The real estate market has been a challenge to navigate during the past few years, and New Jersey is no exception. During the early stages of the coronavirus pandemic, many people hesitated to move because they did not want to expose themselves to people unnecessarily. This initially led to a drop in demand for housing, but as the world began to open up again, and many people started working from home, demand for houses shot up dramatically, contributing to skyrocketing housing prices.
Now, with interest rates rising, demand for houses is falling again, contributing to a drop in some home prices. Dennis Lynch is a real estate analyst based in Rumson, New Jersey, and he has a tremendous amount of experience navigating all types of real estate markets. Now that housing prices are falling in some parts of New Jersey, Dennis and his company—Dennis and Marshall Lynch—have a few tips homeowners need to keep in mind. Where are housing prices dropping in New Jersey?
In August 2021, the average 30-year interest rate for a fixed-rate mortgage was 2.7 percent. Since then, the average interest rate has gone up four percentage points; someone trying to purchase a house today might be looking at a 30-year fixed-rate mortgage of nearly seven percent. While home prices have gone up dramatically during the past two years, these factors contribute to slower home sales and increased inventory.
Housing prices are gradually starting to come down, as the market transitions from a seller's market to a buyer's market. Prospective home buyers no longer feel the urgency to make high offers on houses before they are snapped up. Dennis Lynch has noticed home sales have fallen significantly during the past year. In New Jersey, there is two to three months' worth of inventory on the market, which represents a significant increase compared to last year.
At the same time, the housing market is not the same across the entire state. There are some parts of the state where housing prices are still very high, and other locations in New Jersey show prices beginning to fall.
One way to figure out where housing prices are falling is to identify the New Jersey townships with the largest home inventories. For example, according to Dennis and Marshall Lynch, Alpine has the largest available housing supply compared to any other town in the state. Alpine is estimated to have nearly a year’s worth of inventory on the market, but Alpine is also one of the most expensive townships in the country. The median home price in Alpine may be significantly more than the average person can afford.
Several other townships have large inventories of houses available. For example, Loveladies also has nearly seven months of inventory available. In addition, both Saddle River and Far Hills have more than five months of supply available. Atlantic City, Guttenberg, and Delaware Township have just under five months of inventory available.
Having a large supply available in these townships may mean houses are having a difficult time selling. As a result, sellers may be inclined to drop prices to make their homes more attractive. This could cause the average home price in these areas to fall, making homes more affordable in a market with a higher interest rate.
According to Dennis Lynch, one of the side effects of increasing interest rates is that foreclosures will go up as well. Some people may have taken out adjustable-rate mortgages—as a result, the interest rates on their mortgages might begin to go up, and they might be forced to foreclose on their homes.
Homes going into foreclosure can create opportunities for buyers to purchase houses at a discount. New Jersey has a variety of normal markets that could see rising rates of foreclosures. In August, New Jersey had the fourth-highest rate of foreclosures in the country. Some housing markets most vulnerable to foreclosures include New York and Philadelphia suburbs; this includes Passaic, Camden, Gloucester, Bergen, Essex, and Sussex counties. If foreclosures in these areas begin to go up, housing prices could come down, making them more affordable.
Dennis Lynch has years of experience navigating various housing markets in New Jersey. He is based near Rumson, New Jersey, and he understands some buyers may have questions about how to navigate a market with falling home prices and rising interest rates.
Rising interest rates can make mortgages more expensive, but there are also some upsides. For example, buyers may not have to worry about competing with multiple offers, and they might convince sellers to cover some closing costs. There are also opportunities for buyers to purchase houses by putting less money down, as they do not have to worry about competing against many cash offers. This means VA and FHA offers might experience a higher rate of acceptance.
Finally, buyers might also have opportunities to purchase properties under list price, which has been almost unheard of during the past few years. Therefore, even though buyers might end up paying more money and interest, they might not have to take out as much principal. Dennis Lynch also wants to remind buyers that they might be able to refinance when interest rates fall. They don't necessarily have to worry about paying a high-interest rate over the life of the loan.
Dennis Lynch is a highly experienced real estate professional based in Rumson, New Jersey. As one of the leaders of Dennis and Marshall Lynch, he has helped countless clients navigate all different types of markets, including markets with higher interest rates and falling home prices. He consistently puts client needs first, anticipating potential obstacles and challenges ahead of time. That way, he can put his clients in the best position possible to achieve a favorable outcome.