By JENNIFER GRIMES

In To Wait or Not to Wait, Part 1, I took a look at buyer sentiment in a real estate market we describe as “fragmented” given the wave of price reductions and the frequent multiple bid situations, taking place side by side. Some buyers are anticipating steep price reductions and pressing pause on their Upstate home purchase, with the doom and gloom of national headlines on the topic of real estate justifying this outlook. But so far prices have largely held in, thanks to fundamental underpinnings to The Catskills and Hudson Valley economy that have shifted in recent years, most obviously during the pandemic. So it’s worth exploring these factors because buyer expectations of a bubble burst may be misplaced or over-estimated.

Why isn’t our market imploding?

Why are home prices in The Catskills and Hudson Valley not taking a universal nosedive like in other parts of the country? I think there are three key reasons, starting with basic supply and demand. There is woefully little inventory, particularly in Sullivan, which has 30% fewer listings v. October 2021. In Ulster Co. in November versus last year, the number of sales and of new listings were down and sale prices were up. I would attribute continued strong demand primarily to a paradigm shift in work life. And third, I think the overall investment climate still makes real estate in our region attractive when compared with the stock market and with real estate opportunities in nearby regions.

#WFH

The seismic shift in how and where people work is a major influence in our current real estate market. The pandemic introduced a huge number of Metro New Yorkers to our counties, a relatively easy day trip from the city. Working from home has blown up the 40 hour office workweek, and made variations on “country living” a possibility for many. This has injected a whole new category of buyer into the market, creating demand that I expect to remain remain a long-term presence . It’s not a blip, it’s a shift.

A very unscientific Instagram poll of our followers recently asked those who have NYC employers and already have homes up here about how they work now. Among their stats: 29% working remotely and living here full time; 8% of respondents said they changed jobs to be fully remote; and 54% split their time between Upstate and the city. This reflects major behavioral change, with widespread impact on our small but growing towns. Our proximity absolutely is impacted by these shifts and the market continues struggle to deliver the inventory to fully satisfy this new buyer. This is an important part of the supply and demand influence on current prices.

Housing as an investment you can use (or rent)

Buyers from the city are often financially savvy, and more likely to be holding their downpayment or even full purchase money in the stock market than buyers in other areas of the country. So the performance of financial markets also has a significant influence on Upstate real estate because it impacts a buyer’s wealth, and perhaps more importantly, their perception of wealth. Shave 20% off a portfolio and it’s pretty easy to put off that second home purchase. So as the stock market goes, I would argue, so too does a chunk of our buying market. There are a lot of you who have pumped the brakes on a second home purchase, opting to wait until either your financial investments’ performance improves, or until the fog in the economic crystal ball clears.

The flip side, however, is there is still an enormous amount of money in New York City, and real-estate-as-enjoyable-investment presents an opportunity to put cash to work in a more stable asset versus the volatile stock market, one that can actually be quite a lot of fun. Cash buyers will not feel the interest rate pinch, and those getting mortgages may feel property price reductions off the heady post-Covid days go some way to offset higher financing rates. Because as these things are cyclical, rates will eventually drop, and one can refinance. How much better to have snapped up a property when values are lower than they were a year ago (if they are), or even to have had the benefit of enjoying a country home and lifestyle during that time.

But clever investors aren’t all necessarily buying at the high end or for all cash. We see clients who choose to continue to rent in the city but build equity via an Upstate property purchase. It’s a relative value choice: What can I get for my money elsewhere versus The Catskills? And STILL, in spite of years of price appreciation, the value remains when compared with other desirable areas.

And then there are the masses of buyers for whom the cost of a second home purchase is partially offset by renting for short-term stays. This is an interesting segment of the market because it has been a powerful driver of the wave of purchases just before and certainly since Covid. There is no end to the line of buyers for whom rentability is on their list of criteria. It will be interesting as the market saturates, which it certainly is, how those who do not have the “secret sauce” to making their home a hospitality destination will fare, and if sales of those homes will result. I think we’re seeing a small amount of that already. Many have caught the bug, however, and it’s not uncommon to have investor/owners purchasing multiple properties as STRs. More on that in an upcoming blog you won’t want to miss.

Summary

So in a wrap-up to our two part post on current market conditions, the fragmented market hasn’t tanked, and I think it’s unlikely we’ll see major price drops of, say 20% across the board, given with strong foundation propping up real estate here. The behavioral shift among NYC employees now free to roam and even put down roots elsewhere is a major contributor, along with the relative value of The Catskills versus other areas within a 3 hour radius of the city. The investment opportunities that can be enjoyed alongside actual use of the property, or from renting, are attracting investors diversifying from a volatile stock market. Barring a significant recession, the greatest threat to our market is lack of inventory.