New Jersey Real Estate Market Trends & Analysis
The New Jersey economy continues to struggle. For five consecutive years, in fact, New Jersey has ranked as the most fiscally unsound state in the country. Due, in large part, to unfunded pension liabilities and irresponsible retiree health care obligations, the entire state has had a hard time making up for the ground it lost over the last recession. As a result, one industry has had a particularly hard time getting back on its feet: real estate.
The New Jersey real estate market has yet to replicate the rest of the county’s momentum. It is worth noting, however, that the obstacles facing real estate in New Jersey have made the majority of homes more affordable. Combined with the nation’s highest foreclosure rate, local affordability has awarded buyers and investors more opportunities to acquire deals at attractive prices.
The Top New Jersey Real Estate Markets
While the best real estate market in New Jersey is up for debate, here’s a list of the cities investors may want to pay special considerations to:
Newark
Trenton
New Jersey Real Estate Fees & Regulations
Real Estate
| Closing Conducted by: | Title Agents; North New Jersey: Attorneys |
| Conveyance: | Bargain-and-Sale Deed |
Foreclosure Procedure
| Primary Foreclosure Method: | Judicial |
| Process Period: | 3 - 10 months |
| Notice of Sale: | Sheriff |
| Redemption Period: | 6 Months |
Taxes
| Income Tax: | 1.4% - 8.97% |
| Corporate Tax: | 9% |
| Sales Tax: | 7.00% |
| Estate Tax: | 16% |
| Inheritance Tax: | 0.16% |
| Median Property Tax: | 1.89% |
| Property Taxes by County: | http://www.tax-rates.org/new_jersey/property-tax#Counties |
Average Transactional Costs
| Closing Cost: | $2,625.00 |
| Transfer Fee: | 0.4% - 1.21%; Homes over $1 million 1%; Commercial sales over $1 million 0.1% |
| Origination Fee: | $1,891.00 |
Overview
Median Home Value: $338,096
1-Year Appreciation Rate: +1.8%
Median Home Value (1-Year Forecast): +3.7%
Median Rent Price: $2,000
Price-To-Rent Ratio: 14.08
Average Days On Market: 116
Unemployment Rate: 3.5% (latest estimate by the Bureau Of Labor Statistics)
Population: 8,882,190 (latest estimate by the U.S. Census Bureau)
Median Household Income: $79,363 (latest estimate by the U.S. Census Bureau)
Percentage Of Vacant Homes: 10.0%
Foreclosure Rate: 1 in every 1,043 (9.5%)
Median Home Prices In New Jersey
Seven years ago (in the first quarter of 2013), the median home value in New Jersey dropped to approximately $283,000. Though they didn’t know it then, residents had weathered the worst of the recession. If for nothing else, it was at that time when the economy started to pick up and gain a lot of momentum. In the wake of a strengthening housing sector and growing optimism, home values began to appreciate, and never look back.
Not unlike just about every state in the country, New Jersey experienced a great run on home prices for the better part of a decade. For seven consecutive years (from February 2013 to February 2020), in fact, the median home value in New Jersey has increased at a historical pace. From its lowest point in the recession to today, the median home value in New Jersey increased 19.4% to reach $338,096, the highest prices have been in a very long time.
An appreciation rate of nearly twenty percent in as little as seven years is quite impressive. However, when placed in the context of national real estate trends, New Jersey may have actually underperformed. To put things into perspective, the median home value in the United States was around $167,000 when New Jersey real estate hit rock bottom (February 2013). Since then, the median home value in the United States appreciated 46.1% to get to where it is today: $244,054. While it is important to note how far New Jersey has come, it didn’t get to where it is today at the same pace as its national counterpart.
In the last year (December 2018 to January 2020), the national appreciation rate has more than doubled that of New Jersey’s—3.7% and 1.8%, respectively. The difference shouldn’t be seen as an indictment on the New Jersey real estate market, but should instead serve as a testament to the national housing market. After suffering through one of the worst recessions in American history, home prices across the country rallied to bolster the national economy.
