Inventory Shrinks

Prices Soar

Bidding Wars Escalate

Townhouses Have Their Day

Bulk May Be Reined In

Enough, Already?

Advice for Sellers

Corrections or additions?

These articles were prepared for the May 11, 2005 issue of U.S. 1

Newspaper. All rights reserved.

Today, Small Houses are Big Sellers

Asked for a recent home sale that surprised her, real estate agent

Robin Gottfried hesitated – there is so much that is surprising in

this overheated real estate market. "Okay," she says, choosing an

example. "There was a townhome in Princeton Walk. It was in perfect

condition, but it backed up to a busy road." A few years ago the home

might have languished. But not now, not in the spring of 2005. "It

drew 15 offers," says the agent, who works with Coldwell Banker in

Princeton.

That is the story of the real estate market as it kicks into high gear

for the spring selling season. Its themes include incredibly tight

supply, rapidly rising prices, rapidly decreasing interest in lawns,

investors on the prowl, immigrants from both Latin America and tony

towns in North Jersey yearning to find homes in central New Jersey,

and, yes, the rise of the townhouse as a major object of desire.

Joining townhouses in the smug role of real estate star are condos.

There was a time, way back in the late 1980s and early 1990s, when

demand for these units was so low that developers resorted to auctions

to unload them. They were considered ugly stepsisters to the Holy

Grail of housing – the single family home, preferably with outsized

garage and lots and lots of land. Those single family homes are still

in demand – and the object of frequent bidding wars – but they now

share the spotlight with their land-poor brethren, the townhouse and

condo.

No matter what the home type, however, when its owner decides to put

it on the market, it is going to get lots of looks.

Top Of Page
Inventory Shrinks

‘There is a shortage of houses compared to an oversupply of buyers,"

says Gottfried. "All prices ranges are moving fast. Under $1 million

is moving very fast."

From Princeton to Trenton, the story is the same. There are just not

enough homes to go around. "People are desperate for houses," says

Anna Shulkina, an agent with Weichert’s Princeton Junction office.

"The supply is so low." This is so, in no small part, she says,

because central New Jersey is a one-of-a-kind place. "This is a unique

situation," she says. "It’s become a suburb of both New York and

Philly."

"In Lawrence anything in the $200,000s and $300,000s goes right away,"

says Mike Richman of Weidel’s Lawrenceville office. And it’s not a lot

easier to get in at the higher end. "We have someone now who wants to

spend $800,000 to $900,000 in the village of Lawrenceville," he says.

"It’s hard to find, but we’re working with him." Large homes within an

easy walk of the village’s shops and restaurants can now command a

couple of hundred thousand dollars more than the couple want to spend

– if such a home can even be found.

Hunting is not any easier in West Windsor. "I have to steel people,"

says Bernard Smolowitz, a broker/partner with Keller Williams. "Single

family homes in move-in condition with four bedrooms in the $400,000

to $500,000 range are virtually non-existent. Good houses go in days,

with multiple bids."

Frances LaPera, an agent with Century 21 in Hamilton, reports that "in

the price range of $300,000 to $400,000, there is nothing out there."

She has been in the business for 12 years, and says "this is the

hottest market. If you price right, a house will sell within hours."

If the house is in Princeton, it will sell even if it has attributes

considered liabilities in other towns. "The borough is still much in

demand," says Gottfried. "If they want to walk to town, they’re

willing to overlook age, parking, etc. They will make sacrifices."

Shulkina talks about a small house on Pine Street in the Borough that

was in "huge disrepair." It came on the market at $250,000.

Immediately there was a bidding war. "My client stopped at $35,000

above asking price," she says. He was a builder, able to do the

repairs himself. But someone wanted the handyman’s special more than

he did. "It went for more than $100,000 over asking price," says

Shulkina, adding, "that’s not unusual for Princeton."

The same situation prevails in older sections of Princeton Township,

where buyers hesitate not one second before fighting over 1950s split

levels with one-car garages.

