Housing Recovery Reaches New York State; 2013 Outlook

Neighborhood near the Buffalo Central Station
Homes near the Buffalo Central Terminal. Photo by Derrick Mealiffe.

The housing recovery is sweeping across the country. Inventories are shrinking, property values are rising, and builders are gearing up for new construction.

If the latest numbers are any indication, the housing market recovery has now reached New York State, as well.

According to the New York State Association of Realtors (NYSAR), the state’s median sales price rose by 4% in November, compared to a year earlier. Below is a list of metro areas in New York where home prices rose by more than 3% over the last year.

Methodology: This list is based on median home price data provided by Realtor.com. These percentages show the change in median prices from the third quarter of 2011 to the third quarter of 2012.

1. Buffalo – Niagara Falls +10.1%

In 2011, real estate publisher Inman News created a list of “10 Real Estate Markets to Watch in 2011.” Buffalo, NY was listed as the #2 housing market to watch. It was a good call. Back then, Buffalo had one of the fastest-rising list prices (a.k.a. asking price) of any major U.S. city.

That trend has leveled off — asking prices in 2012 did not rise nearly as much as they did in 2011. But there are still some positive indicators coming out of the Buffalo real estate market. According to Realtor.com, the median home price in this metro area rose by 10.1%, from Q3 2011 – Q3 2012.

2. Albany – Schenectady – Troy, NY +5.6%

The number of homes for sale in the Albany metro area dropped by 12% over the last year or so, according to Realtor.com. This reduction in inventory, combined with a higher level of demand, has enabled sellers to set higher asking prices. The median house price rose by 5.6% during the reporting period.

3. Rochester, NY +5.5%

Housing inventory has come down in Rochester as well, and home prices have stabilized. Realtor.com reports a 5.5% jump in the median home price for this area, while Zillow shows a 4.4% increase in the median sales price. No matter how you slice the data, things are looking up.

Rochester’s unemployment rate peaked at 9.1% in February 2010. It fell to 7.8% in October 2012 (source). This brings more buyers into the housing market, increasing demand for homes. If the jobless rate continues to fall, the Rochester real estate market could see significant price gains in 2013.

4. Elmira, NY +4.2%

Remember the Inman News piece mentioned earlier, “10 Real Estate Markets to Watch in 2011”? Elmira, NY also appeared on their list. Among the justifications: Elmira’s housing market experienced the largest increase (16.5%) in home prices of 152 metro areas, between the fourth quarter of 2009 and the same period in 2010.

The real estate website Trulia states: “Compared to the same period one year ago, the median home sales price [in Elmira] increased 20.6%.” The area’s unemployment rate is still hovering above the national average, though. This will put some downward pressure on home prices in 2013 — but probably not enough to prevent additional price gains.

5. Glens Falls, NY +3.8%

According to Realtor.com, the median home price for Glens Falls was $164,600 in the third quarter of 2012, an increase of 3.8% from a year earlier. Data provided by Zillow shows a 6.5% increase in median list prices over the last year or so.

New York Real Estate Outlook for 2013

Without a doubt, 2013 will be an interesting year for New York State real estate markets. On the plus side, we have low mortgage rates and rising consumer confidence. Thirty-year mortgage rates are expected to remain low (below 4%) for at least the first half of 2013. And based on recent surveys, consumers are feeling better about the economy as a whole. On the negative side, we have a whirlwind of uncertainty surrounding the fiscal cliff and the new mortgage rules scheduled to take effect next year.

Generally speaking, most economists and analysts agree that U.S. home prices will rise in 2013. But we’ve seen much variation at the local and regional level. Consider the difference between Phoenix, where home prices rose 20% from September 2011 to September 2012; and New York City, where prices fell -2.3% during the same period.

If current trends are any indication, New York State will experience uneven housing trends in 2013. Those areas where inventory has fallen the most could see significant price gains. Other areas could remain stagnant for most of next year.

Statewide in New York, there were 20.8% fewer properties on the market in November, compared to the same month last year. November 2012 marked the lowest inventory reading for any month since March 2006, marking a 61/2 year low. This is the most significant trend for the New York real estate scene, and it will be the primary driver of home prices in 2013.