The regional housing market in Westchester and the Hudson Valley started to show the first signs of meaningful price appreciation in the first quarter of 2017, with prices up in most of the counties. Moreover, with inventory rates dropping, we expect this trend to continue through a robust Spring market and for the rest of 2017.
Inventory throughout the region continues to drop. Regional inventory fell almost 26%, and is now down to 6.3 months–right at the level that the industry considers a “balanced” market. But many of the individual counties in the region are now well below six months, moving into “seller’s market” territory. For example, Westchester is now down to 5.0 months for single-family homes, 4.6 months for coops, and 3.2 months for condos. Indeed, outside of Dutchess County, every single market segment in every county in the region is at or below 6.1 months of inventory.
The lack of inventory is continuing to stifle sales growth. Regional sales were up 5% from the first quarter of last year, marking 10 straight quarters of year-on-year sales growth. But that 5% increase was the smallest in that 10-quarter streak, indicating that the pace of growth is slowing due to the lack of inventory. Essentially, the market is capable of even greater sales growth, but only if it gets more “fuel for the fire.” All that said, buyer demand is as strong as we’ve seen in over 10 years, with regional sales up 11% for the year and reaching the highest 12-month sales total since the third quarter of 2005 — the height of the last seller’s market.
High demand and low inventory is starting to drive modest-but-meaningful price appreciation. In our last Report, we said that we were “about to witness ‘Economics 101’ in action,” explaining that rising demand and falling supply were poised to drive prices up. Well, from that perspective, we had a “textbook” result in the first quarter, with the regional average sales price up over 7% from the first quarter of last year.
Moreover, average prices spiked in several counties in the region, rising almost 7% in Westchester, 5% in Rockland, and 7% in Orange. Prices were down in Putnam and Dutchess, but even in those counties, the yearlong trend was relatively promising. Essentially, the market is capable of even greater sales growth, but only if it gets more “fuel for the fire.”
Going forward, expect big things for this market in 2017. Demand is strong, bolstered by near-historically-low interest rates, prices that are still near 2003-04 levels (without controlling for inflation), a generally strong economy, and sharply declining inventory. Given these conditions, we expect that prices will continue to go up in a robust Spring market and throughout 2017.