Coronavirus and the Spring Housing Market
January 2020 was the “Best Month Ever” for residential real estate sales. The volume of transactions in January, usually one of the slowest months in the real estate calendar, increased 12% in January 2020 for an all-time new high. With the mild winter and increase in millennial home buyers, the spring market had an early start and 2020 was poised to be a great year for real estate. However, the coronavirus moved beyond Wuhan, China and is now shaping up to be the biggest risk to the global economy since the financial crisis.
It’s hard to predict the full effect that the coronavirus will have on the housing market. It may be only March, but there are some bright spots in terms of housing in our area:
Continued Low-Interest Rates
The Federal Reserve cut the U.S. interest rate by 0.5% in early March to alleviate economic concerns about the coronavirus and to stabilize the stock market. The Mortgage Bankers Association reported that the average 30-year fixed-rate mortgage dropped to 3.5%, its lowest level in 7 years. Low-interest rates mean higher purchasing power for buyers.
Buyers can lock into a very low 30-year interest rate and can also consider higher priced homes. Maybe they can afford a house with updated bathrooms or a house with a finished basement or larger yard.
While the drop in interest rates is appealing, market volatility and concern about the coronavirus will keep some people from moving. But certain segments of the population, like young expanding families or seniors whose needs have changed, will need to move.
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Overall Market is Healthy
Despite the uncertainty from the coronavirus, our area has a solid housing market. Inventory remains low, especially at the lower and middle end of the market. The absorption rate, which is the estimated number of months it would take to sell all of the currently listed homes in a given market, is how we look at supply vs. demand in real estate. Six months of inventory is considered a healthy, balanced market and all of our towns have less than a 6 month supply.
| Town | Actives | Sold | Avg Sold/ Month | Months of Supply |
| Long Hill Twp | 36 | 115 | 9.6 | 3.8 |
| Bernards Twp | 118 | 468 | 39.0 | 3.0 |
| Warren | 67 | 185 | 15.4 | 4.3 |
| Watchung | 36 | 82 | 6.8 | 5.3 |
| Berkeley Heights | 46 | 186 | 15.5 | 3.0 |
| New Providence | 43 | 177 | 14.8 | 2.0 |
| Source: GSMLS based on closed sales 9/1/19 through 3/1/20 | ||||
The average home sales prices in the area last year fluctuated. Watchung’s average home sale price had the biggest increase at 8.7% and Bernards Township had the highest decrease at 6.6%.
| Town | Avg Sales Price 2018 | Avg Sales Price 2019 | % change |
| Long Hill Twp | $525,775 | $510,119 | (3.0%) |
| Bernards Twp | $666,374 | $622,369 | (6.6%) |
| Warren | $832,609 | $838,836 | 0.7 |
| Watchung | $702,950 | $764,239 | 8.7% |
| Berkeley Heights | $616,081 | $604,828 | 1.8% |
| New Providence | $617,120 | $600,829 | (2.6%) |
The housing market is strong for entry-level homes due to low unemployment, rising salaries, low interest rates and continued low inventory. The higher end of the market, the luxury sector, continues to be weak. Overpricing and extended marketing times reduce the urgency of buyers in the luxury market and the loss of SALT deductions have also hurt.
Our local towns have great school systems and good access to highways, hospitals and major employers. 2020 will not be the banner year for real estate we had hoped for, but we are poised to withstand the economic bumps coming our way.
Jody Udelsman is a Realtor-Sales Associate with Weiniger Realty in Warren. Jody is an empty-nester living in Basking Ridge with her husband Lee.