NJ Housing Market: A Cool-off is Coming
Now that the Federal Reserve has announced a quarter of a point hike in interest rates, with several more increases to come this year and beyond, the cost of getting a mortgage is going to rise.
As a result, the red-hot New Jersey real estate market is expected to cool off. But that might not happen for quite a while.
Jeff Otteau, the founder of the Otteau Group Real Estate Valuation & Consulting Co. in Matawan, and the managing broker of Hudson Atlantic Realty, said because of ongoing inflation concerns “the Federal Reserve is now handcuffed.”
"They will not be able to raise interest rates as quickly as they had intended, and we think that’s going to create some breathing room for the housing market," he said.
Salaries don't match home prices
Otteau said it’s clear that a decline in New Jersey home prices is coming because they’ve gone up 27% over the past two years “while salaries, which provide the currency to be able to support house prices, have only risen about 6%.”
Otteau noted any time that home prices rise faster than incomes, there must be a correction to follow.
Otteau said one reason the New Jersey housing market exploded shortly after the pandemic began is that many New York City households fled to the suburbs, bringing with them the higher income and buying power of New York City jobs, which drove prices up.
He said that migration has largely ended now, “and what we’re left with is very high house prices, which tied to New York City incomes, that now need to be supported by New Jersey incomes.”