Home buyers clamor to get into Montclair, and prices are sky high
By JAIMIE JULIA WINTERS
It took Brooklynites Steve and Lindsay Stankovich a year and half to find their house in Montclair.
They began their search in March 2019. Still not finding what they wanted and with the pandemic hitting, they moved in with Lindsay Stankovich’s parents in Cedar Grove in early 2020. The housing inventory lowered. Prices rose and bidding wars began, with the couple losing out on homes that were going for as much as 20% above listing prices, Lindsay Stankovich said.
As the pandemic raged on and lockdowns set in, city dwellers who paid a premium for small apartments in New York City were seeking the suburbs of Montclair, Rich Stanton, broker and owner of Stanton Company, said.
After losing another home to higher bidders who came in after the sellers had already accepted the Stankovichs’ bid, the couple finally got a seven-bedroom, two office home (important to them during COVID-19) on Gates Avenue in June 2020.
“We got really lucky,” Lindsay Stankovich said about their winning bid of $905,000 on a home listed at $839,000. There were only three bidders, but the home needed some work, such as a new kitchen and central air.
And now Montclair’s housing market is even more competitive, Stanton said. As the state is opening up, more city dwellers and apartment renters are flocking to the suburbs of Montclair in search of homes with more space and backyards. The New Jersey Realtors association reports the demand for homes far exceeds the inventory on the market.
Stanton said sales data reflects three main factors that, together, are leading to multiple bids and homes going as high as a third above asking price — low inventory, price appreciation and more large homes being sold.
As an example, in February, a 2,200 square foot home with an asking price of $700,000 sold for $935,000, Stanton said.
In Montclair in April, the most recent month for which statistics are available from New Jersey Realtors, 57 houses were listed, compared to 20 in April of last year, during the height of the pandemic. But in April of 2019, 80 homes were listed, up five from the year before.
Essex County overall has seen a 35% drop in inventory this year, according to New Jersey Realtors.
Despite what the real estate association is calling a “continued inventory crisis,” April was a strong month for home sales in Montclair, up 25% from last year. Low interest rates, which continue to decrease, are also driving the market, with Freddie Mac reporting last week a rate of 2.93%, down from 2.96% the prior week, on a 30-year loan. Last June, interest rates were 3.21%.
In New Jersey, inventory is at historic lows, down 53.5% from April 2020, when the market had already been impacted by the ongoing pandemic, according to New Jersey Realtors.
Even in New Jersey, apartment dwellers are also seeking homes. New Jersey saw its number of available rental properties increase by more than 70% this year, according to QuoteWizard by LendingTree, which has been tracking the rental vacancy rate in each state since 2019.
“Our team of analysts found that over the last two years, people have moved out of large cities and into more suburban areas. The change since 2019 is staggering,“ Nick VinZant, senior research analyst and insurance expert with QuoteWizard, wrote in a June 8 post to the company’s site.
The low housing inventory is driving multiple bids and homes in Montclair are selling on average 14% in 2021 above the listing price compared to 5% average in 2019, with the median price of $910,000, according to numbers provided by New Jersey Realtors.
May brought about even higher numbers, with the average sale price of a Montclair home breaking the $1 million dollar mark for the first time ever, Stanton said, citing newer figures than those yet available from the Realtors group. The average premium over ask was 35.9% in May, Stanton said.
“There is some premium built in here in anticipation of bidding wars, so it isn’t an exact reflection of how much the market is up. However, the 12-month trailing average price is $906,000, vs. $740,000 a year before, which is still a healthy 22.4% increase,” Stanton said.
Homes in the $600,000 range were seeing 15 to 25 bidders, while homes in the $800,000 to $1 million were seeing about six offers, Stanton said.
By the time a property sale closes, the market may have already moved higher than that sold price suggests, according to New Jersey Realtors.
But Amanda and David Smock, who also moved from Brooklyn, got their dream home on Porter Place in August 2020 at asking price. They had driven by the home in June of that year and had fallen in love, but it was above their price range, at $1.2 million. By the time they had secured a real estate agent, the price had dropped to $1.1 million. The home had two kitchens, which many buyers couldn’t see past, Amanda Smock said. After viewing eight other homes, they put a bid in for the asking price. She also included a cover letter detailing her family, why they wanted to move to Montclair and why they wanted the 1890 Queen Ann-style home.
“It had a turret and magical gardens. I could see us raising our family there,” Amanda Smock said.
Although there were two other bidders, the Smocks got the home.
In 2021 however, Stanton said, some buyers have to come up with more cash down due to appraisals coming in lower than than the high selling prices. But he said appraisals are catching up to reflect the market.
The average number of days a home is on the market in Montclair has gone down, with 39 days averaging in 2019, 30 in 2020 and 26 days this year, according to New Jersey Realtors.
According to Stanton’s figures, Montclair’s inventory continues to lag, with 116 active listings in May, vs. 119 last year (just coming out of COVID-19 lockdown), and a more typical 195 active listings in May 2019. Sellers have been slow to come to market because they have been having trouble finding their next home due to the low inventory or the inability to travel outside the area.
But Stanton said he expects inventory to increase as prices drive homeowners to list while they are better able to find their next homes, as they can travel freely due to coronavirus restrictions easing.
Buyers may have to put in offers on multiple homes to secure a purchase, according to New Jersey Realtors.
Stanton is also recommending that sellers consider negotiating leasebacks — when a seller leases from the buyer for a period — after closing.
This would allow sellers to stay in their homes for a certain amount of time after closing, while giving them the funding and timing flexibility to conclude the purchases of their next homes. Stanton currently has two sellers that are doing leasebacks.
“They are also in better position to close on another place as they have cash in hand,” Stanton said.
The Stankovichs also made concessions, giving the owners an extra two and half months to move out. They also waived any inspection issues.
William Scott, co-chair of Montclair’s Housing Commission sees a few negatives in the rising prices for the township itself. With the sale price of two- and three-family homes also increasing, rents will be driven up as landlords struggle to make the higher mortgage payments.
A recent analysis conducted by the township examined the 1,473 two-to-four family rentals units in town. It shows Montclair’s Fourth Ward houses 44% of the two-family units, and 41% of the three-family units — neither of which would be covered by a rent control ordinance the township first passed last year, but that has been tied up in a court battle since. It would, however, apply to four-family units, 43% of which are in the Fourth Ward.
“You can’t blame the seller, but with these prices we will lose the socioeconomic diversity of Montclair. Will diversity become expendable in Montclair? It’s well on its way,” Scott said. “People will be out priced of Montclair whether looking to buy or to rent. There isn’t enough affordable housing to meet the need now.”