The housing market is cooling.

Interest rates have risen 4 percentage points since August 2021 when they were 2.7%. Inflation is at about 8.3%, making everything from groceries to gasoline more expensive. And home prices have risen 28% in the past two years, not counting gains so far in 2022.

All of these things are combining to slow sales and increase inventory, pushing the market toward the buyers favor.

Were now transitioning from a sellers market to a buyers market in which home buyers no longer feel a sense of urgency to buy quickly before prices go higher, said Jeffrey Otteay, a real estate economist and president of the Otteau Group.

Home sales are down 17% since the beginning of the year and there are 7,000 more homes on the market than there were last year, according to data from the Otteau Group.

One measure to judge whether the market is a buyers or sellers market is the months supply of homes for sale in an area. Months supply refers to the number of months it would take for the current inventory of homes on the market to sell given the current sales pace, according to the National Association of Realtors.

In New Jersey, as of August, there is 2.7 months supply of inventory statewide, according to New Jersey Realtors.

When you look at the inventory thats out there, a lot of it is new home starts, said Robert White, president of New Jersey Realtors and a broker with Coldwell Banker Spring Lake.

He said a new adult community in Howell, where properties were listed at $849,000, this month were being offered for $720,000 if the buyer can close by Oct. 31.

I think youre going to start seeing that in a lot of these communities, White said. When they build in phases, as they sell homes, they typically raise prices by a certain percent. Now, theyre forced to reduce prices back to Phase 1 if theyre in Phase 3.

There are areas in the state where its still a strong sellers market, particularly in transit centric or transit adjacent towns, said James Hughes of Compass in Montclair.

Pricing is critical, he said. Properly priced properties are selling quickly.

The largest supply of unsold homes is in the $1 million to $2.5 million price point and the more than $2.5 million price point, which each have 17% more unsold homes, according to data from the Otteau Group. Unsold homes are up 10% in the $600,000 to $1 million price group.

Unsold inventory is lowest in the under $400,000 price bracket where there are 22% fewer homes on the market. And its down 6% in the $400,000 to $599,000 range, the Otteau Group found.

The New Jersey town with the highest months supply of homes is Alpine, in Bergen County, where the median price of a home is $4.04 million and they sell in about 150 days, according to Redfin data.

Alpine is the priciest zip code in the state and has been ranked among the most expensive zip codes in the county.

Alpine doesnt have a lot of homes to begin with, so when you do percentages its always going to feel like its more, said Michael Kolsky of Coldwell Banker, adding that there are between 800 and 900 homes total in Alpine.

Some of it is the houses are not priced right. Some of it is location, Kolsky said. A lot of homes in Alpine that are on the market have received offers that were not accepted. They just werent satisfactory to the owner.

In Guttenberg — where the median sales price is $477,000 and homes sell in about 119 days, according to Redfin data — Maira Fernandez, broker at Century21 Realty Group says there is a lot of condominium inventory.

In The Galaxy Towers, three condominium buildings with about 3,000 total units, there are 38 properties for sale, she said.

As far as 1 or 2-family homes, were having the same problem as everybody else, Fernandez said. Theres nothing available.

Here are the New Jersey towns that have the largest supply of houses and how many months supply they have, according to data from the Otteau Group:

1. Alpine – 11.8

2. Loveladies – 6.8

3. Saddle River – 5.4

4. Far Hills – 5.1

5. Atlantic City – 4.9

6. Guttenberg – 4.8

7. Delaware Township – 4.8

8. Millstone – 4.7

9. Rocky Hill Borough – 4.3

10. Long Beach Township – 4.1

11. Fort Lee – 4.1

12. Long Branch City – 4

13. Harvey Cedars – 4

14. Surf City – 4

15. Lambertville – 3.9

16. West Long Branch – 4

Are you an agent, buyer or seller who is active in this changing market? Do you have tips about New Jerseys real estate market? Unusual listings? Let us know.More Coverage:These are the N.J. towns where homes are selling the fastest Heres how rising interest rates are affecting N.J. home sales This 2-family N.J. home with unobstructed views of NYC is on the market for $3.2M

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Allison Pries may be reached at apries@njadvancemedia.com.