Jersey Shore Real Estate Market Update August 2014
By Ian Lazarus
How is the Real Estate Market? It is a good time to buy and an even better time to sell! Predicting the real estate market is just like predicting anything else, it is best to look at its history .
So I went into my home office and checked out the local sales data from the past 15 years. I looked at sold and new listing information (to see what the supply and demand) in Cape May County. Then I identified a few of the monumental mania and crisis points by date to the last real estate cycle of 1983-1998.
The top of the last real estate market (December 2004-December 2006, depending the town.) was the period that started the rollover and decline. Inventory was high and was also priced very high. As a result, the buyer’s stopped buying at these over extended prices.
The steady decline of “sold properties” and prices took place in the years 2007-2010. The crisis point was when the investment banking debacle and the mortgage industry problems collided. With many properties having values below mortgage principle balances this was putting stress on the banks when it came to defaults. They were considered under water.
This was becoming more apparent. Investment banks were holding billions of dollars of worthless mortgage backed securities and this caused the financing market to seize up and stop. Interest rates rose and jumbo loans (over $417,000) were almost impossible to get or were at extremely higher rates. Panic set in throughout Wall St. and Main St. People couldn’t sell and people couldn’t buy and prices continued to slowly decline.
To make matters worse, lenders foreclosing and now being the owners of distressed properties, which needed to be resold in order to clean up their balance sheets which put additional pressure on the market.
The first ray of light was in late 2011 when interest rates hit an all-time low (down to 3-3.25% rates for a 30 year fixed rate). We saw demand pick up and started buying the remaining distressed supply of inventory.
Our market was stabilizing, when Hurricane Sandy came through and we experienced a large decline in transactions due to the uncertainty of flood insurance coverage caused by new rules from FEMA.
Since the Spring of 2013 when FEMA introduced the new area flood maps the market began to stabilize and we saw inventory decline, prices increase and days on the market reduced.
This year has been interesting with sales volume lower, prices have still been steady and with less homes for sale, we consider this a normal market.
So what’s happening next?
If history repeats itself the next year or so, this new market should bounce around and go sideways.
The Jersey Shore market is poised for a recovery over the next ten years!
A two main points for this recovery is the shrinking rental market and the “Baby Boomer” population. The Baby Boomer population could have the biggest positive effect on the Jersey Shore real estate housing market. With the Baby Boomers using their shore homes more often, renting less or even retiring in them, will bring on a shortage of beach rentals to an increase in sales and an increase in rental rates over the next 10 years.
Depending on your short term and long term plans this is one of the most important times to meet with your Realtor, Accountant and Financial Advisor to make the right moves. If you are thinking about selling or buying contact me so I can bring my team of experts to help you make the right choices.