In terms of the overall health of the market, which observers often like to peg as either a “buyer’s” or “seller’s” market, the sense was that the market was neither, with “balanced” a better description. Arguments could be made why conditions favored sellers and point to rising prices, and arguments could be made opposing this view.
The median selling price for all single family homes in Westchester in Q3 2014 was $682,500, nearly matching the peak of $685,000 reached in early 2007. It has taken seven years for prices to creep back up—although on an inflation adjusted basis prices are still significantly down. Note that there is typically wide variation among this median depending on market and home specifics. Total Westchester home sales are flat year-to-date in 2014 versus 2013 levels, following several years of consecutive growth. 2013 total sales of $4.4 billion is far below peak activity of $5.4 billion in 2005.
One sign pointing to a stronger market is that the final sales price for homes is coming in at 97% of the final list price compared to weaker markets where the figure settles at 93%-95%. In some of the more attractive markets 1/3 of homes were sold at or above the asking price during Q3 2014. Jeremy notes that inventory is low at less than six months of supply, and anecdotally there are many frustrated buyers having trouble finding appealing homes within their price range. All of these factors favor a seller’s market.
On the opposite side, many homes which have not sold over the summer, which likely did not appeal to many buyers, are experiencing price reductions, often more than once. With new inventory listed after Labor Day, homes that did not sell over the summer had to lower prices to compete with the new listings. A key factor limiting price gains is stricter availability of mortgages, and bank appraisals which are coming in at conservative valuations. Home price gains in the past two years have exceeded the growth in personal income, which further limits the outlook for price gains. Although inventory remains tight, this factor alone is not enough to materially push up prices. These factors generally favor a buyer’s market.
A trend that seemed to be on the increase was a stronger desire by buyers to purchase move-in ready homes, with less tolerance for homes that need work. Good school districts remain in strong demand, but this is not unique to today’s market.
We compared some of the information on Westchester to the Manhattan market and noticed similarities. Median sales price trends in Manhattan, and as can be seen in the chart below, are similar to Westchester, with median prices up from their lows but still below the peak. The market summary for Manhattan provided by Douglas Elliman also mirrors Westchester. The Elliman report notes that the Manhattan housing market “is best characterized as having record low inventory, heavy sales volume, but only modest price growth” – which we read as being a “balanced” market, not obviously favoring either side.
S&P/Case-Shiller New York City Home Price Index
For buyers the advice is the corollary: make bids, even if they seem far below asking price, for homes that may seem out of range. At minimum, it will provide buyers with information on the market and test sellers on where they stand with their asking prices.
Jeremy can be reached at 917-549-5296 or at firstname.lastname@example.org
Note that this article was written to provide information and education, and is not intended to be considered investment advice, which can only be provided by DIA following a consultation and execution of an Investment Advisory Contract.