Why is it so hard to find an NJ home to buy? Here's the answer, and what needs to change
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The inventory of homes for sale in Monmouth and Ocean counties remains far below even last year's rock-bottom level, a real estate expert said Monday, even as the crunch has begun to ease in the rest of the state.
Jeffrey Otteau, chief economist of the Otteau Group Inc., said short of an unlikely scenario — a recession or a sizable drop in interest rates — the Shore's housing market will remain squarely in the sellers' favor.
"Even though there's less demand, there's even less inventory," Otteau said. "Therefore, prices continue to rise."
The lack of inventory has been a regular complaint from buyers and real estate agents alike since the pandemic began in the spring of 2020, prompting people to flee cities and snap up houses in the New Jersey suburbs, where they felt more secure.
The Jersey Shore's housing market has only tightened since then, pushing prices to new heights. The median price for a single-family home sold in Monmouth County was $750,000 in April, compared with $485,000 in April 2020. In Ocean County, it was $587,000, compared with $325,000 in April 2020, according to New Jersey Realtors, a trade group.
'Difficulty in finding good properties'
Caught in the whirlwind are Mike and Lauren Heist. The couple and their two children moved from Brooklyn to Fair Haven last July to be closer to family and then set out for a career change. They started New Again Houses, a franchise that renovates blighted homes and resells them.
They bought their first in March, spending $275,000 for a single-family home in the Belford section of Middletown. Their general contractor, Wescott Construction in Holmdel, gutted and refurbished the home. And the Heists are listing it for $499,000.
But for the business to take off, they will need more homes.
"It's been challenging," said Mike Heist, 39. "We just started in January, but that has been one of the things we've been most surprised about — the difficulty in finding good properties that we can add value to."
Home owners are staying put. Inventory of homes for sale in New Jersey plummeted from 43,413 in May 2019 to 14,159 last month, or 67%, according to the Otteau Group.
Monmouth and Ocean counties have a particularly acute shortage of homes. Monmouth's inventory in May was down 27% from a year ago, while Ocean's inventory was down 29% during that time. By comparison, New Jersey had 2% more inventory than a year ago, Otteau said.
What's driving the shortage at the Shore?
- Handcuffed by interest rates. As the Federal Reserve Board sharply increased interest rates to slow down the economy and rein in inflation, the average 30-year mortgage rate climbed from less than 3% in May 2021 to about 7% in August 2023. Few owners want to move if they have to give up their low-interest loan.
- Demographics. Monmouth and Ocean counties have a high share of seniors and vacation home owners — two segments of the market who are less likely to sell their homes, Otteau said.
- Employment gains. The region's job market has been humming, providing homeowners with the income they need to keep up with their mortgages. From February 2020 to March 2024, the Middlesex-Monmouth-Ocean region's employment grew 4.7%, faster than the U.S. rate of 3.8%, according to the Federal Reserve Bank of New York.
- Few foreclosures. Just 1.1% of home loans in New Jersey were delinquent in the first quarter of 2024, lower than the national rate of 1.7%. By comparison, 2.4% of real estate loans nationwide were delinquent in the first quarter of 2020, Otteau said.
- Zombies are dead. In the Garden State, 0.41% of residential properties were abandoned before the foreclosure process began, referred to as zombie homes, according to the research company ATTOM. Only New Hampshire had a lower rate.
"Abandoned homes in foreclosure continue to get harder and harder to find around the country," said Rob Barber, chief executive officer for ATTOM.
Otteau said the most likely scenario for the inventory crunch to ease is that inflation continues to slow, the Fed begins to lower interest rates, and mortgage rates drift downward. Homeowners who balked about moving when mortgage rates are 7% might be more willing if mortgage rates are 5%.
"You're not thrilled about it, but it's more palatable," Otteau said.
Michael L. Diamond is a business reporter who has been writing about the New Jersey economy and health care industry for more than 20 years. He can be reached at mdiamond@gannettnj.com.