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279 Valley Way, Montclair, New Jersey 07042

Record Median Prices and Price Premiums (Again) in June.

Prices Holding, but Buyer Traffic Slowing.

Local Market Recap

43 Montclair homes sold in June, which is down from 68 in June 2021. Short supply drove median sale prices to a new record $1.2 million despite a median asking price of only $829K.

Clearly, the premiums paid over asking prices were significant, and we saw another record here with sales prices averaging 33% above asking prices.

57 new listings in June once again fell short of last year’s 65. This further widens the gap of new homes to 473 in the past 12 months, versus 697 in the previous 12 months that ended 6/30/21.

Affordability Given Property Appreciation

There’s always interest in the high end of the market, but I thought I’d take a look at what’s happening at a more affordable segment of the market – homes with a minimum of 3 bedrooms that sold for $600,000 or less, and compare that to the $1.5 million+ segment over the past 5 years. The results were more pronounced than I expected.

The number of 3BR homes $600k and under has fallen steadily from 111 in 2018, to only 24 in 2022 (first 6 months results extrapolated to 12 months). At the same time, the number of houses selling at $1.5 million or more has steadily risen from 23 in 2018 to 78 in 2022 (again, 2x six months results).

Affordability Given Rising Interest Rates

Further compounding affordability is the rise in interest rates. Let’s compare 3% and 5% for simplicity sake. A buyer spending $2,530 on principal and interest at 3% could afford a $750,000 house assuming 80% loan to value. At 5%, the same $2,530 spend only buys you a $589,000 house.

In theory, as a result, we should see more 3BR+ houses sell for less than $600k, but the interest rate effect has yet to manifest itself in the Montclair market. This is due, in part, to buyers financing less than 80% of purchase price which mitigates the effect of increased rates.

It’s a complex market right now, and your situation is unique. Call me to discuss.

Best, Rich