Weichert Princeton March 2016 Market Update Seminar

Princeton Area Real Princeton Area Real EstateEstate

Market UpdateMarket UpdateJoshua D Wilton

Managing BrokerWeichert Realtors

Princeton Office

Dave Ramsey Financial Guru

When getting help with money, whether it is insurance, real estate or

investments you should always look for someone with the heart of a teacher,

not the heart of a salesman.

Agenda

The Market: The Big Picture

Understanding the Local Market(s) You’re Buying Into or Selling Out Of

Process and Strategies for Buyers and Sellers

Real Estate Market UpdateReal Estate Market Update

Agenda

What are you hearing about the market?

The National Picture

17 Year Real Estate Cycle

Number of Home SalesJanuary through November

in millions

Y-O-Y by region

EXISTING Home Sales

Northeast

NAR 1/2016

2016: Looking Forward

Source: 5 Real Estate Trends That Will Dominate 2016. Realtormag.realtor.org.

Experts say five trends will dominate the

real estate market in 2016:

2016: Looking Forward5 Trends Will Dominate the Market

Trend #1: Normal is coming• Expect healthy growth in home sales and

prices – at a slower pace than in 2015.• New construction and distressed sales should

return to more historic levels, and home prices are expected to follow at “more normal rates consistent with a more balanced market.”

• “We’ve lived through 15 years of truly abnormal trends, and after working off the devastating effects of the housing bust, we’re finally seeing signs of more normal conditions.” – Jonathon Smoke, chief economist at realtor.com®.

• Millennials represented nearly 2 billion sales in 2015 – one-third of homebuyers. They are expected to continue to be a major buying pool in 2016, with the majority of buyers between ages 25 and 34 expected to be first-time homebuyers next year.

• Two other generations will also have a big presence in 2016: financially recovering GenXers and older Baby Boomers who are entering retirement. Since most of these people are already homeowners, they’ll play a double role, boosting the market as both sellers and buyers.

Trend #2: Generational buyer trends shape up

• Builders have been faced with higher land costs, limited labor and concerns about the demand of the entry-level market. As such, they shifted to constructing more higher-priced homes, which caused new-home prices to rise significantly faster than existing-home prices.

• In 2016, they likely will shift to more affordable products to cater to the entry-level buyers.

Trend #3: New home construction focuses

more on affordability

• Mortgage rates will likely be volatile in 2016. But the recent move by the Federal Reserve to guide interest rates higher should push mortgage rates higher in the new year from the historic lows they have been at for years.

• However, higher rates will drive monthly payments higher. Along with that, debt-to-income ratios will also go higher. This means the markets with the highest home prices will see the effects from the higher rates the most.

Trend #4: Higher mortgage rates

• Rental costs are skyrocketing, and the costs are likely to only go up in the new year. More than 85 percent of the nation’s markets have rents that exceed30 percent of the income of renting households.

• Rents are accelerating at a more rapid pace than home prices, which are moderating. Because of this, it is more affordable to buy than to rent in more than three-quarters of the United States.

Trend #5: Rents go up even higher

2016 Market Trend

5.05.0% % Dec 2015

Labor force status: Unemployment rate

Source: US Bureau of Labor Statistics

2016 Market Trend15 Largest Job Markets

Job Change: Nov 2014 – Nov 2015Added+61,90+61,9000 JobsNew York +1.8%

Philadelphia +1.3%

2016 Market Trend15 Largest Job Markets

Ranked by Unemployment Rate4.8

Year of the MILLENNIALSMILLENNIALS

2016 Market Trend

MILLENNIALS ~ 25 TO 34 YEAR OLDS• Largest demographic of buyers 32%*

• Largest share of First Time Buyers 68%*

2016 Buying Force

*Source: NAR 12/2015

MILLENNIALS ~ Raising Confidence in Owning*

• 2011: 65% Want to Own/Buy• 2014: 78% Want to Own/Buy• 2015: 80% Want to Own/Buy

2016 Buying Force

*Source: Ralph McLaughlin, economist with real-estate research group Trulia.com

MILLENNIALS ~ Soaring Rental Rates*

2016 Buying Force

*Source: US Census Bureau News Report

MILLENNIALS ~ Buying Preferences

2016 Buying Force

• Safety of Neighborhood• Quality of home• Resales• Live near public transportation/city centers/close-in

suburbs popular• Convenient to shopping/restaurants/amenities

Baby Boomer ~ Buying Preferences

2016 Buying Force

• Safety of Neighborhood• Quality of home• Resales• Live near public transportation/city centers/close-in

