Unique Future for JC & Hoboken

There is a common narrative that rent prices are too high, home prices are too high, and interest rates are too high. But, what if that isn't completely true?

To understand if these items are actually 'too high'. we need to consider a comparative metric, the annual Mortgage-to-Rent ratio over the last 10 years. In order to standardize the figures, I specifically chose the median sale price and median rent price of 2-bed, 2-bath condos in JC Downtown and Hoboken. Then incorporated the average mortgage rate of each year based on a 20% down payment, the median property tax based on the annual median sale price, and gave a fixed average HOA fee of $500/mo. This provides a relatively accurate depiction of what a person would witness when comparing the total mortgage payment and rent payment in any given year.

The ratio in 2023 is certainly at the top of the decade-long range, but does not exceed it. Could this quantify prices to be too high? Not quite. Prices are high, but not beyond the highest recorded figure that the market has witnessed over the last decade (i.e. 2018).

Could it be that wages have not kept up? The median household income for JC Downtown and Hoboken was estimated near $150,000 in 2018, which provides a Rent-to-Income (RTI) ratio of 29.5%. In 2023, the median household income in JC Downtown and Hoboken is estimated to be around $168,000, providing an RTI ratio of 30.7%. Although higher, the 2023 figure is barely higher than 2018.

The market is 'expensive', but the data shows how our local JC & Hoboken markets do not align with the common narrative of unaffordability. There are other factors at play, such as the cost of food and core essentials, but when looking solely at housing, a different narrative is present - The market is at a teetering point. If rates, prices, or rents continue to rise, then the market will reach 'overpriced'. But, if any of these metrics go down, then the market will remain within normal boundaries. Most notably, if mortgage rates go down, even by just 1%, then nothing else has to change for relative affordability to remain within decade-long boundaries.