Home price appreciation continues to accelerate in both the Rochester and Finger Lakes regions. But we are not alone in this as prices continue to increase throughout the United States. Today, they are driven by the simple concept of supply and demand. Pricing of any item is determined by how many items are available compared to how many people want to buy that item. As a result, the strong year-over-year home price appreciation is simple to explain. The demand for housing is up while the supply of homes for sale hovers at historic lows.
Let’s use three maps to show how this theory continues to affect the residential real estate market.
Map #1 – State-by-state price appreciation reported by the Federal Housing Finance Agency (FHFA) for the first quarter of 2021 compared to the first quarter of 2020:
As the map shows, certain states (colored in red) have appreciated well above the national average of 12.6%. Specific to Rochester and the Finger Lakes, as of May 2021, our median home price was $175,000 which is an increase of $26,000 over this time last year. In addition, homes in the area are selling for 11.6% above the list price.
Map #2 – The change in state-by-state inventory levels year-over-year reported by realtor.com:
Comparing the two maps shows a correlation between change in listing inventory and price appreciation in many states. The best examples are Idaho, Utah, and Arizona. Though the correlation is not as easy to see in every state, the overall picture is one of causation. Even though New York is one of the states with the lowest decrease, it’s still quite challenging for buyers to find and purchase a new home. According to the Greater Rochester Realtor’s Association, the Rochester and Finger Lakes region had 3,846 fewer homes on the market in May 2021 than there were at the same point last year. This is the reason prices continue to accelerate – housing inventory is still at all-time lows while demand remains high, resulting in multiple offers being presented for most houses on the market. However, this may be changing.
Is there relief around the corner?
The report by realtor.com also shows the monthly change in inventory for each state.
Map #3 – State-by-state changes in inventory levels month-over-month reported by realtor.com:
As the map indicates, 39 of the 50 states (plus the District of Columbia) saw increases in inventory over the last month. In our area, there were 413 more homes on the market in May 2021 than there were in April 2021. Coming on the heels of 8 straight months of declines in listings, this represents a 4-month upward trend for us. This may be evidence that homeowners who had been afraid to let buyers in their homes during the pandemic are now putting their houses on the market.
We’ll know for certain as we move through the rest of the year.
Some are concerned by the rapid price appreciation we’ve experienced over the last year. The maps above show that the increases were warranted based on great demand and limited supply. Going forward, if the number of homes for sale better aligns with demand, price appreciation will moderate to more historical levels.
As always, whether you’re buying or selling a home, it’s important that you contact us before you begin either process. As experienced real estate agents, we will be with you every step of the way to ensure that the price and terms you settle on are right for the today’s market and beyond.