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262 Grove Street, Montclair, NJ

Is This the Beginning of a Slowdown?

Will low inventory, higher prices, and rates slow buyer traffic?

Inventory remains low despite strong demand and price appreciation.

New listings in the local area have been trending downward over the past several years. Empty nesters have been sitting tight, contemplating their next move, and perhaps tapping some low interest equity in their home for improvements or debt consolidation.

There were 83 active listings in May, down from 92 in April. This was down significantly from 122 in May ‘21, as 53 new listings hit the market in May versus 73 in ‘21. (Note that 2020 was a COVID anomaly that was largely compensated for in the summer.)

Multiple offers in the first week of listing continued to be the norm in May as the average sale price among 43 closing exceeded ask by 29%, down slightly from 32% in April.

Days on market remained low at 19 versus a trailing twelve-month average of 24.

Median prices are up and price versus asking price is high, but what does a specific home appreciation look like?

Examples of appreciation in local homes recently sold:

1. A 4BR 3.5 bath 2,600sf home sold last year for $1.42 million. It sold this Spring, with no significant improvements, for $1.925 million.
2. A more typical example is a 5BR 2.5 bath 2,300sf home bought for $805k in 2019 sold this Spring for $1.176 (upgraded electrical).

While prices have held, we are seeing reduced buyer traffic. Buyer fatigue seems to be setting in between low inventory (and subsequent bidding wars) and rising rates.

Rising Rates Revisited

We are seeing a lot of cash deals, but expect the rate environment to quell prices. Rates are up 2% over the past twelve months to 5% from 3%. Still low from a historical basis, but the impact on a buyer financing 80% is pretty significant. The principal and interest spend of $3,040 on a $900k home ($720k loan) at 3% is the same as a $709k home ($567k loan) at 5%.

Are ARMs Back in Vogue?

As a result of increased rates, adjustable rate mortgages are getting more attention again as the rates can offer a decent discount and still have an attractive fixed period.

Personally, I’d sell if I could.

Email me back if you would like to discuss your real estate goals.

Best, Rich

Rich Stanton
Principal Broker
3rd Generation Owner