Finding the Housing Market’s ‘Sweet Spot’
Leah Caro | April 1, 2015
Spring is in full spring! Whatever does that mean? One sure sign of spring is that golfers are returning to the links. So why not examine the Westchester County real estate market using a golf analogy?
But first, a little background. The fourth quarter of 2014, as well as 2014 as a whole, showed strong numbers both in the volume of sales and sale prices. The median sale price of a single-family house in Westchester in 2014 was $635,000, an increase of 4.1% over the median in 2013. Co-ops and condos had double-digit increases in the number of sales in 2014 over the previous year, and prices showed modest gains.
The biggest surprise of 2014 was the activity in the fourth quarter. Most buyers, sellers and Realtors would all agree that the time between Thanksgiving and New Years is slow, but not last year. Many agents reported that buyers were actively looking at (and buying) homes in December. All around, 2014 felt good and strong and promising—and that kind of feel-good optimism would surely carry us into a strong spring market, right?
January started off virtually free of snow, sellers listed their homes, and buyers responded with good offers. Some markets, Bronxville being one example, saw new January listings coming on and selling in mere days to buyers competing in “highest and best” scenarios. Wow, spring had come in January! And then it snowed, and snowed and snowed.
Undeterred, sellers prepped their homes to be listed and “showing-ready” as soon as the snow could be shoveled from the front walk. Because 2014 was good and strong and promising, and those January houses sold so quickly, surely the March listings would be great too, and sellers could demand any price because it was finally a seller’s market again. Right?
Here comes the golf analogy (thanks for waiting). Golf is a sport, not a science. Yet, the trajectory of that little white ball, the movement of that great big driver, and the swing of the golfer can all be analyzed and graphed and broken down into smaller bites and poured over by experts in order to find just the right combination of timing and force and form to create the perfect tee shot. Every golfer is looking for the sweet spot on that ball—and boy, is it elusive.
The real estate market is an inexact science. Future activity is based largely on past performance. Experts analyze and graph and break down the market into smaller bites to find just the right combination of timing and force and form—seeking the elusive sweet spot of pricing. 2014 showed gains in price and sales volume. January was brisk. The first quarter statistics are out, and what are they saying?
The median sales price of a single-family house in Westchester County in the first quarter of 2015 was unchanged from the first quarter of 2014. Unchanged! As in 0.0%. The number of single-family houses sold in the first quarter of 2015 was down 0.9% over the first quarter in 2014. Is that bad? Not necessarily.
Recall that 2014 was a great improvement over 2013, and certainly over any year since the start of the recession in 2008. The market continues to be better than the recent past, but flat in regard to new gains for now. Most Westchester markets are reporting low inventory and the first quarter statistics support this—inventory over all types of residential housing (single and multi-family, co-ops and condos) is down more than 10% from this time last year.
Generally, the laws of supply and demand hold true. Lower inventory should portend higher prices and we may well see that in the second quarter of the year, particularly if more buyers enter the marketplace and must compete for limited inventory. Additionally, most indicators point to rising interest rates by the end of 2015 or early 2016; this should also induce buyers to act now
However, an all out sellers’ market it is not. Sellers acting with “irrational exuberance” (to quote Alan Greenspan) should look to the first quarter statistics when pricing their homes rather than the fourth quarter of 2014. Aim for finding the elusive sweet spot, rather than swinging so hard that the ball ends up lost in the tall grass.
Finally, remember that real estate is local. Every house in every market is different. The conditions of a small hamlet in northern Westchester could be very different from those of a big city in the south. Buyers and sellers would be wise to speak to an expert who understands the different markets and can help create the perfect swing.
Leah Caro is president of the Hudson Gateway Multiple Listing Service Inc., and is also president and principal broker of Bronxville Real Estate.