suburbs popular• Convenient to shopping/restaurants/amenities

Now* 2014 2013 2010 Gas per gallon (NY area) $1.58 $1.99 $3.81 $2.73

Stock market (Dow Jones) 16,943 17,893 14,776 11,578

Avg. 30-year fixed rate 3.75% 3.73% 4.43% 4.71%

GDP 17,649 17,419 16,163 14,964

Household income $54,382 $53,891 $53,046 $49,276

Unemployment rate 5.0% 5.67% 7.4% 9.3%

Foreclosures 1,009,345 1,117,426 1,369 ,405 2,871,891

2010 to Current Comparisons

Tightest Inventory MarketsCity Centers/Close-In Suburbs

Sales Office Absorption Rates 1/01/2016Jersey City/Downtown, NJ 1.79Jersey City/Exchange Place, NJ 1.70Hoboken, NJ 1.60Bayonne, NJ 3.50Chatham, NJ 3.08Madison, NJ 1.22Summit, NJ 3.43Short Hills, NJ 1.74Maplewood, NJ 1.89Westfield, NJ 3.76

2016 Buying Force

Inventory Challenges/Shortages ~ Why?

• Current heavier buyer demand than supply– City centers/close suburbs– Most affordable/popular price points– Public commuter route destinations

• Low new construction availability

The boom….The New Jersey MarketThe Statewide Picture

The New Jersey MarketThe Statewide Picture

Source: NJAR 10K Research

Closed Sales2015

Days on Market2015

Average Sales Price2015

The Hyper Local Market

Real Estate is Local

It’s Local to the County

It’s Local to the Town

It’s Local to the Price Point

It’s Local to the Neighborhood/Development

It’s Local to the Street

I can do my own local research online…

You’re probably thinking….

Source: Zillow.com

Online Estimates

If the estimate is accurate within 5% you’re talking about a

$50,000 spread on a $500,000 estimate

The home value could be anywhere from $475,000 - $525,000

And they’re only that close a third of the time

Quicken Loans

Appraiser Home Value Opinions Compared to Homeowner Estimates

The boom….The Local MarketThe Local Picture

Mercer County

1. Supply & Demand

2. Price TrendsSource: NAR, November 2008 Forecast

The Local Picture

Long Term Demand …

Source: NAR, November 2008 Forecast

http://lwd.dol.state.nj.us/labor/lpa/pub/factbook/merfct.pdf

Long Term Demand for Housing

Source: NJAR 10K Research DataSource: NJAR 10K Research

Mercer CountySingle Family Market

Mercer CountyCondo/Townhouse Market

Mercer/ Middlesex/ Somerset County‘Market Drivers’

