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Sellers Vigilant for First Sign of Prices Dropping?

Demand Staying Strong, Prices Staying High (for now)

New property listings remain few and far between, continuing their slump that we’ve seen since the later part of 2021.

Home owners held off on selling in the fall of 2021 due to a resurgence in COVID cases. Spring of 2022 saw those sellers enter the market when there was a decent jump in new listing for Montclair homes.

However, mortgage rates jumped from around 3% in June 2021 to just under 6% in June 2022, putting the breaks on the real estate market as potential sellers stayed put with their existing low mortgage rates.

Despite higher rates, low inventory has kept home prices high, especially in the $800k plus range. We are seeing some pressure on prices below $800k, as buyers in that range are more rate sensitive. Sales under the $800k price range drove a drop in median prices in September to $990k, which is down from $1.1 million last year, and $1.325 in August.

I predict down-sizers in the higher price range will begin the sell at the first hint of lower prices; capitalizing on the equity in their home to put toward their next, cheaper, purchase.

On the commercial front, the demand for retail space, especially restaurant space, remains strong as consumer spending has been stable. However, we are starting to see weakness in investment property prices as higher rates have driven up cap rates. With the 5 and 10 year treasuries close to 5%, local investors will be looking for 7-8% cap rates in the near term, putting downward pressure on asset prices.

Questions about the local residential or commercial markets?

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Best, Rich