Glut of Million Dollar Homes
Being a research-oriented Realtor® for nearly 20 years, I’m always curious about how laws and trends affect housing prices. Getting a grasp on the direction prices are headed gives me an advantage over most of my competitors and has led to my success.
I’m sure you’ve heard, by now, the new Tax Bill has included legislation limiting the tax deduction for mortgage interest and further imposes limits on deductions from state and local taxes. These two changes alone will hurt home values in New York with high-end home values being hurt the most. Pete King said, “most economists I’ve spoken to believe prices will fall between 10% – 20%.”
Realizing homes are commodities, it stands to reason that when supply goes up, demand and prices come down. With that thought in mind, I was curious to see just how many high-end homes are coming to market in Nassau and Suffolk counties compared to past years. What I found was an eye-opener!
High end up 37%
Measuring Nassau and Suffolk Counties from Jan 1 to March 15 in 2018, there was a 37% increase of million dollar homes hitting the market when compared to the same timeframe in 2017!
I will be updating this post to compare year over year increases periodically. Make sure you bookmark this page and return to the updated information.
My best advice if you have a high-end home you’re contemplating selling – don’t wait! While it may already be too late to be early, don’t wait until the traditional selling season begins in April. The earlier you place your home on the market, the less competition you should face and the easier time you will find to sell.
Call or contact me if you would like to see statistics for your town.
- Historically, the choice between renting vs. buying a home has been a tough decision.
- Looking at the percentage of income needed to rent a median-priced home today (28.9%) vs. the percentage needed to buy a median-priced home (15.7%), the choice becomes obvious.
- Every market is different. Before you renew your lease again, find out if you can put your housing costs to work by buying this year!
- Daniel Bachman, Senior Manager, U.S. Economics at Deloitte Services, LP
- Kathy Bostjancic, Head of U.S. Macro Investors Service at Oxford Economics
- David Downs, Real Estate Finance Professor at VCU
- Edward Pinto, Resident Fellow at American Enterprise Institute
- Albert Saiz, Director at MIT Center for Real Estate
- 21.6% believe prices will appreciate by 6% or more
- 71.6% believe prices will appreciate between 3 and 5.99%
- 5.7% believe prices will appreciate between 0 and 2.99%
- Only 1.1% believe prices will depreciate
Bottom LineAlmost ninety-nine percent of the top experts studying residential real estate believe that prices will appreciate this year, and over 93% believe home values will appreciate by at least 3%. It is important to remember that this is a national projection. Just how home prices will fare in New York State and Nassau and Suffolk counties remain to be seen!
Bottom LineBe thankful that you can still get a better interest rate than your older brother or sister did ten years ago, a lower rate than your parents did twenty years ago, and a better rate than your grandparents did forty years ago. If you are thinking about purchasing a home, stop thinking and start acting! Remember, your buying power decreases 10% for every 1% rise in interest rate.
Buyer DemandThe map below was created after asking the question: “How would you rate buyer traffic in your area?” [caption id="attachment_37261" align="alignnone" width="650"] Buyer Demand[/caption] The darker the blue, the stronger the demand for homes in that area. Only four states had a ‘stable’ demand level.
Seller SupplyThe index also asked: “How would you rate seller traffic in your area?” As you can see from the map below, 25 states reported ‘weak’ seller traffic, 21 states reported ‘stable’ seller traffic, 3 states and Washington D.C. reported ‘strong’ seller traffic, and only 1 state reported ‘very strong’ seller traffic. This means there are far fewer homes on the market than what is needed to satisfy the buyer demand, those who are out looking for their dream homes.
Bottom LineLooking at the maps above, it is not hard to see why prices are appreciating in many areas of the country. Until the supply of homes for sale starts to meet buyer demand, prices will continue to increase. If you are debating listing your home for sale, let’s get together to help you capitalize on the demand in the market now!
Here are five reasons to sell this spring.
1. Demand Is StrongThe latest Buyer Traffic Report from the National Association of Realtors (NAR) shows that buyer demand remains very strong throughout the vast majority of the country. These buyers are ready, willing and able to purchase…and are in the market right now! More often than not, multiple buyers are competing with each other to buy a home. Take advantage of the buyer activity currently in the market.
2. There Is Less Competition NowHousing inventory has declined year over year for the last 32 months and is still under the 6-month supply needed for a normal housing market. This means that, in the majority of the country, there are not enough homes for sale to satisfy the number of buyers in the market. This is good news for homeowners who have gained equity as their home values have increased. However, additional inventory could be coming to the market soon. Historically, the average number of years a homeowner stayed in their home was six but has hovered between nine and ten years since 2011. There is a pent-up desire for many homeowners to move as they were unable to sell over the last few years because of a negative equity situation. As home values continue to appreciate, more and more homeowners will be given the freedom to move. The choices buyers have will continue to increase. Don’t wait until this other inventory comes to market before you decide to sell.
3. The Process Will Be QuickerToday’s competitive environment has forced buyers to do all they can to stand out from the crowd, including getting pre-approved for their mortgage financing. This makes the entire selling process much faster and much simpler as buyers know exactly what they can afford before home shopping. According to Ellie Mae’s latest Origination Insights Report, the average time it took to close a loan was 45 days.
4. There Will Never Be a Better Time to Move UpIf your next move will be into a premium or luxury home, now is the time to move up! The inventory of homes for sale at these higher price ranges has forced these markets into a buyer’s market. This means that if you are planning on selling a starter or trade-up home, your home will sell quickly, AND you’ll be able to find a premium home to call your own! Prices are projected to appreciate by 4.8% over the next year according to CoreLogic. If you are moving to a higher-priced home, it will wind up costing you more in raw dollars (both in down payment and mortgage payment) if you wait.
5. It’s Time to Move on With Your LifeLook at the reason you decided to sell in the first place and determine whether it is worth waiting. Is money more important than being with family? Is money more important than your health? Is money more important than having the freedom to go on with your life the way you think you should? Only you know the answers to the questions above. You have the power to take control of the situation by putting your home on the market. Perhaps the time has come for you and your family to move on and start living the life you desire.
That is what is truly important.
- When listing your house for sale your top goal will be to get the home sold for the best price possible!
- There are many small projects that you can do to ensure this happens!
- Your real estate agent will have a list of specific suggestions for getting your house ready for market and is a great resource for finding local contractors who can help!
“For current homeowners, the decision to buy a new home is typically linked to their decision to sell their current home… Because of this link, the financing costs of the existing mortgage are part of the homeowner’s decision of whether and when to move. Once financing costs for a new mortgage rise above the rate borrowers are paying for their current mortgage, borrowers would have to give up below-market financing to sell their home. Instead, they may choose to delay both the sale of their existing home and the purchase of a new home to maintain the advantageous financing.”The Freddie Mac report, in acknowledging this situation, concluded that prices are not adversely impacted by higher mortgage rates. They explained:
“While there is a drop in the demand for homes, there is an associated drop in the supply of homes from the link between the selling and buying decisions. As both supply and demand move together in this way they have offsetting effects on price—lower demand decreases price and lower supply increases price.They went on to reveal that the Freddie Mac National House Price Index is…
“…unresponsive to movements in interest rates. In the current housing market, the driving force behind the increase in prices is a low supply of both new and existing homes combined with historically low rates. As mortgage rates increase, the demand for home purchases will likely remain strong relative to the constrained supply and continue to put upward pressure on home prices.”The following graph, based on data from the report, reveals what happened to home prices the last six times mortgage rates rose by at least 1%. [caption id="attachment_37220" align="alignnone" width="650"] Home Prices[/caption]