The New Jersey real estate market has struggled to keep pace with the rest of the country. Due, in large part, to a stagnant economy, the local housing sector has merely stayed afloat for the better part of a decade. For years, New Jersey has ranked as one of the most fiscally unsound states 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 slowed down in the wake of higher interest rates. Buyers have remained sidelined for fear of an uncertain economy, and sellers have pulled their listings to avoid trading lower mortgage rates for higher ones. Moreover, the fear of an impending recession may hurt the New Jersey housing market more than others.
All things considered, the New Jersey real estate market has had a rough couple of years. However, the slowdown in activity may actually work in the market's favor. In the event prices come down and inventory rises, real estate in New Jersey could experience a resurgence.
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:
Median Sales Price: $510,000 (+12.1% year over year)
1-Year Appreciation Rate: +14.1%
New Listings: 10,751 (-10.5% year over year)
Pending Sales: 7,260 (-15.6% year over year)
Closed Sales: 7,804 (-16.0% year over year)
Homes For Sale: 18,145 (-17.8% year over year)
Months Of Supply: 2.7 (unchanged year over year)
Average Days On Market: 26 (-13.3% year over year)
Median Rent Price: $1,835 (+14.4% year over year)
Unemployment Rate: 3.9% (latest estimate by the Bureau Of Labor Statistics)
Population: 9,267,130 (latest estimate by the U.S. Census Bureau)
Median Household Income: $85,245 (latest estimate by the U.S. Census Bureau)
Foreclosure Rate: One in every 2,564 housing units (second highest in the country)
New Jersey Median Home Prices
In the third quarter of 2012, the median home value in New Jersey was about $287,000. 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 ten 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 historic pace. In ten years, the median home value in New Jersey increased more than 60.0% to reach $470,843. Up more than 60.0% in a decade is an aggressive rate of appreciation. 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 increased 114.3% over the same period of time.
In more recent history, the fastest rate of appreciation in the New Jersey real estate market has taken place in the last two years. Since the start of the pandemic, in fact, the median home value in New Jersey has increased by 36.8%. In that time, the U.S. median home value increased about 40.6%, suggesting the New Jersey real estate market has made up some ground.
Over the rest of 2022 and well into next year, prices are expected to continue rising. However, the latest increase in mortgage rates has softened demand. The New Jersey real estate market has already seen a decline in mortgage applications. Lower demand will temper competition and at least slow down appreciation rates. That said, inventory remains low across the entire state of New Jersey. The lack of inventory will allow prices to keep rising, but not as fast as in the last few years.
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. 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 has increased 14.4% over the last year. Today, the median rent in the New Jersey real estate market is $1,835. At that price, the median rent for a one-bedroom unit sits at $1,556. Those looking for a two-bedroom unit can expect to pay somewhere around $1,937 a month.
Rents have increased along with home prices, but the coming year may see rents start to rise a little faster. As more and more people get priced out of buying, it's safe to assume more renters will enter the market. If that's the case, rents may increase at a faster rate than home prices.
New Jersey Foreclosure Trends & Statistics
According to ATTOM Data Solutions' Midyear 2022 U.S. Foreclosure Market Report, a total of 164,581 U.S. properties filed for foreclosure in the first six months of the year. For the period, foreclosure filings were up 153% year over year but down just one percent from the same period two years ago.
“Foreclosure activity across the United States continued its slow, steady climb back to pre-pandemic levels in the first half of 2022,” said Rick Sharga, executive vice president of market intelligence at ATTOM. “While overall foreclosure activity is still running significantly below historical averages, the dramatic increase in foreclosure starts suggests that we may be back to normal levels by sometime in early 2023.”
Foreclosures are on the rise, and the New Jersey housing market has contributed its fair share to filings. In fact, New Jersey had the second highest foreclosure rate as recently as July. With one in every 2,564 housing units filing for foreclosure in July, only Delaware had more.
While New Jersey already has one of the highest foreclosure rates in the country, it is safe to assume more foreclosures are on the horizon. An impending recession and the highest inflation rate the country has seen in nearly 40 years will make it difficult for homeowners to keep up with mortgage obligations. It is too soon to tell just how high delinquencies will climb, but there's a good chance there will be more by the end of the year.
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 investors and homeowners across the country have enjoyed several years of seller gains and attractive ROI (return on investment). According to Attom Data Solutions’ second quarter Home Sales Report, "profit margins on median-priced single-family home and condo sales across the United States hit another new record of 55.5% following the largest quarterly gain in a decade."
“Home sellers in the second quarter continued to benefit from the rapid growth in home price appreciation the country has experienced over the past few years,” said Rick Sharga, executive vice president of market intelligence at ATTOM. “While price growth may slow down as higher mortgage rates dampen demand from prospective homebuyers, home sellers should continue to profit from the record $27 trillion in homeowner equity in today’s market.”
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 remain historically low. While up year-to-date, the average commitment rate on 30-year fixed-rate mortgages is 5.13%. As a result, borrowing costs are still attractive, 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 relatively low 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 trailed national trends for the better part of a decade. In recent history, however, home prices and activity have picked up, 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.
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 current market better than many states. The local housing market was tempered by fire and now appears ready to take the steps to improve itself.
*The information contained herein was pulled from third party sites. Although this information was found from sources believed to be reliable, FortuneBuilders Inc. makes no representations, warranties, or guarantees, either expressed or implied, as to whether the information presented is accurate, reliable, or current. Any reliance on this information is at your own risk. All information presented should be independently verified. FortuneBuilders Inc. assumes no liability for any damages whatsoever, including any direct, indirect, punitive, exemplary, incidental, special, or consequential damages arising out of or in any way connected with your use of the information presented.