For decades, a home in the Buffalo Niagara region has been a place to live — and not much of an investment.
The Buffalo Niagara housing market has radically transformed over the past two years, tilting from a marketplace where buyers had the upper hand to one where sellers now hold the position of strength.
Where home sellers once turned to open houses as a way to drum up interest in homes they were struggling to sell, they now use them to weed out buyers. The competition for quality homes in desirable neighborhoods can be so strong that it now isn’t unheard of for sellers to hold an open house on a weekend and tell potential buyers to submit their best offer by midweek.
The numbers bear that out. Housing values in the Buffalo Niagara region grew by 6 percent over the past year, according to the Federal Housing Finance Agency, which used third-quarter data from both home sales and appraisals to produce one of the most broad-based snapshots of the local housing market.
Not since 1989, when the region finally started to pull out of a long housing slump caused by the collapse of the steel industry and other painful plant closings, have local housing values increased as rapidly as they did in the past year.
Housing markets don’t turn around in an instant, and the rebound in the Buffalo Niagara region has been steadily gaining momentum as the region’s economy has improved, with unemployment falling to around 5 percent and slightly above-average job growth. Equally important, the vibe over the Buffalo Niagara economy has markedly improved, with the veil of pessimism that long hovered over the region lifting in favor of a new sense of optimism.
All that plays into a stronger housing market. The federal data shows that local home values have grown as much during the past three years — 15.5 percent — as they did during the eight years before that.
These charts show just how much the local housing market has changed.
It’s been more than a decade since home prices were rising as rapidly as they are now.
Home values have increased by at least 4 percent during each of the last four years, including a 6.05 percent increase over the past year, according to the Federal Housing Finance Agency. The last time the local housing market had a similar price spurt was a five-year span between 2000 and 2005.
Prices are rising because home sales are selling briskly.
Home sales have averaged more than 1,000 a month since mid-2016. Never before has the region seen a prolonged period of such robust home sales, even with rising housing prices making the region’s largely affordable housing stock a little less budget friendly and fewer homes on the market for buyers to choose from.
Prices are rising, in part, because there are a lot fewer homes on the market.
After five straight years of declining listings, there are almost half as many homes up for sale as there were six years ago. That steep decline in inventory leaves buyers with fewer choices and increases the competition for the quality homes in popular neighborhoods that do make it to the market.
The housing market is like a scale. When it’s in balance — typically when there is about a six-month supply of homes up for sale — prices tend to rise modestly, since neither buyers nor sellers have the upper hand.
But with fewer homes up for sale and demand strong, the scale has tipped sharply in favor of sellers.
With only about a three-month supply of homes up for sale, the competition for attractive houses is stiff, simply because buyers don’t have a lot of other choices. And the choice they often have is whether to pay more than they’d prefer or risk missing out on a home they like.
Less competition is good news for home sellers. With fewer homes to choose from and buyers still swarming the market, sellers aren’t coming down as much from their asking price.
Sellers over the past year got about 2 percent less than their asking price. Back in 2010, the average discount was around 5 percent.
It may not sound like much, but on a $200,000 house, each percentage point means an extra $2,000 in the seller’s pocket.
Buyers can’t afford to dawdle these days. The average home now sells about 1½ months after it hits the market. That’s a full month less than it took just five years ago. And there aren’t any signs that the market’s quickening pace is slowing down. Homes that sold during 2017 were on the market for 11 fewer days than it took to sell the average home in 2016.