Expect the unexpected. This old adage that you’ve heard time and time again is the single most important statement when it comes to assessing the climate of real estate in New Jersey. Previous real estate forecasts with respect to last year could have never predicted the unwavering amount of pressures that commercial and residential real estate markets experienced. In fact, previous forecasts expected new construction and development to hit a boom and interest rates to increase. What happened instead? Mortgage rates barely saw movement, house prices rose, and the development of new homes and construction didn’t see an increase until very close to the end of the year. It wasn’t the 2017 that many had expected, which left many wondering what to expect in 2018.
One expectation for New Jersey homeowners in 2018 was the gross impact that the tax reform would have on their pockets. The new $10,000 cap on state and local tax deductions is a considerable and unwelcomed change for residents who paid an average of $17,800 on their state and local taxes just 3 years prior. Additionally, the elimination of interest deduction on home equity mortgages and the cap on new home mortgages are expected to keep a slow-growing New Jersey real estate market at an almost stand still.
Home inventory in New Jersey is already tight enough as it is. Many homeowners have either found their perfect home and don’t want to move or simply can’t afford to move at this time. The amount of renters has increased as well, particularly in areas near major cities such as the suburbs of Philadelphia and New York. Under the new tax reform, the already limited home inventory is likely to become even smaller. Existing homeowners whose mortgage exceeds the $750,000 cap, but falls below $1,000,000 are less likely to move if they are required to take out a new, larger mortgage on the new home. An additional concern under this outlook is that those homeowners who were looking to upgrade their home or move from a starter home into a larger home may now no longer be able to afford as much house as they had initially planned. All in all, fewer home buyers pooled with the decreasing amount of homes entering the New Jersey real estate market decreases the number of home buying transactions that will occur this year.
All isn’t lost or bad in 2018 for the New Jersey real estate market. With New Jersey being primly located between Philadelphia, New York, and even DC, more millennials are flocking to the area to buy up homes. Despite previous reports, Forbes believes the millennial demand for housing will see a drastic increase as the population of people born after 1980 is fully in the workforce, married, and starting families. Even though millennial homeownership saw a slow start, New Jersey should begin to feel the impact of their homeownership soon.
In addition to millennials becoming homeowners, there are parts of the New Jersey that are in high demand. Areas with access to mass transit, good schools, and single family homes are prime real estate. New Jersey Shore real estate falls greatly into this category. In fact, according to Neighborhood Scout, 5 of the top 10 highest appreciating New Jersey cities since 2000 are located along the New Jersey shoreline. Their growth is only expected to continue.
It’s fair to say that the New Jersey real estate market can be summarized with one word: uncertain. However, home prices are steadily rebounding. The median home value in New Jersey is $313,560, a 10.6% increase over the past year. The median home listing is $285,000 where the median home closing price is $253,700. It seems that those who are purchasing homes are getting more bang for their buck, making the outlook on 2018 promising.