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By Janet Besheer
It was an interesting year in real estate in the Capital Region. There were several shifts in our market. Interest rates went up, home prices started to come down, and inventory remained tight.
On the bright side, homes are now staying active on the market longer. Rather than selling in a matter of days, properties are on the market for many weeks and in some areas for months.
There are fewer bidding wars. Buyers can take a breath when making offers on properties. Price reductions are starting to be a daily occurrence, something we did not see in early 2022.
Real estate is regional and varies across the country. Markets that saw a radical increase in prices over the past few years (such as Arizona, California, and Idaho) are currently experiencing the greatest decrease in prices as we move into 2023. However, the Capital Region has been fairly insulated from the extreme highs and lows. Prices will be somewhat steady this year, growing at a rate of approximately 3 percent according to Realtor.com.
The average home sale price in the Capital Region in late 2022 was $279,000.
A major portion of the population moving into the Capital Region comes from the Tri-State area—downstate New York, New Jersey, and Connecticut. Many of these are second home buyers, and many are cash purchases. There is desire for a better quality of life, with less congestion, more safety, privacy, nature, and outdoor activities.
The most sought-after homes have amenities such as in-ground pools, home gyms and spas, smart home technology and proximity to other family members. The Adirondacks and the local attractions of this area are also a major draw to buyers looking for investment properties to host as vacation rentals.
The uptick in mortgage interest rates in late 2022 drove many buyers out of the market, especially first-time homebuyers. A wiggle of 2 to 3 percent made homes unaffordable for many.
Rental rates also rose for this reason. Fortunately, mortgage lenders predict that we should see rates dropping throughout 2023. According to the Institute for Luxury Home Marketing, all indicators point to a lull, rather than a crash in our markets.
At NAR’s Real Estate Forecast Summit in December, NAR chief economist Lawrence Yun speculated that mortgage rates may have already peaked. He pointed to an “abnormally high spread between 30-year fixed-rate mortgages and treasury notes, which historically are more closely tied together.”
Yun is forecasting rates to settle at about 5.7 percent by the end of 2023 as the Fed slows the pace of its rate hikes.
He also notes that rates will be considerably lower than the pre-pandemic historical rate of 8 percent.
New construction has seen a rise in prices in our region. There are dozens of new developments from the Adirondacks through Albany. According to Robert Dietz, chief economist for the National Association of Home Builders, single-family home building will ultimately lead a rebound for housing and the overall economy in 2024 as interest rates fall back on a sustained basis, bringing demand back to the for-sale housing market.
Taylor Marr, deputy chief economist at Redfin predicts home prices will decline the most in pandemic boomtowns while markets in the Midwest and Northeast will hold up best. Housing markets in relatively affordable Midwest and East Coast metros, especially in the Chicago area and parts of Connecticut and upstate New York will hold up relatively well.
As we navigate through the changes ahead, the signs indicate that this should continue to be a good year for real estate in the entire Capital Region.