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From The Garden State: The Otteau Report: July 2006

[This monthly market report is provided by Jeffrey Otteau of the Otteau Appraisal Group [1] who also authors a series of widely followed quarterly market reports [2] on the New Jersey real estate market. This information is collected from various sources including Boards of Realtors and Multiple Listing Systems in New Jersey.]

I have known Jeff for many years and consider him one of the leaders in the real estate appraisal profession. He has taught me a lot about quantitative real estate market analysis. -Jonathan Miller


SUMMER MARKET REMAINS COOL

July was another cool month for the housing market as declining buyer-confidence continued to take its toll on home sales. In July, contract-sales activity declined 11% from the June level and was 25% below the year earlier pace in July 2005. That this slowdown comes in the midst of the prime March-to-August selling season when home sales should still be running hot provides compelling evidence of a market transition wherein home buyers have greater control over final selling prices than at any time since 1991, a 15-year span.

From an inventory perspective, the number of homes being offered for sale now stands 67% higher than a year ago. This equates to a 9-month supply as compared to only 4-months last year at this time. It is however encouraging to note that Unsold Inventory increased by only 1.5% in July following a 47% increase over the 1st 6 months of the year, which works out to nearly 8% per month over that period. This moderation, coupled with recent declines in mortgage rates present home buyers with an opportunity window that will likely close once mortgage rates continue their upward climb.

From a price perspective, market conditions continue to exhibit the greatest weakness for luxury priced homes. Unsold Inventory below $600,000 stands at an 8 month supply as compared to 27-months above $2.5 million. This weakness in the luxury market has been developing slowly for several years now and will likely continue for the foreseeable future. As a result, expect the market for more affordably priced homes to be the first to recover.

Here are 2005 annual stats.