Will JC/Hoboken Prices Crash in 2022

Pavel Saikin
Apr 27, 2022
3 min read

Updated: May 8, 2024

When considering the possibility of a market crash, there are several factors that have to be considered. Some of the factors are going to be specific to a certain area, whereas other factors will have macro economic effects. There will always be a plethora of factors to consider when analyzing the economy and local markets, but a few are particularly important. An argument can always be made for the market to move in either direction. Whether someone thinks the market is going up or down, there will always be data and a hypothesis to support either prediction. But, when attempting to predict a market crash, economic health needs to have significant consideration. For the Jersey City and Hoboken markets, the population growth and rental prices need to be considered. For the economy, the important factors are home equity, labor participation, and interest rates.

Population Growth and Rising Rents

It’s no surprise to learn that the population in JC/Hoboken has grown over the years. With new development comes more housing units and more people. Although the rise in population is common knowledge, the actual rate of growth is far more interesting. According to the U.S. Census Bureau, Jersey City’s population in 2010 was 247,597, and by 2020 it was 292,449. That is an increase of over 18%. Hoboken’s population in 2010 was 50,005, and by 2020 it was 60,419. An increase of over 20%. This is far from the end of the growth in both cities. Development continues all throughout, and even though Hoboken does not have as much vacant land as Jersey City, they are building at equally proportional rates. All of this new development has been leading to rising home prices and rising rents. Jersey City is leading in rental tower development with hundreds of new units expected over the next 5 years. These new rental towers keep pushing higher rent prices, which provides the older rental buildings flexibility to increase their prices, and thus leading to individual landlords matching the increase. None of this could occur without population growth, and based on the low inventory conditions today, it seems that population growth is pushing onward.

US Home Equity and Labor Participation

The importance of Home Equity figures is to determine how many homes are mortgaged, and of those, how many are equity rich (having over 50% equity). Approximately 65% of homes have mortgages. 41.9% of mortgaged homes are equity rich with over 50% equity. Compared to the 4th quarter of 2020, where 30.2% of homes had over 50% equity. On a historical basis, this is a very strong figure and shows how much buffer homeowners have. This is partly due to the meteoric rise of home prices during the pandemic, but it is also due to tighter lending guidelines and more competitive market conditions, leading to larger down payments. The Labor Participation data is a better metric than the unemployment data because Labor Participation measures the total number of people working as a percentage of the total population. The figure as of March 2022 is 62.4%. For context, the percentage range from 2013 - 2019 was 62.4% - 63.1%. The March reading is up significantly from its 2021 low of 61.4%.

Interest Rates

The idea that increased rates leads to a housing market crash may be disproven once again. Since 1965, there have been 8 periods of time in which interest rates increased and it led to a technical recession. Of those 8 times, only 3 witnessed a drop in home prices that took longer than 1 year to recover. In 5 of those instances, home prices either grew or fully recovered within 1 year. Interest rates absolutely have a major impact on the economy, but they usually do not lead to a housing market crash.