Update 07/03/2025: New Jersey Mansion Tax Shake-Up & Mid-Year Market Momentum

Big changes are here for New Jersey real estate! In this special 4th of July week episode, Pete D'Angelo breaks down the sweeping update to the NJ Mansion Tax—what it means for sellers, the new tiered rates, and why it’s sparking a last-minute rush to close before the July 10th deadline.

Then, it's halftime for 2025! Pete reviews the major housing trends so far this year: record-high median prices, rising inventory, and signs of softening demand. Plus, hear his projections for the rest of the year, including why moderating rates may boost buying power—and why volatility is far from over.

If you're a seller, buyer, or real estate pro in New Jersey, this is the update you can’t afford to miss.

📈 #RealEstateNews #MortgageRates #HousingMarketUpdate #NewJerseyHomes #MansionTax #FedPolicy #MarketForecast #HomeBuyingTips #Refinance #InterestRates #InventoryUpdate #4thofJuly #ThePulseAndPerspective

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Peter D'Angelo | NMLS: 885309 | Branch Manager | Guaranteed Rate, Inc., NMLS 2611
Peter.DAngelo@Rate.com

*All information, topics, discussion is my own personal opinion and insight, not reflective of Guaranteed Rate, Inc. May contain market information for informational purposes only, not to be used as financial advice.

Transcript

Podcast_Update_07.03.2025

[00:00:00] You are listening to the Pulse Send Perspective, hosted by me, Pete D'Angelo, branch manager for rate. Located in TOA, New Jersey, I assist individuals and families navigate in their journey toward home ownership. Each week I'll be providing you with valuable insights and updates on the real estate and mortgage industries.

Occasionally we'll be sharing snippets of interesting interviews with local professionals sharing their stories of real estate, business, and life. Enjoy the show. 

On today's episode, we're going to give you that update on the New Jersey Mansion Tax. Then we're going to do a first half of the year in review. We're halfway home. Let's take a look at how the first half went and make some projections about what the second half of 2025 will look like. Let's get into it.

 [00:01:00] Welcome back to the Pulse End Perspective with me, Pete D'Angelo. I hope you're doing well. Happy 4th of July to those listening, on radio Fre Montclair, and for those listening on July 3rd, happy early 4th of July to you and your families. We're going to first start off with the big news that hit, the presses this past week, which was Governor Murphy signing into law an update on the New Jersey Mansion Tax.

So for those for context Manchin taxes, when you're a seller in the state of New Jersey, it's customary that you already pay something that's called realty transfer taxes. This is the tax that's applied when you transfer the asset of real estate to a new party 

so if you're listening in other states. It's very common that, you know, looking over the Delaware water gap from where I am in [00:02:00] Pennsylvania, normally it's a split between buyer and seller to cover that realty transfer tax in the state of New Jersey. Though that burden of cost falls squarely on sellers that is separate from this New Jersey Mansion tax 

new Jersey Mansion tax was 1% and it was paid for by the buyer. So if you were buying a home that was a million dollars or up, you paid 1% Mansion tax. Where this money goes, we don't necessarily know, but this is a tax collected by the state. They do mention that this is to help with overall property tax relief throughout the state.

But there was a new update. Here's what that update is. Governor Murphy signed into law that now the Mansion tax is going to increase. So update number one, the Mansion tax is increasing and it's increasing across different price points now, before 1 million and up. You had a 1% [00:03:00] mansion tax paid by the buyer.

Now, if you are selling a home, that's a million dollars to $2 million, it is still 1%. However, that 1% is being paid by the seller now, so the seller's going to be paying this cost for all of the New Jersey Mansion taxes. There's an additional update with the price bands, so there's going to be different cost structures.

Now, when you get to 2 million to two point a half million, that cost is going to be 2%. When you go from two point a half million to 3 million, that is going to be two point a half percent. When we get to 3 million to three and a half million, that cost is 3% and over three and a half million. The Manchin tax in New Jersey is now going to be 3.5%.

All of these costs now paid by the seller of the property. This is on top of that real estate transfer tax that I mentioned. This applies to residential, some [00:04:00] commercial mixed use properties and certain vacant land sales. So this will be far reaching, in the state of New Jersey and definitely have a tangible impact on pricing and the market.

