Greater Rochester regional home sales have risen for six consecutive years, with 2016’s 14,278 transactions topping the all-time high set in 2005.
The 7.6 percent rise in closed sales was the strongest since 2012 and nearly double the 4 percent national average gain (Figure 1).
This positive trend reflects the slow but steady improvement in local labor market fundamentals since the end of the Great Recession.
Adjusted for inflation, aggregate payroll earnings for all private-sector workers in the Rochester area have risen 11 percent since 2009. If the hard-hit chemicals manufacturing sector is excluded, the increase in real earnings jumps to 13.8 percent, only slightly below the 16.4 percent U.S. norm.
Rising employment and income, coupled with historically low mortgage rates, is a powerful driver of housing demand. So much so that supply constraints are now a factor in the 2017 sales outlook.
The inventory of available Rochester-area homes for sale has declined from a 6.1-month supply in 2011 to an estimated 3.5 months in 2016 (Figure 2). In Monroe County, that figure is even lower, flirting with just a two-month supply—or one-third the level typically considered well-balanced based on historic sales patterns.
As one might expect with greater collective purchasing power chasing a limited supply of available properties, the median sales price of Rochester-area homes is moving higher—climbing 1.4 percent in 2016 and 10 percent since 2011.
Throw in a wild card of demographic support from a growing pool of millennial-age first-time buyers, and the near-term outlook remains upbeat.
While conventional mortgage rates are expected to increase 50 basis points by year-end, the hike should not derail overall demand—making 2017 another good year for home sales, construction and ancillary businesses tied to the real estate cycle.
Gary Keith is vice president and regional economist at M&T Bank Corp.
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