As we settle into the year 2016, it’s time for the Home Guru to report on the closing of the fourth quarter of the housing market in 2015 and to take a look into his crystal ball and see how experts say it might behave in the months ahead.
Closing out 2015: Just in are the results of the last three months that show continued heavy residential sales volume in Westchester with strong economic conditions in the region as well as declining affordability in New York City as key motivators of demand.
Listing inventory fell 4.1 percent to 3,814, the lowest fourth quarter total since 2004. The absorption rate, which is the number of months to sell all listing inventory at the current rate of sales was 4.7, 14.5% faster than a year ago and the fastest market pace we’ve seen since 2003.
Days on the market, indicating the number of days from the original listing to contract, fell 11.7% to 98 days, about half the 186 days in the same quarter five years ago. Listing discount, the percentage from the original list price to the sales price, lessened to 3.6% from 4.3% in the year ago quarter. Median sales price for all residential properties was unchanged at $425,000 from the year ago quarter.
Average price per square foot rose 2.6% to $280 from the year ago quarter. Average sales price slipped 3.6% to $548,877 reflecting weaker conditions in the luxury market. Median sales price for single family sales, representing 58.1% of all county sales, was $565,000, down 0.5% from the same period a year ago.
Looking ahead: While no one can make any guarantees about the future, some experts are in general agreement that the following factors will be affecting the real estate market over the next twelve months.
Inventory will remain low: Today, home prices are higher again, following the fallout of the recession, but not quite as high as they were in 2007. The result is that—even though demand has risen a small amount—inventory remains low. It’s a better time to be a seller now, although homes will still have to be priced realistically to generate interest.
Renting vs. buying: The recession, along with the market slowdown that accompanied it, drove up the cost of rent in two ways. First, low inventory meant that many potential home buyers had to settle for renting when they couldn’t find a property to purchase soon enough. Second, the hardships of the recession made renting seem safer than buying for many individuals. This was great news for landlords, who could raise their rents and keep vacancies low in the face of high demand.
However, what goes up must come down, and the demand for rental properties may soon be taking a dip. Should the cost of renting continue to rise, buying a home and building equity may seem like the more affordable option to more and more people.
The economy is improving, except when it’s not: Unemployment is down, you say? Splendid, except wages have remained stagnant. Not so good. Well then, last month the Federal Reserve bumped up short-term interest rates by 0.25 percent, based on its belief that the economy can handle it. Sounds optimistic, but alas, this was followed by the Dow losing 1,437 points in the first two weeks of this year.
What does this mean for home buyers and sellers? Some buyers will be motivated to make their purchases now, before the Federal Reserve makes the next of its projected rate increases, which will affect mortgage interest rates. Some buyers will be encouraged by the overall improvement in some areas of the economy, but then some will be scared off by the wild fluctuations that are still taking place. Sellers are left to decide whether their homes have gained back enough of their value to be worth putting on the market, or if they could wait longer but risk seeing the market ebb again.
Trends would indicate a better market for sellers, but the financial burden faced by younger buyers, paying back student loan debt, combined with continued economic volatility, may somewhat dampen the good news.
Home buyers should be aware that interest rates will probably continue to rise, and competition for available homes will be more lively than in years past. And that means that homeowners who are on the fence about listing their homes at this time can feel more confident about taking the leap. We know for sure that the buyers are out there again, and we realtors are getting really frustrated that we don’t have enough inventory to show!
Bill Primavera is a Realtor® associated with William Raveis Real Estate and Founder of Primavera Public Relations, Inc. (www.PrimaveraPR.com). His real estate site is www.PrimaveraRealEstate.com, and his blog is www.TheHomeGuru.com. To engage the services of The Home Guru to market your home for sale, call (914) 522-2076.