N.J. housing market slide provides opportunity for first-time buyers

by Joseph R. Perone/The Star-Ledger
Saturday January 03, 2009, 7:10 AM

In a wooded neighborhood of Raritan Township, Sarah Nojiri walks through an empty colonial with a dining room big enough to fit the large furniture her grandmother gave her.

She can't wait to hold family dinner parties inside her first home, and she loves the location in Hunterdon County with easy access to Route 202.
Mia Song/The Star-LedgerSarah Nojiri, left, who is buying her first home in Flemington, does a walk-through with her Weichert Realtor, Paula Anastasio.

"For people with good credit, it's a good time to buy," said Nojiri, a 28-year-old pharmacist, who lives with her parents in Neshanic Station.

After months of searching and one deal that fell through, Nojiri found the right property in a town with a blue-ribbon school system, according to her real estate agent, Paula Anastasio. Her client is paying $470,000 for a house that sold for $598,000 two years ago.

For all the consternation by New Jersey home sellers about the sorry state of the housing industry, there are plenty of savvy first-time buyers like Nojiri who know a good value when they see one. They are taking advantage of one of the worst housing markets in a generation to find good deals, according to people who follow and are involved with the housing industry.

"There are some phenomenal deals out there," said Anastasio, a Weichert Realtor in Flemington.

No one should be surprised the real estate market has turned to sawdust. Home sales in New Jersey are expected to finish 2008 at just 68,000, down 20 percent from the 85,000 sold a year ago, said Jeffrey Otteau, president of otteau.com, an East Brunswick market research and appraisal firm.

Home values have dropped 6 percent, with the median price -- meaning half sold for more and half for less -- of a single-family home in New Jersey now at $312,437, down from $330,396 a year ago. During the peak of the housing boom, in the fall of 2005, the median sale price was $367,573, he said.

The housing market should hit bottom by spring of 2010, and home prices could decline another 10 percent before then, Otteau said.

"But we could hit bottom as early as the summer of 2009 if job losses show some improvement," he said. "The next 12 months continue to be the best time to make a home purchase in a long time."

Many consumers are still having trouble qualifying for a loan. But house hunters with great credit scores are benefiting from lower interest rates, he said, because every 1 percent drop in rates reduces the cost of a new home by 9 percent.

The Federal Reserve's move last month to cut interest rates to near zero is expected to keep 30-year mortgage loans below 5 percent next year, said Domenick Cama, chief operating officer for Investors Savings Bank in Millburn.

"Rates have already dropped as low as 4.5 percent for a conforming loan of less than $417,000," he said. "It looks like these rates will continue to be around for a while."

Cama expects lending will loosen up toward the latter part of this year and 2010 so more buyers can enter the market.

Bianca Martinez and her fiance, Adam Starling, aren't waiting. They are buying a condo at Dixon Mills in Jersey City.

"Some of the sellers are desperate to sell, and we felt secure enough to get a mortgage," Martinez said.

Starling has noticed banks are making it more difficult for buyers to obtain a loan. They had originally qualified for a 5 percent down payment, but now their lender wants 10 percent down. They also have to prove Martinez's current condo in Jersey City has a new tenant.

"We're finding new hoops that have to be jumped through that weren't there a few weeks ago," Starling said. "It's nerve wracking."

They are buying the one-bedroom condo in a brick, converted pencil factory for $340,000, about $59,000 less than the original list price.

John Ha, sales agent for Dixon Mills, said the renovated condos are attracting buyers because the housing costs about $450 a square foot, compared to condos in Brooklyn or Queens that run $800 to $1,000 a square foot.

"Despite the state of the financial markets, we are still getting a steady stream of people," he said. "They are value hunters."

The recent drop in rates has made urban properties more affordable for both first time buyers and older empty nesters, said Ben Jogodnik, senior vice president of Toll Brothers City Living in Hoboken.

"Your payment on an identical mortgage is about 10 percent less in the past few weeks, which is enormous," he said. "Everyone has been hesitant, because they are afraid of buying and having prices fall further."

His company has used sales incentives such as custom painting, flat screen TVs or upgraded window treatments to persuade buyers to make a purchase.

First-time home buyers are the most critical part of the residential food chain because they allow other sellers to purchase more expensive homes, said Paul Csik, senior vice president, American Properties Realty in Iselin.

"The first-time buyer buys a monthly payment," said Csik, whose company sells condos and townhomes in Burlington, Mercer and Monmouth counties. "For a condo, anything under $300,000 or a townhouse under $400,000 in a desirable location is the sweet spot in the market right now."

Generation X shoppers, who were born between 1965 and 1980, are driving the housing market right now, and they are extremely savvy about house buying, according to Anastasio, the Flemington Realtor.

Her client, Sarah Nojiri, brought in an expert to inspect her chimney for possible cracks with a fiber-optic camera.

"In 31 years in the real estate business, I've never seen a chimney inspection this thorough," she said. "It was so high-tech."