Below are my thoughts on how the Monmouth County market fared in the 3rd quarter of 2022. as well as a bonus Q and A with my friend Chris Miller from Family First Funding to discuss mortgage rates and programs. I hope you find these blogs useful, but if there are every any subjects that you’d like me to cover please just let me know!
In 2022 the real estate market came back down to earth with a year-to-date decline after two years of exceedingly robust sales activity. 2021 was the best performing market in my 25-year career and 2020 kicked off this unprecedented period after the Covid shutdowns. The last market we saw that can be considered “normal” was in 2019.
Using 2019 as a benchmark shows how far ahead of a normal market we are. I believe this is more illuminating than a traditional year over year comparison, considering 2021’s unparalleled record-breaking performance. Inventory levels overall are also a key part of understanding the full dynamics at play and we’ve been in the midst of a major inventory shortage for some time now.
The luxury sector outpaced other price points in our local markets this year, with the middle and upper tiers replacing the lower ranges as the primary drivers of the market. As a result, the average sale price is skewed upward by increased sales in the higher price ranges making the 44% rise a tad misleading.
|Monmouth County YTD||2019||2022|
|Avg Sales Price||$490,843||$710,130||44%|
Even with rising interest rates I remain optimistic that our local market should be somewhat insulated from a major downturn with low Inventory levels and continued high buyer demand. Although rising interest rates have reduced buying power and concerns about the economy has put downward pressure on price, we still benefit from our proximity to New York and the heavy demand that continues to flow from the city into our communities.
A few anecdotal observations:
-Buyers want turn-key (well-designed with appealing floor plans) and well-priced homes. If a home is not in move-in condition or the price is not correct, then buyers will simply sit on the sidelines and wait. Homes that are properly priced and show well can still get multiple bids!
-Gone are the days of waiving appraisals and inspection contingencies. Buyers now want to feel that they are getting value.
-Many sellers who want to trade-up are hesitant to list their current homes because they are locked into low interest rate loans that make the idea of upgrading less attractive or unattainable.
Speaking of interest rates, I’ve had the pleasure of interviewing Chris Miller from Family First Funding for this issue of my blog.
For more info on any of these programs contact me or Chris. Here is our Q and A…
Q - Hey Chris, are there any new programs available to lower interest rates?
Hi Kelly, Buyers can consider a 2-1 Buy Down (it must come in the form of a seller concession). This program reduces your mortgage rate by 2% the first year and 1% the second year. Be careful though as it is just kicking the debt down the road. Buyers should contact me to discuss in depth.
Although ARMs (adjustable rate mortgages) are not new programs they are extremely popular these days. For the past 4 years the difference between fixed rate and ARM mortgages was so negligible that it almost always made sense to go with the fixed rate option. More recently that spread has widened and the ARMs are more attractive to buyers.
If you are betting on rates not returning to more recent averages then you may consider buying down the rate. That means spending money up front to purchase a lower rate. This is available with most lenders.
Q - How can high net worth individuals leverage their assets to reduce mortgage interest rates?
These types of borrowers usually have access to borrowing against their portfolio. Large banks compete hard to keep these assets under management; thus, they are more than happy to dangle the “portfolio loan” carrot to their clients. Take JP Morgan Chase for example. They have billions in customer deposits that they pay .25% or less on. Lending it against assets already under their own management is a very low risk exercise hence why they can offer such low rates on these types of loans. If you default, they just sell your assets and pay off the loan.
Q - What programs are available to help 1st time homebuyers?
Family First offers the “Welcome Home Program” which is available for individuals/households making less than $98,800 in Monmouth/Ocean counties. They can put as little as 5% down, get a below market interest rate plus reduced mortgage insurance. (Available in all counties but income limits vary)
With FHA loans you can put 3.5% down and they have lower credit score requirements
The Home Ready (Fannie Mae)/Home Possible (Freddie Mac) programs you can put 5% down and get reduced mortgage insurance
Most local banks have a CRA (Community Reinvestment Act) program. They are usually similar to the Welcome Home program.
Q - Are there any other programs out there of which potential buyers might not be aware?
I would like to highlight Family First Funding’s doctor loan program. If you are an MD and are purchasing a home, there is no competition when it comes to this program. It is 100% financing up to a purchase price of $1,500,000 with no mortgage insurance and below market rates. You can also finance 95% up to $2,000,000 and 90% up to $2,500,000. I guess the bank believes in the recession proof nature of that industry because those terms are unparalleled.
SENIOR LOAN OFFICER I NMLS #1787407
O: 732-505-4600 x826
280 Highway 35, Suite 400, Red Bank, NJ 07701
NMLS #1195708 | www.nmlsconsumeraccess.org