State of the monroe county real estate market

Although we typically talk a lot about commercial real estate on this blog, I would be remiss if we didn't occasionally talk about the single family home market in our region.  The reason why it is important is because, single family home sales can help us check the pulse on economics and consumer sentiment that drives other facets of the real estate market in our area.  For instance, when home prices go up, home owners feel wealthier.  Their home equity goes up and they tap that home equity to fund home improvement projects, or to send their kid to college, or go on a big vacation, etc.  Increasing home values also give lift to the economics of new home construction, which has a whole myriad of different economic affects for a given area.  On the other side of the coin, rising home prices can also place homeownership or upgrading to a larger house out of reach for many people as well.  Below is a recent report of home price performance that has been sorted by each school district in Monroe county.  The findings were interesting to say the least and also provided some confirmation of things that I have seen first hand as a REALTOR and heard second hand, anecdotally from my real estate colleagues.

The above chart is sorted by order of percentage change in the MEDIAN home sale price.  "New - GR" means new construction greater Rochester.  "Existing - GR" means existing construction greater Rochester.  I decided to also provide analysis of the price per square foot pricing trends as well.  The time line of this analysis was a snapshot of September 2021 and September 2022.  All of the data from this chart was sourced from InfoSparks, a data aggregation service which scraped their data from the Greater Rochester Association Of Realtors Multiple Listing Service.

One peculiarity that I noticed across the board was the fact that the median price per square foot rose appreciably more than the median sale price in most areas.  The most plausible explanation for that is that there was a greater sales volume for homes that are on the smaller side of the home size range.  In effect, there was more volume of smaller home sales in September 2022 than in September 2021.  Are more home buyers competing for smaller homes?  Or is this just some coincidence?  If buyers are more desirous of smaller houses, why?

If I can draw from my own recent experience, I have noticed that buyers have needed to settle for buying less house due to a couple of factors:

1. The interest rate on a 30 year mortgage has gone from 3.05% in October 2021 to 6.92%  just recently or 126% increase in just 12 months!  This increase 387 basis point increase equates to over a 38% reduction in purchasing power for home buyers needing financing.
2. The median home sale price is up nearly 14% in Monroe County if you strip out the city of Rochester data.  With average household income only rising 3.2% year over year, something has got to give.  You either significantly increase your housing expense or you buy less house.

Where do we go from here...
​Looking forward.

I'm going to dump some other stats on you:

• For the entire Rochester region, # of showings per listing is down 3.5% year over year.
• Average days on market are down from 26 days on market to 20 days on market.
• Number of new listings are down 8.2% year over year.
• Pending Sales Down 9.9% year over year.
• # Homes for sale in total down 14.1% year over year.  (meaning even less inventory)
• According to the St. Louis Federal Reserve Bank September Price reductions are down to 144 price reductions in the month of September 2022 from 174 in Sept 2021.  Month over month 136 price reductions to 144 from August.  Remember, how we saw the housing market starting to slow as reported in our previous blog post here?  The ramp up in price reductions that was seen in late summer could be boiled down to simple seasonality.  See below and you'll see that price reductions typically happen July through October: as inventory balloons; sellers have to get realistic, reduce their prices and then inventories get worked off.

Online Listing views per property- down 17.5 % from previous year.

This was one statistic that really intrigued me.  Like we all dream, right?  Are buyers so discouraged, that they aren't even looking at houses online even just for fun?  Below is another chart from the Federal Reserve branch of St. Louis.  What's also interesting is the noticeable yearly seasonal jump in January.  Many people must make homeownership a New Year's Resolution!

The Bottom Line

Based upon all of the aforementioned statistics, we believe that pricing on the lower end of the market will remain very strong for the foreseeable future.  We also believe that the market for larger homes will remain significantly less competitive which might help some families with their plans of trading up.  This demographic typically has significant equity in their homes (to use for a down payment) and housing expense is usually significantly less portion of their income, so I foresee that they will be less sensitive to higher rates.

If this trend becomes a thing, we anticipate that these families putting their homes on the market might loosen up the extremely tight inventory for first time homebuyers and start to return this extreme seller's market to more of the balanced one like we are used to seeing.
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