Is it a good time yet to buy a home in New Jersey?
🏠 The number of homes for sale is down by a quarter from a year ago
🏠 Sellers are still getting more than asking price
🏠 Interest rates are expected to dip in 2024
Wannabe home buyers can only stay on the sidelines for so long, just waiting for something to change.
It's still very much a seller's housing market in the Garden State, and experts advise: if you have flexibility, don't make the major purchase just yet.
It's a dark market for buyers, but there's a tiny light shining through it for sometime next year.
Supply and demand
According to the latest monthly data from New Jersey Realtors (October 2023), the number of homes for sale in the state has dropped by 25% from the same time last year. A shortage of inventory has been a main reason for inflated home prices ever since the coronavirus pandemic took hold of New Jersey.
The median sales price for a home in the state (nearly $520,000) is up by more than 10% from a year ago, the statistics show.
"People who are in the market want to buy and they're desperate to buy," Leslie Beck, owner and principal of Compass Wealth Management in Rutherford, told New Jersey 101.5. "Sellers are getting over the asking price for their homes."
And buyers aren't just getting hit with the wild purchase price — interest on a 30-year fixed-rate loan remains higher than 7%, which means monthly payments in order to stay in the home are reaching impossible amounts for prospective buyers to take on.
Home prices in New Jersey have increased by about 45% since the onset of the pandemic, according to Jeffrey Otteau, chief economist for Otteau Group in Matawan. When you combine that with the hike in interest rates, which were lower than 3% before the pandemic began making waves, buying a home is 85% more expensive than it was just a few years ago.
Inventory right now is about two-thirds lower than it should be, Otteau said. One reason: existing homeowners who locked in low interest rates when they bought or refinanced their homes do not want to trade up to today's rates.
"When buyers do find something, there's eight or 10 other buyers that are competing to buy the house," Otteau said. "Those with lower incomes or lower savings are getting pushed to the sidelines. They're being affected disproportionately."
When should I buy a home in New Jersey?
But forecasts call for some relief for buyers in the new year. Interest rates should drift lower in 2024, according to industry observers.
"We think that they're going to settle in by the end of next year at somewhere between 6 and 6.5%," Otteau said. "Inflation has recently been drifting lower, and interest rates and inflation are pretty much joined at the hip."
At the same time, the rise in home prices is expected to halt in the first half of 2024.
According to Otteau, the "sweet spot for a buyer" in 2024 may be near or during summer — home prices should be where they are today, interest rates should be lower, and inventory should be higher.
Those who are or feel forced to buy a home now will have the option to refinance when interest rates come down.
Beck, with Compass Wealth Management, has advised clients with flexibility to consider building out their current home, instead of buying a new one. And individuals looking for their first home may have an easier time negotiating for new builds, rather than resales.
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