Written by Henry Steiner Thursday, 21 January 2010
No, the sky did not fall − it merely got somewhat lower. That is the situation today with local real estate values. I've written in the past, and it probably bears repeating, that knowing what has happened to real estate values in Sleepy Hollow, Tarrytown, and Irvington is a relatively simple matter. Knowing what will happen in the future? Much harder to say.
Regardless of whether we own homes or rent them, residential real estate values affect us. They affect our schools and the quality of life in our community. A year ago I wrote that, in spite of the recession and the fallout in the finance industry, local real estate values were "doing a lot better than we think they are." So what has happened since then? In order to get a clear picture of the market, it helps to be specific and local when discussing real estate values. If we take the three village postal districts of Sleepy Hollow, Tarrytown, and Irvington together, and focus on single-family homes, we see a not altogether surprising reduction in home values over the past two years.
So how should we feel about this decline and what should we expect in the future? Everything's relative. Compared with the performance of the Dow Jones Industrial Average over the past two years, local real estate values look almost rosy. Of course, there are obvious fundamental differences between these two measures. As I mentioned last year in this column, one factor that may contribute to the stability of values in the Hudson River Towns is the scarcity of buildable land. The new constructions that do come along have been few and are mainly at the highest end of the market.
The average single-family home selling in one of the three villages decreased in value (per square foot) by approximately 3.5 percent from 2007 to 2008 and another 9.5 percent in 2009. The volume of single-family homes sold dropped in each of the past two years. In 2008, volume was down approximately 20.5 percent; in 2009, volume was down another 11 percent. This volume data may be a more telling bellwether.
We seem to have witnessed a kind of "conspiracy" of buyers and sellers, where both groups appear to be shying from the market. I believe there is an explanation for both behaviors. To date, buyers who have found it difficult to pass muster in the mortgage process and who may have expected a wealth of choices spread before them, have shown signs of disappointment with the scope and quality of the inventory. Many potential sellers have been sitting the dance out − apparently with no compelling financial reason to enter the market.
To be sure, there was a respectable inventory of homes offered locally this year and quite a few of those did not sell − but not nearly the number that one would expect from the national news, which tended to focus on the worst regional cases. Again, that portion of the listings that buyers "passed" on, but which continued on the market, tended to disguise the successes of the, perhaps surprising, number of sellers who indeed found buyers.
At this time last year, in discussing inventory, I pointed to the Sleepy Hollow neighborhood of Philipse Manor as an interesting case in point. At that time there was virtually no inventory in that neighborhood − one listing out of a housing stock of nearly 350 homes. This year, at the time of this writing, there are still only six homes on the market in that neighborhood. Local homeowners have shown reluctance to enter what they perceive to be a crowded market, and a large number of them have seemed able to keep their hands neatly folded.
Many would-be buyers have found it difficult to access home financing. One local real estate attorney suggested that, "The banks have been afraid of their own shadows." In general, the guidelines for financing appear to have gone from prodigal to scrupulously austere. Bank appraisals, too, appear to have become uncommonly stingy, possibly in sympathy with whatever phobia the institutional lenders may have contracted. In some cases, a seller who has found a buyer and struck a deal may find themselves with one more hurdle to jump at the end of the buyer's mortgage approval process.
In Sleepy Hollow, the average single-family home sold for approximately $804,000 in 2009, with the median home selling at about $715,500. The average selling price was down about $23,000 from 2008 and about $34,000 from 2007. Volume was down only one unit from 2008, but seventeen units from 2007.
In Tarrytown, the average single-family home sold for approximately $572,250 in 2009, with the median home selling at about $525,500. The average price was down about $212,000 from 2008 and about $251,000 from 2007. Volume was down three units from 2008, and six units from 2007. The value decline in Tarrytown appears quite deep, but this is for reasons mostly unconnected with the recession. The 2007 and 2008 numbers reflect an artificial boost from luxury, new-construction sales in southern Tarrytown.
In Irvington, the average single-family home sold for approximately $1,001,500 in 2009, with the median home selling at about $800,000. The average price was down about $31,000 from 2008 and about $68,000 from 2007. Volume was down seven units from 2008, and eleven units from 2007.
So how do we interpret this state of affairs to get a read on what the future holds? I prefer to avoid predicting the future, but, if I had to say, my sense is that we will probably see a market this year that is essentially similar to last year's market. To this I would add a modest up-side potential, particularly should the lending institutions start using mortgage guidelines more like the Bailey Savings & Loan guidelines and less like those of Mr. Potter.
I believe that one of the things that has held values down is that it is now increasingly more difficult to qualify for "jumbo" mortgages (over $729,500) than lower "conventional" mortgages; a jumbo mortgage in a community like this is not so jumbo. This situation is a de facto drag on average home values. And there is that other obvious point − it is much easier for most people to pay cash for an inexpensive home than an expensive one.
Home buying tends to be a life-style decision more than an investment decision. I think that as long as Irvington, Tarrytown, and Sleepy Hollow can continue to offer attractive communities to potential homebuyers and their families, the future looks bright for local real estate values.
Henry Steiner is the managing broker of Steiner Real Estate Associates and the village historian of Sleepy Hollow; henry@SteinerRealEstateAssociates.com
