{"id":35733,"date":"2022-10-17T10:44:18","date_gmt":"2022-10-17T14:44:18","guid":{"rendered":"https:\/\/www.glensfalls.com\/glensfallsbusinessjournal\/?p=35733"},"modified":"2022-10-17T10:44:18","modified_gmt":"2022-10-17T14:44:18","slug":"business-report-area-housing-market-on-strong-footing","status":"publish","type":"post","link":"https:\/\/www.glensfalls.com\/glensfallsbusinessjournal\/2022\/10\/business-report-area-housing-market-on-strong-footing\/","title":{"rendered":"Business Report: Area Housing Market On Strong Footing"},"content":{"rendered":"
\"\"
Steven Luttman, broker\/owner of SJ Lincoln Realty, host of The Expected Returns podcast.<\/figcaption><\/figure>\n

By Steven Luttman<\/p>\n

Former Speaker of the House Tip O\u2019Neil made famous the phrase \u201cAll politics is local\u201d. The meaning being that while problems exist on a national level, at the end of the day voters care most about issues close to home.\u00a0<\/span><\/p>\n

I would make the argument that real estate, much like politics, is predominantly a local matter. Do country-wide trends matter? Certainly yes. Monitoring data like the monthly Case-Shiller Home Price Index will provide good insight into the overall health of housing.\u00a0<\/span><\/p>\n

Does it accurately reflect what\u2019s currently happening in your neighborhood? Oftentimes not at all. Predicting the future of local housing markets can be more art than science. If you don\u2019t believe me, ask Zillow.\u00a0<\/span><\/p>\n

The real estate platform lost hundreds of millions of dollars last year due to its iBuyer algorithm overpricing offers made to sellers. As of the writing of this article, publicly traded shares of Zillow Group (ZG) were down 52 percent year to date, vastly underperforming the S&P 500 (SPY) as a whole by roughly half over the same period. Computers are great, but boots on the ground still count for something.<\/p>\n

What we do know is that taking a long-term viewpoint, the Capital Region housing market is on sound footing. Our two largest employers (healthcare and local \/ state government) represent sectors unlikely to see a contraction in staffing, regardless of external economic events. While negative net migration in the state is concerning, this is overwhelmingly a downstate problem.\u00a0<\/span><\/p>\n

<\/span><\/span>Census data points to our area as experiencing minimal change, with some outliers like Saratoga County actually growing in population. Recently announced expansions at Global Foundries in Malta, Plug Power in Bethlehem and an offshore wind tower factory at the Port of Albany should all help the cause.\u00a0 \u00a0<\/span><\/p>\n

In April, mortgage rates had eclipsed 4.5 percent for the first time since the fourth quarter of 2018. I made the argument that borrowing costs remained very attractive despite the fast runup we had seen. Interestingly, the elevation of rates from the start of the year to the date of that article is very similar in size compared to what we\u2019ve seen since. Lenders are now advertising 30 year fixed rate loans north of 6 percent.\u00a0<\/span><\/p>\n

By this point we are all familiar with the Federal Reserve\u2019s efforts to cool inflation by increasing interest rates. Whether or not this policy is already working can be difficult to discern, as many economists believe it can take no less than six months for changes in rates to fully make their way through the system. Meaning the 75 basis point hike Chairman Powell implemented in late September may not truly be felt until the end of the first quarter of 2023.\u00a0<\/span><\/p>\n

This aggressive approach to rate hikes (five times so far this year) has three distinct possible outcomes; rates are not raised enough and inflation becomes entrenched within our economy, rates are raised too much causing growth to stagnate and ultimately triggering a recession, or a \u201csoft landing\u201d is achieved where rates are increased sufficiently to slow inflation but not to the point of cratering the economy. Two of the three don\u2019t sound overly appealing.\u00a0<\/span><\/p>\n

How are consumers reacting to the rise in the cost of housing? Back in June, John Burns Real Estate Consulting published research that found the monthly payment required to own a single-family starter home had eclipsed the cost\u00a0 <\/span>to lease a similar property by $839 per month. While this data is heavily weighted toward major metros, the message is still relevant to us. While rents have increased by double digits over the past 12 months, ownership costs have made renting a very attractive option.\u00a0<\/span><\/p>\n

While nationally home prices have retreated off all time highs, here in the Capital Region the\u00a0 <\/span>trajectory remains upward. The Greater Capital Association of Realtors (GCAR) reported an August median sales price of $300,000, an all-time high. Given the current velocity in which sales occur it would take two months for today\u2019s inventory of available homes to be absorbed.\u00a0<\/span><\/p>\n

Six months is generally considered to be a healthy market. It\u2019s worth noting that sales data is a lagging indicator. The majority of transactions closed in August were negotiated and agreed to in June and July.<\/p>\n

For folks interested in listing their home it\u2019s important to have appropriate expectations from the outset. Transactions historically decrease around year-end holidays, so you may not see as many offers as you\u2019d like and as quickly as you\u2019d like.\u00a0<\/span><\/p>\n

For someone interested in buying, my guidance has changed little. Having your financing lined up in advance of touring homes is viewed less as an advantage than it is as table stakes. It\u2019s unlikely your first few offers will be accepted, so become comfortable with rejection. If today\u2019s elevated costs of homeownership will pose a strain on your finances, then consider a property with a short-term rental component.\u00a0<\/span><\/p>\n

Predicting the direction of markets can oftentimes be a fool\u2019s errand, but examining trends can provide a helpful working hypothesis. Nobody should hope for a repeat of the double digit gains we witnessed the past two years, as that growth over the long run is both unhealthy and unsustainable. Given the Fed\u2019s appetite to wage war on asset prices, a slight decline in home values is not impossible.\u00a0<\/span><\/p>\n

However, given the limited housing supply and steady demand for Capital Region properties, an uptick in prices by a few percentage points in 2023 seems to be the most likely path forward.\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

By Steven Luttman Former Speaker of the House Tip O\u2019Neil made famous the phrase \u201cAll politics is local\u201d. The meaning being that while problems exist on a national level, at the end of the day voters care most about issues close to home.\u00a0 I would make the argument that real estate, much like politics, is […]<\/p>\n","protected":false},"author":89,"featured_media":35207,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[10],"tags":[],"yoast_head":"\r\nBusiness Report: Area Housing Market On Strong Footing - Glens Falls Business Journal<\/title>\r\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\r\n<link rel=\"canonical\" href=\"https:\/\/www.glensfalls.com\/glensfallsbusinessjournal\/2022\/10\/business-report-area-housing-market-on-strong-footing\/\" \/>\r\n<meta property=\"og:locale\" content=\"en_US\" \/>\r\n<meta property=\"og:type\" content=\"article\" \/>\r\n<meta property=\"og:title\" content=\"Business Report: Area Housing Market On Strong Footing - Glens Falls Business Journal\" \/>\r\n<meta property=\"og:description\" content=\"By Steven Luttman Former Speaker of the House Tip O\u2019Neil made famous the phrase \u201cAll politics is local\u201d. 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