How Interest Rate Changes Are Affecting NJ Home Prices

     Hi! I’m Rich Iorio, a dedicated real estate agent with Century 21 Crest Real Estate. I’m here to guide you through every step of your real estate journey. Whether you’re a first-time homebuyer, looking to upgrade, or ready to sell, I have committed to help you achieve your goals. As a real estate agent with Century 21 Crest Real Estate, I often get questions about interest rates and their impact on the New Jersey housing market. Let’s dive into how recent changes in interest rates are affecting home prices in the Garden State.

Current Interest Rate Landscape

     As of March 28, 2025, the current interest rates in New Jersey stand at 6.63% for a 30-year fixed mortgage and 6.06% for a 15-year fixed mortgage2. These rates have seen a slight decrease from their peak in 2024, when they reached nearly 8% 4. The Federal Reserve’s decision to implement two interest rate cuts in 2024 has brought mortgage rates down to a more manageable range of 6% to 7%  1.

Impact on Home Prices

     Despite the fluctuations in interest rates, the New Jersey housing market has shown resilience. By this I mean despite higher interest rates affecting affordability, prices have continued to increase due to a lack of supply. As of January 2025, the median home price for single-family homes in New Jersey is $530,000  8. This represents a steady increase from previous years, with home values in the state experiencing consistent growth.

     However, the rate of price appreciation has slowed compared to the rapid increases seen in recent years. Projections indicate a rise of just 2% to 4% in home values for 2025  1. This moderation in price growth can be attributed, in part, to the higher interest rate impacting affordability for buyers.

Market Dynamics

The interplay between interest rates and home prices has created an interesting dynamic in the New Jersey real estate market:

1. Buyer Adaptation: Despite higher mortgage rates, buyer activity remains strong. The median days on market has decreased from 70 days in December 2024 to 47 days currently, indicating that buyers are adapting to the new rate environment and acting decisively when they find suitable properties  1.

1. Supply Constraints: Not enough houses means the price of buying a home is still on the rise. New Jersey continues to face a shortage of housing inventory. As of February 2025, the months’ supply of inventory stood at 2.7 months, which is below the balanced market threshold of six months. This limited supply is helping maintain upward pressure on home prices 15.

1. Price Appreciation: While the rate of price growth has slowed compared to previous years, home values in New Jersey continue to rise. For example, the median sales price for single-family homes increased by 3.5% year-over-year as of February 2025   12.

1. Regional Variations: The impact of interest rates on home prices varies across New Jersey. Certain areas, such as commuter-friendly suburbs and desirable neighborhoods, continue to experience strong demand and price appreciation, while others may see slower growth  36.

1. Shift in Buyer Preferences: Post-pandemic trends have shifted buyer preferences toward suburban and exurban areas with more space. This has led to increased demand and price growth in these regions  46.

These dynamics suggest that while higher interest rates have affected affordability, New Jersey real estate prices continue to rise due to limited inventory, strong demand, and regional variations in buyer activity. Sellers continue to benefit from favorable conditions, while buyers are adapting their strategies to navigate the current market landscape.

Looking Ahead

As we move through 2025, several factors will continue to influence the relationship between interest rates and home prices in New Jersey:

• Economic Recovery: The ongoing post pandemic economic recovery in New Jersey is expected to support the real estate market, potentially offsetting some of the effects of higher interest rates  6.

• Supply and Demand: The limited housing supply in New Jersey continues to be a significant factor in maintaining home values, even in the face of higher interest rates and it doesn’t seem like that will be changing in 2025 4.
• Affordability Concerns: As both home prices and interest rates remain elevated compared to historical norms, affordability will continue to be a key issue, particularly for first-time homebuyers  3.

Conclusion

     While recent interest rate changes have undoubtedly impacted the New Jersey housing market, their effect on home prices has been nuanced. The market has shown resilience, with home values continuing to appreciate, albeit at a more moderate pace than the immediate post pandemic market had. For both buyers and sellers, understanding these dynamics is crucial in navigating the current real estate landscape.

If you’re considering buying or selling a home in Northern New Jersey, it’s essential to work with a knowledgeable real estate professional who can help you navigate these market conditions. As an agent with Century 21 Crest Real Estate, if you are ready to take the first step on your real estate journey I’m here to provide expert guidance and support, just give me a ring at 201-218-9666.