Monday, July 10, 2006

Jefferson County Home Prices Up 57.1%!!

Okay, so I keep ranting that the sky is falling and the NYS Association of Realtors comes out to say that

"Jefferson County led the state in median sales price growth, recording an increase of 57.1 percent compared to the same period a year earlier."

57%!! Are you kidding? That is roughly 20 years of home price appreciation in a single year.

Unfortunately, we don't have access to all of the data to see if some specific sales skewed the data (I suspect commercial sales of land in LeRay and Outer Arsenal St. may have pumped up the numbers meaningfully). But let's assume the numbers represent traditional home sales. What could drive up prices by such an absurd amount?

Clearly limited supply or increased demand must be the main factors, right?

Let's look at supply. Today there are roughly 2,050 listings in the Northern New York MLS. I've watched the MLS fairly closely over the past couple of years and it has historically had 1,200-1,400 listings. There appears to be almost 50% MORE inventory today than there was last year.

Huh? But if supply is up than prices should be FALLING not rising, right?

Well, let's look at demand. This is harder to quantify. Realtors - who are in the business of making demand look strong ALL THE TIME - continue to cite the increased demand for housing from Fort Drum's expansion.

I'd love for someone to give me some hard facts to back this up. To the casual observer it seems many soldiers are single (not homebuyers), almost all soldiers make a very modest income (should not be homebuyers) and many soldiers transfer frequently (should not be homebuyers). To my eye, I'd guess that maybe 10% of the military population should be buying homes because they plan to live in the North Country for 10+ yrs and they can afford an inflated home price with rising mortgage rates. I'm very suspect that Ft. Drum is driving demand. I think perception is driving demand.

People in Northern NY have watched friends and family around the US get paper rich on real estate over the past 5 yrs and they want a piece of the action. Couple this with the local media's obsession to beat you over the head with one message "Ft. Drum is EXPANDING, BLAH, BLAH...." and you get a perception that home prices are going up and going to stay up.

Just in the past few weeks I've seen many asking prices taking steep dives as people realize that there is little real housing demand in NNY.

I'm afraid that too many families are putting their financial futures at risk in the hopes of reaping the benefits of investing in a home. Buy a home because you need a place to live, it should not be viewed as an investment vehicle.

1 comment:

Scott Barker said...

My wife was promoted in her job an hour's drive from our home. She is now part of management so will end up on occasion working odd and/or long hours.

We thought about putting the house up for sale...briefly. The houseing market is not favorable to the buyer if there is a possibility of leaving the area in 1-3 years.

We thought about renting but the quality of housing there is tight as well. We decided to make our lives a little more comfortable here with a pool and deck and a few improvements and she will continue making the hour drive each way.

It makes no sense to make a short term purchase in this market.