Supply is an acute problem in Trenton, too. "There are no houses for

sale in Hiltonia’s inner streets," says Bill Harbach, an agent with

Doolan Realty. A large middle class neighborhood of Tudor and Colonial

homes, Hiltonia is one of Trenton’s most prominent neighborhoods, but

the city’s shortage of housing inventory is not limited to its leafy

streets. "There are six houses available in Glen Afton," he says,

naming another desirable neighborhood, "but three are under contract."

It’s the same in all of the Trenton areas that draw commuters. The

azaleas, lilacs, and tulips are in full flower, but "for sale" signs

are just not coming out to join them.

Like Shulkina, his counterpart in West Windsor, Harbach sees Trenton’s

location vis-a-vis the major cities at its borders as one reason that

house hunters are snapping up anything with four walls. "We had a

Westfield couple, New York City commuters," he recounts. "They could

not afford anything in Westfield, and they discovered that this is an

easier commute. We recently closed on one Glen Afton couple who came

from Chicago. He’s working in New York, and she’s working in Philly."

As he talks about other sales, he mentions families from California

and from Florida. In addition to an easy commute, the newcomers are

attracted to the city’s value. "You cannot find $275,000 brick

Georgians in other towns," he declares.

"We have buyers waiting for the right house," says Harbach. "They come

up, and they go."

Top Of Page
Prices Soar

‘Appreciation is 1 1/2 percent a month for townhouses," says Shulkina.

"For single family houses, it’s $50,000 to $60,000." She gives a

recent sale as an example: "I just sold a townhouse in Princeton

Landing for $650,000. A month later, the same model came on for

$699,000, and it sold above listing price. My client bid more than

$700,000, and lost it."

The prices vary from town to town, generally going down in direct

proportion to distance from Nassau Street. Yet throughout central New

Jersey, the trend is up – way up.

In Trenton, Harbach reports that a Hiltonia house went for $309,000 in

February, 2004. Its new owners quickly decided that the large house

was too much home for them, and they put it back on the market in

October, and it promptly sold for $335,000. While this house was a

relatively modest 1950s Colonial, Harbach himself owns a 1938 Tudor

revival. He paid $112,500 for it in 1982, a record high in the city at

the time. He guesses the house would now fetch a price "in the

mid-$600,000s."

Just up the road, in Hamilton, prices are also soaring – so much so

that at least one real estate agent is astounded. "People are getting

their prices, but a few are ridiculous!" declares Derek Malbone of

ActionUSA Jay Roberts. "A four-bedroom Colonial in a top, premier

section sells for close to $500,000 – even over," he says. "That’s

maybe 50 percent over three or four years ago." He paid $189,000 for

his three-bedroom ranch in the Briar Manor development three years

ago. Until recently he thought that if he were to sell, he would ask

$425,000. But now he is revising upward because a neighbor just put a

house on the market for $483,000. "Mine," he says, "is twice as big."

A real estate agent in East Windsor, who did not want his name used

because he says it is against corporate policy for individual agents

to give interviews, reports that prices in and around that township

are "up 30 percent in one year." Four bedroom Colonials now sell in

the $500,000 to $600,000 range. "I had somebody walk into my office

looking for a house for $500,000," he says. Even at that price the

buyer could not find the size and amenities he was looking for. "I

ended up selling him an $800,000 house in Millstone," says the agent.

Like every other agent, he reports rampant bidding wars. "Some

surprise even the realtors," he says. "I can’t believe the prices."

While sellers rejoice, many potential buyers weep. Yvonne Hammond, of

Gloria Nilson’s Princeton Junction office, talks about one such

casualty of the hot real estate market. "This weekend I had a woman

who wanted to spend $450,000 on a house in West Windsor." The house

hunter specified that she wanted four bedrooms and did not want to

look at houses that were more than five years old. "It’s not

happening!" says Hammond. "Not even in townhouses."

Houses are easier on the pocketbook in Ewing, where Robert Koch of

Burgdorff ERA’s Princeton office says that a three or four bedroom

home in the northern part of the town can be had for $300,000 to

$400,000. That is more than the house would have cost a year ago, but

still less than its West Windsor equivalent, which he puts at about

$700,000.

Still, even at half the price of a West Windsor house, the sticker for

a home in Ewing can induce shock. "I have people moving from the

Midwest," says Koch. "They say ‘I could have bought three houses in

Ohio for this price!’"

