I had the pleasure of attending the National Association of Realtors annual convention recently and one of the headline speakers was Lawrence Yun, the NAR chief economist. One statement he made which I found interesting was this – he said the Wall Street Journal asked 50 economists, each with their own models, for their predictions on the housing market.
By averaging their individual predictions, the consensus was for a 5% increase in housing prices for 2014. Yun cleverly pointed out that if each individual in the auditorium full of people to whom he was speaking tried to guess his weight, many would be wrong but that when you looked at the average of all those guesses, the answer was statistically likely to be very close to his actual weight. Crowdsourcing does serve a purpose. So the idea is that the average of all these different economists’ opinions is going to be pretty close to the real outcome.
The mortgage giant, Freddie Mac, is in agreement that 2014 is going to be a strong year for housing. Even with the expectation of a 30-year fixed rate mortgage creeping into the 5% range, prices are expected to rise and housing in most areas is still considered affordable. While Manhattan prices may seem stratospheric to some, that only makes Hoboken that much more attractive.
The big driver of pricing is inventory and we have certainly seen in Hoboken how a longstanding lack of new condo inventory has caused prices to rise as demand outpaces supply. Both NAR and Freddie Mac agree that housing starts are not at the level they would need to be to exert any sort of downward pressure on prices. The problem in Hoboken is that there is simply no open space available for new construction – until, of course, those 54 acres at the NJ Transit yards get developed.