Mortgages and the Housing Market in New Jersey

All over the media, whether it be newspapers, radio, the Internet, or television, people keep hearing about how the real estate market is doomed and everyone and their mother is being foreclosed on and living in a cardboard box. This is absolutely not true. Today is still a good time to buy a home if you have stable income, good credit, and possibly a down-payment. I personally work as a real estate agent in New Jersey and am a homeowner who knows exactly what is going on in my local area.

The people who are being foreclosed on are the idiots who thought that interest rates would never go up and decided to be fooled by unethical mortgage brokers who convinced them to get an interest only mortgage which would allow the buyer to purchase a home that they could not afford with a conventional 30 year mortgage. Well needless to say, they were quite surprised when 1-2 years later the prime rate went up and their interest rates were readjusted, not to mention that now they are also paying the principal as well as interest (interest only mortgages last only a few years). Now that $1500 monthly interest only payment is now $2800+ and now the homeowner is up a creek without a paddle. The mortgage broker who they entrusted their livelihood, was only interested in their own commission and now they are on the brink of the dreaded foreclosure.

In Union, NJ, the market is overwhelmingly good. Homes are being sold at higher rate than last year (2006). Homes that do not sell in this market in New Jersey, do not sell for two reasons:

1) They are not priced right. Home owners have ridiculous assumptions of what their home is worth and instead of comparing their home to one that sold similarly, they assume that because Bob down the street sold his immaculate home for $500k, that their home is also worth $500k even though they have less bedrooms, a smaller lot, and it needs TLC. Homes that are priced correctly by the agent and agreed to by the seller will sell in 30-60 days.

2) Location, Location, Location... Homes in areas of high crime, flood zones, poor schools, high taxes, will not sell quickly or sometimes at all regardless of the market price. Few people wish to live in a drug and gang infested area willingly, or want to pay high taxes and receive poor services in return.

A perfect example in New Jersey of an area that is doing well in home sales is Union, NJ. It has decent schools, medium taxes for the area, and pretty decent services.

An example of an area doing poorly in home sales is Roselle, NJ. The schools are abysmal, the taxes are absurdly high yet the services are questionable at best. Many people I have spoken to in Roselle say they don't understand where their tax dollars are going considering the state of the schools.

If you are looking into buying a home, make sure you have stable income, good credit (or you will either get a ridiculously high interest rate or not be approved at all), and look into a conventional loan or FHA loan because interest rates are not going down in the foreseeable future. Prepare to buy something that you can afford monthly and avoid interest only and adjustable rate mortgages like the black plague.