The deadline for this, because of the timeline that was established in this bill, goes into effect July 10th there's now going to be a rush to have certain transactions close to hopefully avoid the exposure to this real estate transfer tax. There could be a refund. For those who are closing, it really goes by when the deed is filed.

When you purchase a property, a title company is involved. They're the ones acting as the settlement agent in the middle of everybody involved, collecting everybody's money and then dispersing properly to the parties involved in the transaction and other service providers. In addition to doing this, the title company will also file documents at the county so that they are legally recorded documents with respect to [00:05:00] the real estate transaction.

This Mansion tax, it will be going by when that deed gets filed at the county. if a seller is going to be selling and it closes before July 9th, right now it seems like the title company still needs to collect the amount of money as per this new legislation. However, the sellers will be able to apply for a refund as long as that deed gets filed before July 9th.

They'll be able to file for a refund to get reimbursement from the state for anything above the. Prior tax amount for that real estate transfer on a mansion, anything over a million. First, obviously affecting seller net proceeds. This is going to drastically reduce the amount of money that the seller's going to net when they sell their property.

There's going to be quite a hectic. Experience for the next week here in New Jersey 'cause there's gonna be [00:06:00] a lot of people trying to get their closing in as soon as possible to try to avoid exposure to this new tax rate. The projected revenue for this is roughly $282 million for the state of New Jersey.

That affects roughly two to 3% of New Jersey home sales. I'm in North Jersey in Bergen County. Some of those township averages. Are home values over a million dollars. There's certain pockets in markets in the state of New Jersey that a million dollars is not a mansion.

That is just the cost of housing in these higher desirable areas. The additional projection is that this would provide property tax relief. This is what we are hearing as the narrative as it's being presented to us from Trenton. This is something that is going to be very difficult to manage.

My heart goes out to my partners who are title representatives and people in the title insurance industry and the [00:07:00] attorneys out there. This cannot be a fun time to have to manage client expectations with this type of curve ball that's being sent. It's difficult to swallow with this is we really don't have any accountability for our local government here in the state of New Jersey to know where this money is actually going to be going, and if there's going to be a tangible benefit to a lion's share of homeowners in the state.

Lastly. With this update, the home sellers. I wanna go back to the comment I made about the pricing. In certain pockets, it's, you're not getting a mansion, so this new legislation, these types of things are difficult and cumbersome to manage. So it's gonna be interesting to see if this is something that will be able to get updated in the future.

My personal opinion is that. If they want to have this new cost structure, well, number one, putting the burden of cost on the sellers, I don't necessarily agree with. I know that they're sitting on a lot of equity. [00:08:00] To me, it looks like more of a cash grab because they're sitting on that equity and the state has an opportunity to take a share of it.

Secondly. The homes that are a million dollars and up are no longer mansions in the state of New Jersey because of the higher price points, the averages in the state are above $550,000. That's the actually the median sales price. So that's the most commonly occurring number. If we look at an average, that average could be higher because of the competition.

We're in a highly desirable market. Here in New Jersey. So that's my 2 cents. We'll see what transpires after this, and if new government in the state will make any adjustments or changes to this. Stay tuned. I'll keep you posted. But for my real estate professionals out there, this is important information, especially if you're looking to be listing any homes that are above a million dollars.

Now let's take a look at interest rates. We are seeing a little bit of a move downward, which is welcomed. Thankfully, we're getting some relief. 30 year fixed rate [00:09:00] is averaging anywhere between 6.6 and 6.76%. As of today, it's quite a bit lower. We're testing some of the best interest rates that we've seen here in 2025.

The 15 years averaging in the mid to high 5% range, and the VA is. Close to around 6% right now and refinance rates because they are higher than purchase interest rates. Those are sitting at around 7%, give or take, depends on the scenario. Recent movement is a drift downward, as I mentioned. There is a little less volatility occurring in the markets right now.

This is customary for the summertime. The markets are a big component of how interest rates are priced, and in the summertime a lot of people take their eye off the ball. And stock market. Bond market, things like that, are mostly managed by algorithms and computers. So they're taught a certain framework.

So we will see, normally a narrow band. [00:10:00] It's when there's outliers that we can see some volatility in the summer, and it's purely just by the numbers. And if enough. Algorithms are set to buy or sell when certain conditions are met. Small movements can become big movements. So over the past week, we haven't seen a lot of volatility, which is good, but that doesn't mean there's not going to be volatility possibly in the future.

