A January surge in demand for houses in New Jersey likely will be felt in Morris and Somerset counties later this year because home prices in those areas are relatively higher than elsewhere in the state, a real estate analyst said this week.

A "foodchain effect" in which the sale of lower priced homes feeds purchase demand for more expensive homes means Morris and Somerset aren't yet seeing the surge in housing demand that saw, statewide, a 31 percent increase in the number of home purchase contracts over the previous January, according to Jeffrey G. Otteau of Otteau Valuation Group, an East Brunswick firm that analyzes the real estate market in New Jersey.

Morris saw a 3 percent increase. Somerset saw an 18 percent increase. Nationally, there was a 2 percent increase in the number of purchase contracts, Otteau said.

Otteau said in a statement the housing demand in New Jersey "exploded off the chart in January" and that, with home prices at 2003 levels and low interest rates, 2012 is the "opportunity of a lifetime" to buy a home.

Drivers of the increase in purchase contracts include more consistent job creation and improved consumer sentiment, he said.

"The recovery in real estate has now begun," he said.

While demand is up, increased foreclosure actions and previously discouraged sellers re-entering the market "means that any increase in future home prices will move slowly for an extended period of time," he said.

Otteau noted the 4,700 New Jersey home purchase contracts in January also surpassed the 4,600 contracts in January 2010 when home buyer tax credits were still in place.

Real estate agents in Morris and Somerset counties said they are busier and feeling good about the industry.

John Turpin, president of Turpin Realtors, which has offices in Bernardsville, Chatham, Mendham, Far Hills and Oldwick, said 2011 was a challenging year.

But "right at the end of 2011, as the holidays began, we noticed an uptick in buyers coming out to look," Turpin said.

They've been busy since and real estate agents around the country are seeing more activity, he said.

Peter Cammarata, of Stonybrook Realty, a new company that opened an office in Montville last year, said they have been very busy, especially in the past month.

Cammarata said the seller of a Hillsborough home he listed at $364,900 accepted an offer after the home was on the market for less than a week, and that the home received multiple offers in that time. It went under contract on Friday. He said activity like that as a good sign for the real estate market.

Bernie Goodman, owner of RE/MAX First Choice Realtors II, which has an office in Roxbury Township, said sales are up considerably, including in areas like Lake Hopatcong.

He said his office is seeing more first-time buyers. About 20 percent of homes in the $100,000 to $250,000 range are being sold to investors who are looking to renovate and flip them or to have the homes appreciate.

"Rates are down, prices are down and the economy is getting stronger," Goodman said, leading buyers who were on the fence to pull the trigger.

Jeffrey Halpern, vice president of Coccia Realty, which has offices in Madison, Montville, Rutherford, Lyndhurst and Kearny, said there is pent up demand for housing and that historically low interest rates means people should consider buying.

Interest rates were around 16 percent when he started working in real estate in 1980s, he said. Now, buyers can get a 30-year fixed rate mortgage for around 4 percent, he said.

"If anybody can buy now, they have to," he said.