The soaring home prices New Jersey has seen in recent years should finally slow down in 2024, real estate experts say. And the market is expected to normalize.
Lower interest rates should put more homes on the market, helping to smooth out prices. The Fed's recent statements suggest that inflation is slowing and that rate cuts could begin in March or June.
Jeffrey Oto, a real estate economist who heads Oto Group, said the real estate market could see changes by Memorial Day or even the second quarter of 2024.
“As interest rates start to approach or fall below 5.5%, existing homeowners will be more willing to put their homes on the market,” Oto said. “As inventory increases and sales activity picks up, home prices will likely level off.”
Jack Binder Jr. of Avalon's Ferguson Dechert says he's already seeing an improvement in the Avalon market.
“We're seeing demand come back in a big way,” he said. “We gained new leads at a faster pace than we saw in all of 2023.”
And this is not typically a busy time, Binder said. “People are feeling down or thinking about their kids' school in Florida. That busy season tends to start after President's Day weekend.”
New Jersey home prices rose about 7% in 2023, following a 9% increase in 2022 and double-digit increases in 2021 and 2020.
Experts had predicted that prices would slow or even fall in 2023 as interest rates more than doubled from a year earlier. But with low inventory, the few homes that came on the market were in high demand.
The hardest hit market segment was first-time homebuyers. The luxury housing market was the least affected, as these buyers were less sensitive to changes in interest rates.
Many first-time buyers have been locked out of the market as rising interest rates add hundreds of dollars to their already high monthly payments.
“There weren't that many out there, or you'd be overpaying,” said Cheryl Toye of Weichert Realtors, which serves Morris, Sussex and Warren counties.
If you find a $350,000 home, with an 8% interest rate, 20% down payment and $7,000 in annual taxes, your monthly payments will be about $2,700. At a 6% interest rate, the monthly payment would drop to $2,400, Toye said.
“I don't think interest rates have fallen enough to go crazy again,” he said. “If you introduce[5% interest rates]people will start coming back into the market. By the mid-5s, sellers may think, 'Okay, I missed the boat, but let's get on board.' do not have.”
Oto said first-time buyers are critical to the real estate market because of the knock-on effects from home purchases.
“Entry-level buyers drive the overall housing market because for every first-time home buyer, there are typically four other homes sold in the housing chain.” A seller of a $600,000 home will trade up to a $600,000 home, a seller of a $600,000 home will purchase an $850,000 home, and a seller of that home will purchase a $1 million home. .
Beth Kimmick of ERA Central Real Estate in Cream Ridge, which serves Ocean, Monmouth, Mercer, Burlington and Middlesex counties, said the 2023 market “scared a lot of people.”
“Inventory really ran out all of a sudden. When interest rates went up, buyers were gone and sellers got scared,” she said. “And how do you buy a home if you don't have inventory? That gives people pause in a big way, and that's what's happening right now.”
Housing inventory has been on the decline for the past decade. There were 71,194 unsold homes on the market in New Jersey as of July 2011, according to data from Oto Group. By July 2016, 51,010 homes had been sold, and in July 2021, there were 20,729 unsold homes on the market. At the end of 2023, there were just 11,000 homes for sale in New Jersey.
“I don't think there will be a rush of inventory or buyers,” Kimmick said. “People are paying attention to everything and will come back to the market once they feel safe.”
By 2024, she says, the process of buying and selling a home will feel more normal.
“If the price is wrong or it's not in good condition, it ends up on the market. Buyers are more critical,” Kimmick said.
He also said buyers will not be exempt from inspections or appraisals. “It’s going to be more traditional in that the buyer and seller balance it out throughout the transaction.”
Are you an agent, buyer, or seller operating in this changing market? Do you have tips for the New Jersey real estate market? An unusual listing? please tell us.
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Allison Pries can be contacted at: apries@njadvancemedia.com.
