As I wrote in my blog about the entire state of New Jersey, suburban Essex County is among the counties experiencing a stabilization meaning, home prices are no longer falling. That’s the good news. Jeffrey Otteau, of the Otteau Valuation group – the foremost expert on New Jersey home values, says that we will experience a slow and steady recovery in Essex County with the worst of the decline behind us. But, it will take some time (years) for prices to reach the levels they once were at the height of the market in 2005.

Glen Ridge still has strong demand and the low levels of inventory. Many homes are selling there and it’s among the most swiftly moving towns in New Jersey in terms of number of days on market. The beautiful community of Essex Fells, once nearly frozen in sales, is among the most improved locales in the entire state in terms of recovery. By the way, their exclusive elementary school may soon be absorbed into the West Essex Regional School District. Small class sizes will likely remain the same but they will lose control of the curriculum.

Montclair is once again experiencing bidding wars, mainly in the $400k-$700k range although bids are not as high above the asking price as they once were in 2005. Most homes are still taking some time to sell. Of those homes currently under contract in town, average days on market was 82 and half of them were listed between $650K – $3.5 million. With some of the most impressive homes in Essex County, Montclair is trying to find the new “top of the market”. The most expensive home sold in the last 24 months traded for $3,622,000. Michael Strahan’s house, once listed at $7,750,000, is now on the market for $5,795,000. Comparatively, best selling author Dorothy Benton Frank’s magnificent stone manor home will give it a run for its money listed at $4.2 million. Stay tuned for developments.

West Orange has an enormous amount of inventory and is having a hard time, experiencing the highest amount of homes for sale in suburban Essex County - over 300 homes. However, even they are experiencing some swift sales among homes that are priced correctly – to reflect the market. Also, the recent purchase of a home in Llewellyn Park by Whoopi Goldberg should boost that exclusive gated community.

Of the Caldwell’s, North Caldwell has the most expensive inventory that is under contract with nearly half of it in the $1million – $1.6 million range. However, average days on market is 160. Comparatively, both Caldwell and West Caldwell housing is taking about 70 days to sell but with most of the ‘under contract’ homes selling between $300 – $600K.

Verona homes are taking 105 days to sell and current under contract sales are averaging in the $400 range.

South Orange is taking about 71 days to sell and most of the under contract housing is in the $300-$500K range.

Maplewood is less expensive with most of the under contract houses in the $200-$400k range and taking 83 days to sell.

Bloomfield’s average days on market is 130 and has nearly 200 homes currently on the market. Of those under contract, only 6 are listed above $400K.

I’ll blog about the state of the market on a quarterly basis so look for updates.

How is the market?  This is a certainly a loaded question these days.  But, I do get asked this constantly so look for this topic to be a regular blog entry.  Let’s look at the national picture first and then, in my next blog, we’ll drill down to New Jersey and Essex County. 

The National Picture

Perhaps the most popular or commonly quoted national real estate measurement is Standard & Poor’s/Case Shiller Index which measures home prices and the pace of home sales.  It’s a three month moving average and they reported earlier this week that existing home sales are up 10.1% – most likely due to the first time homebuyer credit (now expanded to existing homeowners, too).

The home price index measures 20 metropolitan areas and that index rose only .03%.  At least it rose.  However, nine cities including Boston, New York, Charlotte and Seattle fell.  I want to take a moment to note something.  The Case-Shiller Index measures only about 45% of the market and does not even measure condos, co-ops and townhomes, at all.  This is significant as these are largely entry level homes. Statistically, for every entry level (or “starter” home) that sells, four more sell as a result.  So, an argument can be made that the Case Shiller Index is overly pessimistic. I’m not saying that the index is not reflective; only that it should be noted.

The National Forecast

The New York Times reported on 11/25/09 that there is some pessimism about a second potential dip, leading to what’s known as a “W” shaped recession which has two lows.  A traditional recession is “V” shaped.  The pessimistic forecast pointed to an abundance of inventory, continued unemployment and a traditional slow-down of real estate sales in winter. 

Jeffrey Otteau, New Jersey’s foremost valuation expert, disagrees. For one thing, a “V” or “W” shaped recession implies a steep or rapid decline followed by a steep or rapid recovery.  Everyone agrees that we did not have a rapid decline in real estate (it took four years, beginning in June 2005) and certainly no one expects to see a rapid recovery. Rather, he forecasts a boat shaped recession which began with a long, slow steady decline after which the market will skip along the bottom for some time and then conclude with a long, slow steady recovery.  While the market will recover in fits and starts, Mr. Otteau does not forecast another major dip due to the extension of the home buyer credit, the fed continuing to buy down interest rates and job losses continuing but leveling off.

Additionally, he says that the point of view about loads of pent up inventory should largely be offset by loads of pent up demand among untold numbers of buyers who have put off a purchase – some for years - while waiting for the market to hit bottom.

