Report: Luxury Home Sales in Markets North of NYC Increased by Double Digits in the Third Quarter
The growing number of closed sales is concentrated in the lower end of the luxury market.
WHITE PLAINS—At a recent webinar hosted by the Hudson Gateway Association of Realtors, a National Association of Realtors economist reported that affordability of homes in our region continues to slip. “Households now need to be earning about $200,000 per year in order to be able to afford just half the listings in the New York metro area,” revealed Nadia Evangelou, NAR Senior Economist & Director of Forecasting.
Evangelou noted the average monthly mortgage payment in September 2021 was $2,100, compared to the September 2022 average payment of $3,360 per month. “That’s close to an extra $1,300 more each month,” she said. “Mortgage rates are significantly higher than in previous years and it definitely affects homebuyers, many who are paying up to 60% more.” NAR estimates more than 1.4 million New York metro households were priced out of the market this year.
Along with a panel of local real estate experts, Evangelou weighed in on the state of the market for the fourth quarter of 2022 and first quarter of 2023. Inflation, she stated is one of the main triggers of what’s happening in the housing market. “In August, for example, inflation rose much faster than expected, hitting 8.3%,” she said at the Sept. 22 online program. “Combined with the higher mortgage rates, the accelerating costs of gas, groceries and other goods are now forcing some people out of the market.”
Currently, rates are over 6% band Evangelou predicts they will stay in that range through the end of 2022. “While there has been a decline in home sales, I think prices will continue to increase but at a slower rate,” she said, explaining that housing inventory is still falling short nationwide.
While 2021 was the best year in the housing market across the nation, this year home sales have continued to drop for the last seven months. “We’re definitely seeing a slowdown in sales but not in prices,” Evangelou explained. “Our data shows that home prices rose by 7.7% nationwide for the second month in a row. Because of the severe housing shortage across the country, the prices will tend to remain stable because there’s not enough supply.”
Panelist Joseph Rand, Chief Creative Officer with Howard Hanna | Rand Realty in Nanuet, agreed. “We did hit a record in 2021, but you can’t really compare this year to 2020 and 2021 when sales were through the roof,” he said. “I think we need to compare current sales to the 2019 or 2018 markets and in that case, home sales are up in most areas of the Hudson Valley.
Rand hesitated to use the word “recession.” “I don’t think we’re going to see anything like what we saw in 2008,” he added. Fellow panelist Jonathan Miller, President and CEO of Miller, Samuel Inc., Real Estate Appraisers & Consultants in Manhattan, agreed. “There’s really no way to accurately predict whether a recession is coming—it all depends on how the Fed continues to raise rates,” he explained. “Clearly, the momentum has been taken out of the mortgage industry due to doubling rates, but that, in turn, is pushing people into the rental market.”
Still, throughout the U.S, households rose by 7% from last year, according to recent NAR data. However, some major metro areas like New York lagged behind at just 6%. In New York City, Queens and Kings counties reported the fastest growth in the last decade at 8.5%, and New York County (Manhattan), at 8.3%.
Conversely, as compared to the rest of the country, the New York metro area has the fifth largest annual population decline. On a national scale, NAR found that 47% of the relocating population has been inbound to urban areas, but 53% were migrating to suburban or rural areas. “A lot has to do with the shift to remote working, which is five times larger than it was in 2019,” added Evangelou. “Those moving to suburban areas are also looking for larger homes.” In 2019, the average single-family home measured 1,580 square feet but in 2022, the national average is 1,900 square feet.
Currently, there are approximately 3.47 million renters in the New York metro region alone, and millions more throughout the nation. While married households may fare better with two incomes, NAR statistics indicate that only one in three renters are married. “With high rents, it becomes a challenge for single people to save money to eventually buy a home,” she noted.
Panelist Gabe Pasquale, Vice President of New Development, Christie’s International, NY Metro, believes the answer may lie in the development of additional single-family rental communities. “We haven’t seen a lot of this in the Northeast, but it seems to be growing in other areas of the country,” he said. “This will give younger people a new opportunity to have a single-family home. A lot of Millennials are now looking to change their urban lifestyle without being locked into buying something.
”In White Plains alone, where the average rents range from $1,800 to $2,200 for a one-bedroom, Pasquale said that situation is not giving people a lot of incentives. “If they are forced to continue renting at these prices, they’re not going to be able to save,” he added.
Miller added that while some rents are stabilizing, he doesn’t expect them to nosedive. “It’s hard to imagine rents coming down to more affordable levels, especially when the rental market is already very tight,” he acknowledged. “I do think that the single-family rental market and the newer ‘rent-to-own’ offerings will be big growth factors.”
Chintan Trivedi, panelist and real estate broker with RE/MAX In The City in the Bronx, believes the rental market will stay robust. “I do think Millennials are waiting on the sidelines and don’t want to commit to a 30-year mortgage at this point,” he said.
On the selling side, Rand’s concern is sellers who may not be able to afford to sell. “You’re usually going to spend more money when you’re looking to upgrade your home, but now factoring in the interest costs, many sellers have such good rates they don’t want to give up their current homes,” he said. “I think we have to find more creative ways for today’s sellers to be able to sell.”
As for the future, Rand cautions sellers and buyers against panicking. “We’re not going to see 2008 again when people who had no business buying a home could get a loan. We don’t have bad loans and a foreclosure boom today and prices are still up 30% from two years ago,” he said.
Miller echoed Rand’s sentiments. “Lenders are not losing their minds and mortgage underwriting conditions are much more conservative now,” he added. While Pasquale believes the fourth quarter of 2022 may not be a great one, he said the fact that there’s still a housing shortage will help to stabilize prices.
“The bottom line is that buyers can’t make an offer that’s 20% below asking and expect to get it, but sellers shouldn’t reject a decent offer,” Rand noted.
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