As a real estate agent in the Rochester area for 31 years, Linda Wilson is meticulous and thorough.
Before she shows a home, she makes sure she has toured it herself. She wants to know the essentials and the nuances, to be able to offer the most complete information to her clients when they take a tour.
So earlier this month, Wilson headed out to Greece to walk through a house that had just gone on the market. Upon arrival, she patiently waited as another agent showed the home. And she continued to wait when another agent arrived with prospective buyers.
“Within 40 minutes, four sets of couples had come to look at the house,” said Wilson, a Brighton-based real estate agent for Howard Hanna Real Estate Services. “By the end of the day, they had seven offers and expected two more.”
Welcome to Rochester home-buying, version 2018. Which isn’t much different from Rochester home-buying, version 2017.
An acute shortage of houses remains the prevailing them for the real estate market. Redfin’s Real Time Housing Market Tracker showed just 687 homes were listed in January in the Rochester area, a decline of 16.8 percent year over year. In 2017, the New York State Association of Realtors’ annual report showed there was just a 1.5 months’ supply of inventory, the lowest of any county in the state. A 6 to 6.5 months’ supply is considered a balanced market.
“Real estate is a pure supply and demand market,” said Andy Hopfinger, broker at Red Barn Properties of Pittsford. “We would prefer a more balanced market, but this isn’t bad. People still want the home they want.”
The problem: others probably want the same house, and homeowners are receiving several bids for houses priced in the market sweet spot of $100,000 to $250,000.
“There are multiple buyers for every home we list,” said Linda Hillery, a real estate agent with ReMax Plus in Brighton. “It makes it very difficult for the first-time home buyer. That doesn’t mean every home will get three, four, five, six offers, but nice homes that are priced right certainly will.”
In 2013, the available inventory of homes in Rochester was at 5,446, according to statistics at the annual Economic Breakfast in January provided by Gary Keith, vice president and regional economist at M&T Bank. In 2016, that number dropped to 3,578. Last year it was just 3,135.
“I have not seen anything like this,” Keith said.
The result: intensified competition for prime properties and upward pressure on pricing, he reported. The median sales price in the Rochester market in 2017 was $130,000.
Which is good news if you’re selling a home.
“Across Upstate New York, from Buffalo to Albany, 38 percent of houses sell in the first month,” said Charles Hunt, chief operating officer of Hunt Real Estate ERA. “Buyers are very aware of the lack of inventory.”
As a result, some may bid a bit higher than their comfort zone, he said. Which means a higher mortgage payment, although a higher winning bid doesn’t mean the buyer paid too much.
“Value is what a ready, willing and able buyer is willing to pay,” said Chris Spaker, president of Canandaigua National Bank & Trust Mortgage Co. “A house that hits the market, if it’s a quality property and priced aggressively, it’s going to sell quickly. We have a really good stock of ready, willing and able buyers.”
Through the first nine weeks of 2018, CNB Mortgage was up 15 percent year over year in the number of houses financed, Spaker said.
Still, the inventory shortage will quite likely continue well beyond the here and now. Baby boomers, locally and nationally, aren’t selling their homes at the rate they once did. A Realtor.com survey in mid-2017 showed 85 percent of boomers weren’t planning to sell in the next year. That includes real estate agents.
“I live in a Colonial and I joke that when I get older, I’m getting a down rail and I’ll see you downstairs,” joked Wilson, who is also president of the Greater Rochester Association of Realtors Board of Directors. “Every five or seven years, people were moving. Now everybody is staying longer.”
One reason folks are comfortable where they are: television has made home improvement easier. Whether it’s HGTV or another do-it-yourself program, remodeling a room isn’t necessarily a task only for professional contractors anymore.
“The average length of time in a home in Upstate New York is longer than the rest of the country,” Hunt said. “The people that are selling need to sell. They had a third kid, a second dog, they’re getting divorced. They have a distinct need to sell.”
Otherwise, a much larger percentage of home owners than ever before—especially boomers—are content with where they are, and for various reasons. They’ve paid off their home. They have a very low interest rate. They refinanced and used the money to upgrade their house, so now have what a new home might have given them.
And it’s the old double-edged sword when it does come time to sell and move. They’ll may get more for the house they’re in, but they may end up paying more for the house they want when it comes time to make a competitive offer.
“For some it doesn’t make sense to sell and re-start a mortgage again,” Hunt said. “And an appreciating market prices some people out. So a lot of people just say, ‘I guess we’ll stay where we’re at.’”
“I don’t see any direct path to inventory spiking.”
More new homes would help alleviate the shortage—if the homes are in that $100,000-$250,000 range, Spaker said. But single-family home building permits in the Rochester area declined the past two years, Keith said.
“If we’re going to turn the corner on the inventory issue, we have to look at housing starts,” Spaker said. “There has to be new construction because existing stock just is not turning over.”
Contractors say they’d love to build more but they’re having great difficulty finding workers. That, in turn, pushes back the timetable for completing a project.
“Where it used to take 120 days to build a house, it now takes 180,” said Rick Herman, CEO of the Rochester Homebuilders’ Association. “There are not as many masons, there are not as many framers. The crews are few and far between.”
The majority of homes that are being built aren’t necessarily moderately priced, either. Tight profit margins are one reason, Spaker said. The contractors must get the most bang for their buck.
But lenders are certainly willing to provide financing, Spaker said. “We’re a really active construction lender.”
So the prognosis for the 2018 is a familiar one: Not enough homeowners will be selling the house they live in to balance the market.
“I guess that’s a good thing,” Hopfinger said. “People like it here and want to stay.”