Are you aware that there is a single day of the year that is often cited as the biggest closing day in real estate? Can you guess what day it is? It is the last business day of June, which in 2023, was June 30th. This means that the traditional Spring housing market culminates with the single most largest day of residential home sales. Why is this important? Because with most of the year’s activity happening in the first-half of the year, we can examine how real estate is trending and what potential opportunities may exist in the second-half of the year.
So let’s dive into the numbers and see how the first-half of 2023 compared to the same period last year. The housing data is based on The Minken Housing Index, which tracks real estate in Northern New Jersey across 3 counties and comprises 14 towns.
Inventory of Homes – How is it trending?
Across all towns comprising The Minken Housing Index, housing inventory has seen a decline during the 1st half of 2023 compared to the same period in the prior year. As shown in the chart below, the number of homes sold during the months of January through June of this year is significantly below the housing activity in 2022. With the exception of one town (Chatham Township), all of the towns in The Minken Housing Index have experienced a double-digit percentage decline in the number of homes sold in 2023 vs 2022 during the 1st half of the year, ranging from -14.9% in Madison up to -52.3% in Mountainside.
With this sharp percentage decline in 2023 compared to 2022, you might be asking, “What is the “typical” level of homes sold for the 1st half of the year?” Is this decline in inventory of homes sold a new phenomenon, or has the housing supply been steadily trending downward year after year?
These are the questions that got me wondering, so I decided to expand the data back to 2019 and develop a 5-year history of housing inventory. Curious about how low the 2023 inventory is versus prior to the Covid pandemic in 2020? Take a look at the chart below. I think you will agree that this comparative analysis showing the number of homes sold during the first-half of each year since 2019 is quite fascinating. Sometimes just a single photo, or image, can say a thousand words!
As you can see in this 5-year history, the aggregate inventory of homes sold according to The Minken Housing Index peaked in 2021 at 2,316 homes following the onset of the pandemic. In marked contrast, this inventory level for the 1st half of the year of 2,316 homes in 2021 dropped a whopping 40.6% to just 1,381 homes in 2023 for the same period. And at 1,381, this is a drop of 26.7% homes that sold during the 1st half of 2019! Thus, the current level of homes that sold in 2023 is not only well below the peak of 2021, but is significantly below the pre-pandemic level of 2019.
This means that the housing inventory isn’t just low, it is extraordinarily low! As we look at the market activity over this 5-year period, it seems as though the real estate market is shrinking with fewer and fewer homes being traded. The result? Housing “gridlock”!
As fewer homes come onto the market, the only real “flow” in the housing market is the steady flow of would-be home buyers, many of whom are no longer tethered to the traditional seasonability of the market. These buyers are perched and waiting in the wings for additional homes to come onto the market. Buyers take note! If you are a potential home buyer, you will want to expand your home search and cast a wide net to include multiple towns.
What about home prices? Let’s see how home prices have been affected by the ultra low level in the housing supply.
Prices of Homes That Have Sold – How are they trending?
Many buyers are getting used to the “new normal” in mortgage rates as average home prices during the 1st half of the year (January through June) continued to increase over the same period last year in many towns. Overall, average home prices have increased 5.6% during the 1st half of 2023 among the towns comprising The Minken Housing Index compared to the same period in 2022.
Take a look at the chart below. It is important to note that each town in The Minken Housing Index is trending differently. While most of the towns in The Minken Housing Index saw average home prices increase in 2023, only 4 towns saw double-digit increases: Millburn/Short Hills 14.0%, Montclair 13.8%, Chatham Township 10.4% and Westfield 14.4%.
Surprisingly however, a handful of the 14 towns comprising The Minken Housing Index saw average home prices drop modestly: Maplewood -5.0%, Madison -3.1%, Mountainside -1.3%, and Summit -0.8%.
How Does the Data All Add Up?
So what do these data charts mean if you are buying or selling a home? The data shown here underscores the importance of taking a “granular” view and assess the housing market competitiveness of each town. When working with an experienced and skilled realtor, such as myself, you can “overlay” the town’s competitiveness and apply it to a specific property. Confusing? Let me explain.
If you are housing hunting and you find your perfect home, you will need an “offer strategy”. While there are many factors to consider when crafting an offer, begin with knowing how competitive the town is where you found your dream home. Next, you will want to understand the “market positioning” for your desired home at the time the home was listed for sale. Some home sellers may choose to list their home at an “ambitious price”, while others may choose to set the list price “ahead of the market“. As a potential home buyer, knowing the difference is key. And it is by digging deep into the ultra-local market data (e.g. inventory & home price trends) that you will gain the insight needed to formulate a winning offer strategy.
On the other hand, let’s say for example that you are a homeowner getting ready to put your home on the market. You need to know how “hot” your town is, or even your neighborhood. You will also need to know which “seller listing strategies” are effective for generating buyer interest in 2 weeks versus more than 30 days. There is a potential buyer for every home, especially in the current imbalanced housing market of supply (low inventory of homes for sale) and demand (over-abundance of potential home buyers). Yet not every home sells, no matter the housing climate, if the home is mis-marketed. And it is the ultra-local market data that can unlock the crucial insight for setting the list price as an effective marketing tool. Homes do not sell at a “fixed” price. Homes sell within a range of values. And homeowners need to know the most recent market activity in their town or neighborhood. Having the right seller strategy begins with knowing the data. The expertise of a great realtor is the cornerstone for formulating a winning “seller strategy”.
Just recently, I was working with my seller client in determining the list price of their home. Knowing how similar homes in the neighborhood were trading and generating buyer interest within days of going on the market was key to setting the list price. It was a marketing tool for attracting would-be buyers. Had we set the list price too high, we would have reduced the buyer pool. We needed to show “value” to potential buyers as soon as the house was listed in order to maximize buyer interest. And that’s just what we did.
We set the listing price at $1,249,000, which was slightly below the market value. The result? We had over 40 showings in one weekend! Seller Guidelines were developed and provided to those buyers interested in making an offer by the Tuesday deadline. My sellers were thrilled to receive multiple offers. They accepted a strong offer that was not only in excess of $100,000 above the list price, but the offer terms were excellent as well. The closing date is scheduled for next month. The synergy of the right seller strategy, combined with an effective marketing plan, generated offers within just one week of going onto the market!
Whether you are embarking on a journey to buy or sell a home, having access to hyper-localized and up-to-the-minute real estate data is crucial. The real estate market is ever-changing. And to make informed decisions, you need to be equipped with the most relevant and current insights that are tailored to your own unique circumstances.
Within the housing data lies invaluable “gold”. Unlocking its potential is paramount to successfully navigating the complexities and nuances of the market. Align yourself with the right realtor to get the “gold”. Achieve the winning outcome you deserve.
Want to Dig for Gold?
For a limited time, I am offering a complimentary Digging For Gold 30 minute (one-on-one) “home strategy session” for buyers and sellers. To reserve your individual session, simply click on the link to register: Digging for Gold – Complimentary Home “Strategy” Session with Suzy Minken
Did you miss my previous article? Simply click on the hyperlink: Navigating the Low Inventory in the Housing Market: 5 Clues to Find YOUR Home in 2023
Got questions? Reach out to me at 908-239-9261 or via email: [email protected]. I’ve got you covered from coast to coast, as needed, together with my CØMPASS colleagues in over 300 offices around the country. My mission is to help everyone find their place in the world.
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