Recently, the inquiries I receive can be roughly categorized into two types: "Real estate prices have dropped a lot lately, right?" or "I've heard real estate prices have gone up significantly; what’s the market like these days?" The current real estate market, especially for personal homes in New Jersey, is very hot. It’s hard to believe that the real estate market is thriving when the economy and real estate should be struggling due to the pandemic. However, to put it simply, in just July and August, the prices of personal homes in Bergen County that were in the low $600,000s have surged to the mid to high $700,000s, and homes priced around $1.5 million have exceeded $1.8 million. This represents roughly a 20% increase. If you attend an open house, even with social distancing measures in place, the line can be long enough to wrap around the corner.

The reason for this is clear. Everyone has been cooped up at home for months, and it’s becoming increasingly difficult to stay in the same place. With the prospect of this confinement lasting longer, and interest rates at historic lows, many are thinking they should buy a house with a spacious backyard and are diving into the real estate market. To make matters worse, residents from Manhattan, the Bronx, and Brooklyn are attempting to escape to New Jersey, Upstate, and Long Island, driving up real estate prices. For sellers, this is an unparalleled opportunity.

There are two main factors driving the rise in real estate prices: population influx and capital influx. Population influx refers to the arrival of people from outside into the area where I live, while capital influx refers to significant development occurring in my area. It can also mean that a lot of money is circulating in the market. Which of these two factors contributes more to rising real estate prices? Above all, the most significant factor influencing real estate prices is population movement. Even if large developments occur in an area, the benefits tend to accrue to only a few people, and the positive effects on the area are not substantial in the short term. However, population movement is a natural phenomenon that tends to have a significant positive impact on the market even in the short term. The fact that people are flocking to an area without major development indicates that something about that area offers convenience or prosperity, and when people move, it often creates a trend that attracts many others, which naturally drives up real estate prices according to the principles of supply and demand.

Currently, both population influx and capital influx are happening simultaneously. Interest rates continue to decline, and money is being released to prevent a larger economic crisis. Additionally, there is a mass exodus from New York, with many people in condo-dense areas like Jersey City, Hoboken, Weehawken, and West New York lining up to buy homes with good backyards.

In fact, Bergen County in New Jersey is already known for its high real estate prices compared to other counties. Prices have risen by 20% here, but other counties in New Jersey have seen even greater increases, making their markets even hotter. I recently visited Essex County to assist a buyer, where homes priced in the $700,000s are selling for around $900,000, and homes in the high $200,000s are exceeding $3 million.

But will this situation continue? If a second wave of COVID-19 hits, will everything come crashing down again? During the second wave, more people may become unemployed, more businesses may fail, and there could be an increase in foreclosures due to inability to pay mortgages or rent. I have been hearing pessimistic views about real estate for over ten years, and everyone claims this time is different. However, I advise my clients that while the economy is in crisis and in a state of panic, the rise in real estate prices is just beginning.

- To be continued
Danny Yoon, REALTOR ASSOCIATE®

917-300-8484

dyoon@mynjhomes.com

www.mynjhomes.com

Licensed as Doojin Yoon

Coldwell Banker

375 Park Ave., Ste 21 Fort Lee, NJ 07024

☎ 201-461-5000 ext. 6001

Fax 862-345-1031

Consumer Information Statement on NJ Real Estate Relationships:

http://www.priv.njmlsnew.xmlsweb.com/public/CIS_form.pdf

Download my mobile app: http://bit.ly/app-dy