Economic sentiment can shift very quickly. It took Wall Street only a couple of days to absorb the significance of Donald Trump’s victory in the presidential election and to prognosticate what was likely to happen next. The cost of borrowing increased. The interest rate on the 10-year Treasury bond immediately leaped upward, and it’s likely to continue moving in that direction. Potential buyers of real estate not locked in to the prevailing rock-bottom interest rates suddenly found that mortgage rates had shot up literally overnight.
Wall Street anticipates that a combination of likely tax breaks and stimulative spending for infrastructure and the military plus other expansionary measures will overcome the fiscal conservatism and suspicion of government dear to most Republican hearts. Deficit spending under the new administration will balloon, and inflation — heretofore dead as a dodo — will be rekindled. Hence more risk and higher prices in the long-bond market.
For the past few years, even with the low interest rates, real estate prices in upstate New York have been stagnant. The median price of residential real estate in New York State increased only 3 percent year to year through the first nine months of 2016. The New York State Association of Realtors (NYSAR) prefers to focus on the fact that the number of home sales has increased by 11 percent this year. Though prices haven’t increased much, there are at least more closed sales.
The supply of homes for sale on the Ulster County market has been declining, and local real estate professionals are predicting that, all things equal, the market is getting closer to the point (now still 10 and a half months’ supply) where potential buyers will have to compete for the remaining available housing stock and prices will finally rise. It’ll be a seller’s market, they say. In Ulster County, the median sales price in the third quarter increased from $211,000 to $212,000 year to year, and the number of Multiple Listing Service-listed closed sales increased from 542 to 569.
Though the existing Ulster County market for real estate may be slow but steady, there are some neighborhoods and categories where there’s been, relatively speaking, a surge of activity, and prices have begun to reflect that surge. One of these hot spots is the Uptown Stockade district in the county capital, including Kingston’s own Wall Street. Much of the activity has been in commercial (office, mixed use, industrial and retail) sector, perhaps a reflection of New York City transplants seeking to create jobs for themselves on their new or second-home turf.
Describing “a vivid uptick” in volume, Kingston assessor Dan Baker confirmed a surge of interest in Kingston’s commercial properties in the last two or three years. “Kingston’s commercial property stock is quite diverse, with large standalone industrial properties, mixed-use properties, apartment complexes, small retail spaces, office space and medical space all with varying age, condition and in different commercial pockets,” explained Baker. “This diversity has attracted both many buyers and leaseholders, and this combination of interest has put pressure on the marketplace. The data that we see coming in has been quite encouraging and positive.”
MLS commercial real-estate listings are never robust, and many transactions take place off that particular radar. In the past two years, 33 commercial properties have shown up on the MLS transaction list for the City of Kingston. Of these, 14 have taken place within the few blocks of the uptown Stockade and its immediately contiguous area. Indicated sales prices of recent transactions vary from $218,000 to $950,000.
The structures in the Stockade neighborhood that have changed hands on the MLS list are a mixed lot of brick, wood and stone. Practically all the sold buildings host several tenants of various kinds, most of whom occupy small amounts of space. The occupancy rate of the buildings is quite high.
Having been a commercial and governmental center with the same street layout for over 350 years, this Kingston neighborhood displays an unusually distinctive character. It is staging a comeback, holding its own and then some, in the local post-mall era. Potential buyers find the ambience charming and comfortable, its mix of uses characteristic of larger urban agglomerations. Though some new owners in the neighborhood have paid for extensive improvements, particularly of dilapidated properties, the majority have not.
Much as the young people in America’s big cities appreciate the excitement of their urban environments, they don’t like the high costs and crowded circumstances. As economists put it, density generates negative as well as positive externalities. Some of these crowded folks are happy where they are. Others will seek suburban bliss, and still others community connectedness. Fortunately, the Hudson Valley has both suburbs and communities. It is in a good geographic position to benefit from the generational restlessness in big cities sympathetic to suburbs, small cities and small towns.
Since the details of the policies of the new president, a real estate guy, have been so vague, it is impossible to predict their consequences for the Hudson Valley. Neither the markets nor the policymakers have yet hazarded a guess.
We’ll be watching. An educated guess is that greater activity will follow from an acceleration of the increasing inequality in American society. The people with money are increasingly likely to invest in exurban real estate, particularly commercial real estate.
In an otherwise flat market for real estate, high-end sales are increasing. The number of Ulster County MLS real estate sales $500,000 or above on Nov. 23 was 84 this year, as compared to 68 in the same period in 2015.
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