For those who want to buy property but are not sure whether they can afford it, the window of opportunity is closing. With inflationary fears increasing, the markets believe with good reason that the sharp upturn in interest rates in the past few weeks is likely to continue. Potential buyers are anxious to act while there’s still time — which means sellers can jack up their asking prices. And they’re doing just that.
The New York State Association of Realtors (NYSAR), the brokers’ Albany-based not-for-profit trade organization, recently released figures for January 2022 that make year-on-year comparisons (NYSAR data doesn’t include ten counties, including several in the Hudson Valley). Last year was a hot year for residential real estate nationwide and in New York State. How’s 2022 shaping up so far?
Statewide, reports NYSAR, new listings and closed sales have been modestly declining in number, the consequence of drop in the supply of homes available to 36 months. And the diminution of supply at a time of high demand has meant higher asking prices and higher selling prices. In January 2022, the median selling price was 13.3 percent higher than it had been in January 2021 – (a median price of $396,500, up from $350,000).
Employing that same year-to-year comparison, Ulster County home prices increased 24.6 percent, according to NYSAR ($360,000, up from $289,000). Closed sales decreased by a higher percentage than in the state as a whole, and the supply of Ulster County homes available for sale dropped from 771 to 435. Local stories of bidding wars higher than asking price abounded.
Surrounding counties both to the north and west of Ulster County — the exurban fringe from New York City — did even better than Ulster. By contrast, home prices in New York City and Long Island increased only in the high single digits.
What’s going on? The last two years — the pandemic years — have been characterized by disproportionate price increases in the exurban areas — beyond suburbia but not too distant from the New York metropolitan area. What remains to be seen is whether that differential will persist when interest rates go up and mortgages become harder to get.
The answer is: it’s too early to tell. The Nobel Prize-winning economist Paul Krugman wrote an article entitled “Covid’s Economic Mutations” in the March 10 issue of The New York Review of Books. “The coronavirus has made fools of us all,” Krugman wrote. “Show me a commentator who denies any seriously bad calls over the past two years — predictions that look embarrassingly off in retrospect — and I’ll show you someone who is delusional, dishonest, or both.”
Krugman went on to say that he didn’t know anyone who had predicted the supply-chain crisis that among other things caused inflation to soar. It was still very much up in the air, he wrote, whether economic management during the pandemic would ultimately be viewed as a success story or a huge failure.
What’s too early to tell in the case of the geography of residential real estate is whether the surge of population departures from many of the biggest cities in the United States during the pandemic has altered the marketplace, and if so who the winners and the losers are likely to be. To what extent will office life return to its previous normal? Will the hybrid economy continue to grow? Will it concentrate in some locations or flourish wherever there’s Internet service? What can individual localities do to improve their competitive position?