Why are Westchester prices down?

If you look at the Westchester single-family housing market, comparing the year-to-date 2016 to 2015 as of the end of May, what you find is a little perplexing: sales are up 12%, but prices are sharply down across the board: down 7% on average, 5% at the median, and 4% in the price-per-square-foot.

And by “perplexing,” I mean “if I was a Westchester homeowner, this would kind of freak me out!”

It’s really very strange.  I mean, all the other indicators, including the existing inventory, the days-on-market, and the listing retention rate, show that fewer homes are hitting the market, the ones on the market are selling more quickly, and they’re selling for closer to the asking price — the hallmarks of a seller’s market.

So if sales are up, inventory is down, and homes are selling more briskly, how can prices be down? That doesn’t make sense, if you thiknk about basic economic fundamentals: if inventory is down, and demand is up, price should go up. Right?

Well, if you look a little deeper at the results, you can see what’s going on. Essentially, the market in Westchester is really strong right now, but it’s disproportionately strong in the lower end of the market.

Take a look at this stratification of the market over the first five months of 2015 versus 2016:

What you can see is that sales below $500,000 are up about 20%, while sales above $1.5M are actually down about 9%. That is, while Westchester single-family sales are up 12% from last year, that increase is largely coming in the lower end of the market.

Indeed, if you just break it down by the million-dollar mark, here’s what you get:

Just look at that: sales below $1M are up 15.6, but sales above $1M are basically flat.

So that’s why the average price in Westchester is down right now: we’re seeing a change in the mix of properties, with entry-level or lower-priced homes selling more briskly than high-end homes. Now, that doesn’t mean that the high-end is “slow.” It’s actually doing just fine, down just a tick from last year. But it’s not as “hot” as the lower-end of the market, and that influx of lower-priced homes is skewing the average sales price down.

Indeed, if you look at the change of the average sales price within each pricing strata, what you see is this:

In other words, even though the average price in all of Westchester is down 7%, the average price in the individual price ranges is relatively flat. In fact, the average price of homes sold above $1.5M is actually up, which tells us that the upper end is not suffering at all from a lack of demand.

And when you see that the average price for sales in the sub-$500,000 range are down almost 4%, even while sales are up over 20%, you have to conclude that we’re seeing the same dynamic at play. Even within the segment, sales at the lower end are more brisk, driving the average price of that pricing strata down.

In other words, if you’re a homeowner in Westchester, don’t panic when you see that the average price is down from last year. Most likely, the value of your home is probably up a bit. It’s just that the average is comprised of a lot more lower-end sales than we had last year.

Meanwhile, sales are way up and inventory is way down. Homes are selling quickly and for relatively closer to the asking price. If you’re a homeowner in Westchester right now, this is very good news.

It’s all going to be okay.

Joe Rand is a Managing Partner for Better Homes and Gardens Rand Realty, and writes the Rand Quarterly Market Report, which will be coming out in July.