Rockland Housing Market Posts Strong Results in 2017; Tax Reform, Rates Are Areas of Concern in Coming Year
Jennifer Mallory | December 2017
Predicting the real estate market is about as easy as timing the stock market, due to the complex interplay of forces that create the market. Four basic numbers tend to drive real estate—home sales, home prices, months supply of inventory and mortgage rates. The economy, encompassing inflation and unemployment, as well as policy decisions on local, state and national levels also affect the local market.
In 2017, each of these forces contributed to create a strong housing market in Rockland County, a trend that looks to continue in 2018, although the tax reform bill being debated at the time of this writing could have serious ramifications on the housing market.
For the year, both pending sales and closed sales are up, according to statistics from the Hudson Gateway Multiple Listing Service, Inc. Since January 2017, pending sales have increased 4.8% for single-family homes, and closed sales have increased 8.6% for the same group. However, the number of new listings trended down most of the year, showing a 1.4% decrease from January 2017 to November 2017. Buyers reacted quickly, recognizing the competition for the best listings, leading days on market to decrease by 14.1% since the beginning of the year.
This downward trend in the number of new listings has caused an increase in sale price for Rockland County. For single-family homes, the median price rose 3.8% for the year, from $425,000 in January to $439,000 in December.
Rockland County Housing Market
Third Quarter 2017
Total # of Home Sales — +7.9%
Home Inventory — -15.1%
Median Single-Family Home Price — $445,000
Source: Hudson Gateway Multiple Listing Service, Inc.
Months supply of inventory measures the number of months it would take for all current inventory to sell, if no new listings came on the market. Typically, more than six months of inventory is characterized as a buyer’s market, meaning that the buyers have more control, and less than six months of inventory is a seller’s market, meaning the sellers have more control. This year, the months supply of inventory dropped from 6.7 in January to 5.3 in November, putting the market clearly in the hands of the sellers. Houses properly priced, in good condition, and staged to show are selling quickly.
Many industry analysts predicted a rise in mortgage rates in 2017. Surprisingly, this did not happen. After a slight bump in the beginning of the year, rates remained historically low, hovering around 4%. Higher mortgage interest rates affect the affordability of homes by making monthly payments higher. A 1% increase in interest rates can decrease purchasing power by 10%, knocking some buyers out of the market and diminishing competition for homes.
Right now seems to be a sweet spot for both sellers and buyers, although some able and willing buyers can’t find a home to buy. The lack of inventory means sellers are getting strong prices, and low mortgage interest rates mean that buyers have lower monthly payments. This combination is causing buyers to get off the fence and make offers. The low days on market tells them that if they wait, they might miss out on a house they love.
Of course, other factors affect the housing market including the overall economy, encompassing unemployment and inflation, as well as governmental policy decisions. Rockland has low unemployment at 4.5%, and nationally inflation is at 1.6% in 2017. Low numbers for each contribute to a solid market, for the time being.
What will happen to the real estate market in Rockland County in 2018? It is anyone’s guess. Some of the anticipated changes in the tax code, specifically caps on the mortgage interest deduction and the property tax deduction, could have a serious dampening effect on real estate sales in Rockland as well as Westchester, both counties with high home values and high taxes. Add rising mortgage interest rates into the mix and there is a real risk for a serious downturn in the market.
At the moment, though, the rate of home sales, rising home prices, low months supply of inventory, and low mortgage rates point to a healthy real estate market in 2018. While it is impossible to time the market perfectly, the bird’s eye view says whether you are a buyer or a seller, right now is a very good time to be in the market.