Did you hear the sound? You know…the “thud” that occurred in May, and then echoed throughout June?  It was the sound of the local housing market falling on its face as the home buyer’s tax credits expired. But for those who had Westfield NJ homes for sale, the market remained stable. Well…only for those that were priced properly!

Westfield NJ Homes For Sale: It’s STILL All About Price!

As an active real estate broker, I had my concerns that the home buyer’s incentive could be creating a “bubble” in the local housing market. Many in the industry worried that the credit might not actually stimulate as many new buyers as hoped, but rather move the existing buyers into an earlier buying decision. If that was the case, then buying activity could exceed recent trends prior to the phasing out of the credit, and then drop off dramatically afterward.

So what actually happened?

The charts below show the homes placed under contract from January through June. The first is Union County, and the second is Westfield, NJ. Pay close attention to the yellow line in both graphs (which represents 2010). Notice how pending sales exceeds 2008 & 2009 in through the spring. But when the Home Buyer Tax Credit expired on April 30th? Ouch!

The Westfield market took a while to get going this spring (again, the yellow line), but by March, it exceeded both 2008 & 2009 in terms of pending sales. But the elimination of the buyer incentive was felt here as well, as pending sales fell below previous levels in May & June.

So what does PRICE have to do with anything?

As I mentioned in a previous post, homes that come to market priced properly (with the original list price within 5% of the final sale price) sell faster, and for a higher percentage of their original last price. So which homes went under contract AFTER the tax credit expired? Those that were priced properly!

Take a look at these two graphics. They represent the 22 Westfield listings that went under contract AFTER April 30th AND closed by the time of this posting. The first chart shows the homes that came to market priced RIGHT (original price within 5% of the final sale price). The average return was a whopping 99.39%. For those who priced too high out of the gate, the return was only 85.7%

And what about time on market? Those that were right priced sold in an average of 15 days. And those that came on too high and needed to have a price adjustment? The average here was 98 days on market.

So what is the take away here?

At first blush, it looks like the home buyer tax credit DID move buyers into an earlier decision, rather than stimulate additional buying activity. (We’ll need a few more months of data to know for sure.) But if this IS the case, then the pool of available buyers could be smaller than usual in the upcoming months.

Sellers MUST understand that PRICE is critical. This is NOT the time to “test the market” with an inflated price. Buyers know value when they see it.  As this data proves once again, if you come to market with no more than a 5% cushion for negotiation, you’ll sell faster and retain your price. If you ask for too much, the market will wait for you to get it right.

And if the buyer pool is smaller for the remainder of the year, you could be waiting a LONG time!