Real Estate Marketplace Update: What YOU Need To Know
With the economy doing well and the new tax laws in effect, interest rates are on the rise. So what does this mean for the New Jersey housing market? Here are some helpful insights from Jeffry Otteau, president of the Otteau Group of New Jersey, specialist in housing market trends.
Has the housing market recovered from the recession?
Train towns – those with a one-seat 45-minute or less ride into the city – have seen a full recovery in home prices, and in fact, home prices in these towns have surpassed their pre-recession highs of 2006. Eight years of significant US job creation, a strong economy and salary increases means a continued strong demand for home buying, and in fact, home sales in our markets are up. 2017 saw the largest number of transactions in New Jersey history.
How has this affected home prices?
Last year, prices in our areas increased by 5%, half a percent per month and that trend is continuing this year. Unfortunately, there has been an 11% decline in inventory year over year, which means that unmet demand will cause prices to continue to rise. Mr. Otteau forecasts that the housing market here will stay strong for the next three to five years.
What about interest rates?
Since last September, home mortgage interest rates have risen by 75bps. While they are still relatively low, Mr. Otteau expects them to continue rising by another 40 bps this year. A one-point rise in the interest rate translates into a 9% decrease in buying power. So if you are thinking about buying a home in the next year, keep this is mind. It may make sense to move up your plans.
What Impact will the new tax law have?
Mr. Otteau doesn’t expect an impact to the housing market. In our towns, with a strong job market, great schools and trains into the city, demand will remain high. For mortgages under $750,000, there is no change in the law. The interest will still be deductible. For those over $750,000, check with your accountant. The State and Local tax deduction is capped at a combined $10,000, so that is something to bear in mind. However, offsetting tax cuts are expected to mitigate that for most taxpayers.