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What Does the Future of New Jersey Real Estate Look Like?
BY: DINA CHENEY
Over the next couple of years, demand and prices for New Jersey real estate should continue to grow while inventory remains low. To enter the market, potential buyers must be more strategic, resourceful, and alert than ever. Here’s what’s likely to play out.
HIGH DEMAND SHOULD CONTINUE
“People talk a lot about the cost of the state. But New Jersey is a highly desirable place to live,” said Senior Policy Analyst at New Jersey Policy Perspective Peter Chen. “It’s close to two large metro areas and has good public schools and robust public services, like New Jersey Transit.” Residents can easily commute to their city jobs while benefitting from the creature comforts of roomier homes, like offices and yards.
“Over the last decade, the state’s population has continued to grow, which is somewhat surprising since New Jersey is already a really dense state,” said Chen. Last year, the population rose by about 1.3%, according to Senior Economist and Director of Real Estate Research at the National Association of Realtors® Nadia Evangelou.
AREAS NEAR JOB MARKETS WILL REMAIN POPULAR
Now that more companies require employees to work in the office, at least part of the time, areas with easy commutes to New York City and Philadelphia should remain most desirable.
Towns with highly rated public schools and walkable downtowns will also continue to draw buyers and renters. “Some towns, like Bridgewater, are adjusting their zoning laws to revitalize their downtowns or create new ones,” said Realtor-Associate® with Hallmark Realtors® Ruth Mesfun.
While families will likely flock to suburbs like Montclair and Princeton, younger buyers tend to gravitate to urban areas like Jersey City and Newark. A few years ago, Martin Boonzaayer of The Trusted Home Buyer purchased a fixer-upper multi-family in Newark. Since then, its neighborhood has improved markedly, as has its value. “This is what’s happening all over New Jersey,” said Boonzaayer. “Neighborhoods people once ignored are becoming prime real estate.”
NO END IN SIGHT FOR LOW INVENTORY AND HIGH PRICES
For would-be buyers who don’t already own homes in the state, the market will continue to be a challenge. Consistent with national trends, inventory remains low. According to Bankrate, as of January 2025, the national average was 3.5 months of supply; in New Jersey, the NJ Realtors® January 2025 housing market data reports showed 2.7 months of supply. The most recent report increased to a three-month supply. The typical belief is that a balanced market requires a 4 to 6-month supply, according to the National Association of Realtors® Chief Economist Lawrence Yun in a recent post on LinkedIn.
Population density is high, and vacant lots are scarce, especially in areas near New York City and Philadelphia. Plus, sellers aren’t budging—often because they don’t want to take out new mortgages with higher interest rates.
The result is climbing prices. On a nationwide basis, NAR in their 2025 Housing Outlook, predicts the median home price will increase by 2% this year and another 2% next year. Nearly 15% of homes are selling for more than their asking price.
In New Jersey, prices in the entire market are increasing more than the national average. According to NJ Realtors® March 2025 housing market data report, the median sales price increased 8.7% year-to-date. Prices in Montclair, Maplewood, and Princeton are up about 27% since 2019, said financial expert and Founder of BeFluentInFinance.com, Andrew Lokenauth. In many cases, only existing homeowners, investors, and international buyers, many paying all cash, will be able to afford them.
AFFORDABLE HOUSING SHORTFALL WILL PERSIST
This leaves behind anyone without ample cash, including veterans and senior renters on a fixed income. “Affordability is very low in the state,” said Evangelou, noting the typical family makes $108,000, which is not enough to afford the $510,000 median home, as of January 2025, and assuming the current average mortgage rate and typical 20% down payment.
Unfortunately, the lack of affordable homes should persist. Total and multifamily new home starts decreased in 2024, according to the National Association of Home Builders in its year-end release, and conditions for builders appear to be worsening.
Mortgage interest rates are projected to hover in the six percent range through at least 2026, according to NAR. Plus, newly announced tariffs stand to increase the cost of building materials significantly. For lumber alone, the duty rate is expected to rise
from 14.5% to nearly 40% later this year, said NAHB AVP, Forecasting & Analysis Danushka Nanayakkara-Skillington. Changes to federal immigration practices could also limit the construction workforce, further curtailing activity.
Regulatory reforms, such as tax cuts, could help to lessen obstacles for builders. Still, for developers to earn a sufficient ROI, they’ll likely need to take on smaller-scale, higher-end projects, rather than large-scale, affordable ones.
BUT INVENTORY IS STARTING TO INCREASE
There is one positive note: Inventory is beginning to rise, even if gradually. On a nationwide level, there was a four-month supply of inventory in March 2025, up from 3.2-month supply in 2024—a 20% increase.
That’s partly because the “lock-in effect” is easing, with homeowners no longer expecting mortgage interest rates to return to the 2-3% lows of 2020 and 2021. While rates are still relatively high, 6.72% was the average for a 30-year fixed mortgage on March 11, 2025, they’re still lower than the 8% rate of October 2023 and the 7.74% historical average, when you date back to 1971, said NAR Deputy Chief Economist and Vice President of Research Jessica Lautz.
SUSTAINABILITY AND MIXED USE WILL BE KEY
Since the state is high in aging buildings and low in vacant buildable lots, developers will increasingly renovate older buildings and convert commercial spaces, like shopping malls and office buildings, into rentals. Located primarily in urban areas, including Jersey City, Hoboken, Newark, and Hackensack, these communities will largely be more economical than suburban single-family homes and will appeal to younger professionals and families.
To comply with regulations and respond to market demand for sustainable living, many of these new builds will feature energy-saving designs, green space provisions, and smart technologies, said Realtor® and Founder of Hudson Condos Jonathan Ayala.
“Solar panels, EV charging stations, and smart home technology aren’t just luxuries anymore—they’re expectations for many buyers under 40,” said Lokenauth.
He’s noticed energy-efficient homes are commanding prices 8-12% higher than equivalent homes without these features. Locations near train lines and mixed-use formats will also be important, said LeFrak Managing Director of Residential Leasing Richard Wernick. Developments will “cater to the demand for walkable neighborhoods, complemented by retail, dining, and entertainment,” said Wernick.
In the 1980s, LeFrak created the 600-acre Newport neighborhood in Jersey City. Recently, the company developed two nearby rental properties, The Bisby and The Beach. These “self-sufficient residential experiences amid downtown neighborhoods,” as Wernick described them, have been LeFrak’s most successful lease-ups to date, said Wernick.
CLOSING THOUGHTS
Opportunities in the market might be hard to find, but they’re there. Ayala recently converted a Newark warehouse into a mixed-use residential complex, with modern lofts and ground-floor retail. That’s the type of project that should exemplify the future of real estate in New Jersey. Dynamism in the market will come from buyers, developers, and investors seizing opportunities and revitalizing existing buildings.