As prices continue to increase, it’s fair to assume appreciation rates will level out. In the next year, in fact, it’s reasonable to assume real estate in New Jersey will appreciate faster than the rest of the country. Therein lies the real reason the New Jersey real estate investing community should remain encouraged: there’s still room for growth.
Median Rent Prices In New Jersey
Rental prices across the country are influenced by home values, and are—therefore—subject to market fluctuations of varying degrees. It is worth noting, however, that there is a direct correlation between increases in home values and subsequent jumps in rental prices—and vice-versa. When home prices increase, for example, it’s safe to assume more prospective buyers will be priced out of the market, ultimately relegating them to renters. Consequently, the more people who are forced to rent, the more landlords will be able to charge in rent. The resulting rental demand from increased home prices will simultaneously drive up competition and prices. Markets in the midst of historical appreciation rates have also seen their rental prices increase, and New Jersey is no exception.
Following in the footsteps of New Jersey’s latest home price appreciation, local rental prices have done their best to follow suit. While it is too much to ask of rental increases to match home price increases, the median rent in New Jersey did manage a 7.0% increase in the same seven years home prices increased (February 2013 to February 2020). It is worth noting, however, that while encouraging for landlords, the rate in which rents increased paled in comparison to national averages.
For a more accurate perspective, the median rent price in the United States increased at nearly twice the rate of New Jersey. Over the last seven years, the median rent price across the whole country increased 24.2%, and is now $1,650—that’s more than three times New Jersey’s rate.
While nowhere near that of the national average, rental increases have tipped the state’s price-to-rent ratio in favor of buyers. It is typically considered to be more affordable to buy a home in the state of New Jersey than to rent. With a price-to-rent ratio of 14.08, however, the line is starting to blur. Home prices are increasing to the point that renting may become the more affordable option sooner rather than later.
New Jersey Foreclosure Trends & Statistics
The New Jersey real estate market has an incredibly high foreclosure rate, at least compared to the national average. Whereas the entire country currently boasts a 4.4% rate of foreclosure (one in every 2,253 properties), New Jersey’s 9.5% is more than double the national average; that translates to one out of every 1,043 homes being in some stage of distress (default, auction or bank owned).
To be fair, New Jersey has begun to make up ground over the past year. While foreclosure filings have increased 7.0% in the last year across the country, New Jersey actually saw a decline in respective filings. As recently as January, “the number of properties that received a foreclosure filing in NJ was 17% higher than the previous month and 10% lower than the same time last year,” according to RealtyTrac.
Despite recent improvements, New Jersey still has several pockets of distressed inventory spread across the state. The highest concentrations of distressed properties exist in the following counties:
Cumberland: (1 in every 376)
Sussex: (1 in every 427)
Salem: (1 in every 460)
Gloucester: (1 in every 544)
Burlington: (1 in every 627)
Tax Lien Investing
Tax Lien or Deed: Tax Lien state (Also has some Tax Deed sales)
Interest Rate: 18% (plus penalties)
Redemption Period: 2 years
New Jersey Online Tax Lien Auction
Listed below are auctions for numerous counties in New Jersey. Click on the link for the county in which you would like to participate. You can also participate in a practice auction, which is listed first to get a feel for how the auctions work.
Real Estate Investing In New Jersey
Real estate investors and homeowners across the country have enjoyed several years of seller gains and attractive ROI (return on investment). According to Attom Data Solutions’ most recent Home Sales Report, in fact, the average home seller in 2019 “realized a home price gain of $65,500 on the typical sale, up from $58,100 last year and up from $50,027 two years ago.” Profits were calculated using median purchase and resale prices, and currently represent a 13-year high.
The report went on to say that profits “represented a 34 percent return on investment compared to the original purchase price, up from 31.4 percent last year and up from 27.4 percent in 2017, to the highest average home-seller ROI since 2006.” Simply put, average U.S. home seller profits are higher than they have been in a really long time, and New Jersey is no exception. Following years of historic appreciation, homes are selling for more in New Jersey than they have in years past, which bodes well for local investors.
