Recently there has been a lot of talk about home prices and if they are accelerating too quickly. In most areas of Monmouth and Ocean Counties, including Howell, seller supply (homes for sale) cannot keep up with the number of buyers who are out looking for homes, which has caused prices to rise.
According to CoreLogic’s Homeowner Equity Report, the average American household gained over $14,000 in equity over the course of the last year, largely due to home value increases. The map below was created using CoreLogic’s report and it shows the average New Jersey home increased in value about $7K during the 1st quarter of 2017 (the latest data available).
The New Jersey Association of Realtors reports that the average single family home price in Howell in May 2016 was $326K. By May 2017, the average Howell home was selling for $340K, an increase of 4.3%. Condominiums in Howell have done even better – their average sales price this year has increased an amazing 20% from what they would have sold for this time last year!
So are these rising home prices good news? Or cause for concern? While everyone who owns a home is happy to see their value increasing, some people are worried that we are seeing another bubble and are doomed to repeat 2006 (when housing values plummeted seemingly overnight) all over again. There are, however, several important differences between what is happening now vs. what happened a decade ago.
Historically, homes in the US have appreciated about 3% each year. The tan lines in the graph below are median home prices as reported by the National Association of Realtors (NAR). The blue lines show that, had home prices appreciated at the normal 3% rate since 2000, prices would still be pretty much where we are now.
The second difference to note is that, in the years leading up to the housing market crash, many homeowners were taking advantage of their rising home values by taking out second mortgages and using their home’s equity to buy cars, payoff credit card debt, or take vacations. Lenders had loosened credit and income requirements of homeowners greatly and were routinely allowing people to borrow 100% (or more!) of their homes value. When home values fell, many quickly found themselves owing more than the house was now worth, causing an increase in foreclosures and short sales which helped to further drive neighborhood home values downward.
Today, lending standards are tighter in terms of credit and income and lenders are more conservative regarding the amount of a home’s equity they will lend against. Additionally, those homeowners who are using their equity at all, are typically using it for long term investments such as their children’s education, investing in starting small businesses, paying off their mortgages sooner, or moving to a different home. They will be better prepared to weather changes to their home’s values if the market changes.
If you own a house in Howell, NJ which is too big, too small, or just not your dream home, now might be a fantastic opportunity to take advantage of the equity in it and the current near-historically low interest rates and move to a home that better suits your needs in the long term. Call me today to find out how much your home in Howell, NJ is worth and discuss your options.