Brokers Say Low Inventory Has Not Tempered Housing Demand

WHITE PLAINS—Sales volume in the market area of the Hudson Gateway Association of Realtors fell sharply in the second quarter of this year with all counties posting significant sales declines ranging from as low as 19% to a high of nearly 27%. Sales prices continue to rise in the Hudson Valley/Bronx region, although at more moderate levels than in the past. Area Brokers blame current market conditions on low inventory, but add that despite headwinds of high interest rates, inflation, and the continued threat of a recession, buyer demand remains strong.

The largest decline in overall residential sales activity in the second quarter was in Sullivan County at 26.9%, followed closely by Westchester County at 26.8% and Bronx County at 20.3%. Rounding out the region, Orange County suffered a 19.7% decline in sales as compared to the second quarter of 2022, Putnam County’s sales fell 19.5%, while activity in Rockland County slipped by 19.0%.

Brokers interviewed by Real Estate In-Depth pointed to the persistent problem of not enough for-sale inventory throughout the region as the chief culprit for the current sales downturn. The recently released 2023 Second Quarter Real Estate Sales Report for Westchester, Putnam, Rockland, Orange, Sullivan and Bronx counties noted that all markets suffered a steep decline in inventory. Total inventory levels (all property types) in the second quarter of 2023 were down sharply in all HGAR markets as compared to the same period a year ago led by Putnam County’s 65.2% decline; followed by Westchester County (-31.4%); Orange County (-29.6%); Bronx County (-26.9%); Rockland County (-26.7%); and Sullivan County (-13.3%).

The second quarter report, based on data compiled by OneKey MLS, stated that single-family home prices in the area appear to be stabilizing. The single-family home median sale price in Westchester County was down by 4.4% to $846,500. Single-family home prices seem to be stabilizing. Putnam County posted a 2.6% increase in the second quarter of this year to $492,500; Rockland County saw a 1.1% increase in the single-family home median price to $652,000. Orange County’s single-family median was flat with just a 0.2% increase in the second quarter of 2023 to $415,655. Bronx County’s single-family median declined 2.9% to $602,000, while Sullivan County posted the largest single-family home sale price increase at 7.7%, which pushed the median price to $280,000.

Editor’s Note: Read the full 2023 Second Quarter Real Estate Sales Report for Westchester, Putnam, Rockland, Orange, Sullivan and Bronx counties, including information on the condominium, cooperative and multifamily markets.

2023 HGAR President Tony D’Anzica said, “It’s difficult to put a positive spin on the most recent market statistics. June statistics reflect a marked reduction in the number of closed sales, demonstrating that the market remains extremely tight with very low inventory. While median sales prices showed some modest increases, price gains are a result of very low inventory and not a reflection of a housing market recovery.”

D’Anzica, the Broker-Owner of Dynamax Realty NYC Inc., noted that while the average 30-year fixed mortgage rates recently fell marginally, they were still significantly higher than they were a year ago.

“Even with inflation tapering, the Federal Reserve is anticipating two more rate hikes this year, which would push mortgage rates higher, further reducing affordability. Additionally, the average wages required to purchase a home has skyrocketed. Nothing in the current market suggests improved affordability and lack of affordability means that the housing market will remain sluggish.”

Lou Budetti, Principal Broker at ERA Insite Realty of White Plains, pointed squarely at the low levels of inventory as the major factor causing lower sales.

In trying to describe current market conditions, Budetti recalled the campaign slogan of the early 1990s: “It’s the economy stupid,” and gave it his own spin. “The bottom line in today’s real estate market is ‘It’s the inventory stupid.’”

He added that despite the “incredible lack of inventory” and other economic headwinds, buyer demand is still strong. Budetti related that buyer competition is intense in all price ranges. “It’s multiple offers, highest and best, even in the $1-million-plus price range,” he said.

The combination of low inventory and multiple offers “is really discouraging for buyers and really discouraging for agents,” Budetti related.

Past HGAR President Anthony Domathoti, AHWD, CRS, C2EX, SRS, said the HGAR second quarter report “paints a positive picture of the local real estate market. Sellers continue to take advantage of the current conditions to maximize their profits, while buyers should be prepared for a competitive environment.”

Domathoti, the Broker-Owner of EXIT Realty Premium of the Bronx, added that the continued increase in sale prices is troubling to some buyers. “Affordability remains a concern for many prospective buyers. While the market is generally favorable for sellers, affordability issues and higher interest rates continue to limit access to housing for some buyers. Buying or selling has been a challenge to both parties,” he said.

Joseph Rand, Managing Partner and Chief Creative Officer of Howard Hanna | Rand Realty, said the market right now is “really strange… because when sales go down like this, they usually drag prices down with them, but prices are still reaching historic highs in most of the markets and homes are still selling quickly and for close to the asking price.”

He agreed with his colleagues that rising interest rates have not had a dramatic impact on buyer demand. “Instead, higher rates have completely restricted supply, because sellers with ridiculously low interest rates on their current mortgage basically have ‘golden handcuffs’ that are preventing them from putting their homes on the market. Even with prices at all-time highs, they don’t want to lose their rates,” Rand said.

Residential brokerage firm Houlihan Lawrence, in its second quarter market report for Westchester Putnam and Dutchess counties, said that a significant majority of homeowners are paying below the current average mortgage interest rate of 6.7%, which is the highest in two decades. This phenomenon has thwarted the trade up, trade down activity in all area markets and further exacerbated the already low levels of properties for sale, the brokerage firm stated. The limited inventory of homes, including luxury properties, has intensified competition among buyers and led to upward pressure on prices in most areas.

“This environment has resulted in a beneficial situation for homeowners who decide to sell, and with mortgage rates currently stabilizing, they are becoming more inclined to make a move. At all price points, sellers are often able to realize top dollar for their properties, when properly priced, and achieve significant returns on their real estate investments,” said Liz Nunan, President and CEO of Houlihan Lawrence.

The luxury real estate market in the region was not immune from the impacts of high interest rates and low inventory. Anthony P. Cutugno, Senior Vice President, Private Brokerage for Houlihan Lawrence, said in the firm’s second quarter luxury market report that the “golden handcuff effect is keeping would-be sellers off the market. Despite limited supply and higher interest rates, the data indicates a resilient luxury market with healthy buyer demand,” he said.

Cutugno noted that the buyers’ sense of urgency has noticeably changed of late. “During the height of COVID-19, buyer urgency was at an all-time high. The purchase of a new home in a lower density area or on a larger parcel was a visceral reaction to COVID and a means to keep one’s family safe,” he said. “As the pandemic moved into the past tense, buyer motivation shifted. Discipline replaced urgency, even as inventory remains low. In fact, low supply gives buyers a reason to wait until the right house becomes available, be it in a month or in a year. This mindset, while practical, squelches urgency and a willingness to compromise,” Cutugno added.

Cutugno concluded his comments with a positive outlook going forward, “The first half of 2023 brought no surprises. The pace of sales is now reflective of a market that is stable. Interest rates are expected to fall in 2023. This should help to correct supply issues that have upset our markets thus far in 2023.”