And what would the Ohio emigres think of the price for a small

attached house on Bank Street in Princeton Borough? A small, older

house, with tiny closets and no driveway, let alone a garage, the

house just sold for over $500,000, according to Gottfried of Coldwell

Banker.

Top Of Page
Bidding Wars Escalate

There are many reasons for a shortage of houses and for price jumps.

Several agents cite low interest rates. At the current rate of 6

percent or so, the payments for a mortgage on a $500,000 house are

less than half of what they would have been in the mid-1980s, when

mortgages rates hovered at 13 percent, a one-third of what they were

at the late-1970s rate of 18 percent. A plethora of new mortgage

products – including interest-only loans and 107 percent mortgages –

also bring pricier homes into range for more buyers.

Another big factor right now is pressure from the north. Any number of

agents cite $800,000 as an entry-level price just 30 to 45 minutes

north of the Princeton area. And yet, as they point out, commuting

time can actually be less from Princeton Junction or Trenton, which

offer a straight shot into the city – no need to change trains – as

well as a number of Amtrak trains, which make few stops and can reach

Penn Station in well under an hour.

But perhaps the biggest driver of quick sales and high prices is

bidding wars.

"I have tons of buyers who have lost out three, four, seven times,"

says Weichert’s Shulkina. "Every transaction is like a war." One of

her clients badly wanted a newly-listed home in Princeton Landing. "He

went well above asking price," she says. "He even waived mortgage

contingency, but he did not get it."

Every time a bidder loses out, he, along with the other five, 10, or

15 other losing bidders, becomes more desperate. "Only one person gets

the house," Shulkina points out. The result is that when the next

similar house comes up, it commands an extra $10,000, $20,000, or

$50,000, as the disappointed bidders join newcomers to the market.

"It’s a vicious circle," she says. "It’s very stressful for everyone."

Like other agents, Shulkina tries to prepare her clients for battle.

She tells them that it is imperative to be completely pre-approved for

a mortgage. Other factors that can give their story a happy ending

include a big down payment and flexibility. The out-sized down payment

assures the seller that they will follow through with the deal.

Flexibility means that under no circumstances will they demand that

the drapes stay and that they will try, as far as possible, to

accommodate the sellers’ terms as far as a closing date is concerned.

Buyers want the best possible price, but they often want peace of mind

even more.

Joan Eisenberg of ReMax Greater Princeton tells the story of a sale

where the buyer rejected a bid that was $30,000 above asking price,

and went with one that was $15,000 above asking price. The lower

bidder was willing to give the seller time to move, while the higher

bidder was insisting on moving in right away. "It’s not just about

price," she says.

Top Of Page
Townhouses Have Their Day

"Townhouses have been the story for the last eight months," says

Coldwell Banker’s Gottfried. This observation is repeated again and

again. Whether the townhouse is 30 years old or brand new, part of a

huge development or grouped with just a few others – it is a real

estate star.

Smolowitz, of Keller Williams, says that "two days ago, two townhomes

in the Brittany development went for asking price." The first sold for

$395,000, and the second sold for $429,00. Prices are even higher at

the nearby Estates of Princeton Junction. "The last townhouse I sold

there went for $500,000," he says, "and now there’s one for sale

there for $530,000."

In the Twin Rivers section of East Windsor, townhouses built in the

early 1970s, which had been treading water just above the $100,000

mark for years, have shot up to closer to $300,000.

In Trenton’s Mill Hill section, which is a short walk from the train

station, historic townhouses "have broken the $300,000 barrier," says

Harbach of Doolan Realty. Just a decade ago, these houses, even when

fully renovated and upgraded, had trouble drawing offers for one-third

of that amount.

In Hamilton, Malbone of ActionUSA reports that prices for townhouses

are up an average of some $50,000 in three years. The popularity of

these homes, in his opinion, has to do with their ease of upkeep.

"People don’t want to deal with maintenance," he says.

That is true for Weidel’s Richman. An owner of the Princeton Car Wash

in addition to being a busy real estate agent, he bought a townhouse

in Lawrence’s Woodmont development two years ago. "I didn’t want to do

all that weeding," he says. "I have limited time. It’s perfect for my

lifestyle."

