At a time when property values are faltering around the country, New Jersey is experiencing something unique for a cold, high-tax state: soaring house prices.
The Garden State saw 6% price growth in February compared to the same month in the previous year, far outstripping the national average of around 0.5%, according to real estate data and analytics company Cotality’s house price index. In gritty Newark in Essex County, the price growth was even more pronounced, at 6.7%.
So what gives?
Supply and Demand + Proximity to Manhattan
New Jersey stands out for several reasons. There hasn’t been the rampant development seen in the Sunbelt states, which has heightened demand, and in Newark, its close proximity to Manhattan ($3 for a one-way trip on the PATH train) and heavy investor buying have caused a rapid increase in house prices.
“What we kept bumping up against is what you see in the news and experts focusing on the supply side,” Katharine Nelson, associate director of Rutgers Center on Law, Inequality, and Metropolitan Equity (CLiME), said regarding a recent report exploring the 30% increase in housing costs between 2021 and 2023.
Nelson added:
“Yes, it’s a problem. But there is no single individual solution to the rental affordability crisis. We need to attack this on many fronts at once. That means building more homes, certainly. But the homes we are producing must be homes we need—very low-rent units and starter homes. At the same time, we need to address the consolidation of landlords and homebuilders, which are driving up prices, and find creative ways to assist very low-income households as federal subsidies disappear.’’
The New Jersey suburbs, particularly in North Jersey, around New York, have seen a rampant appreciation in house prices. According to the New York-centric data and analytics company Property Shark, which analyzed 387 suburban markets around New York City, the median home sale price in NYC suburbs has increased 86% between 2016 and 2025, double the 43% increase in New York City.
Rampant Appreciation in the Poorest Areas
New Jersey accounted for 74% of the 100 markets in which median sales prices at least doubled over the last decade. According to the report, 43% of these suburban markets have prices between $500,000 and $750,000, while only 8% are below $500,000.
“Consequently, what was once a suburban ecosystem with a wide range of price points in which NYC buyers could still find relatively affordable communities has since consolidated into a far more expensive market, dominated by mid- and high-priced suburban communities,” the report said. It shows that New Jersey’s once-affordable, largely rental communities in Newark, East Orange, Orange, and Irvington saw astronomical increases in median sales prices over the last decade:
- 596% (Irvington)
- 509% (East Orange)
- 407% (Orange)
“In the last decade, NYC’s suburban housing market has shifted structurally: Communities that once made up the affordable and mid-priced tiers have moved into higher brackets, leaving a suburban market now centered on mid-six- and seven-figure home prices,” the report said.
Why High Taxes and High Prices Are Not As Much of a Factor in New Jersey
New Jersey gets a pass on its increasingly high taxes and prices, simply because of its location. It’s close to Manhattan, where house prices and rents swamp the suburbs, and close to the heavy, high-paid job sectors throughout New York and North Jersey. The Wall Street Journal reported last year that the Northeast is defined by “tons of demand and low supply,” in contrast to the Sunbelt, where zoning restrictions are less prevalent.
The rapid price increase has displaced Newark’s longtime residents, many of whom can no longer afford to live in the city. Consequently, Newark Mayor Ras Baraka has called on developers to complete 3,000 new affordable housing units over the next four years.
“If you have a credible plan to help us in this effort, then we will expedite your projects and make them our priority. Any project that has greater than 30% of affordable housing, we will help you get it done,” Baraka said, as reported by Homes.com, adding that the state was short of 224,000 affordable housing units.
Delving Into The Details: The Investor Take
Newark, New Jersey, has been a hotbed of investor activity for the last two decades due to its close proximity to New York City and the price disparity between the two cities. However, Newark and New Jersey in general are not monolithic.
Traditionally, much of Newark, particularly in its various wards, has been renowned as a high-crime area with a poverty rate that still hovers around 22%, which is 1.5 times the U.S. average, according to Census data, meaning that around one in four residents lives in poverty. Traditionally, investing here has not been easy because of the labor-intensive property management required.
However, in the heavily Brazilian and Portuguese-inhabited area of the Ironbound section of the city, the incomes are generally higher, and many landlords from Portuguese families have owned real estate here for decades, passing it down to family members or selling to community members, resulting in something of a closed shop for investors looking to get involved in one of the city’s better rental areas. Thus, new developments in the area have been met with robust community and activist opposition.
Final Thoughts: Buy-and-Hold Strategies for Emerging Markets
I once owned close to 20 units in Newark, New Jersey. I had the right intentions, but my timing was way off.
This began two decades ago, when gentrification was just a gleam in a developer’s eye. The proximity to New York made it an obvious place to invest, but it was a war zone, and the stress and headaches of owning rentals here made it impossible for me to preserve my sanity and turn a profit. It seemed like I was in landlord/tenant court every week. Every time my phone rang, I feared another disaster.
It’s a classic case of “coulda, woulda, shoulda”: Had I managed to hold on to those units, I would be swimming in equity now. But I don’t regret offloading them—some back to the bank after the housing crash—or eliminating the stress from my life.
That is a classic scenario that many real estate investors face when trying to get into an emerging market early. Here are some tips on how to do it:
However, I did run into other (Portuguese) investors whose families had owned in the Ironbound for decades, and that income, paid by loyal, hardworking tenants, put their kids and grandkids through college and made the patriarchs multimillionaires through equity.
It’s an important lesson about investing in emerging markets. Buying in the more stable sectors might cost you more in the short term, but it will ultimately pay off.
Discussion about this post