New Jersey Real Estate Market Trends & Analysis
The New Jersey real estate market struggled to keep pace with the rest of the country throughout the last recovery. Due, in large part, to a stagnant economy, the local housing sector has struggled to tread water for the better part of a decade. For five consecutive years, New Jersey has ranked as the most fiscally unsound state in the country, and the introduction of the Coronavirus did nothing to ease the burden.
Not unlike every other state across the country, the pandemic has impeded the New Jersey housing market from making any noticeable improvements. Year-to-date, activity has been relatively slow, despite the governor declaring real estate an essential business. Buyers have remained sidelined for fear of an uncertain economy, and sellers have pulled their listings to avoid selling at lower prices.
All things considered, the New Jersey real estate market has had just as rough of a 2020 as everywhere else. Nonetheless, things appear to be trending in the right direction as the market heads into the fourth quarter. Prices and sales have climbed simultaneously, catalyzing the New Jersey real estate investing community. As a result, the temporary pullback now appears to have created a window of opportunity. Indicators suggest real estate in New Jersey will be one of the first states to see home values rise. Savvy investors who position themselves to take advantage of today's changing landscape may find the rest of 2020 to their liking.
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 |
New Jersey Housing Market Overview
Median Home Value: $353,518
1-Year Appreciation Rate: +3.8%
Median Home Value (1-Year Forecast): +4.5%
Median Rent Price: $2,000
Price-To-Rent Ratio: 14.72
Average Days On Market (Single-Family Homes): 52
Unemployment Rate: 10.9% (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 9,411 (1.0%)
New Jersey Median Home Prices
In the first quarter of 2013, the median home value in New Jersey was about $286,000. Though they didn’t know it then, residents had already weathered the worst of The Great Recession. It was at that time when the economy started to pick up and gain a lot of momentum. Since that time, home prices have increased for more than seven consecutive years.
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. 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 more than 20.0% to reach $353,518, 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 has 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 nearly 50.0%. 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 (July 2019 to August 2020), the national appreciation rate has outpaced New Jersey’s—5.1% and 3.8%, 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.
It is important to note, however, that the New Jersey real estate market appears to be slightly more insulated from the Coronavirus than most of the country. If for nothing else, New Jersey didn't experience the same appreciation rates as the rest of the United States over the last seven years. While prices did increase, they did so at less than half the rate as the national average. That said, it's the state's lack of appreciation which may work to its favor. At the moment, it would appear as if New Jersey home values have more room to run, which could bode well for everyone in the local market.
New Jersey home values are expected to increase 4.5% over the next 12 months. In addition to pent-up demand, inventory is incredibly low. With about three months of available inventory, the state has about half of the listings as a healthy market, and inventory is down 46.4% year-over-year. As a result, more competition has enabled homeowners to increase asking prices.
New Jersey Median Rent Prices
Rental prices across the country are influenced by home values, and are subject to market fluctuations of varying degrees. 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 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. 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 14.72, 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 had an incredibly high foreclosure rate in the past, at least compared to the national average. However, the state has made up a lot of ground in recent history. Whereas the entire country currently boasts a 0.7% rate of foreclosure (one in every 13,691 properties), New Jersey’s 1.0% isn't quite twice as much as the national average; that translates to one out of every 9,411 homes being in some stage of distress (default, auction or bank owned).
Again, New Jersey has begun to make up ground over the past year. While foreclosure filings have decreased 81.0% in the last year across the country, New Jersey actually saw a decline of 87.0%. As recently as August, “the number of properties that received a foreclosure filing in NJ was 2% lower than the previous month and 87% 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:
Sussex: (1 in every 3,892)
Camden: (1 in every 4,788)
Gloucester: (1 in every 5,626)
Essex: (1 in every 5,947)
Atlantic: (1 in every 7,518)
While foreclosures have declined for several years, the Coronavirus will surely cause an influx in the coming months. Foreclosures across the United States have already increased 11.0% from July to August, and there's no reason to think New Jersey will be an exception. It is too soon to tell exactly how many foreclosures to expect in the New Jersey real estate market, but it's safe to say filings will increase sooner rather than later. The financial burden placed on many homeowners by the Coronavirus and rapid increases in unemployment should cause a spike in distressed owners. As a result, well-positioned investors should prepare to step in and help financially-strapped homeowners. Those who line up financing now could simultaneously help homeowners at risk of bankruptcy and secure a deal.
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.
New Jersey Real Estate Investing
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.
New Jersey's distressed inventory is predominantly at risk of foreclosure. Of the state's distressed homeowners, 67.8% are in pre-foreclosure, meaning they are behind on payments. While these homeowners are not guaranteed to fall into foreclosure, they are more at risk than owners who have managed to keep up with principal obligations. As a result, the New Jersey real estate investing community needs to pay special considerations to this particular population. Doing so may increase their odds of landing a deal under market value.
Acquiring a deal below market value is getting harder and harder to do in New Jersey. Years of appreciation have detracted from profit margins for rehabbers. Nonetheless, there's one strategy that's growing more attractive because of the new landscape created by the Coronavirus: building a rental property portfolio.
For starters, interest rates have been drastically lowered in order to combat any negative impact onset by the pandemic. According to Freddie Mac, the average commitment rate on 30-year fixed-rate mortgages is 2.94%. Not only does today's rate mark historic lows, but the Fed has announced it will keep rates low for the foreseeable future. As a result, borrowing costs are drastically reduced, which can help offset today's higher prices. Those looking to acquire a rental property through traditional financing will have an easier time justifying the purchase price.
In addition to lower borrowing costs, landlords can expect vacancies to be lower. The insufficient housing supply has made it difficult for buyers to purchase a home, despite plenty of demand. Therefore, anyone who is unable to buy because of a lack of availability will be forced to rent. At the same time, landlords should find more demand for their units, effectively reducing the likelihood of a vacancy.
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.
Demand for suburban housing will increase: As we get further and further into the pandemic, work-from-home trends appear more sustainable than ever. No longer do employees need to live within close proximity of their workplace. That, in addition to wanting to leave metropolitan areas where the virus continues to spike, should drive more people to consider calling the suburbs their new home. The trend is already happening in every state, and New Jersey isn't the exception. More people will look to leave cities in an attempt to cut costs and wait out the virus with larger living spaces that can't be found in a city apartment.
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, the recent trials and tribulations appear to have prepared New Jersey for the Coronavirus better than many states. The local housing market was tempered by fire, and now appears primed to come out on the other side stronger.
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
http://njar-public.stats.10kresearch.com/docs/lmu/x/EntireState?src=map
https://www.attomdata.com/news/market-trends/mid-year-q2-2019-foreclosure-market-report/
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