New Jerseys housing market has seen major shifts in recent years, especially among its wealthiest homebuyers.
A wave of high-earning households is reshaping the landscape from suburban mansions to beachfront getaways.
Though few in number, these high earners have an outsized impact on the real estate market.
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They tend to buy in the luxury segment, pushing up prices and demand in certain areas.
These affluent buyers influence local markets through the properties they choose and the trends they set.
During 20182023, homes purchased by this income group ranged from expansive suburban estates to upscale city condos.
Many high-income buyers upgraded to larger houses or more desirable locations as their careers advanced.
Others downsized from older mansions into luxury condos or second homes as children moved out.
Because these households can afford high prices, they often drive competition in New Jerseys priciest tiers.
During the COVID-19 pandemic, this trend accelerated as remote work became common.
Affluent families left crowded cities for larger houses with yards and home offices.
Downsizing Patterns
Some wealthy New Jerseyans have been downsizing.
New Construction vs.
Existing Homes
New construction is a part of the picture, but not a huge piece of it.
New Jersey is a mature, built-up state with limited large-scale construction.
Entirely new developments are rarer, but there have been a few aimed at the luxury market.
Housing Types
The majority of these buyers choose houses.
They are often family households, and New Jerseys high-end condo supply is limited to a few areas.
Still, luxury condos and townhouses have their niche.
But by and large, detached, single-family, suburban is the name of the game for high-income buyers.
Their ages can vary, but many are in their 40s or 50s prime earning years.
These families often include children at home around 36% of NJ buyers have kids under 18.
The pharmaceutical and healthcare industries in NJ also create high earners (e.g.
medical specialists or pharma executives).
That flexibility encouraged moves to locations once considered too far from Manhattan.
Nationwide, the luxury home sector sees a higher rate of cash purchases and less dependence on mortgages.
Even when they do finance, high-income buyers easily qualify and often secure the best rates.
Their spending is more influenced by stock market trends and tax policy than by interest rates alone.
Lifestyle Priorities
The pandemic shifted many preferences: suddenly home offices and dedicated Zoom rooms became critical.
This was a major hit for affluent residents of high-tax states like New Jersey.
Essentially, owning an expensive home in New Jersey became less tax-friendly for the wealthy.
This SALT cap had a few effects.
Realtors noted that the cap effectively increases the cost of owning in high-tax areas and could reduce demand.
In the years immediately after 2018, New Jersey saw an uptick in out-migration of high earners.
New Jerseys State Tax Policies
New Jerseys state tax policies also come into play.
However, even below that, NJs income tax and famously high property taxes are a consideration.
High-income homeowners are very aware of these costs.
Economic Factors
From 2018 to 2023, the broader economic climate swung from one extreme to another.
For homebuyers, mortgage rates and the state of the economy are key factors.
These ultra-low rates were a catalyst for many wealthy households to buy property.
This contributed to the buying frenzy of 2020-21.
By 2022, however, the Federal Reserve began raising interest rates sharply to combat inflation.
Mortgage rates more than doubled, reaching around 67% the highest in about 20 years.
Inventory Challenges
Another effect of higher rates was on housing inventory.
This lock-in effect further choked the supply of homes for sale across New Jersey.
By 2023, New Jerseys inventory of homes on the market hit extreme lows.
This shortage propped up home prices even as sales volume dipped.
For the wealthy buyer, it meant fierce competition for the few desirable listings available.
For high-income households in New Jersey, 2020 was a turning point.
The Urban-to-Suburban Shift
Pre-2020, there was a notable trend of younger affluent people favoring city life.
They enjoyed the walkability, nightlife, and proximity to work.
Suburban New Jersey (the classic bedroom communities) sometimes struggled to attract this cohort.
Practically overnight, priorities flipped.
High-earning New Yorkers started eyeing New Jerseys spacious suburbs as a refuge.
The media even called it an exodus from the cities.
Suburban Price Surge
New Jerseys high-end market benefited greatly from this urban flight.
Prices in the suburbs shot up.
For instance, overall NJ home values jumped roughly 30% or more in just two years.
Even very expensive properties that had sat on the market pre-COVID started selling.
The number of luxury sales (e.g.
$2M+ homes) in North-Central NJ doubled from 2019 to 2021, largely due to pandemic-fueled buying.
Shore towns saw an explosion in demand for beach houses in 202021.
Remote work made such moves feasible.
While many moved into NJ for space, others moved out for tax or lifestyle reasons.
Bergen County consistently has some of the most home sales over $1 million.
Proximity to Manhattan (some towns are 1530 minutes away) makes it ideal for finance professionals.
Its population surged (the city grew nearly 60% from 2010 to 2020).
By 2023, Jersey City was often dubbed NYCs sixth borough.
In 20182019, these outer suburbs were a bit quieter market-wise; by 20202021 they were on fire.
Moving further south, Cape May County (encompassing Avalon, Stone Harbor, Cape May, etc.)
became the No.1 second-home market in America by 2022.
Nearly half of recent buyers there were acquiring vacation homes, often expensive ones near the ocean.
Second Homes and Investment Properties
Many $500K+ households dont stop at just one home.
New Jerseys wealthy were part of that wave.
High earners who normally might fly to Europe instead invested in a beach property.
This led to substantial price increases in NJ vacation markets (e.g.
bidding wars for lakefront houses in Sussex County or beach condos in Ocean City).
By 2023, second-home demand cooled from its peak, but remained above pre-pandemic norms.
In terms of investment properties, some high-income individuals also expanded their real estate portfolios for rental income.
North Jersey saw an uptick in small investors buying suburban single-family homes to rent out.
The contrast is striking:
Market Cycle and Pricing
20082011 were crash and recession years.
High-end homes in NJ often took longer to sell and many lost value.
From 2012 to 2017, the market recovered slowly.
Prices in NJ appreciated, but not explosively.
Contrast that with 20182023: after a modest start, we saw record price growth post-2020.
By 2023, NJ home values were far above mid-2000s peaks.
Tax Environment
Before 2018, the SALT deduction had no cap.
High-income NJ homeowners could deduct all their hefty property taxes and state income taxes on federal returns.
This effectively subsidized the cost of owning in NJ.
Starting in 2018, the wealthy felt a new pinch that they hadnt in the prior decade.
This likely contributed to the accelerated outmigration post-2018.
Gen X and older Millennials are the drivers now.
Psychological Factors
An intangible but important difference is confidence.
The wealthy saw prices rising and jumped in to not miss the boat.
The mindset shifted from caution in 2009 to aggressive acquisition in 2021.
We went from a slump to a surge.
