That question seems to haunt me these days. Sometimes it seems that the price for leaving my home to buy a quart of milk is to be asked that question at least once. Unfortunately, I generally leave my crystal ball at home.
The answer to that question in part depends on how you define “recover”. I’m not trying to be cute here. A buyers definition of “recover” may be entirely different from a sellers perspective which is different still from a homeowner who simply wants to refinance but can’t because of tighter lending standards.
To buyers who are turning up their noses at what I believe to be a once-in-a -lifetime opportunity – I often respond that the market will recover a year before they decide they have to buy. Those who are determined to time the bottom of a market are destined to miss it.
For sellers, the answer is more complex. What sellers are looking for is a robust market with a substantial price hike from present values. Although all bad things come to an end, if you are looking for the glory days of 2005-2006, you will probably have a long wait.
Some areas are recovering while others decline:
Some parts of Westchester NY are already recovering. In areas such as Scarsdale and Larchmont, we saw our fair share of competitive bidding this year. This breath of fresh air was restricted to single-family homes in specific municipalities. Prices in these areas are well off their lows in spite of continuing declines elsewhere. But some markets that had been remarkably resistant to correction took a sickening nosedive in prices. If you live in a high-end cooperative or a townhouse, you probably know what I am talking about.
Supply and Demand:
Housing prices reflect supply and demand. You can not have a robust recovery until demand returns. Although there are hopeful signs for the Spring of 2012, we saw those signs in 2011 and our hopes were dashed by the stock market correction that was the result of the Euro crisis. First time buyers were out in droves in the spring and summer. But any bad news gives buyers a big case of cold feet and the rush back to their rentals and renew their leases. What looked to be a great spring/summer market flopped miserably as buyers dove for cover. With no demand prices sank again and many sellers couldn’t find buyers for their homes.
What happened to demand during the crash?
To get a perspective on this, here is a chart of simple housing sales volume since the year 2000. The market in 2000 was not in bubble mode, it was a fairly normal, market. So the sales volume of 2000 -2001 could be considered a reflection of normal. The bubble started and sales volume peaked in 2004 to over 9800 properties sold. Sales volume decreased from that point on and finally crashes in 2008 tumbling 26% in a single year. The declines continued in 2009. Prices followed the loss in sales volume and there you have it – a housing crisis was born.
NOTE: All data was taken from the EAMLS and includes sales of single-family homes, condos and cooperatives. Rentals, multifamily homes, and rentals were not included as they represent a different type of market.
Where are we now?
Sales volume in 2011 was down from the 2010 when the tax credit was in place, but up from the lows of 2009 by about 6%. But we have a long way to go to get back to healthy demand. We are 41% below the peak volume of 2004 and 26% off from the more normal market of 2000.
With demand remaining low sellers will have to think in terms of the long haul. Although I have no crystal ball, these numbers and common sense suggest that a healthy market with regular price increases is a long way off. With demand at such low levels, we could be bouncing along the bottom price-wise for about 5 years.
What should a seller do?
So….if you want to move because your home is no longer affordable, or it no longer suits your needs (your family is growing or contracting) it is probably wise to sell. We can not live in a state of suspended animation forever and there is something to be said about getting on with your life. If affordability is an issue, the continuing outlay will negate any real benefit of a price increases down the road. Also, if you sell in order to purchase something that better fits your needs, you are going to do well on your purchase. However, if you are comfortable with your outlay and can sustain it with ease, or if your space is truly workable for several more years, then perhaps staying put is the best option. There is no right or wrong answer and one-size certainly doesn’t fit all.
When Will the Westchester NY Real Estate Market Recover?
Comments(2)