New Jersey

Compared to the rest of the nation – and certainly the most deeply affected states of CA, NV, MI and FL – New Jersey is well ahead of the curve in terms of recovery and is showing significant signs of stabilization.  With the exception of Cape May County and a few southern areas, the numbers show that the worst seems to be behind us.  In other words, in most of the state, prices are no longer falling.  Most of the recovery is in the lower price ranges, where it always begins and where the homebuyer credit is having the greatest impact.

While lower priced homes are beginning to stabilize, the luxury market is still in trouble, in New Jersey and elsewhere.  Older existing luxury homes in blue chip communities are faring better than new construction (‘McMansions’) with over 3,000 square feet on 2+ acres.  Their perception as a commodity is greatly diminished due to the sheer number of them available and the use of less expensive building materials compared to those used in older existing luxury homes.  With the last of the 80 million baby boomers trading down at an accelerated rate and only 50 million Gen X’ers to buy them (who earn 17% less than their parents did at the same age), they may be in permanent decline.

Despite the aging population, adult 55+ communities may be in the most trouble of all due to their very high maintenance fees and exclusivity which seriously reduces the potential buyer pool. Look for some possible federal legislation down the road to rescue and reclassify them as garden variety condo communities.

I will cover Essex County in particular in my next blog.  The good news, if you’re thinking of buying or selling in Essex County, is that it’s always going to be an area with tremendous resale value due to it’s great housing stock, beauty, culture, proximity to Manhattan and mid-town direct train access.

It was an interesting summer, weather-wise, in the Montclair, New Jersey region.  We had a lot of rain causing some wet basements and some major heat and humidity in August. It’s the time of year to think about getting your home ready for the winter.  While it’s great to pull out the big sweaters and to see the leaves change, homes in the Essex County, New Jersey region can take a beating between October and April. Here are some ideas to help you protect your investment and prolong the life of the structure and systems of the house. 

Air Conditioning Systems

If you have central air, don’t forget to close the vents in your air returns in every room before you turn the heat on. It’s easy to forget that those little buggers are open and that they can allow heat to escape into the attic.  Next, make sure to cover the condensers outside to prevent leaves and debris from building up inside them.  If you do not have a cover from the manufacturer, tape some plastic sheeting over the top.

If you have window units, it’s not a great idea to leave them in over the winter.  I know it’s a pain to remove them but leaving them in will cause you to lose energy. If they cannot be removed, at least cover them tightly with thick plastic.

Heating Systems

Before you turn on the heat for the first time – MAKE SURE YOUR CARBON MONOXIDE DETECTORS ARE IN WORKING ORDER!  Dangerous gases can escape from you furnace which can only be detected with these devices.   Check the battery or replace the unit if they’re not in working order.

The best idea is to have the heating system serviced each fall by a professional.  Don’t forget to bleed steam furnaces once a week in the cold months.  Ask the plumber to show you how – it’s easy and will seriously prolong its life. If you have a forced hot air system, you might want to invest in a humidifying system.  And have filters checked, too.

Fireplaces

The fireplace is another location where dangerous gases can escape into the home atmosphere.  Before you settle into winter, have the flue cleaned out and check for cracks in the lining.  Your home is much more airtight in winter and ventilation is difficult to achieve.  Also keep an eye out on the outside of the home for chipped or falling bricks.  Re-pointing them gradually is much cheaper than re-building.

Windows

Raise or remove screens and drop down storm windows.  Feel for little drafts and apply weather stripping.  You can hire a professional to assess the energy efficiency of your home.  Improving this area (including new insulation) might get you a federal tax credit, too.

Gutters

If you enter the winter months with clogged gutters, water will not be able to travel down the leaders and into the earth.  It will eventually freeze in the gutters which can ultimately create serious leaking issues and expensive structural damage inside your home.

Garden Hoses and Outdoor Pipes

Don’t forget to turnoff water to outside, draining the pipes (a two-man job) and disconnect the hoses so they won’t freeze and crack over the winter.  While you’re at it, bring those ceramic planters inside, too.  They will freeze and then crack in the thaw.

Attic

Check to see that all windows are closed up there.  It’s easy to forget about them and a small opening can cost you quite a bit in escaped heat.  If you have a whole house attic fan, make sure the louvers are closed.  Add some insulation to the back of the attic door for extra energy conservation.

Radon in the Basement

Radon is an odorless and deadly gas that is dangerous for everyone but especially for young children and people with asthma or other lung disorders. Ventilation is the solution to radon.  If you have very low levels of radon and do not have a radon remediation system, the gas can build up in the basement because ventilation is difficult to achieve as you close and lock up windows for the winter.  Every homeowner should test for radon in the basement.  The EPA says that 4.0 picocuries or above should require a remediation system, while recommending a system for over 2.0 picocuries.

On warmer winter days, I like to open the windows up for an hour or so – and run a portable fan – just to air out the basement recreation room.  This is NOT the way to remediate radon and is in no way a substitute for professional testing and remediation.  I like to do it just to get fresh air in the house on the regular basis. 

