The Morris County housing market surged again in the second quarter of 2016, with sales up sharply. Despite increasing buyer demand, though, prices still disappointed.
Sales. Morris County sales were up almost 18% in the second quarter, marking the seventh straight quarter of year‑on‑year sales growth. The long‑term trend is also encouraging, with sales up almost 10% for the rolling year. Indeed, we nearly crossed the 6,000‑transaction threshold for the rolling year, which would be the first time we hit that level in almost ten years, at the tail end of the last seller’s market.
Prices. This surge in sales activity did not, though, have its expected impact on pricing. Prices were down sharply, dropping almost 6% on average and almost 2% at the median. And after some meaningful price appreciation in 2015, we have now seen prices down for the first half of the year, driving the rolling year average price down over 3%. This was a little disappointing, given that we’ve seen sales activity up for almost two years. Normally, rising sales activity would drive appreciating prices.
Inventory. The “months of inventory” indicator measures how long it would take to sell out the existing inventory of homes at the current rate of home sales. In the industry, we generally consider anything below 6 months as a signal for a seller’s market, where tight inventory leads to multiple offer situations, bidding wars, and ultimately appreciating prices. By that measure, we are certainly moving toward a seller’s market, with Morris now down to 8.0 months of inventory, falling almost 38% from last year.
Negotiability. The negotiability indicators showed only modest signs that sellers might be gaining leverage with buyers. The days‑on‑market indicator was relatively flat, falling by just one day from last year. And the listing retention rate was up just a tick, indicating that sellers might be having a bit more success getting buyers to meet their asking prices.
Going forward, we expect that Morris County’s sales activity will eventually have a meaningful impact on pricing. With homes still at historically affordable prices, interest rates low, and a generally improving economy, we believe that buyer demand will strengthen and eventually drive modest but meaningful price appreciation by the end of the year.