From the Star Ledger:
List price and what buyers actually paid for a home in New Jersey have been wildly different for the past few years.
Bidding wars that drove up sales prices were a hallmark of the pandemic market. And now that the market is cooling — largely due to higher interest rates on mortgages — buyers are gaining more control in the residential real estate market.
“People don’t have as much money to spend because interest rates are so much higher,” said Marybeth Mcgee of RE/MAX Bay Point Realtors. “What they could afford last year is now almost $100,000 less.”
Home prices have risen 36% since 2020, and interest rates have doubled since August 2021.
A person making $100,000 per year with a 10% down payment could’ve afforded a home for $383,355 in August 2021. By December 2022 their buying affordability dropped to $279,733, according to data from the Otteau Group.
And a person with an income of $200,000 could’ve afforded a home for $1,085,861 in August 2021. In December 2022 the affordable price tag dropped to $808,295.
Typically home prices increase only 4 to 5 percent per year, said Jeffrey Otteau, a real estate economist and president of the Otteau Group. Between 2013 and 2019, home prices increased an average of 3.5%.
Prices were bid up by people coming from New York City and adjusting them to their own income levels. “People working in New Jersey cannot afford house prices in New Jersey because of this dynamic,” Otteau said.
Percent of list price paid on closed sales in New Jersey dipped below 100% for the first time in December 2022, when it hit 99.8%. It slipped further in January, to 99.4%, and to 99.1% in February, according to data from New Jersey Realtors.
Percent of list price peaked in New Jersey in June 2022 at 105.1%. At that same time — two months after the interest hiked began — price reductions became more common across the state.