When Will NJ Home Prices Finally Stop Rising

Q: Is there no end to rising real estate prices in NJ? Caleb, South Orange, NJ

A: So far in 2021 home prices in NJ have risen 17%, which is the highest home price % increase in NJ since the 1980s. On average, home prices in NJ over the last 60 years have increased 4-5% a year, so the massive price increases we’ve seen recently cannot continue indefinitely. Ultimately, incomes underpin real estate prices, so when home prices go up faster than incomes prices must eventually fall to reach market equilibrium. Although NJ housing inventory has been rising this year, it’s still less than 2 months which is still very low historically. Home prices rise when inventory is lower than 7 months, home prices stabilize at around 7 months of home inventory, and home prices typically decline when home inventory is higher than 7 months. At some point in 2023 or 2024 home inventory will reach and surpass the 7 month home inventory tipping point and home prices will start to decline. Thanks for your question, Caleb.

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