Overall, inflation is a factor hitting all sectors of the economy, real estate included. Less week CoreLogic reported that the average home price increased by over 18% year-over-year. It appears that this rate is slowing as the rate from May to June was only .6%, which translates into an increase in the price of a home to 7 2%, year-over-year.
But the single-digit increase for 2023 may not hold, for the simple reason that if inflation continues its current trajectory, that will translate into a higher cost of living, which will then put pressure on rents. A recent article put out by HouseCanary, reported that for the first half of 2022, the average rent for a single-family home dwelling rose to $2,495 a month. This represents a 13.4% increase year-over-year. Los Angeles and San Diego took the two top spots, coming in at over $4,600 a month. An unlikely number three was Bridgeport, Connecticut, which reported the average rent for a single-family home at $4,352. But the other positions, including San Jose and Oxnard, California, came in at over 4,200 a month.
This rise in rents is obviously the result of rising mortage costs, as typical monthly mortgage payments are 75% higher today than it was in June 2019, according to a report by Zillow.
The mega metro areas, including New York and San Francisco, have led to individuals seeking out more affordable housing solutions. One of the beneficiaries of that migration has been New Jersey, which has increased in population by over a million in the last 3 years.
New Jersey
The New Jersey average price for a single-family home has steadily grown by double digits for the last 30 months. In the big picture, look at the average price of a home sold in September 2018, which was $396,000, as compared with a single-family home sold in June of 2022, which was $638,000. This represents an appreciation of over 61% over that period. Putting this in perspective, the average single-family home increased in price by only 3.1% year-over-year from September 2018 to September 2019.
Certain current data supports the current pricing levels, as seen in the total demand for 30-year fixed mortgages, which increased 1.2% from the prior week. These applications, even those to refinance, increased by 2% week-over-week. And the good news for buyers is that the 30-year fixed-rate mortgage fell from 5.74% to 5.43% from the prior week.
A recent Forbes article stated, “Existing-home sales dropped 5.4% from May to June, marking the fifth consecutive month of declining sales, according to the National Association of Realtors (NAR). However, the median sales price of these homes reached a record high of $416,000 in June, up 13.4% from a year ago.”
The Mortgage Bankers Association recently reported the median sales price of an existing home to be $361,400 in the first quarter. Economists of the Association do not see home prices falling in the near future, but rather expect prices to go up to $402,000 in the second quarter.
If you have any questions about this information or title insurance, please contact Ralph Aponte: 732.914.1400.
Counsellors Title Agency, www.counsellorstitle.net, founded in 1996, is one of New Jersey’s most respected title agencies, serving all 21 New Jersey counties with title insurance, clearing title, escrow, tidelands searches, and closing and settlement services for commercial or industrial properties, waterfront properties and marinas, condominiums, townhouses or residential single family homes. Counsellors Title also features its own Attorney Settlement Assistance Program™ [ASAP], which is an individual resource customized to fit the needs specifically of real estate attorneys, including, Documentation, Preparation, Disbursement of Funds, Attendance at Closing, HUD Preparation or Post-Closing Matters.