Westchester County Real Estate Market Faces Challenges with High Inflation and Low Inventory: Will Falling Mortgage Rates Save the Day?

Is It Inflation? Interest or Inventory- the 3I's

Westchester County- Real Estate Outlook

The real estate market in the New York City/Lower Hudson Valley region is facing significant challenges due to a negative trifecta of high inflation, mortgage interest rates, and low inventory. This combination is putting a dent in home buying sales volume, and the situation is unlikely to change soon. Single-family home prices values continued to rise in the first three months of this year in some markets, but indications are that regionwide, single-family home sales values may have reached their cyclical highs.

Westchester County is one of the areas that is feeling the effects of the negative trifecta. The county had a decrease in residential sales of 32.7%, and it saw a 33% decline in single-family sales in the first quarter of 2023 compared to the same period the previous year. However, single-family median sales prices continued to rise in the first quarter in Westchester County, with a 4.3% increase to $760,000.

Despite the challenging conditions, falling mortgage rates are creating opportunities for many buyers. On April 13, NAR Chief Economist Lawrence Yun noted that the average rate on a 30-year fixed mortgage fell to 6.27% from 6.28% the previous week. He also predicted that with inflation moving closer to the Fed’s 2% target, mortgage rates are expected to decrease further in the coming months, likely dropping below 6% by the end of the year.

This decrease in mortgage rates should improve conditions somewhat. Yun related that if rates drop to 6%, “3.1 million more households will once again be able to afford to buy the median-priced home compared to the beginning of the year. And, one in three of these households are younger than 40. Last year, one in five mortgage purchase originations had a rate higher than 6%.”

Overall, the New York City/Lower Hudson Valley real estate market is facing significant challenges due to a negative trifecta of high inflation, mortgage interest rates, and low inventory. However, falling mortgage rates provide some relief to buyers, which could result in a boost in sales volume. Nevertheless, it remains to be seen whether this will be enough to turn the tide and reverse the declining sales trend.