Last year I was very busy with several home buyers, who wound up not buying. Most opted to continue renting because the porridge was never “just right”.
Most people who opted not to purchase were disappointed in what their money could buy. But when you are living just 20-30 miles north of Manhattan with an easy Metro-North commute to the city, real estate is always going to be more expensive than most of us would like. For some it means settling for something a bit smaller, or in a slightly different location. Perhaps the finishes are a bit dated or the kitchen needs work.
The one thing I kept emphasizing, particularly for entry level or first time buyers, was that waiting wasn’t going to help them. I remember telling one client, “It’s not going to get any easier. If anything, it’s just going to get harder.”
When I said to my clients that I didn’t think things would be getting easier, I was not trying to create false urgency. It was something in the form of tough love. Many of these buyers were so upset with what their money wouldn’t buy them 2016 that they were forgetting that rising prices meant their buying power was going down, not up.
I simply saw nothing on the horizon that would stop prices from rising due to high demand and tight supply. My conclusions were based on the following market realities:
People were reaching the breaking point with with the cost of living in NYC…
More and more people from hotspots such as Brooklyn, Queens and Manhattan were being priced out of these markets and they were actively looking and purchasing homes in areas like Westchester that had reasonable commutes.
The millennial generation were starting to have families…
City life is amazing until you have a child. There is only so many times you can wrestle with a baby and a stroller in the subway system before a move to the suburbs starts to look like a really great alternative. This generation waited longer than previous generations to start their families. The result was that the pent up demand for townhouses and single family homes was finally starting to be tapped.
The people moving here could support higher price points even if current residents couldn’t…
No matter how high prices in Westchester may seem to be, most of the people moving here are from areas with higher prices still. They have the income/wealth to support higher price points when a limited inventory increases competition.
Entry level and mid-range housing were not being built…
In the past, new construction was a great pressure release valve that kept housing costs in check. As prices rose, builders would build and sell more homes and condos. Unfortunately, 90% of the building out there was (and is) for the rental market.
Empty-nesters were not selling their homes…
Since empty nesters mostly want to age in place, they needed a local suitable replacement for the large family home that they were thinking of selling, and they don’t want to rent. With the price of condos and townhouses pushing ever higher, they stuck in the inventory squeeze as well. So they stayed put, keeping yet more inventory off the market.
The bottom line in all this is that there is that there were no levers to relieve the pressure of the housing shortage, so that prices had no place to go but up.
Fast forward to 2017 and take the river towns as an example. Although prices were rising at steady clip along the Hudson, the boom seemed to be very granular and the big gains were limited to a few specific villages and school districts. For several years, many agents and brokers were waiting for a bigger, more universal bull market in the river towns of lower Westchester. That momentum started last year, and seems to have really turned a corner this year.
I’ve have had a few buyers for the river towns this season and almost everything I have seen with these buyers ends up going to “highest and best” within days of listing. Where careful and gradual negotiation ruled just a couple of years ago, putting your best foot forward and making sure you offer enough to beat out the competition is where we are today.
And its not just the river towns. Home values in Westchester generally are going up.
Buyers who sat on the fence in 2016 now have less purchasing power today than they did last year and once again, I don’t see any levers to relieve the pricing pressure in the foreseeable future. Not much has changed except that the housing inventory is even thinner and home values are higher.
Once again, I’m left the same analysis that I had last year. For the entry level and mid-range buyers, prices are headed up along with interest rates. So if you are thinking about purchasing in the foreseeable future, your money will buy more today than it will tomorrow – or next year.
One thing is certain, home buyers may not like higher prices when they are looking, but once they are home owners, this is all very good news!
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