NJ HOME PRICES SEEN RISING FURTHER IN 2021
Sidelined buyers better get a move on it, before interest rates tick up, analyst says
By The Tamima Team
NJ home prices will continue to rise this year and next, buoyed by low interest rates, strong demand from millennials, continued urban migration to the suburbs, improving economic conditions, and diminishing Corona virus fears.
That’s according to NJ housing market guru of Jeffrey Otteau, who presented his spring 2021 outlook to realtors earlier this week.
“In the near term the future is very bright,” said Otteau, president of The Otteau Group, Inc.
While interest rates have ticked up slightly since the start of 2021, they are expected to remain relatively low in the near to medium term.
Otteau notes that every 1 percentage point (100 basis point) drop in mortgage rates lowers debt servicing costs, increasing buyer home purchasing power by 9 percent.
In 2020, rock-bottom rates, along with millennial demand, urban flight from Covid and low inventories, helped overall NJ home prices jump a record 11.6 percent, Meanwhile, the dollar volume of home sales in NJ in 2020 totaled $50 billion, another record, beating the prior peak of $42 billion in 2005.
Slightly firmer interest rates in 2021, as well as weaker demand from fleeing New Yorkers as Covid eases, means overall NJ home prices are likely to rise by 6 percent in 2021, Otteau said. There is no near-term threat of inflation, he added.
“The market will lose some speed, but it’s still a very good outlook.”
As vaccinations ease worries about Covid, trade‐up buyers will be joining the market, while a stabilizing unemployment rate will also add upward momentum to home prices, he said.
“That’s good news for housing. More people with jobs increase the base of potential home buyers.”
While a rising tide has been lifting all boats, so-called luxury homes (priced above $2.5 million) and vacation and second homes, are faring particularly well.
Demand for luxury homes has been strong from wealthy New Yorkers leaving the city for the suburbs, while the new work-at-home zoom culture has encourage many people to purchase second homes by the shore or farther out from northeast NJ suburbs of Manhattan.
Looking out longer term, Otteau expects overall NJ home prices to rise 3 percent in 2022, before correcting in 2023.
“We can expect there’s going to be a price correction in a few years, but it will be gentle,” he said.
Still his advice to would-be buyers is: Buy as soon as possible before the uptick in interest rates increases your costs by making mortgages more expensive.
“For the buyer that waits, this advantage of lower rates is going to be completely forfeited because rates are going to rise in the future,” he said.
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Curious how home prices in your town will fare in 2021? Interested to know more about the outlook for the New Jersey market in 2021 and beyond?
Call Tamima Friedman at 201.306.0267 or email her at tamimafriedman@gmail.com.