Impact of Mortgage Rates and Inventory on First-Time Home Buyers in New Jersey

As a first-time homebuyer in New Jersey, navigating the current market can be challenging. The combination of low inventory and high mortgage rates adds another layer of difficulty.

According to Bankrate, the current average rate for a 30-year fixed mortgage in New Jersey stands at 7.55%, slightly below the national average of 7.63%. Looking back to this time last year, the average rate was 5.55%. These rates haven’t been this high since June 2001.

Unfortunately, there aren’t any signs of mortgage rates decreasing in the near future. Although these rates don’t directly impact the rising home prices, they do contribute to the limited housing inventory.

Real estate agent Jenn Vongas from Coldwell Banker Realty in Morris County explains that prospective sellers might be hesitant to move given the high mortgage rates for their next home. This situation creates a ripple effect, resulting in a 23% decline in New Jersey’s housing inventory over the past year. There were 11,404 new listings in July 2022 compared to only 8,732 new listings in July 2023.

The combination of limited inventory and increasing mortgage rates further deters first-time buyers from entering the housing market. Ghada Abbasi, a real estate agent for Coldwell Banker Realty in Bergen County, highlights the fierce competition that first-time buyers face, often being outbid by individuals with greater purchasing power. These buyers can make larger down payments, offer above the asking price, and even pay in cash.

“The demand is there for the premier buyer, I should say. The buyers who will meet the income requirements, who have the cash,” Abbasi mentions. “Whenever something comes up, they jump on it, overpay for it, and get it.”

Many first-time buyers often encounter challenges as they lack a property to sell, leaving them without funds from a sale to contribute towards a new home. As a result, it may be advisable for some individuals to continue renting until they can accumulate a nest egg and enhance their buying power in the housing market. Oftentimes, first-time buyers overlook the fact that owning a house involves more than just paying the mortgage; additional costs such as homeowners’ insurance, property taxes, utilities, and maintenance should be factored into their budget.

However, for those in a stable financial situation, there is no need to wait for an increase in housing inventory or for prices to decrease. It is recommended that all first-time buyers make an offer on a desired property if it becomes available, and make a compelling offer if they are truly interested. Waiting to see how the market unfolds may not prove beneficial, considering that buying a home is meant to be a place of residence rather than a mere investment.

Although current high mortgage rates may appear discouraging, potential buyers should not be deterred, as there are options to adjust rates should they decrease after purchasing a house. It is advised to “marry the house and date the rate,” as refinancing is possible at any point. Delaying a purchase may lead to a significantly higher price if rates decline by one or two percent.

While having sound financials and good credit is crucial, there are other factors that can help guide first-time buyers in this housing market. Consideration can be given to making a slightly higher down payment, exploring nearby neighborhoods for better inventory or prices, and seeking a balance between wants and needs when selecting a home. Additional features, amenities, and upgrades can always be added to the property over time.

In conclusion, the current landscape of the New Jersey housing market poses unique challenges for first-time buyers. Limited inventory and high mortgage rates create a competitive environment that puts them at a disadvantage.