Understanding the central New Jersey residential market as it continues to fluctuate, more so than before because of the Covid-19 pandemic, is no small task.
But for professionals like Judson Henderson, the broker of record and managing member at Callaway Henderson Sotheby’s International Realty, that comprehension comes easier due to his years of experience.
Henderson has been active in the world of real estate since first receiving his license at the age of 18, becoming a full-time professional four years later. His agency is based in Princeton, but their reach and exposure go beyond to help all central New Jersey residents meet their match in the perfect home—even when the process of doing so has been complicated by outside factors like coronavirus and a temperamental economy.
Translating it for the rest of the world, Henderson shared his views on what to expect for the market, which has gone from dramatic highs to lows on a rollercoaster of property values.
“I can speak to not just what’s going on in Princeton or not just what’s going on in West Windsor, but look a little bit more broadly, in terms of our area of expertise, which is that central New Jersey segment overall,” Henderson said. “The markets are generally starved for inventory, and that is certainly a theme in our area.”
Inventory refers to new listings on the market, meaning that if houses are not being consistently put up for sale, potential buyers have fewer plots or buildings to choose from.
“It’s no secret there, it’s expensive to live in this area. Part of that is high property taxes, high state income taxes, all those things,” Henderson continued. “But as a result of that, we don’t have a ton of our rental inventory.”
According to New Jersey Realtors “Local Market Update for January 2022,” the inventory of homes for sale has dropped dramatically across single family homes (-25.1%), townhouse-condo properties (-27.4%) and adult community homes (-31.8%). This is paired with an increase of median sales prices, and a whopping decrease in new listings from the year prior, specifically in terms of adult community homes (-61.1%).
Using Princeton as an example, Henderson recalls that people initially faced with difficulties in selling their homes began renting them out to others as a fallback.
“Over the last year or two, that’s no longer an issue,” Henderson said, the now-profitable sales rapidly depleting rental inventories. “[There’s] so much additional pressure on people that are coming here to buy a house or to rent a home, because even [with] the choices from a rental standpoint, there’s not a lot of plan b’s for people right now. There’s no part of this market that hasn’t been completely turned around.”
To appeal to a range of prospective owners, structures and designs of the properties vary across condos, townhomes, single-family homes on smaller, postage stamp lots, and large estates with equestrian facilities.
“It really is a much more diverse housing stock than people realize, so it’s hard to generalize in this market, in our area, what’s going on across the board, because it’s very specific to individual counties, and even certain products, within those municipalities,” Henderson explained.
If a house is in “great turnkey condition” that requires little to no work, Henderson adds, it’s likely priced at a premium. Due to the pandemic’s supply issues and inevitable delays, people are more willing to pay a higher amount for an abode that does not have, or need, renovations for functionality.
The reverse of that means that residents who are able to make those enhancements have the fixer-upper-hand, because any successfully completed projects are likely to increase the financial worth of the property.
“There are values out there for people that are willing to take that work on because there are fewer people that are in that position,” Henderson adds.
Outside of the pandemic and in a “normal” market, he said, trends vary over time.
“Some of those are desirable and some of those are not,” Henderson said, illustrating his point with details on the 2008 recession. According to Henderson, after the economic crash, people started to prefer smaller, efficient homes with minimal walking distances to town.
“We are in a post-pandemic world where they say they’re still desirable, but there’s been a renaissance for properties that have a little more breathing room and a little more lifestyle at your fingertips,” he remarks.
With the possibility of being “stuck” at or working from home more relevant than ever before, the pandemic has changed not only what homeowners tend to value, but even minute details such as “floor plan changes that have revealed themselves” in the last few years.
At the beginning of the lockdown, Callaway Henderson Sotheby’s International Realty, alongside others in the world of real estate, watched as everything came to a standstill.
Then, an explosion of interest revitalized the housing market, creating a startling, yet appreciated, new reality for the field.
“We were completely idle for a couple of months, not knowing what was gonna happen, and then all of a sudden, real estate almost did a complete 180°, where we’re as busy, if not bigger, than we’ve ever been,” Henderson said.
The business was then tasked with navigating both the perils of a pandemic and the constant risk of Covid-19 exposures.
Kiplinger’s Daniel Bortz reported that 2021 had “record-low mortgage rates” riding off the high of stimulus checks and rising wages, causing the market to flourish. “That surge in demand, coupled with the lowest home supply in more than two decades, sent U.S. home sale prices to stratospheric highs,” Bortz wrote in a Feb. 23 article from this year.
But now, there are higher sale prices than ever, making the current market tailored to sellers rather than buyers. According to estimates from the website Redfin, as of Feb. 2022, there was a roughly 10-point increase in homes sold above the list price to 48.3%, but a steep, 16.4% decrease in the number of homes for sale to 26,723. Only 6,936 homes were actually sold with Redfin, resulting in a 17.1% decrease.
While the majority of 2022 is yet to come, early predictions maintain that this year is unlikely to simulate the springtime renaissance of 2021, where the market, newly revitalized, took on a life of its own.
Going forward, Henderson finds that some market changes will be non-negotiable.
“Affordability is always the key,” he maintains. “When we have real estate prices rising to the extent that they are, the biggest thing that’s going to influence the upcoming year is what happens with affordability in interest rates.”
“It really starts to have an impact on what people can afford, and that’s going to be the key to anything that happens this year,” Henderson said. “Last year, when interest rates were so low and the market was in a rising environment, people were there to afford these homes or at least people were there to pay higher prices.”
Henderson gave his overview of the future at the Princeton Mercer Regional Chamber’s 2022 “Central NJ Real Estate Forecast” event on March 4, sharing his predictions with an audience, peers and fellow speakers. His projections ultimately revolved around what New Jersey renters and homeowners are willing to tolerate.
“How much more price appreciation and rising interest rates can people actually stomach?” he asked about the trends. “People are going to chase affordability. They’ll find what they want from a housing standpoint and then move to a municipality of a secondary nature.”
Henderson’s takeaway is that these traditional boundaries may no longer be as important as they were in the past, with residents feeling more inclined to relocate for their evolving needs—this would mean the markets could change based mostly on movement.
“If people don’t like what they see in one municipality, then they’re going to venture out to a municipality that is more affordable,” he said, envisioning one of the conceivable changes.