While home values are reaching new highs with each passing month, the New Jersey real estate investing community is more than aware that attractive price margins can just as easily be found at the time of acquisition. The cost of acquiring a home plays just as much of a role in calculating one’s return on investment as the sales price. As a result, real estate investors in New Jersey have made a habit out of dealing in the state’s distressed property market. Distressed properties award savvy investors the opportunity to simultaneously capitalize on attractive profit margins and motivated sellers.
Real estate investors in New Jersey have already turned to the distressed property market. In fact, 20.1% of all sales in the New Jersey real estate market in 2019; that was the highest of any state, according to RealtyTrac.
Bank-owned homes make up the majority of the state’s distressed inventory. Representing 41.1% of New Jersey’s distressed inventory, bank-owned homes are the most abundant source of foreclosed properties. As a result, the New Jersey real estate investing community should focus its marketing efforts on bank-owned homes in 2020 if it hopes to increase their chances of landing a good deal with attractive profit margins.
While the New Jersey real estate investing community is free to practice any exit strategy, one appears more suitable for today’s market indicators than any other: rental property investing. That’s not to say local investors can’t make money flipping or wholesaling homes in New Jersey (the distressed property market makes these options very viable), but rather that rental properties appear to have the most upside at the moment. More importantly, years of cash flow could easily help offset today’s higher purchase prices.
New Jersey Housing Market Predictions
The New Jersey housing market has had a great run, much like the rest of the country. For the better part of a decade, in fact, real estate in New Jersey has exhibited many of the same characteristics as its national counterpart, albeit to a tempered extent. Price increases, confidence in the market and several other indicators are in line with national trends, but what does that mean moving forward? What can the New Jersey real estate investing community expect moving forward?
Trenton may receive added investor attention: As the capital of New Jersey, Trenton already has a fair amount of demand. However, as the cheaper alternative to large cities like East Rutherford, Jersey City and Piscataway, Trenton could easily see an influx of budget-conscious investors. Priced well below the median home value in New Jersey, the median home value in Trenton is a welcome sight for budget-conscious buyers. As a result, it’s reasonable to assume more buyers will turn to Trenton in the coming year.
Inventory will drive appreciation: Inventory levels, or lack thereof, have sufficiently capped New Jersey’s real estate potential. Much like everywhere else, there aren’t enough homes in New Jersey for sale, which has driven prices upwards for several years. What’s more, it looks like the trend will continue, at least until new inventory can be brought to market.
Foreclosure filings should decline, albeit modestly: New Jersey has hosted one of the country’s largest foreclosure rates for far too long. However, hope is on the horizon, as years of appreciation have returned equity to many places it was thought to once be gone. As a result, fewer homeowners will find themselves under water, which should reduce the number of foreclosures in the state.
New Jersey Real Estate Market Summary
The New Jersey real estate market has had a harder time removing itself from the last recession than most other states across the country. Hit incredibly hard by foreclosures, local homeowners lost more faith in their market than most others. However, positive trends appear to be building momentum. With foreclosure filings dropping year-over-year, price appreciation expected to continue, and a renewed optimism in the housing market, New Jersey looks ready to press forward.
Sources:
https://www.attomdata.com/news/market-trends/home-sales-prices/attom-data-solutions-year-end-2019-u-s-home-sales-report/
https://www.truthinaccounting.org/library/doclib/FSOS-booklet-2019.pdf
https://www.census.gov/quickfacts/fact/table/NJ/PST045218
https://www.bls.gov/regions/new-york-new-jersey/new_jersey.htm#eag
https://www.realtytrac.com/statsandtrends/foreclosuretrends/nj/
https://www.realtytrac.com/statsandtrends/nj/
https://www.realtytrac.com/statsandtrends/
https://www.realtytrac.com/statsandtrends/foreclosuretrends/
https://www.zillow.com/home-values/
https://www.zillow.com/nj/home-values/
http://njar-public.stats.10kresearch.com/docs/lmu/x/EntireState?src=map
https://www.usnews.com/news/best-states/articles/2019-09-24/new-jersey-has-worst-fiscal-health-in-nation
https://www.attomdata.com/news/market-trends/mid-year-q2-2019-foreclosure-market-report/
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