The Covid-19 pandemic turned the world upside down, including the real estate market. Buying a home is a tough choice, made tougher in today’s real estate market in New Jersey. However, Covid-19 brought on a new set of challenges. The impact of the pandemic on real estate prices was great enough for people to start worrying.
While you may have heard that real estate is all about “location, location, location,” many other factors come into play. At Rober DeFalco Realty, we look at all the factors that impact the real estate market.
The Impact of the Pandemic on Real Estate Prices
The Covid-19 pandemic changed how we operate many of our regular and professional lives. Covid-19 not only affected health but also impacted many businesses, including real estate. There were many changes seen in real estate after the pandemic.
A Seller’s Market
The impact of the pandemic on real estate prices all over the United States was catastrophic. According to an analysis, house prices across America rose during the pandemic and have stayed there post-pandemic. The prices, on average, rose by 2.8%, meaning that the price rose from $250,000 before the pandemic to $257,000 post-pandemic.
New Jersey’s real estate value rose by 2.91% since the pandemic, ranking 26th on the increase in real estate price list of the fifty states.
The suburbs of New Jersey saw a great increase in the selling price of real estate, the most being in Upper Saddle River, where the selling price rose by 35%. Teaneck saw a sale price increase of 33%, Montclair and Paramus sale prices rose by 22% each, and Hackensack’s real estate selling price rose by 19%.
Houses on the Market
The increasing real estate prices in New Jersey saw a decelerating demand for housing in one year. In 2022, the total amount of homes for sale in New Jersey was around 38,000 houses, down by 10.9%. The number of new listings was around 14,000, down by 14.9% since 2021.
For single-family homes, as of February 2022, close sales were down 17.5% compared to the year before with only 4533 sales. The total number of residential properties on sale was 12,295 homes, a 30% decline from the previous year.
Impact of Pandemic on Real Estate Prices in the Commercial Sector
While sales in real estate in the residential sector have seen a decrease in selling and closed sales, the sales of commercial real estate have seen a tremendous increase.
The pandemic increased technological adaptability and work-from-home experience in various fields. Now, one of the major amenities looked for is a clean, well-ventilated apartment or house with office space. This has caused many real estate sellers to invest more in creating the desired space for living.
Where people looked for office spaces next to gyms or meeting rooms, the demand for indoor air quality and touchless technology has risen.
Many sectors in the commercial market have seen an increase in activity during and after the pandemic. These sectors include retail real estate spaces, warehouses for E-commerce, and storage facilities.
Especially for warehouse real estate, there was a record low vacancy in warehouses due to increased E-commerce. This decreased the ‘supply’ of available warehouse real estate and, in turn, raised the cost. The average rent for the warehouse rose from $9.67 to $10.17 in 2021.
The Reasons for The Impact of the Pandemic on Real Estate Prices
The impact of the pandemic on real estate prices and the reason for the increase in prices can be accredited to several reasons.
Lack of Inventory
Lack of inventory means not having any homes for sale. As seen in the data above, houses on sale had decreased significantly. People selling properties were usually selling off investment property or people moving away. However, with the pandemic and increase in market prices, people had nowhere to go.
Impact of the Pandemic on Real Estate Interest Rate
Due to the pandemic, the USA saw an economic hardship still affecting the country. To deal with the economic crisis, mortgage interest rates have been booming since the pandemic hit, especially in New Jersey.
In 2020, New jersey’s average interest rate on home loans peaked at 3.21%. As of August 7, 2022, the average interest rate on a home loan has increased to 5.54% for a 30-year loan and 4.8% for a 15-year loan.
The increase in average interest rates has made people wary of choosing to mortgage and instead preferring to rent,
Impact of the Pandemic on Real Estate Renovation
Due to the shortage of laborers and materials, home renovations had been stalled indefinitely once the covid pandemic hit. They soon resumed but with a new price range that is only expected to rise.
The average renovation cost in New Jersey was around $58,000, with a maximum of $104,000. The impact of the pandemic on real estate renovation costs resulted in an increase in the asking price by sellers.
The Future of Real Estate and How Robert DeFalco Realty Can Help
With the increase in real estate prices, the number of closed sales decreased tremendously, as mentioned before. Experts predict that the winter of 2022 will see an increase in home buyers due to the continuously rising rates of real estate means that more people would prefer to buy homes only to flip them.
Robert Defalco Realty has over 30 years of experience in the real estate market. Our experienced agents are well versed in selling and buying real estate and can help you in many ways. With over one billion dollars in sales in Staten Island, the Robert Defalco team consist of over 300 professionals.
Come visit us at our New Jersey office, and we can help you find your home’s worth or help you find the best commercial or residential property that fits your budget and needs.
You can also contact us by filling out the form on our website or calling us at 732-845-3200.