Western New York home sales took a dive in May, as the meager sales from the cold months of late winter showed up at closings in county halls across the region.
The number of closed sales fell by 7.6 percent in May, to 781, compared with 845 a year earlier, according to the latest figures from the Buffalo Niagara Association of Realtors. That’s the first drop in closed transactions since November and the second-lowest level for the month of May in 15 years.
However, pending sales – where a deal is signed but not yet finalized – rose by 14.7 percent, to 1,337. That’s at least a 15-year record and possibly an all-time high for any month of the year.
Moreover, pending sales are up by 12.6 percent for the first five months of the year, to 4,988, and have risen every month since last September. In April alone, pending deals were up by 17.4 percent.
Closed sales typically represent contracts that were signed 60 to 90 days earlier.
That means May’s closings date from March and even February, when the region was locked in bitter cold and snowy weather that hindered both real estate agents and homebuyers from even going outdoors.
“It was that terrible February and terrible March weather that we had. And if you figure a 75-day closing process, that all fell in May,” said Merle L. Whitehead, owner and CEO of RealtyUSA, the largest independent brokerage firm in upstate New York, with more than 63 offices statewide. “It was strictly weather-related. The agents aren’t even in the office, and that’s going to affect our closings.”
And May’s record-setting pending sales, some of which were already carried over from prior months, won’t be reflected in closings for at least another month or more.
In fact, Whitehead said his firm’s June figures have already soared, flipping around the slow start to the year. “We’re substantially ahead of last year now, so June was a really great closing month,” he said. “It’s definitely going to be a much stronger year in 2015 than it was in 2014.”
Similarly, sales at rival Hunt Real Estate Corp. are up by 11.5 percent for June, while pending deals are up by 20 percent.
“It’s always hard to say why closings are off year-over-year in any given month. This result may be simply timing,” said Chairman and CEO Peter F. Hunt. “I would suspect that closings will be higher year-over-year in June as they were for.”
“The overall market numbers should start to show significant improvement based on what we’re observing here at Hunt,” agreed Peter R. Scarcello, Hunt’s general manager for the Buffalo Niagara region. “We are still seeing multiple offer situations in demand markets.”
Still, the flurry of pending sales that accumulated in prior months haven’t materialized into closed deals, indicating that the contracts are either significantly delayed or fell through for some reason, possibly because the sale was contingent on the seller finding a new home.
Financing has also been a problem in the past, as the mortgage process has taken much longer because of new regulations and requirements – and tighter underwriting criteria – imposed in the wake of the financial crisis several years ago. “There is no question that closing mortgage loans has become significantly more problematic,” Hunt said.
But both real estate agents and mortgage brokers say the mortgages aren’t the problem right now, although appraisals and surveys are taking longer.
“Loan fall out has not been an issue,” said Christopher M. Corica, president of Queen City Funding, a mortgage broker. “The bigger, local banks are experiencing a backlog of business, causing closing delays which may be contributing to this drop.”
Meanwhile, the inventory of homes for sale continues to fall, although it hasn’t stopped the house shopping. New listings rose in May by 10.3 percent, to 2,147, and were up by 7.3 percent for the year to date, to 7,698. But the rate of deal-making continues to outpace the new additions, as the number of homes for sale fell by 9.6 percent from a year earlier, to 4,606.
That’s higher than it was two months earlier, when the inventory hit a four-year low of 4,148. At the current level and sales pace, the supply of homes would last exactly five months, well below a healthy level but higher than in March.
“The City of Buffalo is really strong, and we’re seeing the biggest challenge with finding inventory for the first-time homebuyer,” Whitehead said, citing an example of a recent sale in which a Buffalo starter house was priced at $99,900, received 16 offers and sold for $20,000 more than the asking price.
Finally, sales prices ticked up in May. The median price – half sold for more, half for less – rose by 2.1 percent, to $122,500, while the average increased by 5.8 percent, to $149,484.
“Prices in the city, particularly Elmwood Village, Allentown, Delaware District and Parkside, are up dramatically,” said Susan D. Lenahan, a broker at MJ Peterson Corp. “Inventory is still low in the city.”