What goes up...
On June 1st of this past year, I looked at the spreadsheet that we use to track our monthly sales and realized that the first five months of the year were far more difficult than I had realized. Our sales were down 31% from the year before and it didn’t look as though there were any lighthouses or lifeboats in the distance to help us navigate to more favorable waters or carry us to safety. There weren’t houses on the market for sale nor did we sense that homeowners were going to be listing any time soon. I had only experienced market conditions like this at one other point in my twenty-eight-year career and that was during the recession. Frankly, I was scared and so were those around me. Any number of factors seemed to be coalescing to limit inventory and, at the same time, conspiring against both buyers and the agents working with them.
• Because Americans have become more financially conservative with their money, homeowners are remaining in their homes four or five years longer than they were a few short years ago.
• Interest rates have been rising and current owners weren’t and aren’t interested in purchasing a new house if it means having to trade in their low-interest mortgage for a loan with a higher rate
• Many Americans still seem reluctant to engage in large financial transactions during times of uncertainty and we are currently living in unusual times
• A feedback loop was playing out in the local real estate market in which nobody was interested in selling because they weren’t sure where they would go.
This phenomenon continued to echo and reverberate throughout the late winter and spring. All of the detail aside, isn’t it obvious that this was going to take place? After all, the housing market has grown and strengthened for nearly eighty consecutive months. However, there was an inevitability lurking behind the sale of every white picket fence that was, at some point, going to play out. It was the spring of this past year that this certainty reared its ugly head trampling the front-lawn-begonias that so many would-be buyers had been dreaming of someday owning.
Because my dad was a cop in the city of Buffalo (look for my best-selling memoir of the first 18 years of my life hitting bookstores soon....) I inherited some personality traits during those formative years that prove to be effective during times like these. One such trait is a pronounced and scrappy tenacity. In the face of adversity, I tend to furrow my brow, roll up my sleeves and god help anyone who gets in my way. As the first leaves of autumn began to fall, so too did my concern that I was suddenly going to be subjected to a life of penury. We regained a lot of lost ground and found that our sales were only 5% lower than they had been for the same period in the previous year. Ultimately, at year’s end, the team and I sold $57,000,000 worth of real estate- a decrease in sales from the previous year of 9%. Not great, but better than the initial numbers that we’re hearing from the Greater Rochester Association of Realtors.
Now, before I go any further, it’s important to mention that, although volume was down and buyers had a difficult time finding homes to purchase, sellers were having a great time. Property values increased 8% year over year. Homeowners continued to recognize the benefits of owning vs. renting. The most recent study conducted by the Federal Reserve’s Survey of Consumer Finances showed that the net worth of those who own their home is 44% higher than the net worth of those who rent.
There are signs that the worst of this may be over. I’m not suggesting that it’s going to be as robust a market as we experienced in 2017, however, this coming year probably won’t be as difficult a market for buyers as the previous twelve months. Given the volume of transactions that the team and I are engaged in every year, we can oftentimes see, six months in advance, how the market is going to perform. One of our leading indicators is a tally of how many properties we will be putting on the market for sale in the near future. It looks as though inventory levels are going to rise which may relieve some of the pressure that buyers have experienced. This is probably a good thing. Why? Increased inventory means that property valuations will begin to slow a bit. The last thing that anybody wants to see is another real estate bubble that catalyzes a larger economic slowdown. Diminished price appreciation allows for wages and salaries to catch up which, ultimately, means a stronger housing market moving forward.
If you’re a seller and want to enjoy the last gasps of the exuberance that defined last year’s market, I’ll offer the same advice that I have in years past. If the weather remains good, consider listing your home for sale in January or February. Once the last of the confetti has been swept from Times Square, buyers are on the prowl. Sellers, on the other hand, traditionally wait until March 1st to list. In doing so, they’re only increasing the likelihood that they will have more competition. We’re proud of the fact that, this past year excluded, our January sellers are often selling their homes with multiple offers in contention, driving up the value of the property. Give us a call if you’d like details.
What We Can Expect
Looking forward, there are any number of factors that will probably end up impacting real estate activity both locally and nationally. Rising interest rates, trade wars, a global economic slowdown, continued stock market turbulence, and technology all seem like potential disrupters. Locally, it will be interesting to see how it is that downtown Rochester continues to evolve as a residential center. The first girders will be driven into earth that was, until recently, the Inner Loop. This spring, Christa Construction will begin construction of a mixed-use site on East Avenue and Union Street. Alexander Park on the site of what, at one time, was Genesee Hospital, will begin to take shape. If you’ve driven Route 490 over the Genesee River, you’ve certainly noticed the Court Street Apartments rising along South Avenue. Sibley Place continues to grow and the Cadillac Hotel may even begin to show signs of new life. Within the year, the long-anticipated metamorphosis of downtown should finally start to reach critical mass.
In my own small way, I too, helped to create a more vibrant center city when, earlier last year, I placed another stake in the ground by purchasing 7 Lawrence Street. My partner, Duffy, and I transformed what was the ugliest building in the city into what is now being described as a restaurant/lounge that one would expect to find more easily in lower Manhattan- certainly not upstate New York. 80W has surpassed all of our expectations both in terms of the community’s reception and the success that we’re enjoying. Thankfully, we opened at a point in the calendar year when it is that the real estate market begins its annual acknowledgment of the arrival of the holidays. This respite provided me an opportunity to launch our new venture. Now that we’re established, both Duffy and our incredible manager, Jeff Terrillion, have taken the reins fully in hand allowing me the opportunity to get back to my first love- real estate sales.
Whatever it is that plays out in the world of residential home sales this year, I know that my team and I are ready to continue fighting on behalf of our buyers and sellers in the same way that we have for almost thirty years. As we do every year, we’ve reconfigured our team to address what it is that has and has not worked on behalf of our clients. We’ve hired a new coach- one whose sole expertise is working with highly successful real estate teams- to guide us toward greater success. We’re growing our relocation network as more and more Human Resource Departments are understanding the benefits of referring their new employees to us. In short, we’re prepared to address the uncertainties of the coming market to ensure that our clients are enjoying the best advice and greatest real estate expertise available in the area. As always, thank you for your support of and your belief in our team. We’re grateful for your referrals and the privilege of working with you! Best wishes for a healthy and prosperous new year!