The news is full of stories about falling real estate prices. There are a lot of comparisons to 2006-2008 housing market crash, but that is not what is happening here. The run up in housing prices pre-2006 was caused by loose lending guidelines and predatory lending practices. Buyers bought with adjustable-rate mortgages they could not really afford once the rates adjusted, and many wound up owing more than the house was worth and unable to refinance to a more affordable mortgage.

The rising prices this time around were driven by low housing inventory, millennial demand, migration out of cities, and artificially low interest rates. The only thing that has changed in the past year is the interest rates, and let’s face it they had to adjust back to more historical norms. Low inventory and high millennial demand have not really changed, while migration away from cities may have slowed, there are still a lot of buyers in the market, and we still have low inventory.

Below are five indicators that point to a pull back but not a crash.

1. Prices

While there are a lot of areas around the country that are seeing significant price corrections, let’s focus on Westchester County – that’s where we live. In the past 12 months the median price of single-family homes and condominiums* in the county rose 2.7 % or $20,000. While some towns still saw double digit gains such as Eastchester (13.5%), Scarsdale (12.4%), and Bronxville (15.3%), others were more modest like Yonkers (4.2%), and Mt Vernon (3.4%). A few towns were flat, Pelham (0.4%) and New Rochelle (0.1%) and others such as Tarrytown (-6.7) and Ardsley (-1.3%) did see a decrease in median prices but overall, we are not seeing the huge price drops that the media would have us believe. In addition, average sold price vs list price remains high better than 99% with the Westchester county average at 101.5%.

2. Average Days on Market

Days on market means the number of days from when a property is first listed to when it goes into contract. In Westchester this period includes when the property is initially shown, the accepted offer period where inspections are completed, the contract being drawn up, reviewed by both attorneys, and finally signed by both parties. Average days on market in Westchester fell to 42 days (-17.6%). And while some towns experienced a decrease, Eastchester (-2.1%), New Rochelle (-12.1), and Greenburgh (-18.4), others like Mt. Vernon 67 days (+8.1) and Yonkers (+1.9) did see an increase.

3. New listings per month

Number of new listings per month indicates how many new homes are coming on the market each month. In Westchester the number of new listings per month fell to 7,447 down 13.7%. The reduced number of new listings will keep inventory low. Fewer new listings seem to be the situation across most of Westchester New Rochelle (-16.1), Yonkers (-10.5), and Eastchester -23%) to name a few. Some cities and towns are seeing an increase in homes coming on the market such as Mt Vernon (+15.7).

4. Month Supply

The months’ supply indicates how long it would take to deplete all the inventory currently available based on the current sales pace. 1-4 months inventory usually indicates a seller’s market, 5-8 months is typically considered a balanced market and over 9 months is typically an indication the market favors buyers. Westchester county overall has a supply of single-family homes of 2.5 months. Most Towns are sitting under 3 months’ supply Eastchester (2.7), Scarsdale (2.2), and Greenburgh (1.9). While some have crept over 3 months Yonkers (3.3) and Mt Vernon (4.9).

5. Interest Rates

No market discussion would be complete without considering the impact the rapid increase in interest rates is having. Higher rates have an impact on how much buyers can afford to spend and how much mortgage they can qualify for. The impact of interest rates is starting to be felt in the market, some buyers are pausing to re-evaluate their situation. While we are still seeing multiple offers, there are fewer offers for sellers to consider and buyers are more cautious about going over the asking price.

Where does this leave the Westchester market going forward?  We still have low inventory and high demand; however, higher interest rates are having an impact on buying power pushing us to a more balanced market. Most likely 2023 will see a correction in the market but not the deep drops we saw in 2008. Remember also these numbers are lagging indicators, meaning they are in the past and while they are positive, sellers need to focus on the most recent months data 30-60 days where possible when working with their agent to determine pricing. Buyers will be less willing to forgo contingencies such as inspections and appraisals. Seller concessions are creeping back into conversations.

Buyers shouldn’t give up on their dream. Focus on how much you are comfortable with as a monthly payment, have a conversation about the market, your specific situation, and any first-time buyer programs you may qualify for. Maybe you are ready now, maybe not, but by arming yourself with the facts you can put a plan place to reach your goal of homeownership.

If you are thinking of buying or selling give me a call to discuss all the nuances of this shifting market. If you decide to move forward, I would be happy to help you successfully navigate this market.

*Based on MLS data from Hudson Gateway Association of REALTORS®, median price excludes seller concessions or down payment assistance.