Page 47 - 2024 Westchester Relocation & Moving Guide

REAL ESTATE
Trends for the
2024 Housing Market
Joe Rand
Chief Creative Officer,
Howard Hanna | Rand Realty
Activity in the regional housing market slowed considerably through most of 2023, with sales way down from the heights of the sizzling market from 2020-22. But strangely enough, this decline in sales didn’t have any real impact on pricing, with average prices continuing to hit all-time highs throughout the area.
So, what’s going on? Why are prices still going up while sales are going down? The answer is simple: rising interest rates.
The big story of the housing market in the last year has been the dramatic increase in mortgage rates, which went from about 3% in early 2022 to about 7% by the middle of 2023.
Usually, rising interest rates tend
to cool down a housing market, because the increase in the cost of home buying drives down buyer demand. But that’s not what’s actually happening. We may not have the
kind of white-hot demand we had in 2020-21, but we still have many eager buyers out there, enough to generate multiple-offer situations and bidding wars for reasonably priced homes. Indeed, homes in the region are still selling very quickly, and in many cases for more than the asking price. You won’t see that in a market where high interest rates are driving down buyer demand.
So why are sales going down?
Simply put, it’s not about the demand, it’s about the supply. Rising interest
rates, after a long period of historic lows, have distor ted the market by severely restricting the amount of available inventory of homes for sale.
Here’s why: too many homeowners have mor tgages with interest rates that are around 3-4%, and those rates are acting like “golden handcuffs” shackling them to homes. In many cases, they don’t want to move because they don’t want to give up their historically low rate. Indeed, many of them would like to downsize to a smaller and less expensive home, but their new payment at the higher rates would be higher than their current payment!
And that’s what’s distorting the market. Under basic “Economics
101” principles, when demand goes up, prices go up because all those buyers chase the available inventory, and then supply goes up as sellers see the opportunity and rush to take advantage of those higher prices. But, thanks to the golden-handcuff effect, that's not happening.
As a result, we have historically low levels of inventory throughout the region. In the industry, we measure inventory levels by calculating how many months it would take to sell out the existing inventory of homes for sale. That is, if a market is selling
100 homes a month, and we have 600 homes for sale, that works out to be six months of inventory. In fact, by industry standards, six months
of inventory is what we consider a “balanced” market.
What happens next?
Here's the problem: throughout the region, we are seeing historically low inventory levels at two or three months of homes for sale. That’s simply not enough fuel for the fire, which is why sales are going down even while prices are going up.
Eventually, we expect that we will
see more homes hit the market, especially if prices continue to stay
at these historically high levels.
Maybe mor tgage rates will fall just enough to reduce the appeal of the golden handcuffs. Or maybe more homeowners take advantage of adjustable-rate mor tgages, which fell out of favor during the long period of low rates, but could lock a rate for 5-7 years until the current rate environment shif ts again.
Whatever the reason, we believe that with prices at historical highs, and with the likelihood that they’ll eventually star t coming down, many homeowners will want to join the par ty and star t dancing before the music stops.
LIVING IN WESTCHESTER AND THE HUDSON VALLEY | RELOCATION & MOVING GUIDE 45
© COURTESY JOE RAND