Is Now a Good Time to Buy or Rent a Home in New Jersey?
For many New Jersey residents, deciding whether to buy or rent a home in today’s market is a difficult choice. According to data from Zillow, the median monthly rent for a single-family home in New Jersey was $2,750 as of September 2023. However, average mortgage payments including taxes and insurance total roughly $3,400 per month for a typical single-family home purchased in the state right now, based on current average 30-year fixed mortgage rates of over 7%. This means the cost of buying a similar home is over 24% higher than renting at today's rates and home prices.
As the Federal Reserve continues raising interest rates, analysts expect the affordability gap between owning and renting to remain elevated through 2023. Additionally, New Jersey has faced a shortage of homes on the market over the past two years, with inventory down over 30% since 2020. The low supply has put further upward pressure on already high home prices.
Buying a home in New Jersey is significantly more expensive than renting right now. As mortgage rates have climbed from 3-4% up towards 7% over the last year, this affordability gap has widened. The current conditions mirror the lead-up to the 2008 housing crash. However, today's homeowners enjoy relatively low rates historically.
While prices remain high in many areas, cities like Trenton, Atlantic City, and Camden are exceptions, with buying being more affordable than renting. This has fueled migration as priced-out homeowners from North Jersey seek cheaper properties.
And even as buying gets more expensive, many New Jersey homeowners are reluctant to sell and become renters. Low existing rates incentivize staying put, keeping the market balanced.
When was the last time in New Jersey it made more financial sense to buy a home vs renting?
According to the New Jersey Association of Realtors, the last time it made more financial sense to buy a home vs rent in New Jersey was in 2019. In that year, the median rent for a single-family home in New Jersey was $2,200 per month, while the median monthly mortgage payment for a single-family home was $2,100 per month. This means that buying a home was slightly more affordable than renting in 2019.
However, the housing market has changed significantly since then. Home prices have risen sharply, while mortgage rates have also increased. As a result, the cost of buying a home is now significantly higher than the cost of renting a home in New Jersey.
In summary, buying a home is far less attractive compared to renting for most New Jersey residents currently. The growing affordability gap and limited supply present major hurdles for prospective buyers. But affordable pockets do exist, driving relocation. Amidst challenges, stability comes from current owners staying in place. Careful cost analysis is essential for weighing buying versus renting in New Jersey now.
With rising rates, limited inventory, and growing unaffordability, renting tends to be the more flexible and cost-effective option currently. However, conditions vary locally. Monitoring market trends is key for informed housing decisions.
| Buying a home | Renting a home |
|---|---|
| Higher upfront costs (down payment, closing costs, etc.) | Lower upfront costs |
| Higher monthly payments (mortgage, taxes, insurance) | Lower monthly payments |
| More financial responsibility (repairs, maintenance, etc.) | Less financial responsibility |
| Equity builds over time | No equity builds |
| Less flexibility to move | More flexibility to move |
