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New Housing Inventory Increases for Second Month in a Row

Local market remains competitive with average days on market dropping and many cash offers.

New housing inventory improved for the second month in a row, with 51 new Montclair house listings increasing active inventory to 86 in May. That was up from 68 new listings in April, and up from 63 new listings in May ’23. Total new home listings are still lower in the most recent 12 months (347) than in the prior 12 months (391).

Average Days on Market Dropping

There have been more home choices for buyers, but they aren’t lingering on the market any longer. Average days on market among homes under contract in May fell to 16 from 18 in April and 17 last year. Buyers were right there to snap up these recent new listings with 50 homes going under contract, up from 32 last month.

Price Premiums Hit 25%

Strong demand is keeping prices and price premiums high. 30 homes closed in May with a median price of $1.124M while the average premium over ask was 25%, unchanged from last month and up from 23% average over the past 12 months. There is a particular shortage of affordable homes in Essex County. We had a listing in East Orange listed for $395k that received over 30 offers.

Locally, many offers are cash or mostly cash, mitigating the effect of higher interest rates, which, incidentally, are little changed from this time last year.

Mortgage Contingency Options

Offers that include mortgage contingencies typically have an appraisal floor to remain competitive with cash offers, meaning buyers will put more equity in the deal if the home appraises below contract price. E.g. if the contract stipulates a $1M price and 80% mortgage, the buyer “puts in” $200k. If, however, there is an appraisal floor of $800K and the home appraises for $900K, the bank will lend 80% of $900K ($720K) and the buyer will contribute an extra $80k ($800K-$720K) to the purchase.

Alternatively, many banks are offering appraisal guarantees to make their customers’ offers more competitive. If a property appraises below the guaranteed level, the bank will lend greater than 80% with no penalty in rate to the borrower.

Reach out to me with any questions, comments or a real estate consultation.

Thanks for reading.

Best, Rich