In recent years, the New Jersey real estate market has been on an upward trend due to the rising demand for housing. As more and more people seek to invest in properties, it’s no surprise that this demand is met with rising prices. What does this mean for a prospective real estate investor?
Several factors affect the New Jersey real estate market. So, buyers and sellers must stay updated and make informed decisions.
In this article, we will explore these factors in light of the current state of the New Jersey real estate market. Then, we’ll examine whether it is likely to crash in 2023.
Let’s dive in!
What factors affect the New Jersey Estate Market Value?
Before we examine the New Jersey real estate value over time, let’s look at 3 key factors that influence the stability of the real estate market.
- Government policies
Changes in government regulations and policies are tangible contributors to the demand and supply of real estate in New Jersey. This includes regulations like Zoning laws, building codes, and tax policies.
For example, Zoning laws regulate the types of activities or purposes that properties can be used for within a specific district. That is, the Zoning laws determine if properties within a particular location are used for residential, retail, or office building purposes. According to research by CATO Institute, policies like this have the potential to increase the prices of properties.
- The economy
This revolves around factors like job growth, income levels, GDP, and the overall economic stability of a city. Typically, economic trends have a different effect on various real estate types. So, for example, real estate investments in industrial properties are more likely to be affected by the volatility of an economy than investments in residential properties.
New Jersey has proven to have a thriving economy, with about 658 industries according to IBISWorld. For such a vibrant economy, it’s safe to say that the value of housing is more likely to increase over time.
- Interest rates
Another crucial determinant of the real estate value in New Jersey is the mortgage rates. No doubt, a mortgage gives you the capacity to purchase a new property in New Jersey. However, the interest rates will determine how high or low the property prices will be. Lower mortgage rates mean more demand, and consequently, an increase in prices.
On the other hand, higher mortgage rates will mean less capacity to buy, a decline in demand, and lower prices of properties in NJ.
What’s the Real Estate Market in New Jersey like today?
According to Redfin, New Jersey real estate prices increased by 2.4% compared to the previous year, and there was a 36.7% decline in the number of properties sold as of January 2023. Zillow records a 6.8% increase for the same period. Looking at the trend below, you will observe that there has been a gradual increase in the value of properties over the past 5 years.
In 2022, there was a steady increase in this trend and towards August 2022, a decline was spotted. But, the end of 2022 saw another increase in the price of properties.
With trends like this, it’s easy to expect a real estate market crash, but the factors that determine the viability of the real estate market do not depend on the prices alone. The increase in the prices of real estate has not completely halted the demand. People still want to bid for properties whether they are above or below the list price.
On a commercial level, JLL’s New Jersey insight for the fourth quarter of 2022 revealed that tenants did not stop to lease spaces. Construction activities also increased—in fact, JLL reported that it was at the highest level in the market’s history. In view of this, the industrial report states that landlords will still have the upper hand in 2023.
The above insights show that in spite of the rising cost of real estate in New Jersey, it’s still a competitive market that has more to offer.
So, will the New Jersey Real Estate Market Crash?
The New Jersey real estate market is influenced by several complex factors that can impact potential buyers, sellers, and investors. Looking at three factors, we see that government regulations, economic trends, and interest rates have a significant influence on the value of properties in New Jersey.
Additionally, the observation of trends over time proves that the real estate market in New Jersey continues to thrive even as the property value increases. Buyers are still interested—and sellers are not ready to stop listing properties. For the investor, such appreciation in the value of real estate promises higher returns on investments in the future.
However, bearing in mind the trends will continue to change due to the above-mentioned factors (and others not mentioned in this article), the prudent investor will not go blindly into the market. So, it’s best to keep an eye on patterns in the market so that you can make an informed decision in a dynamic real estate marketplace like New Jersey.