1. Trains/ Schools/ Affordability

2. Schools/ Trains/ Affordability

3. Convenience/ Town Center/ Lifestyle

4. Affordability

HopewellTrain

Schools

Lifestyle

Affordability

Hopewell Twp Market ActivitySingle Family HomesAverage Sale Price

2012 2013 2014Source: TrendMLS

Hopewell Twp Market ActivitySingle Family Homes

Average Days on Market

Source: TrendMLS

2012 2013 2014 2015

Hopewell Twp Market ActivitySingle Family Homes

List to Sale Price Ratio

Source: TrendMLS

2012 2013 2014 2015

Hopewell Twp Market ActivityCondos & Townhouses

Average Sale Price

Source: TrendMLS

2012 2013 2014 2015

Hopewell Twp Market ActivityCondos & Townhouses

Source: TrendMLS

2012 2013 2014 2015

Hopewell Twp Market ActivityCondos & TownhousesList to Sale Price Ratio

Source: TrendMLS

2012 2013 2014 2015

LawrencevilleTrain

Schools

Lifestyle

Affordability

Lawrenceville Market ActivitySingle Family HomesAverage Sale Price

-36.9%vs 2014

Lawrenceville Market ActivitySingle Family Homes

Source: TrendMLS

2012 2013 20152014

Lawrenceville Market ActivitySingle Family Homes

Source: TrendMLS

2012 2013 20152014

Lawrenceville Market ActivityCondos & Townhouses

Average Sale Price

Source: TrendMLS

2012 2013 20152014

-27.7%vs 2014

Lawrenceville Market ActivityCondos & Townhouses

Source: TrendMLS

2012 2013 20152014

Lawrenceville Market ActivityCondos & TownhousesList to Sale Price Ratio

Source: TrendMLS

2012 2013 20152014

West WindsorTrain

Schools

Lifestyle

Affordability

West Windsor Market ActivitySingle Family HomesAverage Sale Price

2012 2013 2014 2015

West Windsor Market ActivitySingle Family Homes

2012 2013 2014 2015

West Windsor Market ActivitySingle Family Homes

2012 2013 2014 2015

West Windsor Market ActivityCondos & Townhouses

Average Sale Price

2012 2013 2014 2015YTD as of 7/21/15

West Windsor Market Activity Condos & Townhouses Average Days on Market

2012 2013 2014 2015

West Windsor Market ActivityCondos & Townhouses List to Sale Price Ratio

2012 2013 2014 2015

West Windsor Market Activity Condos & Townhouses – Canal/Colonnade Point

Average Sale Price

2012 2013 2014 2015

RobbinsvilleTrain

Schools

Lifestyle

Affordability

Robbinsville Market ActivitySingle Family HomesAverage Sale Price

2012 2013 2014 2015Source: Trend MLS

Robbinsville Market ActivitySingle Family Homes

2012 2013 2014 2015Source: Trend MLS

Robbinsville Market ActivitySingle Family Homes

2012 2013 2014 2015Source: Trend MLS

Robbinsville Market ActivityCondos & Townhouses

Average Sale Price

2012 2013 20142012 2013 2014 2015Source: Trend MLS

Robbinsville Market Activity Condos & Townhouses Average Days on Market

2012 2013 2014 2015Source: Trend MLS

Robbinsville Market ActivityCondos & Townhouses List to Sale Price Ratio

2012 2013 2014 2015

Source: Trend MLS

South BrunswickTrain

Schools

Lifestyle

Affordability

South Brunswick Market ActivitySingle Family HomesAverage Sale Price

2012 2013 2014

Source: Middlesex MLS

South Brunswick Market ActivitySingle Family Homes

2012 2013 2014 2015

South Brunswick Market ActivitySingle Family Homes

2012 2013 2014 2015

South Brunswick Market ActivityCondos & Townhouses

Average Sale Price

2012 2013 2014 2015

South Brunswick Market ActivityCondos & Townhouses

2012 2013 2014 2015

South Brunswick Market ActivityCondos & TownhousesList to Sale Price Ratio

2012 2013 2014 2015

PrincetonTrain

Schools

Lifestyle

Affordability

Princeton Market ActivitySingle Family HomesAverage Sale Price

Princeton Market ActivitySingle Family Homes

Princeton Market ActivityCondos & Townhouses

Average Sale Price

2012 2013Source: TrendMLS

2013 2015

Princeton Market ActivityCondos & Townhouses

Princeton Market ActivityCondos & TownhousesList to Sale Price Ratio

The Local Market

It’s Local to the Town

It’s Local to the Price Point

It’s Local to the Neighborhood/Development

It’s Local to the Street

The Take-Away Is…

Be Strategic

Think Hyper Local

Slice the Market Thin

The boom….The Local MarketYour Strategy

Tips for Buying and Selling in Today’s Market

When is the Best Time to buy or sell a house?

When it’s time to move.

Source: NJAR 10K Research Data

When’s the best time to Buy/Sell?

Source: Trend MLS

2016Top Seller Negotiating Strategy…

1.Price it Right2.Pretty it Up3.Fix it First4.Stay in Control

All Negotiations, including real estate, are all about negotiation and control.

Home Pricing

Who is in control?

The Impact of Your Initial List Price

• Promotes a sense of urgency among buyers &

agents (fear of loss)

• Generates interest and showings• Sets the stage for multiple offers in the first 30

• Offers tend to be higher in relation to list price

• Results in highest price in shortest time

Effects of “Right” Pricing

• Buyer excitement diminishes quickly

• Extends time house is on the market

• Results in price reductions

• May attract “bargain hunters” and discounted offers

• Results in a lower selling price

Effects of Over Pricing:

Negotiations are about leverage, use the listing price as yours…

PTA suggested Market Value of $780,000

Listed at $769,000

8 Days on Market

11 Offers

Sold for $805,000

The seller had control

West Windsor

Princeton36 Mercer St.

The Price Trend Analysis suggested Market Value of $1.250 I recommended listing at $1.1 million

Princeton36 Mercer St.

• Pre-inspection• Staged*

• Right Pricing

Sold for $1.350 million, cash in 7 days. No contingencies.

62 MaidenheadListed at $629,000

Comparable property had sold previous at $6408 offersPending

Negotiations are about leverage, use the listing price as yours…

Listed at $544,900

Reduced to $535,000

Reduced to $509,000

Reduced to $499,000

96 Days on Market

1 Offer

Sold for $490,000

The buyer had control

Hamilton SellerOur recommended price at time of listing: $149,000

Sale Price is 5% higher at the lower List Price

Seller received 7.5% MORE at a lower list price

Home Staging

Who is in control?

The process of preparing homes for sale

regardless of price, location, or condition

to achieve the maximum sales price in the minimum marketing time.

The goal is to appeal to the broadest range of BUYERS.

What is Home Staging?

Clean & In Good Repair

“Wow…. I could live here!”

Buyers Only Know What They See …

Home Staging

*Based on a StagedHomes.com survey of over 400 homes across Canada & the Continental US prepared for sale by an Accredited Staging Professional (ASP™) from June 2007 through November 2007.

