The Housing Issue
What can be expected if the Federal Government becomes an advocate for the middle-class home buyer?
The Federal Government could do 3 things immediately:
They could drive down the cost of lumber.
They could begin drilling for oil.
They could legislatively limit Wall Street’s appetite for single-family homes.
There are most people — You know who they are — They are the ones who think that mortgage rates are the rudder to this housing conundrum. But it’s not JUST mortgage rates, but rather unaffordable building that is the elephant in the room. What we are expecting in this housing market, the corrections necessary, that the new administration ‘could put into effect’ are the following:
Eliminate the egregious tax that was placed on lumbar coming from Canada. The price of lumber in the United States fluctuated widely over the last five years, from a low of $240 per 1,000 board feet in January 2016 to a peak of over $1,500 in April 2021. Currently the cost is $565 per 1,000 board feet. That too is still too high!
And now we need to open up the oil pipelines. Re-open the Keystone Pipeline. The decision to close down the Keystone Pipeline was an act of war against America’s middle-class families. It was a cancerous tax on everything from food, clothing and shelter. It also had an impact on the overall cost of transportation.
The cost for a brand-new Honda Accord in 2019 was about $24,000 list price. In 2024 that price is $29,000 and more.
And finally, we need to limit the number of single-family homes that are bought by Wall Street. By 2022, investors accounted for nearly 30% of sales of single-family homes, up from an average of 16% just three years earlier. In some cities, institutional investors account for a far higher share of single-family homes.
New Jersey homeowners are holding their breath as they wait for mortgage rates to respond to recent Fed interest rate cuts. Even after a cut in September and another smaller reduction yesterday, the average rate for a 30-year fixed mortgage remains high at 6.79%, according to Freddie Mac. This is a stark contrast to the pre-pandemic rate of around 4% that many New Jersey residents enjoyed, putting a strain on both buyers and those looking to refinance.
In the past five weeks, mortgage rates have jumped 67 basis points, marking the sharpest rise in two years, per the Mortgage Bankers Association. This increase is creating a bottleneck in the New Jersey housing market, where home prices are already high, and affordability is a significant concern.
So, is it a seller’s or a buyer’s market in New Jersey? At this point, it’s neither. The high rates are putting both sellers and buyers in a holding pattern, with limited movement in the market. And for New Jersey homeowners hoping to refinance at lower rates, patience is essential.
So, it is possible that as building supply costs drop, we can hope that housing supply will open up.
So, is it a seller’s or a buyer’s market in New Jersey? At this point, it’s neither. The high rates are putting both sellers and buyers in a holding pattern, with limited movement in the market. And for New Jersey homeowners hoping to refinance at lower rates, patience is essential.
The final issue that should be addressed is the real estate taxes in New Jersey. Until the state gets a wake-up call to lower their budgets, residents will continue to flee the Garden State.