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What is Market Absorption?
Market absorption offers a snapshot of how “hot” a market is. It’s calculated by dividing the number of homes available in a particular sector of the market by the number that have gone under contract in the last month in that same sector.
For example, if there are 21 properties available in a particular sector of the market and 3 go under contract in the previous month, the market absorption in that sector of the market at that time is expressed as 7 months (sometimes referred to as “7 months’ supply of housing”).
As a rule of thumb, we consider 7 months’ market absorption the dividing line between a seller’s market and a buyer’s market — the lower the number goes below 7, the more the market favors sellers, and the higher the number above 7, the more it favors buyers.
Here’s an example to demonstrate what you already instinctively understand:
In the example above, with 21 available homes, if 7 homes went under contract instead of the 3 in the example, the measure of market absorption would be 3 months — solidly a seller’s market. And that makes sense, because you know if more houses go under contract that’s better for sellers.
If you’d like to know the market absorption figures for a real estate market of interest to you or if you’d like additional objective data to help you make informed real estate decisions, let us know. We’re always looking for opportunities to share our knowledge regarding residential real estate.
How has Covid-19 Affected the Local Real Estate Market?
We are fortunate that life in our section of rural, ex-suburban, New Jersey is very different to what our friends and colleagues are experiencing in nearby New York City and more densely populated areas of New Jersey. We’re all trying to make sense of what’s going on, how our lives have been affected, and what it will mean for our future as individuals, families, and as a society.
With homelife ever more at the center of our focus, many people are asking us how Covid-19 has affected the real estate market. Is it a good time to sell? Is it a good time to buy? What’s going to happen in the real estate market?
We can’t predict the future, particularly when faced with circumstances none of us has previously experienced before, but we can look at the objective data of the real estate market to help us understand what is happening.
Property Showings Are Continuing. The last few weeks have shown a marked increase in the showing activity among New Jersey homes currently on the market as reported by ShowingTime, a tool used by some brokerages to schedule property showings:
Of course, the process for showing properties isn’t like it was before. In the last few weeks, we’ve been showing properties virtually (e.g., using Zoom and 3D interactive tours with everyone at a computer or device, with FaceTime to connect a listing agent with a buyers’ agent and the buyers as they walk through the home and by walking through properties as a buyers’ agent with our buyer clients on FaceTime). We’ve also been showing properties “in real life” taking precautions to protect buyers, sellers, and agents involved.
Interesting Shifts in April Real Estate Market Statistics. We took a look at what’s actually happening with listing and sales in some of our local markets:
The data regarding actual listings and sales show a few things in the short term:
- Available properties: the local residential real estate market has low inventory compared to prior years (For sellers, this is good news — if you’re serious about selling in the near future, your property has less competition.)
- Buyer activity: In many municipalities, buyer activity is lower what it’s been in prior years, but under the circumstances, there are still a remarkable number of properties going under contract despite the obstacles presented by social distancing requirements and economic constraints. For buyers, it’s also good news — it’s still possible to buy a house as sellers, agents, lenders, appraisers, title companies, lawyers, and municipalities have all been swift with modifying normal practices to be able to continue to transact business during the pandemic.)
When comparing these new supply (available properties) and demand (properties under contract) numbers by looking at market absorption, some municipalities (Califon Borough, Clinton Township and Tewksbury Township) have shifted to a seller’s market, while other municipalities (Clinton Town, Lebanon Township, Readington Township, and Long Valley) have shifted to more of a buyers’ market.
We aren’t seeing any clearly-defined trends from the limited April data and expect that as time goes on, the trends will be more clear. We’ll be watching to see what sectors of the market (by geography, style, and price point) do well in a post-Covid19 world, and how this compares to what we are used to seeing.
The mechanics of how Leaf agents work and the advice we give may have changed, but our intent remains the same as it was from when we opened our doors in 2011: to educate clients so that they are empowered to make informed decisions in purchasing, selling, or renting real estate.
If you have questions about buying or selling property in the short- or long-term, we’re available to counsel you on how to achieve your goals and navigate the process and the market.
We look forward to hearing from you.
