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Across the country, interest rates of over 7% and the fierce competition are concerning buyers.
The spring months of April and May are traditionally the busiest for home sales in northern New Jersey, said real estate agent Julie Kim. But with 30-year mortgage interest rates climbing to over 7% and the lack of houses available for sale, the dynamics of the market are different this year.
“I’ve had clients take a pause because it’s just too competitive,” said Kim, with Sotheby’s International Realty.
According to the National Association of Realtors’ latest data, existing-home sales fell 3.4% in April of 2023, with all four major U.S. regions registering month-over-month and year-over-year sales declines.
There were 4.28 million unit sales in the country in April, with a median sales price of $388,800. The median sales price is down 1.7% year-over-year. Mortgage interest rates on a 30-year loan for people with good credit averaged 7.130% as of May 30, according to Interest.com. In May of 2021, the average rate was 3.1%.
The rising rate environment coupled with the lack of inventory is prompting potential buyers to postpone their purchase, said Carolyn Morganbesser, mortgage originations officer at Affinity Federal Credit Union. In some cases, the rate increases are decreasing some potential buyers' purchase prices, as they no longer qualify for higher loan amounts, she said.
There are fewer buyers who can afford to compete in today’s housing market, but a key piece of the issue is that there are fewer homes for those buyers to shop for, Zillow senior economist Nicole Bachaud said in a statement.
“The severe lack of new inventory coming onto the market is restricting home sales more so than the pull back in demand. And as mortgage rates are staying high and experiencing a degree of volatility, existing homeowners are feeling locked into their low rates and monthly payments,” Bauchaud said.
Despite some buyers dropping out of the market, competition is still ferocious for the few homes that are available in Essex County, New Jersey, Kim said. Bidding wars are still common, she said, noting that a three-bedroom house in Bloomfield, New Jersey, listed at $699,000 recently sold for $999,000.
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