From the Record:
The number of home sales in North Jersey plummeted some 30 percent in 2007, raising the odds of a significant decline in home values beginning this year.
Prices inched down only slightly in 2007. But the corresponding drop in sales volume suggests this could be the year when sellers holding out for top dollar blink in their ongoing standoff with bargain-hungry buyers.
“The laws of supply and demand have not been repealed,” said Paul Merski, chief economist of the Independent Community Bankers of America. “At some point, things have to come into equilibrium. Either the demand for homes has to increase or the price has to drop to stimulate demand to get things back into balance.”
Predictions about what’s ahead vary, although few experts foresee a quick return to the boom of the first half of this decade.
Donald Moliver, a real estate professor at Monmouth University, predicted that home prices in New Jersey may drop as much as 20 percent over the next several years, although he said that number could be lower if mortgage rates — now around 6 percent — decline.
A double-digit decline in home prices would eclipse the real-estate downtown of the late 1980s and early 1990s, when the state’s home prices declined about 8 percent from the top of the market and did not return to peak levels for a decade.
Adding to the pressure on prices are tighter mortgage standards, a weak job market and rising foreclosure rates. But homes remain unaffordable for many North Jersey families. Even with the market slowdown, home prices are almost double what they were in 2000, while New Jersey median household incomes rose only about 21 percent from 2000 to 2006, the latest figures available.
In 2007, prices dropped 1 percent to 5 percent across most of the region, with the upper-end neighborhoods hurt slightly more than lower-end areas, according to a study by The Record of about 29,000 home sales.
But the more telling statistic from The Record’s study is a steep decline in the number of sales, which are down about 40 percent from the market peak in 2004.
The drop in sales volume cuts across all segments of the market, with low-end neighborhoods in southern Bergen and Passaic counties hit slightly harder. Sales volume was off about 42 percent in neighborhoods where the typical home sells for up to $350,000, compared with a drop of about 37 percent in areas where homes generally sell for more than $600,000.
In North Arlington, for instance, the overall value of home sales fell 50 percent from a peak of $62.9 million in 2005. But the median price barely declined last year, from $410,000 to $405,000.
A tighter mortgage market has shut out many people. Rates are relatively low, but it’s much harder to qualify for loans than it was in 2004 and 2005, when lenders freely offered interest-only and no-down-payment loans.
And many potential buyers are scared of paying too much.
“A lot of them seem to be holding off, with the thought that we may not be at the market bottom yet,” said Sheldon Neal of Re/Max Real Estate in Oradell.
Still, many sellers can’t stomach the idea of lower prices.
“Maybe we’ll say a house should be listed between $500,000 and $520,000. Inevitably, the seller wants to be at $520,000 or $525,000,” Neal said. “We are seeing a little bit of a standoff where sellers are not willing to swallow too much pride and accept that the market has lowered the value of their home out of their control and out of the Realtor’s control.”
Sal Poliandro, an agent with Re/Max Properties in Ridgewood, recalled one seller who cried when he suggested she list her house at $450,000.
“The market value is what the market value is,” Poliandro said. “Nobody cares how much you owe on your mortgage. Nobody cares that you’re getting a divorce and want to start your life over.”