Future Jersey City/Hoboken Real Estate Trends

Pavel Saikin
Jul 27, 2022
5 min read

Updated: May 8, 2024

Markets can move quickly, but trends take time to develop. Something we learned from the pandemic is that population shifts can have massive impacts on real estate prices. The migration away from cities led to astronomical price increases throughout the US while weakening demand in areas such as New York City, Jersey City, and Hoboken. This trend ended in 2021 and a new trend has been emerging for several months, the return to cities. This is best reflected in the rental market. Massive rental demand has led to record-high prices and a shortage of supply.

There is one more trend on everyone’s mind, the recessionary trend. By many metrics, we are already in a recession, but a second quarter of negative GDP growth will confirm the technical definition. The thing is, this trend has also been forming for several months. Most of the catalysts that are contributing to a recession are already playing out, but Jersey City and Hoboken are feeling a different effect.

Inventory in Jersey City and Hoboken has decreased substantially. The number of new listings has decreased by 21% for the first half of 2022 compared to the first half of 2021. Some buyers have decided to pause their search due to economic fears, but that decrease in buyer demand was balanced by the decrease in housing supply. This supply and demand dynamic has led to home prices sustaining or increasing in many cases. The migration in 2020 led to a large turnover of homes, which condensed the pace of new listings and is now causing an expansion of that pace. As the rental demand pours over into buying demand, inventory will continue to remain constricted. The number of new listings can increase, but it will likely be met with an increase of demand since the population of Jersey City and Hoboken is increasing, but the number of homes to purchase is remaining relatively unchanged.

A popular topic circulating news headlines is the interest rate. The rate that is quoted in these headlines is often an exaggerated figure relative to what the average consumer is witnessing. There was a day several weeks ago where mortgage rates for certain borrowers would have hit as high as 6%, but most buyers in Jersey City and Hoboken are seeing rates around 5% for a 30yr fixed rate. Even as low as the mid 4% range. It pays to get a real quote from a lender rather than relying on exaggerated figures for sensational headlines. This mortgage rate range of 4.5%-5.25% is absolutely higher than the rates seen in 2020 and 2021, but that was an outlier to a historical data set. I don’t mean rewinding all the way back to the 80s and 90s. Just in 2018 the mortgage rate was nearing 5%, very similar to the numbers we are seeing today. There is a recency bias amongst some buyers that rates are high and thus prices have to crash, but the rate is only high relative to 1-2 years ago. It’s not high relative to 4-5 years ago and yet people still continued to buy homes throughout that period. This is just a sticker shock because of the rate of change rather than the figure itself. Rates have since stabilized and have actually been decreasing for several weeks, but the news is no longer reporting on it.

Markets can still turn ugly in other parts of the US. Many areas of the US saw home prices increase by 50% or more, predominantly in Suburban areas, and caused the local residents to get priced out. Well, the buyers that bid up those prices may expect difficulty selling their homes in the years to come. They moved to these suburban areas to escape the cities, but now the pandemic has passed and the migration to these areas has mostly ceased. So, who is going to buy the home from them? It won't be the local residents because they can’t afford it and it won't be another New Yorker because nobody actually wants to live in most of the towns that have seen these outrageous price hikes. Some towns will still remain desirable, but the vast majority of these over-bid towns will struggle to find buyer demand to even support these valuations in the future. They will be lucky to see prices fall 10-20% before somebody can purchase those mistakes. This trend will take many years to unfold. Younger generations, especially those garnering high wages, need to live in cities to facilitate their work commutes and often want to live in cities for the local amenities. As birth rates generally decrease across the US, the need for the suburban home gets pushed back further and the demand for those inflated suburban home prices will not come back at the scale that was seen in 2020-2021.

Jersey City, Hoboken, and NYC prices have only seen minor price increases over the last 3 years. Somewhere around 10%, which is a far stretch from the 50%+ seen in the suburbs. A large price increase does not always need to be considered over-valued, but if the price increase occurs under a specific set of market conditions that have since reversed, then it would be considered over-valued. Such as a global pandemic and artificially low interest rates. Well, what else has gone up in price 50% or more? Rent prices in Jersey City and Hoboken. It is fair to say that this increase in rent price is partially fueled by buyers' concerns over the economy (specific set of market conditions), leading them to rent instead of buy. When those economic concerns diminish, and the need/desire to live in cities remains, those renters will likely turn to buying. This will cause rent prices to stabilize and home prices to rise. Would rent prices drop? Theoretically, they could, but unlike the suburbs, cities have a more transient community that can get replaced from all parts of the world, whereas the suburbs often rely on niche buyers.

Unless everyone loses their jobs en masse, then city demand will continue to rise. There are some companies slowing their hiring and some trimming their staff, but this is just good corporate restructuring to maximize efficiency. Unlike previous recessions, most companies today have healthy budgets and most homeowners have plenty of equity in their homes. Making a real estate decision, whether buying or selling, with the intention of predicting a market crash is a highly risky, and often unsuccessful endeavor. Make your real estate decision based on your needs rather than the market. Sell your home when you need to make a move or need the funds. Buy a home when you are ready to commit to a property and location for ideally 5+ years. Don’t stretch the budget and keep some cash in reserves just in case.