‘Tis the Season for Property Tax Appeals
If you currently own real estate in New Jersey, you have the pleasure of sharing in a property tax system that has the highest property tax rate as a percentage of property value (1.89%) according to www.tax-rates.org. If you are frustrated about the amount of property taxes you pay, there are a few things you can do about it:
- Move to another state. (My brother, who lives in Tuscon, Arizona, pays an amount of property taxes that I sincerely thought was a typo when I saw the listing a few years ago for the house he was under contract to buy it).
- Move to a New Jersey municipality with a lower tax rate relative to property values. For example, Harding Township and Bedminster Township are at the top of many buyers’ lists of desirable places to buy a home in our area because of their favorable tax rates.
- Appeal your property taxes. To decide if you have a good chance of prevailing in an appeal of your taxes, you should collect some information:
1) Your 2019 tax assessment as published on the Tax Assessment Card (the little card that usually arrives in the mail at the end of January or in early February from your municipality
2) Your municipality’s average tax ratio (The New Jersey Division of Taxation website includes the average tax ratios for municipalities in Hunterdon County, Somerset County, and Morris County).
3) Information about the sale prices of three to five homes comparable to yours in your township that sold (i.e., closed) between October 1, 2017 and October 1, 2018. The closer they are in style, square footage, acreage, and neighborhood to your home, the more likely they are to be considered comparable. Note that sales that are considered “distress sales,” e.g., foreclosures or short sales, may not be recognized as comparable sales because if they are anomalous in your neighborhood (this may not help you on your tax appeal, but it’s a good thing for your property’s market value if you don’t have a lot of distress sales in your neighborhood).
So what do you do with this information? When you divide the total assessed value on your 2019 Tax Assessment Card by the average tax ratio for your municipality, you arrive at the property value that your municipality thinks your property was worth between October 1, 2017 and October 1, 2018 (which is the relevant period for this valuation for 2019 taxes). The same New Jersey Division of Taxation website will also give you the high and low margins of error for each town (+/- 15% around the average ratio).
Here’s an example: A homeowner in Tewksbury Township has a property for which the total assessment is $416,500. The average tax ratio for Tewksbury Township for 2018 is 81.46%. This means that the township thinks her house was worth $511,293.89 between October 1, 2017 and October 1, 2018. She believes this is not the case. However, the township is given a little latitude in its +/-15% margin. Because 1.15% of the township tax ratio (the upper limit of the tax ratio with the 15% margin of error) is 93.68%, this hypothetical homeowner must show that her house was worth less than $444,603.38 in that period in order to prevail in her tax appeal.For additional resources in appealing your taxes, a straightforward guide to property tax appeals in New Jersey is available in a brochure published by the state. If you have questions regarding the market value of your home as reflected by recently-closed properties similar to yours, contact Leaf, Realtors at 908-975-9756 for information specific to your property. Of course, if you want to move to Harding or Bedminster, or if you live there already and decide to move to Tucson, Arizona or anywhere else, contact us to find out about the Leaf, Realtors’ solutions for selling or buying a property in New Jersey in today’s real estate market.
SOLD! 17 Beavers Road, Tewksbury Township, New Jersey — $610,000
The sale of this home has a special place in our real estate hearts. Prior to connecting these buyers and sellers, the sellers had been frustrated with the outcome of their efforts to sell their property — after lots of agent showings and well-attended open houses, they still didn’t have an offer that was acceptable to them, so they took their house off the market for a break. Relocating from overseas, the buyers had viewed scores of properties in the Tewksbury/Mendham/Somerset Hills area and were frustrated that they couldn’t find a property that fit what they were looking for. After introducing the buyers to the sellers, it was clear that we had a match that benefitted everyone — the buyers found a home that was a far better fit than anything else they had seen before and the sellers were able to complete their move without disrupting their household to market their home.
Congratulations to P.B. and J.D. on the sale of their home and we welcome A.W. and S.W. and their family and congratulate them on purchasing a home in Tewksbury.
If you’d like to learn more about finding buyers for your home without listing your home on the Garden State Multiple Listing System or finding properties not currently on the market, let us know.