There's a higher propensity for that in the summertime typically, or the exact opposite. So it's feast or famine. Fed policy is another important component of this. They are keeping their interest rates where they are, but as I mentioned on the last episode, categorically if we wanna see inflation at 2%, they will need to lower their Fed fund rate.

Lastly, the market, again, I'll go back to some. Commentary on that. It is still going to be volatile this summer. It's going to be very dependent on the data that we get, particularly jobs, numbers, and [00:11:00] unemployment numbers. Lastly, the inflation readings, the consumer price index and the personal consumption expenditure.

Depending on what those look like, we'll dictate for us what the market will be anticipating for rate cuts. That's what creates the market environment. I'm just going to hit this again. It's been a couple weeks since I mentioned it, but this is a very important component If you're a prospective home buyer or a real estate professional.

Interest rates are. Speculative. They are not something that's set in stone because of the market, especially when we're in an unprecedented time like we are right now. With that being said, interest rates are speculative, so the market is anticipating what the Fed will be doing because that's what is informing the trading on the bond market and in the market right now.

And as long as that trading is being informed by that, that's what's going to currently create. The market environment we have, that's how that's going to work. Right now, we're looking pretty good [00:12:00] on interest rates. It's a great time to get pre-approved. Take a look at your buying power. This is going to be some of the highest level of buying power that we've seen right now in 2025.

Now to give some context, I believe that rates are going to moderate this year, which is welcomed, and quite frankly, that's all that I think that we really need here so that we can start to see a little bit more stability in the housing market and create some more affordability.

Fed is still going to remain cautious. They're going to remain data dependent. The market is going to work to anticipate that. The uncertainty with tariffs is still a thing. At any moment things can pop up. Be prepared to see some headlines talking about these tariffs again in the coming weeks.

The affordability challenges are still going to persist, but if we get stability in the interest rates buyers can, shop with a more normal cadence. Over the past couple years, buyers have popped into the market and popped out because of getting priced out [00:13:00] or interest rates getting volatile or the competition level was just too high.

Now there's a little bit more opportunity by way of a little bit less competition in certain markets in New Jersey. But most importantly, the stability of interest rates and the affordability is remaining. So that is going to be helpful for any prospective home buyers moving forward. What we need to watch for in the coming weeks.

This was Trump's, legislation he's trying to pass through. It was signed off. We have to see that coming into play that's going to have an effect on the market Because of the implications within that bill. Markets could react positively.

Markets could react negatively. Yeah, that's going to create volatility. Volatility is not good for interest rates. If the tariff situation worsens, that could possibly shoot up inflation further then fed, cut or not. It takes a fed rate cut off the table Now we're gonna look at our housing market review for 2025. We're six months through the [00:14:00] year, halfway to 2026, which is crazy. Time flies when you're having fun. But let's take a look at what things have looked like this year. Starting off, we had an inventory surge, which was extremely welcomed.

1330 1.5% year over year. Increase in inventory as of May of 2025. This is the highest level since the pandemic. We're making good progress. Price cuts. 19 to 25% of listings have seen reductions in recent months. So in 2025, price reductions have been happening. Let's translate that. If there's price reductions happening, that's showing us that there's a softening happening in the market.

I believe that the price reduction or an indication in proof positive to us that we have now tested the upper limits of the competitive market that we've seen for the past couple years throughout the country. 

There's negotiating happening throughout more of the country than not. [00:15:00] In New Jersey, hot metro areas, Boston, Chicago, Los Angeles, New York, and the surrounding states. We still have high competition. So that's a li, we're an outlier in that sense, but the price reductions are still happening even in those markets.

So that's telling us we've tested those upper limits, home prices growing. Home prices has started to moderate. They are now running at around 4.5%, year over year. But the average fell, the average fell two to 3% for all of 2025. So when we look at the whole year and what our expectations are, we're lowering that bar.

Just also good in New Jersey we're, we've been running it something close to, I think on average, 10% cumulative annual growth. That's an insane growth rate. That pretty much indicates there needs to be a top and there needs to be a stabilization point. That's where we find ourselves. Now, [00:16:00] the record high for median home sales price was hit in April of 2025.

