What’s ahead for the Capital Region housing market?
Housing inventory is still selling quickly and prices haven’t dipped much, but signs point to a more hospitable housing market this spring.
There’s some good news for prospective home buyers: The pandemic-fueled buying frenzy is behind us and most signs point to a more hospitable housing market this spring.
While it’s hard to predict with any certainty how the local real estate market will shake out in the coming months, experts are optimistic that the once red-hot housing market has cooled off.
“Obviously I don’t have a crystal ball,” said real estate agent Brian Sinkoff, associate broker with the Miuccio Real Estate Group. “I think we’re going to see a pretty busy spring.”
Home prices pingponged since the start of the pandemic. Real estate transactions were almost nonexistent early on when the world shut down. Then, mortgage rates dipped to historic lows and many Americans who were trapped at home and pining for new space wanted to buy, but supply couldn’t meet demand. The median sale price of homes rose nearly 40 percent from the spring of 2020 to the spring of 2022 in some markets across the country, according to the U.S. Census Bureau and U.S. Department of Housing and Urban Development. In the Capital Region, the median sale price of homes rose around 20 percent during that same time frame, according to Sinkoff.
“That’s not normal, that’s not sustainable and that’s not healthy,” he said.
The market softened in the latter half of 2022 as economic uncertainty spread, inflation outpaced wage growth and rising mortgage rates hurt affordability. Many buyers were priced out and existing home sales plunged to lows not seen since 2011. The pool of first-time home buyers plummeted, nationally, to 26 percent in 2022 from 34 percent the year before, according to a report by the National Association of Realtors.
Sorry buyers, there won’t be a bust
Home prices, however, didn’t drop significantly in the latter half of 2022
Realtor Brian Sinkoff imagines the very hot housing market we've seen since the pandemic will start to cool as we get into spring of 2023. and remain elevated so far this year, even though there are fewer buyers as supply still outpaces demand. In January, the median sales price of homes in the Capital Region increased by 6.4 percent to $266,000, according to data compiled by the Greater Capital Association of Realtors, a nonprofit trade association serving the majority of the Capital Region and surrounding counties. Demand
remains strong in what is still defined as a “seller’s market.” Listed properties remained on the market for an average of 34 days in January, as compared to 39 days a year prior.
“There were 18,500 showings last month. Despite unpredictable interest rates, inflation and the ‘great resignation,’ inventory is still selling in less time on the market and at a higher price than last January,” said Laura Burns, Greater Capital Association of Realtors’ CEO, in the organization’s market report from January of this year.
As spring inventory levels ramp up — even modestly — affordability will be the driving force in the housing market. There are no indications to suggest prices will drop. Prospective home buyers should still brace for higher prices, however hikes will be far more modest. Online housing marketplace Realtor.com is projecting a 5.4 percent increase in existing-home prices for 2023, or about half of what it was in 2022.
The market will likely stabilize, but buyers shouldn’t expect prices to fall much, if at all, and certainly not as drastically as they did in 2008, said Jennifer Reiszel, director of Branch Operations at Hudson River Community Credit Union, in a spring market preview published by the lender. Listings are still relatively low so buyers and sellers should manage expectations and prepare to negotiate.
The mortgage rate effect
The continuing upward trend in pricing will influence home buying in 2023, but perhaps not more so than mortgage interest rates. The continued stabilization of the real estate market will hinge on whether the volatility with mortgage rates continues.
Mortgage rates declined steadily through January of this year and with that came an uptick in mortgage demand. But rates trended upward in February due to continued elevated inflation and new mortgage applications have tumbled as a result. Some experts believe rates could continue to rise and peak at 8 to 9 percent in 2023 as the Federal Reserve Bank continues to try to stifle inflation.
More than any other factor, rising interest rates have negatively impacted buyers as well as sellers, Reiszel said. Rising rates create an affordability issue
for buyers. Their money cannot go as far as it once did. As a buyer’s purchasing power decreases, sellers may not be able to ask as much for their homes as they could have two years ago.
Where they go from here is hard to say. In the short-term, rates may level off or continue to creep up but one thing is for sure: They won’t tumble toward 3 percent any time soon, if ever, Sinkoff said.
“I don’t want to say never but dinosaurs would have to roam the Earth and zombies would have to come. There would have to literally be an apocalypse for rates to go back to 3 percent.”
Lower mortgage rates will aid in affordability and boost market activity, but there are other paths to ownership firsttime home buyers can consider.
Hudson River Community Credit Union, for instance, offers a First-Time Homebuyer Dream Program that helps approved borrowers receive a grant to help cover expenses, such as a down payment or closing costs. First-time buyers may qualify for special loan terms through Adirondack Trust Co. Qualified first-time buyers can receive a grant of up to $8,500 through SEFCU’s Homebuyer
Dream Program.
The Biden administration announced last week that the Department of Housing and Urban Development will reduce its annual mortgage insurance premium on FHA-insured mortgages by .30 percentage points, from 0.85 percent to 0.55 percent for most new borrowers. The change is expected to save 850,000 home buyers and homeowners an average of $850 per year.
Managing expectations
Erratic rates aside, the market will inevitably pick up as the weather warms and buyers and sellers will certainly
emerge, Sinkoff said. With that will come increased competition so it’s important to reflect on why you want to buy or sell.
If your rent would be on par with a potential mortgage, it’s worth looking. If your family is expanding and you need more space, that’s a good reason to list and seek out new digs. Have a list of wants and needs, Sinkoff said. Pick five of them, and be happy with getting three.
“Buying a home for anyone is a scary time. It’s the biggest financial purchase you’re ever going to make in your life. It’s OK to be nervous,” he said. It’s OK to have a lot of questions. You just have to ask yourself ‘is this the right time?’.”
If you’re hung up on high mortgage rates, but need to move, remember: You marry the house, not the rate, Sinkoff said. You can always refinance in the future.
Aside from that, be sure to have a team of people you trust to guide you, from your real estate agent to your lender and attorney. You need to feel comfortable and keep communicating with everyone on your team.
“Buying a house is stressful but it’s a fun process,” Sinkoff said, “It’s a process you should enjoy.”
Mortgage rates declined steadily through January of this year and with that came an uptick in mortgage demand. But rates trended upward in February due to continued elevated inflation and new mortgage applications have tumbled as a result.