He looked for a year before finding the perfect townhouse, and

emphasizes that, as far as space and amenities are concerned, it is

anything but a step down from a single-family home. Just the same, he

is still a little surprised at how much he enjoys townhouse living.

"My father was born in Brooklyn," he says. For his father, and then

for him, the drive was to get away from pavement and any sort of

communal living arrangements and to achieve a stand-alone house

surrounded by an ocean of lawn.

"But priorities change," he says. "This way I have more time for my

children and grandkids."

Richman is far from alone in discovering the pluses of townhouse

living.

"Keeping up a property can be a problem," says Coldwell Banker’s

Gottfried. She sees buyers who says "’on the weekend we want to run;

we don’t want yard care.’" For many of these busy people – of all ages

– the townhouse is a perfect place to live.

"It’s in the middle," Gottfried observes. "It appeals to people who

are sizing up from a condo, or down from a big house."

A cousin to the townhouse, the condo, which often comes with even less

maintenance, is also doing well. It is sometimes the only shot at home

ownership for first time buyers in this frenzied real estate market,

and also appeals to anyone who wants to be able to just turn the key

and go on a two-week vacation or head to a winter retreat in Florida

with no worries.

Richman’s daughter bought one in Lawrence three years ago, when she

was just starting out in her career, for $96,000. Now married, she has

moved on to a single family home, but is keeping the condo as an

investment. "It’s now worth $170,000 to $175,00," says Richman.

Meanwhile, condos in Canal Pointe, where unsold units were auctioned

off a decade or so ago, are now sought after. Two-bedroom condos there

are now selling for upwards of $250,000.

Top Of Page
Bulk May Be Reined In

There was a time, not all that long ago, when new homeowners would be

sure to mention their lot size. It was a matter of pride to announce

that the new home was on half-an-acre. Often the acreage was the first

attribute that was mentioned. Always, it was prized. A Cape on

one-third of an acre was more valuable than a similar house on a

skimpier lot.

No more.

Now it’s all about the town first, and the house second. Land, an

American obsession even before Washington rode through downtown

Princeton, is now a ho-hum attribute at best, and is often seen as a

negative.

"The demographics have changed since the 1950s," says Derek Bridger, a

land use development specialist in Princeton Borough. "Most people

here are professionals. They don’t have time to mow lawns." Speaking

of Princeton, he says, "it’s almost an urban-type town."

Real estate agents throughout the area agree that a big lot is just

not on most buyers’ wish lists. What these house hunters want is,

well, house – and plenty of it. Fulfilling that request isn’t too much

of a problem in West Windsor or Hopewell Township or Hamilton, where

there are 4,000 and 5,000 square-foot homes aplenty.

Princeton, and especially Princeton Borough, is another story. "In the

eastern section," says Bridger, "we have 1,500-square-foot houses, and

people today want a bigger house." Even in the western section of

town, in the vicinity of Library Place, for example, homes that seemed

more than ample a decade ago no longer look big enough to buyers

intent on having master suites, exercise areas, media rooms, and

professional kitchens.

The result has been a bulking up that has produced houses that some

consider wildly over-sized for their lots. "We’ve gotten complaints

from every part of town," says Bridger.

As a result, for the past year Princeton Borough has been considering

regulations that would put limits on how much house can be shoehorned

onto a lot.

A house on a 20,000-square-foot lot in the western section of town can

occupy 25 percent of the lot, says Bridger. "But you can go up three

stories," he adds. "That could be a 15,000-square-foot house. People

feel that is too much." But not everyone has a problem with houses

that dwarf their neighbors. "Some people don’t think that there should

be any constraints on what they can do with their property," says

Bridger.

What a number of developers are doing with their property in

Princeton, he says, is making a good deal of money. "A small single

family house will sell for $500,000 now," he says. "You can tear it

down and build two attached houses, and sell each for $750,000 to

$780,000."

The proposed curbs would probably put an end to this type of building.

Whatever Princeton decides, the issue illustrates a major shift in

priorities. Given their druthers, it appears, home owners would far

rather have more walk-in closets, and fewer tussles with dandelions.

Top Of Page
Enough, Already?

