ALBANY — Inflation and rising interest rates continue to be a burden for a local real estate market where inventory remains low amid high home prices.
It’s bad news for those who are looking for new homes at the start of 2023, said Laura Burns, CEO of the Greater Capital Association of Realtors (GCAR). “My advice is to wait it out until the spring and see what happens with the market then,” she said.
The average 30-year fixed mortgage rate in New York is currently 6.5 percent, according to Bankrate. With mortgage rates more than double what they were last year, it’s no surprise that potential buyers are temporarily holding off on home purchases and delaying the need to apply for home loans. In Saratoga County, total mortgages collected by the clerk’s office dropped from 11,735 in 2021 to 8,595 in 2022.
And in Albany County, closed sales in November plummeted by 32.2 percent, a downward trend measured by GCAR that’s expected to continue into the new year as buyer demand is lowest during the months of December and January.
What’s going on with the local real estate market?
Hefty listing prices continue to vex aspiring homeowners, with November’s median sales price for Capital Region homes reaching $279,000, an increase of 7.3 percent from the previous year, according to GCAR. And while average home sales are expected to drop slightly as sellers held off on listing during the holiday season, the Federal Reserve has signaled that it will continue to hike interest rates which will further heighten home loan rates and drive down buyer demand.
The biggest hindrance to housing affordability, Burns said, is inventory levels that have fallen significantly over the past several months. In November, the supply of inventory declined to two months, meaning if no listings were added in that period, there would be nothing remaining on the market across the region’s 10 counties.
She attributes the issue largely to the lack of new construction, adding that there wasn’t enough housing built in the past year and that what did hit the market often came with a cumbersome price tag. The median price for new residential homes in the region currently sits around $490,000, she said.
The Capital Region Builders & Remodelers Association (CRBRA) said less new housing was constructed over the past two years as builders were loaded with historically high material and production costs and instead focused on delivering homes for people already under contract. Because of inflationary pressures, CRBRA expects low inventory to continue into 2023 until market conditions improve — but that doesn’t mean it’s not an opportune time to buy, at least according to the builders’ association.
“Presently, material prices are relatively stable, which makes this an excellent time for buyers to purchase a new home before the market heats up again and prices start increasing because of inevitable supply and demand pressures,” a CRBRA spokesperson said.
In her State of the State address on Jan. 10, Gov. Kathy Hochul identified the issue of housing as a key platform, with the goal of creating up to 1 million new housing units in the state over the next decade. Changing zoning rules, creating new tax incentives, highlighting transit-oriented development and streamlining environmental review for construction with few units are among the methods the governor and other experts have mentioned to encourage new home growth, the Times Union previously reported.
Buyer demand is down, but it differs by region
Most buyers are not migrating to the area from elsewhere, but rather locals looking to move within the Capital Region, Burns stated. The pressures of the current market, however, are “jamming up people who want to get out of their starter homes and into their next, higher-level home,” she explained.
Home value, inventory levels and buyer demand vary by ZIP code, and readers can further identify average home prices by utilizing the Times Union’s interactive guide of the Capital Region, Catskills and Hudson Valley housing markets last updated in November.
Some areas of the Capital Region have attracted more homebuyers than others, with the City of Schenectady seeing a 22 percent increase in new listings with a median sales price of $216,000 and a 9 percent increase in closed sales, according to GCAR. Meanwhile, in Albany, listings have dropped by 34 percent.
Troy too has suffered a slowing market, with listings down 46 percent and median sales price increasing from $195,000 to $210,000 because of scarce inventory. Meanwhile, Saratoga Springs remains the most expensive in the Capital Region metropolitan area, with an average home sale price of nearly half a million.
Even in Saratoga County, the fastest growing county in the Capital Region, buyer demand is on the downswing. In 2022, the Saratoga County Clerk’s Office recorded 6,745 deeds that include transfer tax, which is charged to complete the sale of a property from one owner to another. In 2021, the number, which also includes vacant land, commercial properties and foreclosures, was 7,476.
But like all other markets described by the swinging pendulum metaphor, local real estate trends are expected to shift in upcoming months. Burns pointed to the growth of the region’s technological and nanoscience sector as being one of the potential drivers capable of attracting a new population of professionals into the area who are looking to buy homes.
