The housing market in America skyrocketed in 2022. It is currently a seller’s market since the demand from buyers looking for a home does not meet the inventory of houses available.
The high demand for buying a home in New Jersey was present but also exacerbated in 2020, at the start of the COVID-19 pandemic. Although New Jersey was not the only area that saw this trend: in 98% of metro areas nationwide, home values rose approximately 4% from May 2019 to May 2020. While home values rose, the national interest rate was capped at about 3.72%, which made buying extremely attractive during the pandemic.
Since then, mortgage rates have continued to climb. During the recession in 2008, mortgage rates were about 6%. In New Jersey, buyers looking for homes right now are seeing percentages much higher (see current rates below). This is a stark contrast to the rates that buyers saw in 2021, which was a national average of about 2.65%.
Before we present the current mortgage rates across the state, it is important to understand the different types of mortgages available for people looking to buy homes.
Types of Mortgages
- Conventional Loan: This mortgage is not insured or guaranteed by the government under the Federal Housing Administration, Department of Veterans Affairs, or Department of Agriculture loan programs. This option is typically best for buyers with great credit and little debt.
- Jumbo Loan: This type of loan is used when the price of the house is too expensive to use a conventional loan. Limits to the Federal Housing Finance Agency are set by the government. In New Jersey, if the house you are looking to purchase is higher than these prices, you will need to use a jumbo loan.
- Government-Insured Loan: This mortgage loan is used to ensure borrowers will repay their loans to banks.
- Fixed-Rate Mortgage: A fixed-rate mortgage means that your interest rate will not change over the course of time it takes to pay it back. Your principal payment will also remain the same. However, if possible, it is recommended to pay higher than what is required so you may pay off the loan sooner.
- Adjustable-Rate Mortgage: This loan has an interest rate that changes over time. While payments may be lower at first, payments are likely to rise when the market interest rates rise.
Mortgage Rates in NJ
- 30-year fixed-rate mortgages: The rate for a 30-year fixed-rate mortgage sits at 7.29%, which has increased about .15% from only last week’s rate. This mortgage is the most common in New Jersey, with lower monthly payments and higher interest rates.
- 15-year fixed-rate mortgages: The average interest rate right now for a 15-year fixed-rate mortgage is 6.48%. These mortgages will usually have a higher monthly payment but a lower interest rate because you are paying off the loan faster.
- Adjustable-rate mortgages: While interest rates with this loan often change annually with the market, the current rate is 5.59%.
New Jersey Housing Market
The state of NJ has one of the highest costs of living in the nation, sitting at 15% higher than the national average. In terms of housing, New Jersey is 38% higher than the national average.
NJ has also seen a rise in foreclosed homes since the start of the COVID-19 pandemic. In August of 2022, NJ became the fourth state with the highest amount of foreclosure filings. According to Samuel Stebbins, “In New Jersey, foreclosures rose by 245.0%, from 2,660 in the first six months of 2021 to 9,177 in the first half of 2022. The foreclosure rate in the state of one in every 410 homes ranks as the second highest in the nation.”
Analysts at Zillow are predicting that the housing market will stabilize in 2023. However, with a possible recession and rising inflation, there is no way to predict how the market will be.
New Jersey also offers several programs for first-time buyers. The NJHMFA Down Payment Assistance Program, NJHMFA’s First-Time Homebuyer Mortgage Program, and the New Jersey Housing and Mortgage Finance Agency Smart Start, are just a few programs that offer assistance to first-time home buyers. Click here to learn more about these programs.
