Why is the Westchester Average Sales Price Down, When Sales Are Way Up?

Westchester mix

 

Why are Westchester prices down?

If you look at the Westchester single-family housing market, comparing the year-to-date 2016 to 2015 as of the end of May, what you find is a little perplexing: sales are up 12%, but prices are sharply down across the board: down 7% on average, 5% at the median, and 4% in the price-per-square-foot.

And by “perplexing,” I mean “if I was a Westchester homeowner, this would kind of freak me out!”

Westchester 2015YTD 2016YTD Change
Sales  1,688  1,891 12%
Average  $837,313  $775,879 -7%
Median  $610,000  $582,500 -5%
PPSF  $320  $307 -4%
Original 92.7% 93.2% 0.5%
Last 96.3% 96.7% 0.4%
DOM  190  176 -7%
Inventory  3,505  3,408 -3%

It’s really very strange.  I mean, all the other indicators, including the existing inventory, the days-on-market, and the listing retention rate, show that fewer homes are hitting the market, the ones on the market are selling more quickly, and they’re selling for closer to the asking price — the hallmarks of a seller’s market.

So if sales are up, inventory is down, and homes are selling more briskly, how can prices be down? That doesn’t make sense, if you thiknk about basic economic fundamentals: if inventory is down, and demand is up, price should go up. Right?

Well, if you look a little deeper at the results, you can see what’s going on. Essentially, the market in Westchester is really strong right now, but it’s disproportionately strong in the lower end of the market.

Take a look at this stratification of the market over the first five months of 2015 versus 2016:

Sales in Each Pricing Range May 2015YTD May 2016YTD Change
$-$499,999 603 724 20.1%
$500,000-$999,999 704 787 11.8%
$1M-$1,499,999 181 202 11.6%
$1.5M-$1,999,999 87 79 -9.2%
$2M+ 104 89 -14.4%

What you can see is that sales below $500,000 are up about 20%, while sales above $1.5M are actually down about 9%. That is, while Westchester single-family sales are up 12% from last year, that increase is largely coming in the lower end of the market.

Indeed, if you just break it down by the million-dollar mark, here’s what you get:

Sales in Each Pricing Range May 2015YTD May 2016YTD Change
0-$999,999 1,307 1,511 15.6%
$1M+ 372 370 -0.5%

 

Just look at that: sales below $1M are up 15.6, but sales above $1M are basically flat.

So that’s why the average price in Westchester is down right now: we’re seeing a change in the mix of properties, with entry-level or lower-priced homes selling more briskly than high-end homes. Now, that doesn’t mean that the high-end is “slow.” It’s actually doing just fine, down just a tick from last year. But it’s not as “hot” as the lower-end of the market, and that influx of lower-priced homes is skewing the average sales price down.

Indeed, if you look at the change of the average sales price within each pricing strata, what you see is this:

Sales in Each Pricing Range May 2015YTD May 2016YTD Change
$-$499,999 $364,528 $350,993 -3.7%
$500,000-$999,999 $708,706 $697,799 -1.5%
$1M-$1,499,999 $1,240,365 $1,226,895 -1.1%
$1.5M-$1,999,999 $1,679,957 $1,701,445 1.3%
$2M+ $3,091,409 $3,120,334 0.9%

In other words, even though the average price in all of Westchester is down 7%, the average price in the individual price ranges is relatively flat. In fact, the average price of homes sold above $1.5M is actually up, which tells us that the upper end is not suffering at all from a lack of demand.

And when you see that the average price for sales in the sub-$500,000 range are down almost 4%, even while sales are up over 20%, you have to conclude that we’re seeing the same dynamic at play. Even within the segment, sales at the lower end are more brisk, driving the average price of that pricing strata down.

In other words, if you’re a homeowner in Westchester, don’t panic when you see that the average price is down from last year. Most likely, the value of your home is probably up a bit. It’s just that the average is comprised of a lot more lower-end sales than we had last year.

Meanwhile, sales are way up and inventory is way down. Homes are selling quickly and for relatively closer to the asking price. If you’re a homeowner in Westchester right now, this is very good news.

It’s all going to be okay.

 

Joe Rand is a Managing Partner for Better Homes and Gardens Rand Realty, and writes the Rand Quarterly Market Report, which will be coming out in July. 

Posted on June 3, 2016 at 12:59 pm
James Troia | Category: Rand Country Blog | Tagged , ,

Homes in Westchester and the Hudson Valley are More Affordable Than in a Generation

I have always hated it when real estate professionals say “it’s a great time to buy.”  It always seems so self-serving, and I know it immediately causes suspicion.

So I’m not going to SAY that it’s a great time to buy a home right now. I’m just going to show you.

Specifically, I’m going to show you that the monthly payment you need to make to buy an averaged priced home in Westchester and the Hudson Valley is about as low as it’s been in a generation.

