) towns with the highest increases in home sale prices in the 1st Quarter of 2022.
How Can Buyers Find a Home Amid “Vanishing” Inventory in 2022?
With the number of home sales slowing at the start of 2022, here are a few suggestions to guide home buyers in their home purchase:
* Why Now? Re-evaluate why you want to make a home purchase now, rather than in a year or even a few years. Be very clear as to why this is the right time for you to make a home purchase. Some of the top reasons why many of my buyers decide to purchase a home include: increase in family size, relocating for a new job opportunity, need additional space for a home office, and seeking a private backyard which is often not available when renting.
* Know Your Numbers. Reach out to a mortgage lender. Analyze what you can reasonably afford based on the current interest rate, as well as at a series of higher interest rates. The house you want may be several months away and interest rates are climbing upward, so you will want to be prepared.
* Be Open to Different Towns. I have worked with many buyers who began their home search with laser-focus on a particular town, only to buy a home in a completely different town – and they love where they live! There is more than one great town to live in.
* A Diamond in the Rough May Be Worth Considering. A home that doesn’t sparkle in the absence of a renovated kitchen and bathrooms may stay on the market long enough for you to bring in a contractor to evaluate the work that is needed. You might be surprised that it costs less than you think to transform the home.
* Catch the Home Before it Goes Onto the Market. As the expression goes, “it’s not what you know, but who you know”. This is especially true in real estate. You will want to tap into the realtor community and align yourself with an experienced realtor who is well connected. Many talented realtors have a network of other agents who they can collaborate with to identify homes that are coming soon to market or are an exclusive listing. And if you fall in love with an “off-market” home, recognize that you may be expected to pay a premium price for not competing in a multiple offer process.
Spring 2022 is a Fertile Time for Both Sellers and Buyers
As the Minken Housing Index indicates, inventory levels which traditionally are higher in the first half of the year, are off to a very slow start in 2022. Some would-be sellers may be pondering where they could move to that is insulated from rising home prices. But for homeowners who are ready to sell, Spring 2022 continues to be a strong selling season as buyer demand has not subsided. (See my earlier article: Why Homebuyers are “Waiting in the Wings” https://www.linkedin.com/pulse/why-home-buyers-waiting-wings-suzy-minken/
As the data suggests, average home sale prices in the 1st Quarter of 2022 are still on the rise compared to the 1st Quarter of 2021. This is good news for home sellers. So you may be wondering, “how can this be considered good news for buyers too?” The answer is rooted in how the data is trending since 2020.
The increase in average home sales prices in early 2022 is at a much slower pace than we saw in the previous year of 2021 versus 2020. And depending on your price point, Spring 2022 is beginning to reflect a less frenzied market for home buyers. While multiple offers have not disappeared in Northern New Jersey, I am seeing a noticeable drop off in the number of competing offers on a home (e.g. instead of 12 to 15 offers, there may be a handful of 5 or 6 offers). The Spring of 2022, rather than the Second-Half of 2022, may be a favorable time for buyers for another reason. With mortgage interest rates increasing, purchasing a home sooner, rather than later, in 2022 may make financial sense. As rates increase, the home you thought you could afford, just got more expensive. As of now, 2022 is beginning to show signs toward a more “balanced” market according to the Minken Housing Index. Let’s see what happens in the next three months, so stay tuned!
Let’s Move Forward
For greater insights as to how to successfully navigate the 2022 housing market, reach out to me at 908-239-9261 or [email protected] Whether you are house hunting or selling in New Jersey or in another state, I can assist you. And I’m happy to collaborate with my Compass colleagues located in over 300 cities across the U.S. to assist you with all real estate needs.
* The Minken Housing Index Report covers Essex, Morris and Union Counties and is comprised of 14 top New Jersey towns: Berkeley Heights, Chatham Borough, Chatham Township, Livingston, Madison, Maplewood, Millburn/Short Hills, Montclair, Mountainside, New Providence, South Orange, Summit, West Orange, and Westfield. All data is compiled from the Garden State Multiple Listing Service (GSMLS).
My Bird’s-eye View
Finding a Home Amid the “Vanishing” Housing Inventory in 2022 – A Survey of 14 Top New Jersey Towns
April 2022. All Rights Reserved.