Daniel Effenberger calls it a “perfect storm.”
A backlog of pandemic-stalled homebuyers, record low mortgage rates, scarce inventory and a crush of families leaving nearby metropolises for suburbs has whipped New Jersey real estate into a maelstrom of bidding wars and rapid-fire home sales.
“My business has doubled over the last year,” says Effenberger, a successful realtor with Monmouth Beach-based O’Brien Realty, who spends most of his waking hours showing homes and finalizing deals in Monmouth, Ocean and Middlesex counties.
Since spring 2020, Effenberger has watched similar scenarios play out each week: A house hits the market on a Monday. Before the weekend, it’s sold after some two-dozen offers, many bidding $50,000 to $75,000 over asking price.
“This really is a great time to do a lot of things in real estate,” says Effenberger, a Toms River native.
Though the realtor understands many prospective buyers and sellers, who may wish to take advantage of low interest rates or flip their home for a large profit, aren’t sure where to start, or why the market is booming.
Here’s a primer on everything you need to know about New Jersey’s unprecedented real estate swell, including how to get your offer accepted, how to get your home sold quickly, how long the market is expected to sizzle and what this all means for the industry long-term.
Let’s start with the basics: Why is the New Jersey real estate market so hot right now?
“We’re dealing with a perfect storm of factors culminating into this crazy real estate market, which I view as a very exciting real estate market. It’s definitely a great time to sell a home or buy a home. We had a little bit of a delay and uncertainty with COVID in March with the lockdown but then, into April and May, things started to really heat up. … There was this backlog of people not knowing whether they’re going to start looking for a home or sell, or people who had their homes on the market but pulled them because they didn’t want people in their home at that time. That whole backlog created a frenzy that we’ve never really seen in real estate over the late spring, summer, fall, and there hasn’t been a slow down over the winter.
You couple those things with people who are trying to leave the cities and New Jersey, being connected to Philadelphia and New York City, those suburban home markets just started to really boom. This was already happening for a few years, where it was a seller’s market, but it has further increased just because of a supply and demand thing.”
This is all in addition to record low mortgage rates enticing buyers, right?
“Yes. If you look at interest rate charts for the past 20 years, just in the past five years, interest rates have been good. The federal reserve essentially has kept the bond yield down and therefore created these historically low interest rates. People were getting 2.5%. That was essentially put in there to stimulate the market. The fed has said they’re going to do their best to keep things down for the next year or two years. We’re projected to see these low interest rates — maybe not 2.5% or 2.75%, that might not hold — but it was definitely an effort from them to stimulate the economy.
In previous years, we were dealing with 4% and then 3.5%. The lowest that I’ve seen, which was probably over the summer, was right around 2.5%. So for people who can get a point lower than that 3.5%, over a 30 year mortgage term that equates to just major, major savings. So we’re seeing a refinancing boom, too.”
Is this boom unique to New Jersey?
“New Jersey has historically held its value even through ups and downs. The rental market has always been very strong here. We’ve got some of the best school systems in the country, an amazing national park system, county park system and then the major factors are proximity to these cities, Philadelphia and then in our area of New York City, which is literally a boat ride away. You can take the Seastreak Ferry and get into Wall Street in 45 minutes, plus NJ Transit. This place really just holds its value and also the summers, obviously. The Jersey Shore — we transform into this destination once the weather starts changing.”
Is it a seller’s market with the backlog of buyers, or a buyer’s market because of the low rates? Or both?
“It definitely leans more toward a seller’s market — simple supply and demand, inventory is so low. Because there’s so many buyers out there trying to take advantage of these low interest rates, there’s just at the present moment, a shortage of homes. Buyers are dealing with going up against multiple offers, having to bid up on homes and pay over asking price.”
How many offers are you seeing put on an average house right now?
“I’m consistently seeing anywhere from four to 25 offers.”
And what should prospective buyers be willing to pay over asking price right now?
“I’ve seen quite a bit going $50,000 or $75,000 over asking.”
Words of advice for a buyer who wants to stand out from the sea of offers on a given house?
“There’s a hierarchy of terms with any offer. Number one is going to be your offer price. First and foremost. Right behind that is going to be your down payment amount, if you’re doing a mortgage. How much are you putting down? Are you putting down 20%? Are you putting down 50%? Are you putting down 5%? With this influx of homes getting bid up, there comes into question the appraisal aspect of the whole thing. If there’s a $500,000 home that ends up selling for $550,000, accepted offer, the appraiser has to come in there — the representative from your lender — and they have to say whether this home is worth $550,000 or not. If it happens to under-appraise, they want to ensure that those buyers, whoever they accepted, has enough cash reserves to be able to come up with that difference in appraisal. If they see somebody with 5% down and they’re going way over asking, they’re probably going to be more inclined to go with somebody that’s showing that they can put more money down. That’s going to definitely be a factor.
And some people need to close ASAP, other people want to wait until they find a new home. If you’re flexible, if you can close quick or if you can close in five months, if that’s what they need, then that flexibility will be a very big bonus in your terms.”
