Page 50 - 2023 Westchester Relocation & Moving Guide

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LIVING IN WESTCHESTER AND THE HUDSON VALLEY | RELOCATION & MOVING GUIDE
REAL ESTATE
Joe Rand
Chief Creative Officer, Howard Hanna | Rand Realty
The 2022 housing market in Westchester and the Hudson Valley clearly cooled down af ter two torrid years in 2020 and 2021. The culprits? A sharp increase in interest rates and sticker shock af ter two years of double-digit price appreciation.
But cooling does not mean cold. Yes, sales were down about 20% from the all-time highs reached in 2021, but it’s not as if they fell off a cliff— they simply dropped to 2018-19 levels, which at the time were considered to be fairly robust. Moreover, prices still appreciated in 2022, though not at the same sizzling rate as the prior two years. In other words, 2022 was a pretty good housing market!
Never theless, some observers fear that the market is heading toward a 2008/09-style meltdown, when the housing market endured a 50% decline in transactions and a 30% decline in prices in about an 18-month period. But that’s not going to happen, and here are three reasons why.
1. The price appreciation of the past few years came from legitimate economic fundamentals, not an artificial expansion of demand. Why did prices go up? Because we had historically low levels of inventory, historically low interest rates, and strong buyer demand. This was legitimate price appreciation based on economic fundamentals, completely different from the artificial price escalation of 2005-2008 that was driven by an
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irresponsible expansion of buyer credit and gimmicky mor tgage products. Moreover, we don’t see prices falling anytime soon, not with inventory still well below the levels of a balanced market.
We’re not facing a looming foreclosure crisis like we were in 2008. Those gimmicky sub- prime mor tgage products from the mid-2000s not only ar tificially juiced appreciation, they also precipitated a wave of defaults from borrowers who eventually walked away from investments they never should have been allowed to make. But most of the home buyers in the past five years locked in 30-year, fixed-rate mor tgages at historically low rates on homes that have since appreciated by 25% to 30%. They’re not walking away from those homes and defaulting on those mor tgages. Indeed, the foreclosure rate today is about one-twentieth of what it was in 2010, and it’s not going up.
Homes in our region are still more affordable than they’ve been in previous sellers’ markets. We
measure this affordability by cal- culating the monthly payment a homebuyer would need to make to buy an average-priced home at the prevailing interest rate, and we compare affordability over time by looking at the change in the monthly payments controlling for inflation.
The accompanying graph measuring the monthly payments in Westchester shows that those payments are nowhere near the level of the last two seller’s markets. As you can see, that monthly payment has gone up sharply in the last year, precisely because of the spike in interest rates and double- digit price appreciation. But as you can see from the purple line going across the graph, the monthly payment is still substantially lower—about 30% lower— than it was at the height of the last two sellers’ markets in the late-1980s and mid-2000s. That’s good evidence we aren’t set up for a 2008-style collapse.
So, what will happen in 2023? The market will likely stabilize at its current levels of both sales and prices, with a “sof t landing” af ter the torrid pace set over the past few years. And a soft landing is a lot better than what we lived through in 2008.
Trends For The
2023 Housing Market
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© COURTESY JOE RAND