From the Record:
New Jersey home prices are dropping by an average of about 1 percent a month, and will likely not stabilize before the fourth quarter, appraiser Jeffrey Otteau said today. He predicted a 9 percent decline in prices for 2009 overall.
“Because of job losses, housing will continue to contract,” Otteau told a hotel ballroom full of real estate agents in East Hanover, at his twice-yearly seminar on home prices.
This year’s projected decline will follow a 2008 drop that Otteau estimated at 8 percent statewide. The Standard & Poor’s Case-Shiller index recently said the 2008 drop was 9.2 percent in the New York metropolitan area, which includes North Jersey.
While many potential buyers are waiting for home prices to fall further, Otteau said if they wait too long they may lose the benefit of low mortgage rates, which recently have hovered around 5 percent. If interest rates rise just one percentage point, he said, that raises monthly payments as much as a 9 percent increase in home prices.
“Starting next year, interest rates will begin to rise,” Otteau predicted.
Otteau said home prices may start rising in spring 2010 as the economy recovers, but will increase slowly — around 3 percent a year — in the first few years of the housing market’s rebound. As a result, New Jersey home prices will not return to the peaks reached in 2005 until 2020, he predicted.
Otteau also said:
* Demand for smaller, less expensive homes will outstrip demand for large luxury homes in the coming years, as baby boomers retire and downsize, and their children become first-time buyers with limited incomes.
* New Jersey continues to lose residents to other states that offer a lower cost of living.
* Hudson County, which was one of the strongest housing markets in the state a year ago, is now one of the weakest, because job cuts on Wall Street mean fewer people are looking for homes across the Hudson River.