First-time homebuyers, real estate veterans, and investors alike are all looking towards the future of the New Jersey real estate market. The market is experiencing a big shift right now. Whereas sellers had a tight grip on the market from mid-2020 until late last year, buyers are gaining more power in the current market. This shift can mean big things for anyone looking to make a real estate transaction in 2023. As an experienced real estate law firm in NJ, Veitengruber Law is looking toward the major trends in NJ real estate. Here are some of the predictions the experts are making for the NJ real estate market throughout the rest of 2023.
1. New Listings Are Slow but Improving
Compared to the end of last year and the first quarter of 2023, more homes are being listed on the market. The NJ home listings increased by over 96% in the first half of 2023. As economic uncertainty troubles many families across the US, some homeowners will look to downsize or move for financial reasons. These sellers may also feel less intimidated by entering the market now that things have slowed down a bit from post-pandemic highs. More homes on the market means more options for discerning buyers and investors. The more options, the better chance of finding a great deal within your budget. As more homes enter the market, sellers may also need to make concessions to make their listings more attractive compared to the competition.
2. Houses Stay on the Market Longer
The market has certainly slowed since last year. The average home in NJ stayed on the market for 41 days in the first half of 2023, 7 days longer than the average for 2022. Again, this is good news for buyers and investors. The longer a home remains on the market, the more likely a motivated seller will be willing to cut the price or accept concessions to secure the sale. Sellers may need to work with an experienced real estate agent to ensure they are pricing their property to sell. The high home prices of the last few years will begin to fall as homes remain on the market longer.
3. Mortgage Rates are Stabilizing
Mortgage rates have continued to rise in 2023, but the increases have slowed significantly. The average mortgage rate in NJ in the first half of 2023 was 6.79%. The staggering increases from 2022 appear to be tapering off to more incremental changes this year. While we are not likely to see the low mortgage rates of 2020 return anytime soon, a slow increase generally contributes to the market's overall stability. This stability in mortgage rates may entice more buyers to enter the market. However, as these rates continue to increase, buyers must understand how these interest rates impact their bottom line and set the budget maximum for their home search accordingly.
4. Home Prices Expected to Drop
As the market continues to slow, experts expect a dramatic decrease in home prices, with some predicting a price drop of as much as 20%. This will allow many buyers and investors who were previously priced out of the market to enter the market for a new home or investment property. Sellers and homeowners can generally expect the value of their homes to depreciate a bit over the next year or so. Sellers will likely see less profit as the year goes on. Because of these decreasing home prices, it is crucial for sellers to work with an experienced real estate expert to ensure their home is priced to sell in the current market.
5. Home Equity Borrowers Will Have Fewer Options
As home values skyrocketed in 2022, the equity homeowners had in their homes increased dramatically as well. The average American gained $60,000 in equity in 2022. As home prices decrease, so too will the value of property and homeowner equity along with it. This means that homeowners looking to borrow against their home equity will have fewer options available. It also means that homeowners looking to borrow should do so knowing that their home's value may soon decrease.
6. Upside Down Mortgages
One of the most significant risks for current homeowners is the possibility of going upside down on a mortgage. As home prices and values decrease, it becomes increasingly possible for homeowners to owe more on their mortgage than the home is worth. If a homeowner needed to sell the property during this time of low value, they likely would not be able to sell the house for as much as they owe, resulting in a short sale or even foreclosure. Homeowners who purchased a home recently or who have borrowed significantly from their home will be more at risk of this over the next year.
Real estate market conditions are ever-changing and evolving based on many shifting factors. Understanding the trends can help you make an informed decision about your real estate goals. Working with real estate experts like Veitengruber Law can also ensure that your investment is protected.