Well, 2020 has been a long and winding road to say the least. No one in January could have predicted the real estate roller coaster that was this year. Despite the horrific tragedies of the pandemic, there has been a silver lining in some areas in real estate. Particularly – the burbs!
As a real estate appraiser covering northern and central NJ, the year started off stronger than normal. This was primarily due to the low interest rates. Refinancing was in full swing and things were moving along nicely.
Then in mid-February, when the spring market really started to gain momentum, the entire buying and selling arena paused. The next two months represented the height of the Covid-19 intensity. During this time the mortgage rates dropped again and demand for refinancing increased.
Many appraisals turned into desktop orders, meaning no physical inspection was necessary. In these cases, the lenders allowed for virtual inspections, meaning the homeowner would FaceTime with me and walk around the house while I observed the quality, condition, floorplan, and room count.
By mid May, things became a little more under control regarding the pandemic and the floodgates opened in the real estate market. So what normally was a busy spring and summer market, then became a busy summer and fall market. The difference was, not only was there built up demand to move to the suburbs within the residents of NJ, especially in congested areas like Hoboken and Jersey City, but there was a mass exodus of people who lived in New York City that wanted out.
With inventory low and demand high, this caused extreme bidding wars on many properties. Even in areas that were typically not as desirable, I appraised properties that were $50,000 over list price. In some higher end markets, I saw properties going $200,000 and more above list price.
The problem appraisers face when the market moves at such a ferocious pace, is that the sales to support these high values is not there…..yet. This makes supporting these new high and often emotionally driven value bids challenging. It wasn’t until the August/September time that there were enough closed sales that it provided quality support for the market’s appreciation.
Even through to Thanksgiving, the market showed high demand with properties still going over list price. Some homeowners or realtors caught on and started to list high, and that’s when I saw properties sit on the market. Just like any market, when properties are priced correctly, they tend to sell quickly. Knowing the value of the home is a key component to listing it properly.
As you can see in the beginning of the year, the median list price was $499,000 and the sale price was $487,000. By the end of the year the median list price was $530,000 and list price was $540,000. This is an increase of 8% which makes sense as I’ve done studies of other towns that I’ve appraised in and the average range is right in the 7-9% mark. Also look at the list price to sale price ratio. In the beginning of the year, properties were selling at 98% of the list price. In the summer and fall, on average they were selling at 100%.
As an appraiser since 2002, I’ve seen the cycles of the real estate landscape. Not since 2005, have we seen a market as hot as the one in 2020. For an accurate fair market valuation of the home you own or one that you are potentially buying, please give us a call at 908-233-1337.
908-233-1337
908-233-1337