Jersey City Real Estate Market Is Hot, But For How Long?
We asked a local real estate broker and owner of BLVD Real Estate, Kamran Mirza, to tell us more about the real estate market during coronavirus.
2020 continues to be a crazy year! Covid-19, murder hornets, Kobe’s unfortunate death to name a few. But hopefully, we took this time to reflect, budget and cut costs and cherish our health, family, and loved ones. There are eight major factors that and will affect our housing market, each deserving their own article, but I will do my best to summarize and help you understand where we are headed and really understand why the hell is this real estate market so hot?!
7 Factors that have changed our real estate market for 2020
#1 COVID-19 – This pandemic came to the US in February and has affected our lives tremendously with over 5.6 million cases and 176,000 deaths in the US alone. It has hit us very close to home with over 1,500 deaths in Hudson County.
#2 Rent Relief Program – Governor Murphy’s executive order to allow tenants to pay their rents from their security deposit is just another way kicking the can down the road. The residents of NJ definitely need assistance, but not at the cost of other residents. The purpose of security deposits is to help the landlords recoup some funds if tenants stop paying rents or damage the property. Without this, it’s only a matter of time the landlords will have a very hard time paying their mortgages.
#3 Mortgage Forbearance Program – Now for the landlords that cannot pay their mortgage, there is the Mortgage forbearance program offering 180 days to delay your mortgage payments, ending August 31. You can do another 180 days afterward for a maximum of 360 Days. This is a great program for landlords that are experiencing difficulties with now over 4.1 million (8.8%) mortgages in forbearance! (Please bear in mind, this is during the other government assistance programs available including PPP, EIDL, and additional Unemployment assistance) So what do you think will happen when all these programs end?
#4 Unemployment – Our current unemployment rate is 10.2% from our April high of 14.7%. In comparison, the unemployment rate during the 2007-2010 Great Recession peaked at 10.6%. Some experts are predicting this to rise as more businesses decide to cut costs and/or close up shop altogether.
#5 Low-Interest Rates – With Residential mortgage rates at historical lows (2.72% for 15 years fixed mortgage) this is helping bring more demand for home purchases and the fed has continually emphasized that they do not intend to raise for the near future. Good is the rates will remain low, the bad is that the Fed does not have confidence in a recovery anytime soon.
#6 Low Inventory of Homes – Inventory has dropped 28.4% as of August 2020 year over year. Many sellers may be holding back due to a prevailing belief that now is not a good time to sell for the following reasons. a) Fears of the last recession where home lingered on the market for a long time. b) Fear of health concerns and allowing people to tour their homes. c) Concerns of not being able to find their next home due to the low inventory.
#7 Elections (Trump vs Biden) – Both sides have yet to state their full viewpoints on their stance on housing. Trumps’ “redevelopment zones” is a huge success in encouraging developments in poorer, struggling neighborhoods. Jersey City is in an opportunity zone. Biden is proposing to offer $15,000 in tax credit to first time home buyers strapped for cash.
So is the Jersey City real estate market hot? Short answer… YES. The market for jersey city is on fire, but for the wrong reasons. I expect the market to remain hot for the next 6 months, afterwards, it can shift very quickly.
Other than the interest rates remaining low, the other factors that are keeping this market hot will start to shift and create a buyers market. Rent Relief Program will come to an end soon and allow landlords to evict tenants and bring in paying tenants, but the damage may have been done. Mortgage forbearance will end in 180 days and the 4.1 million homeowners will have to continue to pay their mortgage or go into default, as the business’s run out of the relief funds, they will need to cut their costs and payroll, as we get a vaccine for the Covid-19 and more Americans to become more desperate and put their homes on the market, the inventory shortage will end very quickly.
NOW VERSUS 6 MONTHS FROM NOW
Now GOOD 5, BAD 0
Good – Rent Relief Program
Good – Mortgage Forbearance
Good – Low-Interest Rates
Good – Low Supply
Good – Business relief Programs EIDL, PPP, NJ Programs
Prediction: Q2, 2021 GOOD 1, BAD 4
Bad – Rent Relief Program over (evictions will restart)
Bad – Mortgage Forbearance will end (homeowners will go into default)
Good – Low-interest Rates will continue
Bad – Increasing homes supply from homeowners needing funds and COVID scare deteriorating.
Bad – As businesses run out of funds, many will not reopen and/or cut payroll
Kamran’s Homeowner Tips
Home Sellers – SELL! This is a great time to sell your property and get a great price. Rent for 1 year (Since rental rates are low) and Buy 1 year from now when market prices are low. Work with a realtor that offers virtual staging, professional photography, and videography to help with social distancing.
Home Buyers – BUY! This is also a good time to buy. Just please make sure to not get in a bidding war and only offer on properties that reasonably priced.
Landlords with Rentals – LOWER YOUR RENTS! The rental inventory is high right now. I would suggest lowering your rents and screen the potential tenants very carefully that have good income and credit.
This market is good for both buyers and sellers if you do your research and work with an experienced team of professionals that know your market.
About the Writer:
Kamran Mirza is the Broker and Owner of BLVD Real Estate located in Jersey City and a lifelong resident of Jersey City. Kamran holds a real estate broker license in both New Jersey and New York, is a licensed real estate instructor, sits on multiple committees including for Liberty Board of Realtors, and also the National Association of Realtor YPN.