Continued Declining Inventory Raises Concern Despite Continued Strong Home Sales in Region
John Jordan | October 2017
WHITE PLAINS—The Hudson Valley residential market continued to post strong sales volume, although three of the four counties in the Hudson Gateway Association of Realtors’ market area experienced sales declines in the third quarter of this year as compared to a year ago.
Residential brokers emphasized that sales volume in the third quarter of last year was strong. Orange County continues to lead the way, with an 8.2% increase in third quarter sales, according to the “Third Quarter Residential Real Estate Report for Westchester, Putnam, Rockland and Orange Counties, New York” released recently by the Hudson Gateway Multiple Listing Service, Inc. Home sales in Westchester County were flat (-0.6%), while Rockland registered a 5.2% decline and Putnam County’s home sales fell 8.2% in the third quarter of this year.
Realtors interviewed by Real Estate In-Depth said the continued decline in for-sale home inventory in the region is limiting buyer options, particularly for more affordably priced units in the region. Westchester County’s for-sale inventory declined 8.6% year-to-year, while Rockland’s available stock dropped 15.1%, Putnam County’s and Orange County’s inventory each fell by a 16.4% rate.
The reduced inventory was a factor in rising sale prices throughout most of the region in the third quarter. Orange County led the region with a 4.3% increase in the median-single-family home price in the third quarter to $255,000 as compared to the third quarter of 2016. Rockland posted an impressive 3.7% increase in the median to $445,000. Westchester County registered a 1.7% increase in the single-family median to $680,000. Putnam County’s median single-family sale price was flat as compared to last year at $340,000.
HGAR President Dorothy Botsoe, Broker/Owner of Dorothy Jensen Realty Inc. of White Plains, said that recently business in the region “has been slow and prices are flat.”
Her firm, which along with conventional home sales brokerage specializes in the sale and marketing of distressed and foreclosed properties, said there is very limited inventory, particularly for those buyers seeking more-affordable-priced homes. She added that new listings that have come to the market are either priced at or near the median sale price or higher.
In spite of a marked increase in distressed and properties in foreclosure to hit the market in Orange County, and an uptick of distressed listings in Westchester County, Botsoe expects sales activity to slow down due in part to the upcoming holiday season when buyers and sellers normally stay on the sidelines.
“For most people right now, even if they were to put their homes on the market for sale, they have no place to go to (due to the low inventory),” she said. “
“I think we are facing a bit of a downturn,” Botsoe said. She based her prediction on a sense of uncertainty that pervades the market due to concerns over an expected increase in interest rates by the Federal Reserve as well as trepidation from some buyers of federal tax reform that could result in the elimination of state and local tax deductions. She said that HGAR, NAR and other organizations in the real estate industry have come out against the proposal that would impact those deductions.
“Most people are just waiting to see what happens,” Botsoe said.
She added that she is hopeful that Gov. Andrew Cuomo will sign the First-Time Homebuyer Savings Account, a bill that would allow individuals or couples to set aside after-tax income into a bank account designated only for costs associated with buying a first home in New York State. An individual would be allowed to deposit up to $5,000 per year (couples up to $10,000). The State Legislature passed the bill earlier this year, but the measure is still awaiting the governor’s signature.
Scott Durkin, COO of Douglas Elliman Real Estate, said buyer interest in Westchester and Putnam counties is very strong, although declining inventory is impacting buyer options. He related that while the number of sales fell year-over-year for only the second time in three years in Westchester County, sales volume this quarter was the third most of any quarter since 1982 and was 59% above the quarterly average for the last decade.
He said buyer demand is keen, particularly from millennials and other demographic groups priced out of the Manhattan and Brooklyn residential markets.
Other key takeaways from the third quarter in Westchester included the fact that third quarter overall inventory was the lowest in 13 years, the median single-family home sale price rose for the fourth consecutive quarter and co-ops were the only property type to see a rise in sales. Douglas Elliman, in its third quarter sales report, also noted that the luxury residential inventory in Westchester declined for the fifth consecutive quarter.
Durkin stressed that despite inventory pressures, sales continue to be strong, but prices have yet to rise in relation to the lack of available housing stock. He offered a bit of a different perspective on at least part of the reason inventory continues to slip.
“What we have seen the most decline in are listings that have been chasing the market with unrealistic pricing from the sellers,” Durkin said. “Once those listings are expiring, generally the sellers will look for another agency to represent them. But some of them have been on the market so long they have run out of people to choose from and they have taken them off the market.”
Joseph Rand, managing partner, Better Homes and Gardens Rand Realty, said that normally when sales start to fall it signals either a demand or a supply problem. “What we have is a supply problem. Demand is really strong, but buyers don’t have enough homes to choose from. We need more inventory,” Rand said.
He added that sales activity is strongest throughout the markets in the entry-level and middle-part of the market and relatively weaker in the higher-end priced units.
Rand noted that sales prices are increasing and will continue to do so as demand stays strong and inventory remains tight. He believes that eventually, higher prices will bring more sellers into the market, which will stabilize inventory.
He predicts that the market will experience a “ripple effect—the seller of that entry-level home is going to buy a mid-priced home, and the seller of the mid-priced home will buy higher up the chain, and so on. So the heightened level of activity will eventually ripple through every price point. It just takes time,” Rand related.