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Gearing Up for the Fall Market

A detailed breakdown of what to expect.

Montclair buyers and sellers are gearing up for the fall market after the usual August lull.

Spring deals made for a fairly busy August with 35 closings (same as Aug ‘24), but only 10 new listings came on while 11 listings went under contract in August. However, we should see a nice bump in inventory this month as there were 37 and 34 new listings in September ‘24 and ‘23, respectively.

Prices remained stable, but some metrics pointed toward a break for buyers. The median sales price held steady at $1.3 million while days on market bumped up to 25 from 21 last month and 17 in August last year, while price premiums over ask dropped to 18% from 19% in July and 28% in Aug ‘24.

A look at Price Appreciation and Back to Econ 101 Class

In the interest of back to school season, let’s take a trip back to Econ 101 class and see if we can make sense of the price appreciation we’ve been seeing over the past 10 years.

The above chart shows the total new listings, the average price for the year and the average 30 year mortgage in basis points (100x%). The market was fairly stable in the 2015-2019 period with favorable rates and no major exogenous factors. 

In the 2019-2021 period we experienced a big bump in demand, shifting the curve to the right, as interest rates dropped and covid had urban dwellers moving to the suburbs.

At the same time, lower rates encouraged existing homeowners to refinance and improve rather than move, reducing supply and shifting the curve left. The result was an increase in average prices to $973k from $728k.

In the 2021-2024 period, we saw interest rates jump up, further encouraging existing homeowners to stay put, handcuffed by lower rates, further reducing supply and shifting the curve left. The result was an increase in average price to $1,307k from $973k.

There are 2 surprises in this period.

The first is that higher interest rates should have resulted in lower demand, putting price pressure on homes. We didn’t see this however, and that demand curve remained fairly immobile, as buyers were less interest rate sensitive than anticipated and we had pent up demand to work through, i.e, some buyers may have dropped out of lowered their budgets, but not all.

The 2nd effect we should have seen was an increase in supply as sellers reacted to higher prices, cashing out and using equity to retire debt or apply to a downsizer home. We saw a bit of that in the past 12 months in moderation and we expect that trend to continue which should, at least, temper price appreciation.

Have a question about selling or buying in the surrounding towns and beyond?

Feel free to reach out, we are here to help.

Best, Rich