The average increase in sales price of an ASP Staged vs. non-Staged home is

That is an additional $31,050 on a $450,000 sale

“The investment in home staging is always less than your first price reduction!”

Pre - Inspection

Who is in control?

The Impact of Inspection & Repairs on the Salability of Your Home..…

A Certified Home Inspector’s report will review:

Condition of the home's HVAC, Plumbing and Electrical Systems

The roof, attic, and visible insulation

Walls, ceilings, floors, windows and doors

The foundation, basement, and visible structure

It will also advise if any potential environmental hazards were observed

• Why do a Pre-Inspection?

– Fix/ Disclose/ Permit EVERYTHING before going on market

– Removes buyer objections/ fears– Reduce the risk of going ‘off market’ for a buyer

who ends up killing the deal – You stay in control

Pre-Inspection

2016Top Buyer Negotiating Strategy…

1.Pay Now or Pay More Later (core market, schools, trains and towns)

17 Year Real Estate Cycle

Reed Dr S, West WindsorListed at $749,000

7 offers

2 Weeks LaterExact Comp

Listed $759,0005 offers

West Windsor Buyer

Buyer Negotiation Tips in a Fast Market

1. Understand the process before you start shopping.

2. Have mortgage pre-approval from a respected, reliable lender

3. Put a significant amount in escrow if possible

4. Be as flexible as possible with your closing date

5. Remove as many contingencies as possible

6. Use an Escalation Clause

Financing Financing What You Need to KnowWhat You Need to Know

Jennifer HaydenGold Services Manager

NMLS #4384Weichert Financial Services

jhayden@weichertfinancial.com

The Financial Forecast…

Quarter Fannie Mae

Freddie Mac MBA NAR Average

of all four

2016 1Q 4.0% 4.1% 4.2% 4.1% 4.10%

2016 2Q 4.0% 4.3% 4.4% 4.3% 4.25%

2016 3Q 4.1% 4.5% 4.6% 4.6% 4.45%

2016 4Q 4.1% 4.7% 4.8% 4.9% 4.63%

Mortgage Rate Projections

1/2016

Where Are They Going in 2016

2016 Q1

2016 Q2

2016 Q3

2016 Q4

Where They Were in 2015

Source: Freddie Mac

Mortgage RatesFreddie Mac 30 Year Fixed Rate

Which Group is Most Sensitive to

Interest Rates?

Source: First American Real Estate Sentiment Index

Mortgage Credit Availability Index (MCAI), a report from the Mortgage Bankers Association

Mortgage Credit Availability

Typical Down Payment

Pop Quiz

What is the monthly P&I payment on a $200,000 30-year loan?

A.$1,146

B.$966

C.$1,278

D.$1,544

Negotiating Your Purchase

Sales Price

Loan Amount

20% Down Payment

Monthly Payment

Incremental Monthly Increase

Initial Offer $325,000.00 $260,000 $65,000 $1,260.09

+$5K $330,000.00 $264,000 $66,000 $1,279.48 $19.39

+$10K $335,000.00 $268,000 $67,000 $1,298.86 $19.38

+$15K $340,000.00 $272,000 $68,000 $1,318.75 $19.89

+$20K $345,000.00 $276,000 $69,000 $1,337.63 $18.88

+$25K $350,000.00 $280,000 $70,000 $1,357.02 $19.39

The Mortgage Market

Now…• 3%, 3.5% and 5% down payment available

• 100% VA/USDA available (0% down)

• FHA reduced MIP from 1.35 to .85

The Mortgage Market

Now…• The mortgage underwriting process requires

more due diligence since the Dodd-Frank Act was passed in July 2010

• TRID regulations impose mandatory wait-times between events

Average days needed to close a loan…49 days is the longest time needed to close a loan since February 2013.

All closed loans as per Ellie Mae

• Provide you the highest level of Customer Service in the industry

• Make sure you understand your financing options so you make educated decisions

• Ensure your purchase closes on time with the least amount of hassle

My Job…

I look forward to meeting with you

Jennifer HaydenGold Services Manager Weichert Financial Services

Jhayden@weichertfinancial.com

Weichert Family of Companies

What will a real estate company do for me?

Source: 2012 NAR Profile of Home Buyers and Sellers

This is where

you win or lose the sale

Making Making Your Purchase as Purchase as Smooth as PossibleSmooth as Possible

Buying a home involves the careful coordination of many people.

Choosing a real estate team you can count on will make the

process smoother and easier.

Thank you for your time today

Resource and Website Resource and Website ListListwww.trendmls.com

www.realtor.orgwww.njar.comwww.Otteau.comwww.Pre-listing-inspection.comwww.Housemaster.comwww.Stagingshoppingcenter.comwww.realtytrac.comwww.njar.com/10kwww.keepingcurrentmatters.comhttps://education.state.nj.us/pr/

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