What Homebuyers Need to Know About New Jersey’s Housing Market Boom
When the pandemic shut down the country in March of 2020, the housing market in New Jersey briefly stalled. However, home buyers soon made up for the lag with a buying frenzy that started in late spring and is holding steady today. Across New Jersey, homes are hitting the market on Monday and selling for tens, sometimes even hundreds, of thousands of dollars over asking price by the weekend.
The high prices are being driven by low inventory and low-interest rates. Insider NJ reports, “Closed sales were up 17% compared to last January, despite new listings down 21.4%, and the number of homes for sale down a staggering 43.9%”
Additionally, homebuyers are benefiting from record low-interest rates which were intended to stimulate the economy and in New Jersey, they certainly have. With interest rates expected to stay low for at least two more years, the boom in New Jersey’s real estate market may be far from over.
New Jersey’s appeal is nothing new. The state has a strong school system, beautiful national parks, easy access to Philadelphia and New York, not to mention bustling summer activity along the Jersey Shore. All of these benefits make New Jersey alluring to city dwellers, first-time homebuyers, and current residents looking to upgrade.
“We are still getting a lot of people from New York and from Bergen County. (During the lockdown), they had no place to go. Here, you can have a backyard. We have so much more to offer for the money, in terms of property and the school system.” said George Hansen of ERA Suburb Realty in Scotch Plains.
But out of state buyers should be wary of the high price of living in New Jersey. The state has the highest property taxes in the country, and those taxes continue to rise. According to SmartAsset, property tax rates in parts of New Jersey are more than double the national average. “The average effective property tax rate in New Jersey is 2.42%, compared to the national average of 1.07%.”
Also, high realty transfer fees make buying a home in the Garden State pricier than you might think. NBC Philadelphia reports, “The realty transfer fee is imposed on the recording of deeds transferring real property, and is calculated on the basis of the amount paid in the deed.” That means higher home prices lead to higher realty transfer fees.
But that’s not stopping Millennials, who the National Association of REALTORS® reports as the largest share of homeowners. This large group is finally prepared to buy their first homes. CNBC reports, “A new study by Chase Home Lending found 52% of millennial first-time homebuyers feel financially ready to buy a home.” With the intense competition and skyrocketing home prices, this eager group of homebuyers will likely have the hardest time getting their foot in the door of New Jersey’s hot real estate market.
Not only are first-time homebuyers competing with out-of-state buyers, there’s also competition from current New Jersey residents looking to upgrade. Millennials are getting edged out by both in-state and out-of-state homebuyers with more assets and cash on hand.
The fast-paced real estate market in New Jersey doesn’t allow you time to waiver. Single-family homes are spending just 44 days on the market, compared to 72 days last year. To have a chance at a home, buyers need to make their best offer straight out of the gates.
However, homebuyers should be cautious when making a bid over the asking price. When homes sell for more than they appraise for, the buyer is on the hook for the difference.
Daniel Effenberger, a New Jersey REALTOR says in the article N.J. Real Estate is Hotter Than Ever, “If there’s a $500,000 home that ends up selling for $550,000, accepted offer, the appraiser has to come in there — the representative from your lender — and they have to say whether this home is worth $550,000 or not. If it happens to under-appraise, they [the lender] want to ensure that those buyers, whoever they accepted, have enough cash reserves to be able to come up with that difference in the appraisal.”
If you can’t responsibly make a bid at or above asking, another way to stand out in the sea of high bids is to be flexible with your closing. It’s great to be able to close quickly, but some sellers may be looking for a buyer who can wait to close until they’ve found a new home themselves. To stand out in the crowd, the key is to be flexible to meet the seller’s needs.
It’s a seller’s market in New Jersey, and all signs point to that trend continuing for at least another year. Any home buyer looking to take advantage of New Jersey’s amenities will need to move quickly and present a strong, but financially responsible offer.