From the Otteau Group:
ECONOMY & CREDIT CRISIS SPOILING SPRING HOUSING MARKET
New Jersey home sales in March ran well below last year’s pace despite an increase above the February level. In March, contract-sales activity ran 27% below one year ago despite a 9% increase from February. The clear signal is that the housing market has further to fall.
While housing affordability in New Jersey has improved over the last year, home sales remain weak due to a variety of factors including tighter lending standards and low confidence in home prices. Adding to these housing troubles is growing concern about job security as the economy shows increasing signs of weakness. Particularly worrisome for the northern New Jersey submarket is a new Department of Labor estimate which projects as many as 36,000 job cuts on Wall Street, nearly double the previous estimates. Should this play out, housing demand in Manhattan and its surrounding suburbs will be further reduced.
As a result, expect the Spring selling season to be ‘late & brief’ with only a modest increase in sales activity. Given that contract-sales activity this year is the weakest in recent history (see chart at right), the 2nd half of the year will pose significant challenges for home sellers as prices continue to drift downward.
The one positive note for the housing market is that the growth in Unsold Inventory has slowed significantly and is actually declining in some markets. As a result, the New Jersey housing market has 10.5 months of for-sale inventory, down from 11 months in February. Expect a slower pace of home price declines in 2008 as the market gets closer to reaching a bottom point.