MARKET OUTPACING WAGES
Mid-Hudson home prices ‘not going to go back’ to pre-COVID levels, seller says
KINGSTON, N.Y. >> As a result of inflation and the after-effects of pandemic-era distortion, homebuyers are now contending with a housing market that has outpaced wages in the area, according to a Hudson Valley Pattern for Progress report, titled “Out of Reach.”
“While the housing market has historically been a vehicle for personal and generational wealth, fewer and fewer householders are able to purchase homes,” said the non-profit public policy group and its Center for Housing Solutions & Community Initiatives.
Using a formula derived from U.S. Department of Housing and Urban Development area median income figures, a $650 monthly property tax payment, a $90 monthly home insurance payment and a 7% interest rate, the regional think tank estimated what mortgage average homebuyers would qualify for and how that compared to median sale prices in the Hudson Valley.
The organization reported that Ulster County’s median home sales price was $400,000 and that after a 6% down payment, a mortgage of $376,000 would be needed to close a sale. Based on the formula, a two-person household in the county would qualify for a $194,273 mortgage, leaving a $181,727 shortfall for a hypothetical homebuyer.
“With this large of a gap between earnings and the cost of a home, it is no wonder that more of our neighbors are persisting in rentals without moving into homeownership,” the report said.
No going back
Amy Forste, general sales manager for Coldwell Banker Village Green Realty in Kingston, said that while prices have begun to level out, expecting a return to previous standards of affordability would be unrealistic.
A second-quarter report prepared by Coldwell Banker Village Green Realty, comprising the months of May, June and July, said that compared to the same period last year, the number of new single-family homes for sale decreased by 15% and the number of single-family homes sold decreased by 30%, while sales prices had increased by 6.77% and the time properties spent on the market increased by nine days.
Forste said the supply of homes was depressed in Kingston for a variety of reasons, interest rates and a lack of viable alternatives for people to choose to live among them.
“Anybody that’s looking to sell right now, if they bought their home when they were at a low-interest rate in order to buy something again now, the rates are definitely higher than they wanted or in some cases double,” she said.
According to the Federal Reserve Bank of New York, the effective federal funds rate sat at 5.33% on Sep. 18 and was at .09% on Sep. 18, 2020. The effective federal funds rate is the rate used by banks to borrow money from each other which is then passed down to consumers seeking loan vehicles.
“A lot of times people were selling here and buying something in, say, Florida at a lower
price but all of the markets have gone up since Covid,” said Forste.
She said the material difference of increased rates is felt in monthly mortgage costs. Forste calculated that the monthly payment on a $200,000 mortgage with a 3% rate was $840 and $1,330 at 7%. “That is a huge piece of the puzzle, I believe,” she said.
Home prices haven’t fallen drastically, she, said because the pool of buyers, many from California or New York City, have supported the market due to their desire to move to or stay in the region. “This area, a lot of people have found out is wonderful (and) beautiful. People want to live here, they want to live here long term, they’re definitely enjoying what we’ve been enjoying for years,” said Forste.
“Who knows what the future is going to hold here?” said Forste, “but I feel like that this is just the kind of market that is definitely going to stay strong. We’re not going to go back to those pre-pandemic prices. We’re just not.”
Greg Berardi, principal at Berardi Realty in Kingston, said that one way to increase the supply of homes is through house flipping, the practice of buying homes at below-marketrate prices and selling after renovations. The renovations vary in scale price and length depending on the property.
Ideally, he said, after contractors have done appropriate work on a house, that person has an opportunity to get a return on his investment.
“A flipper doesn’t gut a house. A flipper patches a house up,’ he said and added, “People don’t pay for things they can’t see.”
He said the downside that some flippers find is that if they spend too much on renovating a house and attempt to recoup the cost from a potential buyer, the house may sit unsold as buyers wait for the price to go down. Berardi said, “They’ll only sell for what they’re worth.”
He shared an anecdote of a house flipper on Delaware Avenue who was asking $750,000 for a property that was in his opinion was worth $500,000. “That doesn’t mean that he’ll get it,” he said, adding that the time a property spends on a market hurts its sales price because people assume something is wrong with it.
Affordable options for homebuying are available through organizations like RUPCO and the Kingston City Land Bank, but each year only several homes are available as the groups work to meet demand.
As an introduction to a data set expressing that wage movement was the greatest over the past 10 years for those in higher income brackets, the Hudson Valley Pattern for Progress Report said, “Considering the extent of the Homeownership Purchase Gap, the pathway to homeownership is shut down for too many of our neighbors. The rift between owners and renters is expanding.”