New Jersey real estate runs the gamut from beach houses to sprawling suburban homes to modest houses and apartments. Despite the state’s small size, it boasts a number of unique markets.
Homebuyers in northern New Jersey, for example, commonly pay a high price per square foot for proximity to New York City, while buyers in southern New Jersey are drawn to its access to Philadelphia. New Jersey also has its share of larger cities, like Newark and Jersey City, where homes are smaller but local amenities like restaurants and nightlife tend to be abundant.
Sarah LaRue, a real estate agent with Keller Williams Realty West Monmouth, has been selling real estate for over 16 years, and she says there are lots of different reasons why buyers are drawn to New Jersey. A couple of big ones are highly rated schools and access to jobs.
But if you’re thinking of buying a home in New Jersey, it’s important to get a good feel for the housing market. Using information from the U.S. News Housing Market Index, we’ve compiled the data you need for a better understanding of the New York-Newark-Jersey City metro real estate market in 2023.
[READ: New York City Housing Market Forecast.]
How the New Jersey Housing Market Changed in 2022
Single-family home construction increased in New Jersey in 2022, but only modestly. In March 2022, there were 1,141 permits issued for single-family detached homes, according to data from the U.S. Census Bureau. In March 2023, that figure rose to 1,159 permits, marking a 1.58% increase year over year. Single-home permits hit their peak in July 2022, at 1,248, but then dropped steadily until reaching 798 in November, then climbing back up by the year’s end to 1,004. For the three-month period ending in March 2023 versus the same months of a year earlier, the number of single-family detached permits issued fell by 7%.
Multifamily home construction, however, decreased dramatically in 2022. In March 2022, there were about 4,511 permits issued for multifamily buildings of two units or more. In March 2023, there were only about 2,666 such permits issued, marking a year-over-year decrease of about 41%. During the three-month period ending in March 2023, 37% percent fewer multifamily permits were requested versus the same months ending in March 2022.
Although some areas of New Jersey are seeing construction projects start to take off, ultimately, the process can be slow, especially at a time when material shortages remain an issue. Inflation has also driven the cost of construction up, which explains why there hasn’t been much movement for single-family homes and why there’s been a decline in multifamily permits.
[Related:What Should You Consider When Deciding Between a Condo vs. House?]
New Jersey Housing Supply and Demand
Buyer demand in New Jersey remains strong, says LaRue. But higher borrowing rates have had an impact on buyer demand.
“Two years ago, people were paying over $100,000 over asking,” says LaRue, referring to a typical home in her market. “Now, you’re maybe getting a little bit over.”
That said, homes that are coming on the market that are more updated and located in nicer neighborhoods are seeing more offers and being sold for top dollar, LaRue says. Homes that aren’t as updated and on busier streets aren’t getting as many offers — but they’re getting offers nonetheless.
Furthermore, LaRue says, when demand really peaked in 2021, buyers were willing to buy homes sight unseen and waive home inspections completely. These days, people are only waiving parts of the home inspection. “They still want the ability to inspect for big-ticket items,” she explains.
As of March 2023, housing supply in New Jersey sat at a 5.1-month supply, based on data from Redfin. That’s a year-over-year increase of about 1.5 months’ worth of inventory. That 5.1-month supply is also close to the 6-month supply that’s commonly needed to stabilize the housing market and meet buyer demand in full. It’s also worth noting that New Jersey’s 5.1-month supply of homes well exceeds the 1.9-month supply of homes the U.S. housing market is seeing on the whole.
Despite these numbers, LaRue says that she and her colleagues are still struggling with inventory. “The biggest reason people aren’t selling right now is that they don’t have anywhere to go,” she explains.
Meanwhile, the rental vacancy rate for New Jersey reported for December 2022 by the Census Bureau was 3.1%. That’s a decrease of 0.9% from the previous December. The national rental vacancy rate that same month was 5.8%, representing a 0.1% increase from a year prior.
For the week ending April 28, mortgage applications fell 1.2% on a seasonally adjusted basis from the week prior, according to the Mortgage Bankers Association’s Weekly Mortgage Applications Survey. On an unadjusted basis, the Market Composite Index, a measure of mortgage application volume, decreased 0.4% from the previous week. That same week, the average contract interest rate for a 30-year conforming fixed-rate loan decreased to 6.5% from 6.55% a week before.