First time buyers are all but shut out. Move-up buyers, even those

sitting on a pile of equity, are suck in place by inflated prices.

"People are desperate for houses," says Shulkina. "Supply is so low.

We’re a focal point in New Jersey because of the schools, the

transportation, the pull of Princeton. This is some unique situation!

There is no bubble bursting here."

Like most other real estate agents, the folks who are out there every

day, pricing and selling homes, she sees no end to the frenzy.

Richman doesn’t see an end either, but he is growing uneasy about the

pace of price inflation. "I don’t think this can go on forever," he

says, but he doesn’t see an abrupt halt on the horizon. "I think there

will be a gradual slow-down," he predicts. And, he, for one, is ready.

"Some people are totally priced out," he says. "We need a break."

Top Of Page
Advice for Sellers

‘There are bidding wars all over the place," says Joan Eisenberg, a

broker with ReMax Greater Princeton. Hearing this, people about to put

their homes on the market may be tempted to do a happy dance, and then

proceed to slap a price befitting the toniest sections of Beverly

Hills onto their four-bedroom central Jersey Colonial.

Bad idea, cautions Eisenberg. "People will stretch to buy a houses,"

she says, "but not if it’s overpriced. Pricing a house right is

critical."

How critical?

"In 15 years of selling real estate," she declares, "no one has not

asked how long the property has been on the market. No one!

When a potential buyer hears that the house was listed seven minutes

before he arrived, his competitive instincts tend to go into

overdrive. That is especially so in this market, where tales of epic

bidding wars are heard in every supermarket aisle, and on every soccer

field. That "I’ve go to have it" mindset continues for more than

seven minutes, but does wane as one week turns to two weeks, and two

weeks turns into a month.

Early on, the buyer is likely to think "I have to jump in before

everyone else does," says Eisenberg. The upshot, she says, is that

"they’ll bid more aggressively."

As time goes on, however, potential buyers sense weakness. They begin

to wonder why the house hasn’t been snapped up. They imagine an

increasingly nervous seller. They entertain the idea of submitting a

lowball offer.

"Early offers are the best offers," Eisenberg finds – again and again.

While perfect pitch in pricing is essential to generating those early

offers, the appearance of the house is important too. Yes, it most

definitely is a buyer’s market. But, no, says Eisenberg, that does not

mean that buyers can relax, leave a stack of dishes in the sink, and

just let the aging wallpaper sag where it will.

For a top price, and a quick sale, a house has to sparkle.

"De-clutter, organize," advises Eisenberg. "If closets are jam packed,

buyers will assume there is not sufficient storage space." If

organization and donations to the Salvation Army aren’t enough to

winnow the overflow, consider renting storage space.

With the family photos stowed – to allow potential buyers to imagine

their own children’s portraits on the walls – start to work on

creating a neutral palette. Re-paint any orange walls; replace any

purple carpet. Again, the idea is to create a stage set that frees

buyers to envision themselves, and their belongings, in the house.

Major renovation probably is not a good idea; buyers will want to make

their own big changes. But Eisenberg says it can pay to upgrade the

room in which every buyer is most interested – the kitchen. Don’t

spend a fortune, but if the appliances are harvest gold or avocado,

consider replacing them with a more up-to-date color – perhaps white.

"Don’t get top of the line," says Eisenberg. Even a new low-end

appliance in a modern color can make a huge difference.

Consider other relatively low-cost kitchen upgrades as well, she

suggests. Perhaps a new floor, a coat of paint for aging cabinet

doors, or new countertops. Pay close attention to bathrooms, too,

because potential buyers do. A new vanity can be inexpensive. It costs

relatively little to resurface a bathtub. And a new shower curtain and

new towels can be had for every little money. These low-cost cosmetic

changes can yield big rewards.

When all the de-cluttering and sprucing up is complete, there is just

one more step. "The house must be clean!" says Eisenberg.

Sellers who follow the advice will get top price in record time, and

will, therefore, be able to relax a little. Freed from the fear that a

potential buyer will turn up at the worst possible moment, they can

leave a dish or two in the sink, stop snapping at the kids to put away

their baseball cleats the second they walk in, and release the family

pets from the basement.


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