Pressurized Affordability. That’s what’s driving housing prices toward a correction or in some cases, a sharper decline. Nationally, we’ve seen 89 out of 150 major housing markets experience home price declines of greater than 5% since their peaks. The greatest declines are happening in Frothy & NASDAQ markets.

Frothy markets are where home prices have far exceeded affordability for local incomes.

NASDAQ markets include the high-cost tech hubs and luxury groups.

Typically housing prices mirror the supply & demand curve. So, we’d normally see home prices fall once the market gets flooded with homes, causing the sellers to decrease sale prices.

Right now, this is not the case for much of the country.  We haven’t seen a huge flood of inventory.  In fact, most of the country’s inventory is still well below pre-pandemic levels. So, what’s happening?

The combo of rates hovering around 7% and these frothy markets have severely impacted affordability. This type of pressure must eventually lead toward a correction.

How overvalued are our markets? Check out these maps which detail 2019 vs. 2022. The first map details 2019.

Here’s NY.  Unfortunately, Orange County Stats are not indicated here (they don’t consider us a major market). We are geographically in between NYC that’s 11.18% overvalued and Kingston that’s 40.69% overvalued.

Now, being overvalued alone will not cause a sharp price decline. It seems the severely overvalued areas that have experienced the declines had a burst of inventory flood the market over the summer. So while supply and demand aren’t totally running the show, it is obviously still a factor. Goldman sees prices falling 5—10%.

So, what does this mean for us locally, in Orange County?

Since August of 2021, the OC’s median sales price actually increased 13.6% to 375,000. Our inventory is steadily decreasing to boot.

Westchester’s median sales price is 623K and has decreased 1.1% since August of last year.

Rockland’s median sales price is 560K and has increased 12% since August of last year. Inventory has steadily decreased in these areas as well.

Being that Orange County has the lowest median price point, way below Rockland & Westchester – making homes more affordable,  remote work is still at play & the OC is within commuting distance to NYC, it seems we are in a unique position.

Orange County is a bit insulated. Our market does not appear to be as sharply overvalued as the Kingston market. In fact Kingston saw a slight decrease in the median sales prices from May-August, while Orange County saw a slight increase.

Still, most markets are predicted to correct to a certain extent, frothy or not- especially if interest rates continue to rise. Yet, what happens in NYC, Rockland & Westchester will directly impact our home prices. Will prices decline enough in those areas to keep folks there? Or will affordability issues drive them up the OC, keeping our home values steady? Only time will tell.

So, if you are looking to make a move, and you want to wait to see how this all plays out – you will be waiting upwards of 18 months. You’ll have to weigh the costs vs the benefits of staying put.  

For those looking to sell & move south – it may be worth selling here, and renting down south for a year or so, as it seems most of those markets are extremely overvalued.

If you have a place to go already, now is the time to sell, without a doubt.

Want to chat about your options? Give us a buzz.