In February 2023, national consumer sentiment rose 67 on a 100-point scale, up 4.2% on a year-over-year basis, according to the University of Michigan’s Survey of Consumers. In February 2022, consumer sentiment sat at 62.8. However, it’s a ways off from its February 2020 peak of 101.
[Read: The Guide to Understanding Your Home Value.]
Median Home Price in New Jersey
In March 2023, the median home price in New Jersey was $660,000, according to Redfin data, marking a 2.2% decrease year over year. On a national level, the median home price in March 2023 was $401,000, down 2.4% from a year prior.
Not only are New Jersey’s home prices higher than the national average, but the state has the dubious distinction of having the highest property taxes in the nation. In 2022, the average New Jersey property tax bill rose to $9,490. But those higher housing prices and taxes are commonly offset by a higher earnings potential.
“Not many people would choose to spend this much money on property taxes unless there were some sort of benefit to their income,” LaRue says.
LaRue says that when buyer demand was at its peak, bidding wars would commonly drive New Jersey home prices upward. These days, she’s still seeing bidding wars, particularly for homes that are the most desirable. These includes homes with expansive backyards and those that allow for multigenerational living. But bidding wars have slowed down quite a bit, especially for average properties.
Even New Jersey beach homes — a usually hot commodity — are seeing sellers who are open to negotiation, says LaRue. “Today’s mortgage rates are keeping buyers a little more conservative in their offers,” she says.
Meanwhile, in March 2023, the median rent price in New Jersey was $3,156, an increase of 7.5% year over year. On a national level, the median rent price in March 2023 was $1,996, up 4.7% year over year.
Data firm Black Knight shows that 1.3% of homes with mortgages in New Jersey experienced foreclosure activity in February 2023, up 0.3% from a year prior. Delinquency rates declined 0.3% on a year-over-year basis to 3.2%.
Interest rates for 30-year mortgages sat at 6.54% as of March 2023, representing a 2.37% increase year over year, according to Freddie Mac’s Primary Mortgage Market Survey. As of May 4, the average contract interest rate for a 30-year fixed, conforming mortgage was 6.39%, according to Freddie Mac.
Unemployment Trends in New Jersey
New Jersey non-farm employment rose by almost 424,000 jobs in March 2023 on a year-over-year basis to 9.95 million. In February 2023, the unemployment rate in New Jersey was 4.4%, according to the Bureau of Labor Statistics. That’s a 0.7% decrease year over year. The national unemployment rate in February 2023 was 3.6%, down 0.2% year over year.
In March 2023, there were also 44,300 construction jobs in New Jersey. That’s an increase of 3,400 jobs year over year.
Builder Confidence in New Jersey Is Low
In April 2023, builder sentiment in New Jersey was 46 out of 100, according to the National Association of Home Builders/Wells Fargo Housing Market Index. That’s a dramatic drop since April 2022, when it was 74. Builder sentiment is negative at values below 50, neutral at 50, and positive at values over 50.
The Architecture Billings Index, an economic indicator for nonresidential construction activity, was 49.1 in March 2023, up 2.8 year over year. A score of 50 represents no change from the previous month, a score above 50 indicates an increase in firm billings from the previous month, and a score below 50 represents a drop in billings from the previous month.
New Jersey Real Estate Market: Predictions
LaRue thinks New Jersey real estate inventory will hold steady in the coming year. However, she doesn’t expect a notable increase, which isn’t the best news for buyers.
That said, the good thing about New Jersey, according to LaRue, is that “there will always be inventory.” As she explains, people are constantly moving in and out of New Jersey. Inbound movement commonly relates to job opportunities, while outbound movement tends to stem from a desire to downsize and relocate to areas with a lower cost of living.
LaRue also thinks today’s mortgage rates are likely to hold fairly steady. And buyer demand is heavily tied to interest rates.
“As long as interest rates remain the same, the housing market will remain the same. If interest rates fall, you’re likely to see far more buyers re-entering the market and drive prices up even higher,” she says.
All told, LaRue feels that buying real estate in New Jersey is a solid investment, with its proximity to several major metropolitan areas and glorious beaches that tend to perpetually motivate people to buy.
“Those together aren’t attributes that are likely to change anytime soon,” says LaRue. “And so demand should stay high, keeping real estate in New Jersey as a good investment.”
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New Jersey Housing Market Forecast originally appeared on usnews.com
