Ten years after a major stock market crash, the real estate market is coming back with rising prices and low interest rates. That’s according to the housing arm of a Hudson Valley nonprofit, which points to a number of trends in the regional housing market to watch in 2019.
One of the big changes since 2008 through 2018 is a reduction in interest rates. Joe Czajka is senior vice president for research, development & community planning at Hudson Valley Pattern for Progress and executive director of the Center for Housing Solutions and Urban Initiatives.
“In 2008, you had interest rates at about 6 percent, 30-year fixed rate. People thought those were amazing rates, and they were, at the time. In 2018, we are now looking 30-year fixed rate interest rates at 4.5 percent. So a point-and-a-half difference, it actually buys you almost $50,000 more for the same payment. So that’s significant,” Czajka says. “So a home of $250,000 back in ’08 would cost about $235 more per month than it would today. So with that, in combination with the reduction in the median sales price, means that there is more affordability in many of the counties, specifically, Greene, Orange and Sullivan.”
A home is considered affordable when a household pays no more than 28 percent of its monthly income for housing costs. By that measure, Czajka says Columbia, Dutchess, Putnam, Ulster, Westchester and Rockland continued to be unaffordable in 2018. Columbia, Ulster and Dutchess residents on average pay between 28 percent and 30 percent of their income on housing, with Putnam at 32 percent and Rockland and Westchester at about 40 percent.
“So in Orange County, we saw in 2008, a median home price of about $290,000. By 2018, that price had declined to about $245,000,” says Czajka. “Although it’s higher than it was midway, which would be about 2013, it’s still significantly less just after the peak.”
According to data from the New York Association of Realtors, the number of closed sales in the Hudson Valley in the first quarter of 2019 is weaker than in the first quarter of 2018, except for Rockland County, which shows a 7.6 percent increase. The median sales price, however, has increased in every Hudson Valley county. And, since 2016, inventory has declined in every county except Sullivan. Buying power, in some instances, is hampered. Czajka says incomes have stayed relatively flat when adjusting for inflation. And first-time homebuyers have added expenses weighing down their purchasing power.
“Who are the first-time homebuyers? Maybe a couple in their late 20s, early 30s. What does the couple in their late 20s or early 30s have? They have something called student debt," says Czajka. "So, with a combination of having to save for down payment, closing costs and the result and impact of having student debt really puts a barrier to home ownership in all of our counties. It’s not just Oange, Ulster Dutchess, Westchester, it’s all of them. It’s really a challenge for first-time homebuyers.”
Tack on any transportation or commuting costs, especially to New York City, and a young couple could be looking at $1,400 per month just for transportation and paying off student loans.
“What is left to buy a house?” says Czajka. “It’s a really difficult calculus.”
In addition, he says the $10,000 cap on state and local tax, or SALT, deduction impacts the high-end real estate market. Other trends are that homes are more affordable that they have been at any time in the last 30 years. Sales are up and inventory is tight, but stabilizing. Pattern’s Center for Housing Solutions’ analysis teamed up with Rand Realty to provide housing market trends each quarter. Czajka was speaking about trends this spring.