Underground Oil Tanks

As the water table rises in the Essex County, New Jersey area, more and more underground oil tanks are decomposing – allowing oil to leak into the surrounding earth.  In the more serious cases, it can contaminate the water table itself and travel onto other nearby properties.  Many professionals in real estate and in the New Jersey state government recommend removing them whether they are leaking or not.  In fact, there may be some state sponsored programs to assist you in this.  You can install an indoor tank or convert your heating system to gas.

If you have an underground tank, it is critical to have it tested for leaks and to have oil tank insurance in place.  An oil tank spill on your property can cost tens of thousands of dollars to clean up and, in some extreme cases, can cost well over one hundred thousand dollars.  Testing is best done in spring, summer or fall when the soil is not hard and/or frozen.  Begin by contacting your oil company for information.

You may have heard about the problems over the last nine months with appraisals coming in much lower than the sale price.  It’s happening all across the nation and is also a big issue here in the Montclair and Essex County, New Jersey region.  Pending real estate transactions have been deeply affected.  The problem is hardest on the sellers but it’s difficult on buyers, too.

For sellers, after getting an offer that is already lower than they’d hoped (due to the recent real estate decline), an appraisal that comes in beneath the sale price sometimes forces them to renegotiate the price down even lower in order to keep the deal together.  The buyers are impacted because they stand to lose a property they want to buy.  They offered an amount of money that they feel was fair and commensurate with the local trends in Montclair, Glen Ridge and other towns in Essex County, only to be told by their lender that they are overpaying and may not be able to get a loan at the agreed-upon sale price. What’s worse is that many of these appraisals are flat out inaccurate – off by tens – or even over one hundred thousand dollars.

Why is it happening?

The problems began last March, 2009 with some very swiftly-passed new truth-in-lending laws in response to the sub-prime crash, followed by even more new legislation in July, 2009.  Even though many people called it ‘panic legislation’, the motive on Capital Hill was a good one – to try to better educate buyers about how much they can and should spend on housing and to better protect them when dealing with appraisers, banks and lenders.

A central component of the legislation is called the Home Value Code of Conduct, or HVCC.  It is a new standard of conduct designed to remove coercion and pressure on appraisers to overvalue homes at inflated prices.  It was initially a great idea and even the appraisers loved it, at first.  But, the execution was poorly done and is now partially crippling the very industries that Washington was trying to help – the real estate and mortgage industries.  Now many of the appraisers, if not most of them, are as outraged as everyone else is.

The new laws caused banks to begin outsourcing their entire appraisal process by using a handful of national appraisal management companies.  The locally experienced (read: more expensive) and very knowledgeable appraisers were replaced with more “cost effective” appraisers drawn from a very large region, many of whom live in other counties or other parts of the state.  They are less expensive and are largely working outside their geographic realm of knowledge with little understanding of the differences from neighborhood to neighborhood and even street to street.

The Solution

The ideal solution, of course, would be to let the experienced local appraisers back into the markets they know best.  In fact, there is more proposed legislation afoot to try and repeal these laws – or at least modify them.  But at the moment, legislators on Capitol Hill have other, more pressing, legislation to vote on in these difficult times.

What you can do, if you are in the process of selling or buying a home, is to communicate with the lender attached to your transaction.  I have been told firsthand by officers of some major national banks that you don’t have to take a bad appraisal lying down. They don’t want your deal falling apart either.  Ask questions about where the appraiser is from, exactly how well he knows your community, how many appraisals he’s done in your town and what comparables (comps) he is using to value the home.  In fact, the buyer is now required to sign the appraisal before closing so you are able to see the comps used in the appraisal report.  If it’s off, or appears to be altogether inaccurate, you have the right to ask for reconsideration.  It may delay your closing but it’s better than selling a home at below-market value.

I am the co-author of “The Complete Idiot’s Guide to Selling Your Home” (Penguin, January 2010). It has been a dream come true – not only to become a published author with a major imprint but – to have the subject matter be focused on something about which I am passionate – real estate. For the last 10 years, it has been so rewarding to help individuals successfully buy and sell homes. But, through this book, to be able to help people whom I do not know and who may live anywhere in the world, is something that has exceeded my wildest expectations.

Below is just a sampling of some of the chapters you’ll find in the book. If you would like to buy the book, click here.

Other locations to buy from: Amazon.com,  Tower.com

This book is about selling your home in any type of market, and for the highest dollar amount possible. Anyone can get a home sold if they really want to – by giving it away for a bargain basement price. This is about making you more money on the sale than a similar home right next door. It is a comprehensive guide which delves deep into the process and nuances of marketing your property successfully as well as into the psychology of attracting and working with buyers. The book is the result of experience selling tens of millions of dollars worth of real estate in communities (among many others) such as Montclair, Glen Ridge, Verona and West Orange, New Jersey.

There are so many facets to selling a home. There is pricing – which is a critical component and even more so in a down market. But there are also the many different strategies to consider such as how the home is exposed to the ‘buyer pool’; the way it’s staged and professionally photographed; how to negotiate an offer; the way a deal is managed all the way to the closing table once you do get an offer; the psychology of buyers and their mindset; and much more.