That was $414,000, which was a new April record. The sales activity now, we've been talking numbers and inventory. What's been actually transpiring when we're talking about transactions? Existing home sales are pretty flat compared to 2024, so the amount of activity is lower. Makes sense. We're seeing price reductions.

These things are informing one another. New home sales though, are up 4% in the first quarter of 2025, so more new construction, more inventory being created. New construction, single family starts are up 3% and multifamilies are up 4%, commercial and multifamily.

So office downtown markets are recovering currently, but the price in that space remains relatively tight. The retail have the lowest vacancy rates, and in the Sunbelt and the suburban [00:17:00] markets, the demand is rising. We'll see what's going to occur here in office space. More people are returning to work into office settings that may start to move things around a little bit for us there.

And in multifamily vacancies starting to edge down as the high home ownership rate, costs keeps renters in place. So a little bit of stability there. For the rest of 2025. It's looking more and more like we are going to see rates moderating here in that mid 6% range. We're not quite there yet. In some scenarios you could be, but I'd say we're going to see rates moderate here in 2025. Buying power is going to rise because of two functions. One, the moderating interest rates, and number two, there being more inventory and some room for negotiating.

So then you're going to have a little bit more power as a buyer when you're trying to purchase a home. Policies from the government and tariffs will [00:18:00] still be a very big component of how the rest of this year goes, particularly on inflation and the jobs. We'll have to see how that transpires. That's something to keep our eye on for the rest of this year.

I want to provide you with some really actionable items if you are a seller, a buyer, or someone interested in refinancing, and then something that's generally good for everyone. So for our sellers, Manchin Tax we just talked about in the beginning of the episode, million dollars. End up, you're going to wanna make sure you consult your real estate agent and your attorney as soon as possible.

If you are currently a seller of a home that's listed for sale over a million dollars, this will change your net proceeds. Buyers rates are still high, this will help you to be able to plan accordingly. Again, great time to get pre-approved or revisit your pre-approval.

If you were pre-approved in the past, there will likely be more inventory. It's already starting to [00:19:00] transpire. Looking here in New Jersey, we're getting there. It's helpful when I take my dog for a walk in the morning. I'm seeing more homes. With four sale signs out front, it's a move in the right direction.

This is something that's desperately needed for those considering refinancing. Rule of thumb, about a half a percent to 1% lower than what your current interest rate is. Could make sense. That being said, if you were someone who is not refinanced and you're looking at interest rates that are higher from maybe prior it.

Important to also look at your, what's called the amortization schedule. So when you're paying back a mortgage, every monthly payment has a certain portion that's allotted to interest. A certain portion that's allotted to principle. The part that's allotted to interest is higher when you start your mortgage.

So. For those who've purchased in the past two years, you're probably looking at a higher interest rate. Saving a half a percent to 1% is meaningful [00:20:00] savings. If you want to wait and see when rates stabilize, you can do that as well. But as a rule of thumb, half a percent to 1%.

It's good time. Maybe take a look at refinancing. That being said, your personal finances should dictate this. This is just a rule of thumb I like to share. If your monthly payment is manageable, you like to wait the market out until there's a terminal rate that we reach for mortgage rates. If that's going to be a situation, we could do that.

Otherwise, keep an eye out, keep conversation going with the professional that helped you purchase your home or reach out to me. I'll be happy to keep an eye out on the interest rates for you for a refinance opportunity. Lastly, for everyone, stay aware of policy changes, tariff announcements in any news that you hear about inflation or the job market.

This will wind up dictating to us what the interest rate environment will look like. That's it for our show today, but I wanted to take a moment because the show's being [00:21:00] released on my anniversary, so I wanted to. Give a big shout out to my beautiful wife, Jacqueline. Happy anniversary. I love you very much.

I'm looking forward to giving you all an update. Next week. We're going to continue watching how these things transpire, particularly here in New Jersey because there's quite a bit of movement in, we've seen enough happen throughout the rest of the country, and that's now starting to trickle through.

Over here in New Jersey, we're gonna see what that looks like. I'm gonna give you a great update next week, and there's gonna be some more interviews forthcoming. Keep an eye out. I'm very excited. I've got some wonderful people lined up that I'm excited to share their stories, share more about their businesses and understand more about them.

In the meantime, have a wonderful, happy 4th of July. Happy Birthday America. Have a safe holiday weekend and take good care.

 [00:22:00]