Economic Outlook

Housing Prices Still Too High for Many Who Want to Call Hudson Valley Home


Housing market activity remains particularly weak, which is being attributed to rising mortgage rates, elevated home prices and constrained housing inventory. According to Forbes, this combination of headwinds is stoking a housing affordability crisis, which is also being fueled by irksome high inflation and the looming uncertainty of more interest rate hikes ahead.

Mortgage rates accelerated in mid-July with the average-fixed rate peaking at 7.23% during mid-August. This rate is the highest since March 2022, and it comes in the wake of Federal Reserve policymakers voting to raise the federal funds rate by 25 basis points at the committee’s July meeting—the 11th rate increase since the Fed began its inflation battle in March 2022. Despite a Federal Reserve pause in June and September, the Fed has signaled that more rate hikes may come.

Meanwhile, year-over-year existing monthly home sales sagged in July for the second consecutive month, slipping by 2.2% to a six-month low, with all four major U.S. regions posting year-over-year sales declines, according to the National Association of Realtors. Despite the high mortgage rates and home prices, the market remains as competitive as ever, thanks to demand levels surpassing the ongoing inventory crunch and homeowners who locked in low interest rates staying put. These and other factors perpetuate an affordability problem that continues to sideline aspiring homeowners.

In the Hudson Valley area, at the end of the second quarter of 2023, member firms of the Hudson Gateway Association of Realtors were reporting that buying demand remained high, however, buyer confidence had been shaken by the banking crisis, high interest rates, inflation, and often-predicted economic downturn or recession. The results of the second quarter clearly showed that these headwinds remain a concern for homebuyers and home sellers here and across the nation.

Residential sales, which include single-family homes, condominiums, co-operatives and two- and four-family multi-family homes, decreased across the board in the second quarter of this year compared with the second quarter of 2022.

Westchester and Sullivan counties posted the largest sales volume declines at 26.8% and 26.9%, respectively;

Rockland County had a decrease in residential sales of 19%;

Putnam County saw a decrease of 19.5%;

Orange County posted a decrease of 19.7%;

Bronx County’s home sales were 20.3% lower.

In Westchester, the single-family home median sale price was down by 4.4% to $846,500, while the second quarter 2023 median sale price of a multi-family house in Westchester jumped 5.2% to $746,850, according to HGAR. The condominium, median sale price increased by 5.6% to $475,000 as compared to 12 months earlier. The co-op median sale price in Westchester decreased by 8.6% to $185,000 in the second quarter of this year. In Rockland, Putnam, Sullivan and Orange, median sale prices increased for all property classes.

Single-family home prices are stabilizing.

  • Putnam posted a 2.6% increase in the second quarter of this year to $492,500;
  • Rockland saw a 1.1% increase in the single-family home median price to $652,000;
  • Orange’s single-family median was flat with just a 0.2% increase in the second quarter of 2023 to $415,655;
  • The Bronx posted single-family median declined of 2.9% to $602,000;
  • Sullivan County posted the largest increase at 7.7%, which pushed the median price to $280,000.

While economists vary in their outlooks for the future of home prices, the real estate research and analytics company Zillow forecasts that home prices will continue to rise, but at a slower pace. The rapid rise in home prices that we saw in recent years is likely to slow down in the next few years. However, home prices are still expected to rise, although at a more moderate pace. The supply of homes for sale is expected to increase. The lack of available homes for sale has been a major driver of rising home prices in recent years. As more homes are built and added to the market, we can expect to see some relief from the supply shortage. Mortgage rates will also continue to rise if the Federal Reserve raises interest rates further. This policy has made it more expensive to borrow money, which has led to a decline in demand for homes.  In the subsequent years, however, a reversal in this trend is projected as interest rates are anticipated to gradually moderate, potentially igniting a resurgence of demand in the housing market.

All things considered, the housing market should remain competitive. Even with rising interest rates and a growing supply of homes, the housing market is still expected to show positive growth during the next few years. This is due to a number of factors, including strong job growth, population growth and a limited supply of land.

About the author: Michael J. Paton is a portfolio manager at Tocqueville Asset Management L.P. He joined Tocqueville in 2004. He manages balanced portfolios and is a member of the fixed-income team. He can be reached at (212) 698-0800 or by email at [email protected].

Scroll to Top