New Jersey home prices are on the rise for the second consecutive quarter as a result of purchase demand and tight inventory levels.
These two factors tend to make homes less affordable.
Median home prices jumped 2.07% in the first quarter to $262,661, compared to $257,331 a year earlier, according to data from Otteau Valuation Group.
Rising home prices stem from increased demand, tighter inventory levels and continued economic recovery. The for-sale inventory in New Jersey is currently at an eight-year low, while the pace of sales is the highest it’s been in six years.
The number of New Jersey homes considered affordable dropped in the first quarter due to higher home prices coupled with rising mortgage rates. In fact, the state’s affordability index declined for the first time in two years to 130%, an indicator that the median income of today’s homebuyers can afford a home that is priced 30% higher than the state’s median home value.
Despite the drop in affordability, desperate homebuyers are still rushing to take advantage of lower-than-normal prices and record-low rates.
Moving forward, the combined effect of price increases and mortgage rates will continue to erode homebuyer purchasing power in the market.