By Maddie McGay
NorthJersey.com
Your home is likely one of your biggest ― if not your biggest ― investment.
In addition to providing a literal roof over your head, it represents a significant financial investment. How that investment grows and how moves by the government on the local, county, state and national level affect the investment change from year to year.
Next year will be no different.
Here's what to expect in the 2025 North Jersey real estate market.
Home values in our region have consistently risen over the last several years, with New Jersey seeing an 8.4% increase in average home values this past October when compared with the year before. While home values are expected to continue increasing in 2025, the percentage by which they increase is expected to be much lower. Experts at Realtor.com, the National Association of Realtors and Bankrate, among others, project that home price appreciation in 2025 will range from 2% to 4%.
The Federal Reserve announced two interest rate cuts in 2024 — the first time it has done so since 2020 — reducing its 23-year-high benchmark rate of 5.25% to 5.50% down to 4.5% to 4.75%. As a result, mortgage interest rates have modestly decreased from a peak of 8% last October to the 6% to 7% range. Homeowners looking to relocate, or first-time buyers, in New Jersey can likely expect to see those modest decreases continue into 2025.
Homeowners in New Jersey, and across the nation, can likely expect to see their home insurance premiums increase in 2025 as a result of rising property values and elevated inflation, as well as national disasters becoming more frequent. About 56% of experts recently surveyed by Fitch Ratings expect insurance prices to increase in 2025, with 26% projecting it will be by less than 5% and 30% projecting it will be by more than 5%.
The demographic of those purchasing homes in 2025 will likely shift compared with what we've seen over the last several years. The median age of a first-time homebuyer in 2024 was at an all-time high of 38 years old, said the National Association of Realtors, an increase from age 35 in 2023. This will likely remain high as first-time buyers spent more time saving for their purchase as home values increase and mortgage rates remain elevated. Other demographic changes we could see in 2025 include an increase in all-cash buyers, with all-cash purchases accounting for 26% of all home sales in 2024 due to sizable housing equity gains for homeowners.
October marked the 15th month of year-over-year rent declines across the nation, said Realtor.com, but renters in the greater New York metropolitan area will likely continue to see rent prices modestly increase in 2025. This is due to rental demand continuing to outpace the available rentals in our region, especially as people from nearby cities seeking more space continue to move into our suburban areas, and as more pricey luxury rental buildings are built in the area.