Buying a home in New Jersey just got tougher
To try and put the brakes on inflation, the Federal Reserve has increased interest rates by three-quarters of a point, the biggest rate hike in 28 years.
This means borrowing money for anything will cost you more, including getting a mortgage to buy a house.
According to Jeff Otteau, the founder of the Otteau Group Real Estate Valuation & Consulting Co. in Matawan and the managing broker of Hudson Atlantic Realty, this latest interest rate hike will accelerate and exaggerate the slowdown of the real estate market in the Garden State that is already underway.
“We have seen declining home sales in New Jersey now for eight consecutive months,” he said.
Getting a mortgage will be more expensive
He pointed out the main reason for this is interest rates have risen from about 2.7% to 5.3% over the last year, “making it too expense for homebuyers to be able to afford to pay today’s very high home prices.”
He said the just-announced interest rate hike will push mortgage rates even higher, causing an expanded slowdown in home sales, and other sectors will be impacted as well.
“The next one we can expect is going to be demand for retail space, the last sector where we’ll likely see this hit is going to be in apartments,” said Otteau.
Demand for apartment living will rise
He explained that means in the short term rents for apartments will shoot even higher.
“The lack of affordability in home buying will have the opposite effect of creating more demand for renting,” he said.
He pointed out that renting has become “more popular as a lifestyle than it was in past generations, and so that sector will likely outrun all the others in terms of maintaining its momentum.”
Otteau said the bottom line here is making ends meet for many families is going to get tougher in the coming months.
“We face formidable headwinds here in New Jersey on nearly every front. The most threatening of all is the very high cost of living here and for businesses to operate here,” he said.
Otteau said sooner or later New Jersey’s high tax rates will need to be addressed “to preserve the future prosperity of our state for future generations to come.”
He said the three-quarters of a percent interest rate increase reflects an admission “that the approach by the Federal Reserve to this point, to cause a gentle slowdown in the economy, to slow the pace of inflation, has failed.”
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