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Column: Are we still in a ‘bullish’ or heading into a ‘bearish’ real estate market?

Philip A Raices

I have been doing a lot of reading lately and have experienced the real estate market is slowly moving in a slightly less “crazy and frenzied” direction; however, it’s still strong, especially in our local towns in price points of $450,000-$1,000,000.

However, as I mentioned in last weeks column, prices for the luxury market here and in New York City are definitely cooling, “not crashing” due to maximum allowable deduction of $10,000 (S.A.L.T.-State and local taxes) and the increased cost of financing.

Moreover, as real estate taxes go above that allowable deduction, the purchase process slows and there are fewer buyers quickly stepping forward, as they did in the past, when you could deduct all your State and local taxes (you can still deduct up to $750,000 of interest on your mortgage, reduced from $1,000,000).

However, if you are in the 1 percent club, as an-ultra wealthy buyer, it’s more of a psychological effect than a money barrier; but negotiations can be more extreme, especially going into the winter months, when fewer purchasers are out in that luxury market and the snowbirds are down south, which is the best moment in time to “pull the trigger.”

It is important that going forward you must be extremely diligent and knowledgeable when pricing your home to sell.

I see price adjustments on places that are overpriced, staying on the market for several months based on the decreased demand for those luxury properties. I have also noticed an uptick in certain groups purchasing co-ops and condos as opposed to homes. I have asked customers why they have made that transition and the overriding reason was that most homes were beyond their financial capability (or comfort zone), but they wanted the local schools for their children’s education and residing in that specific town was critical to their plan and final decision.

Even still, if somehow prices were to decrease across the board, let’s say, 10 percent, the dollar reduction and impact would be less on condos and co-ops, than it would be on a home priced much higher.

Then some would consider buying a home in that market, because the savings at that point would be considerably greater than their decreased price or possible loss on their current condo or co-op and would be well worth it!

Buying up in a down market is generally an excellent approach, but you have to strategize and plan your move and look at all the angles and tax benefits.
In a recent article, National Housing Inventory Crisis Reaches Inflection Point, realtor.com reported that:
1. New listings jumped 8 percent year-over-year nationally, the largest increase since 2013
2. Total listings in the 45 largest markets are now up 6 percent on average over 2017,
This increase in housing inventory has sparked two different reactions. Some are saying this is the first sign of a potential collapse while others are saying it is a welcomed reprieve from the lack of inventory that has stalled the market recently.

As Zelman & Associates reported in a recent ‘Z Report’:
“With the rate of home price appreciation starting to decelerate alongside the uptick in inventory, we expect significant debate whether this is a bullish or bearish sign.”
Is this a sign the market might crash?
There are those who look at the increase in inventory as a sign that we are returning to the market we saw last decade. However, a closer look shows that we are nowhere near the levels of inventory we reached before the crash in 2008.
A normal market would have about 6-months inventory, but the latest Existing Home Sales Report issued by the National Association of Realtors revealed that:
“Unsold inventory is at a 4.3-month supply at the current sales pace up from 4.1 months a year ago.”
A decade ago, prices began to rapidly depreciate in June 2007. At that time, we had a 9.1-month supply (more than double what it is today) and inventory kept rising until it hit a peak of 11.1 months in April of 2008.
With the current levels of buyer demand, any such increase in months supply is highly unlikely. As Danielle Hale, realtor.com’s Chief Economist explains:
“After years of record-breaking inventory declines, September’s almost flat inventory signals a big change in the real estate market. Would-be buyers who had been waiting for a bigger selection of homes for sale may finally see more listings materialize. But don’t expect the level to jump dramatically.
Plenty of buyers in the market are scooping up homes as soon as they’re listed, which will keep national increases relatively small for the time being.”
What will be the result of the increase in inventory?
The increase in inventory will allow many families who had been unable to find a home to finally become homeowners. Again, we quote from the ‘Z Report’:
“In our view, the short-term narrative will probably be confusing, but more sustainable growth and affordability will likely be the end result.”
The Bottom Line:
If you are either a first-time or second-time buyer who has given up, let’s get together discuss the inventory available in our market.

Philp A. Raices is the owner/Broker of Turn Key Real Estate at 3 Grace Ave. Suite 180 Great Neck. He has earned designations as a Graduate of the Realtor Institute and a Certified International Property Specialist. Receive regular “free” updates of sold homes in your area and what your home would sell for in today’s market or search on: WWW.Li-RealEstate.Com He can be reached by email, at: Phil@TurnKeyRealEstate.Com, or by cell: (516) 647-4289.

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