Think about what I’m saying for a second. I’m NOT saying that homes are cheaper than they’ve ever been. That’s not true. Depending on the year, homes have appreciated, and if you go back more than 15 years, they’ve appreciated pretty dramatically. I’m just saying that the MONTHLY PAYMENT you need to make to buy the AVERAGE PRICED HOME is lower right now than it’s been in a generation — that is, if you control for inflation.

 

If you look at the graph below for Westchester County, you’ll see what I mean.

Westchester SF Affordability 2015

 

On that graph, as we’ve done before, we’ve plotted the monthly payment that a purchaser in the county would have to make to purchase the average-priced home at various points over the years. After all, affordability is not just a matter of the sales price – it’s a matter of the monthly payment you’re going to have to make, which is partly a function of the prevailing interest rate. And then to measure the change in the monthly payment over time, we factored in the effects of inflation.

So we took the following data points:

  • The average price of a single family home up to the end of 2015 – from the local MLS data.
  • The average interest rate for a 30-year fixed-rate mortgage for every calendar year up to 2015 – from Freddie Mac.
  • The prevailing inflation rate for every calendar year up to 2015– from the US Department of Labor.

You can see the results on the graph. The monthly payment you have to make to purchase the average-priced home in Westchester is just about as low as it’s been in years. We saw the slightest uptick from 2012-2014, partially because of a slight increase in pricing and a slow inflating of interest rates. But the payment came down again in 2015, with rates falling and prices stalling.

Generally, though, we’re talking about a monthly payment that is as low as anytime in the past 35 years – and as low as it was in the mid-1990s, during a crippling buyer’s market.

Why? Part of it is that we have not seen prices go up in any measurable way in almost 10 years, during which inflation has reduced the “true” cost of purchasing a home.

But more importantly, rates are significantly lower than they’ve been at any time in modern history. After all, about ten years ago, the average interest rate was about 6%. It’s now below 4%. That’s a huge difference in your monthly payment.

And the same is true throughout the Hudson Valley.  I showed you Westchester first because we have good data on prices for the county going back all the way to 1981.   In other counties, our data doesn’t go back as far, but if we look at each of those counties you can see that it’s pretty much the same story for the time period we have.

Orange County.  Here’s Orange County, where we have data going back to 1994:Orange SF Affordability 2015

You can see that the monthly payment to buy an average-priced home in Orange County is lower right now than it’s been in over 20 years.

Rockland County.  In Rockland, we have data going back to 2002, over 13 years of data.

Rockland SF Affordability 2015

Again, you can see that even with a slight rise in the past few years, the monthly payment you have to make to buy the average-priced home in Rockland is lower right now than it’s been in 13 years.

Putnam County.  Similarly, we have data going back to 2002 in Putnam, and the story is the same:

Putnam SF Affordability Graph 2015

 

Dutchess County.  Again, same story in Dutchess County for that same 2002-15 period:

Dutchess SF Affordability 2015

And although we don’t have data for Orange, Rockland, Putnam, or Dutchess going back as far as Westchester, the fact that the curve over the recent decade or so is very consistent with Westchester’s results suggests that, like in Westchester, the monthly payment you need to make throughout the Hudson Valley is lower right now than it’s been since the Carter administration.

Condos and Coops.  All that’s for single-family homes.  What about condos and coops?  Well, we don’t have data going back as far, but in each county, condos (and coops in Westchester) show the same trend — the monthly payment to buy an average priced condo or coop in the region is lower right now than it’s been at any time since the 2005 era.  Here are the graphs:

Westchester Coop Affordability 2015

 

Westchester Condo Affordability 2015

Putnam Condos Affordability 2015

Rockland Condos Affordability 2015

Orange Condos Affordability 2015

Dutchess Condos Affordability 2015

You can see that except for Westchester and Putnam condos, which have seen some pricing changes in the past two years, the monthly payments are lower than any time since 2005.  And even in Wesstchester and Putnam, they’re lower now than at any time in the last decade, just a little higher than the last two years.

Our expectation is that most of the graphs in this blog post are going to start changing this year, and we’ll look back at this time period as the low point for average monthly payments in the region.

Conclusion

Again, I HATE it when real estate professionals say that “this is a great time to buy,” because at many times in our history that has been bad advice. But if you measure a “great time to buy” by looking at the monthly payment you’ll have to make to buy a home, then we’re talking about as good a time to buy as any in the past decades. Prices have been flat for almost 10 years, and they’re down significantly if you factor in the effects of inflation. And interest rates are still as low as we’ve ever seen them. Unless we see some major shock to the economy, I think we’re looking at a near-decade of reasonable price appreciation coupled with increasing interest rates – both of which are going to drive that monthly payment up over the next few years.

So I’m not going to tell you what to do.  That’s not my job.  But if you’ve been thinking about buying a home, I think these graphs speak for themselves.

Joe Rand is one of the Managing Members of Better Homes and Gardens Real Estate | Rand Realty, and compiles and writes the Rand Quarterly Market Report.

Posted on April 28, 2016 at 12:42 pm
James Troia | Category: Rand Country Blog | Tagged , , , , , , , , ,