For the second month in a row now, home prices remained pretty much exactly the same. March’s average sale price came in at $614,312. This is less than $100 more than the prior month’s average of $614,253, and down from January’s record-breaking high of $628,652.
Housing Inventory Tightens
Yet, this comes along with reduced inventory, which normally pushes prices up. Active listings are down to a stunning 1,499. One year ago, 2,189 homes were up for sale here in Richmond County. This means available homes have dropped 32% in one year. But prices increased only 6% since 2020, when the average home sold in March for $578,773.
Home sales have surged nearly 70% year over year as well. In March 2021, 452 home sales closed, compared to just 269 in March 2020. Homes are also selling much faster than last year. The average home now takes 3.5 months to sell, compared to 4 months during spring 2020. Month’s inventory is at the lowest point in years. Using the current data this month, it would only take about 3.32 months to clear all housing. Last year the time was more than double at 8.14 months.
Home Affordability Is Becoming An Issue
The exodus out of major cities has fueled suburban real estate in the pandemic. Sales are moving faster and in higher volume. So why have prices recently plateaued?
The answer may lie in the rising interest rates. Just a few months ago, mortgage rates were a full point below where they sit now. A 30 year mortgage will now cost you about 3%, and last month when this data was collected it was around 3.25%. This is about a full percentage point higher than it was in January. And a full point could mean hundreds of dollars per month in savings. Because of this, home mortgages are now less affordable than they were a few months ago.
According to Wolfstreet.com, mortgage applications have fallen by 20% nationwide from the January peak. Buyers at the time were rushing to lock in rates below 3%, but that gold rush has since cooled, reducing demand.
If the economy continues to improve, mortgage rates will likely continue to rise over the next few months. This will impact home affordability, which could reduce demand for home buyers. Our local Staten Island market is unique because of investment purchases, so sellers will probably weather the storm better than most places. If anything, prices may stabilize rather than fall.