Waiting for Westchester’s rebound

The suburban enclave sees a long-awaited uptick in sales, but prices are still down and obstacles remain

From left: Muffin Dowdle, broker at Ginnel Real Estate; Cathleen Smith, president of Coldwell Banker Residential Brokerage, Connecticut/Westchester; Houlihan Lawrence CEO Chris Meyers; Chris Raveis, managing partner of William Raveis Real Estate, Mortgage & Insurance; and Mark Nadler, president/principal broker of Prudential Centennial

Westchester may be the suburb that’s home to some of the area’s biggest local celebrities — from Bill and Hillary Clinton to Martha Stewart — but that hasn’t prevented market forces from taking hold of the real estate market there.

Just north of the city, the county has been struggling for the last few years and, like the market in the city, hasn’t fully rebounded yet.

In this month’s Q&A, The Real Deal talked to brokers and market analysts about everything from Westchester’s super-luxury market to the rental market to the foreclosure situation.

Our sources said that after several years of stagnation, there was finally an uptick in sales volume in the third quarter. But that improvement didn’t translate into prices, which are still down by as much as 10 percent from a year ago and by 30 to 40 percent from the boom.

The market is, however, bifurcated when it comes to prices, with the high end and the low end holding relatively well and the mid-market struggling. For example, the $1 million-plus market accounted for 28 percent of all sales — which is almost as big a slice as it accounted for pre-recession. And, one source said the $5 million-and-up range has seen a flurry of activity in the last six to eight weeks.

Meanwhile, the towns closer to the city, such as Scarsdale and Rye, are generally doing better than towns farther north, like Pound Ridge and Lewisboro. There are still plenty of market obstacles, like perpetually low appraisals, a steady foreclosure inventory, and stubborn sellers who are unwilling to accept prices far lower than their properties would have fetched during the boom.

For more on inventory, geographical division and the reshuffling of the brokerage community, we turn to our panel of experts.

Muffin Dowdle

broker, Ginnel Real Estate

How is the overall residential market in Westchester doing these days compared to a year ago and during the boom?

The number of sales is up compared to a year ago by 10 percent. [Prices] are down 10 percent from a year ago. And prices are down 30 to 40 percent from the boom.

Which Westchester towns are performing best right now in terms of residential sales volume and prices, and which are struggling the most?

Scarsdale, Rye and Bedford have always been strong and consistent. [But] Pound Ridge and Lewisboro are secret jewels that are taking a little longer to rebound. They are struggling for no reason other than they are a little further away [from the city].

Who are the most active buyers in the Westchester market right now?

We have a consistent group of younger people and families moving north from New York City. Our weekend market is strong. I would say that 50 percent of my buyers are local people who have upgraded or made some kind of lifestyle change, and they have bought and sold houses within a 10-mile radius.

What’s going on with financing for residential purchases in Westchester?

The banks are definitely coming in with low appraisals, sometimes by 10 to 20 percent. I tell all the buyers not to be surprised if the house doesn’t appraise. We have had a few renegotiations. We are also having a lot of cash buyers who are refinancing after they close.

P. Gilbert Mercurio

CEO, Westchester Putnam
Association of Realtors

How is the overall residential sales volume doing in Westchester these days?

In our third-quarter report we found that there was an uptick in sales volume. That was encouraging because we haven’t seen much in the way of increasing sales in the market for a couple of years now. It showed an overall 8 percent increase compared to 2010.

What’s going on with residential prices in Westchester these days?

Prices are down. [In the third quarter, we found that] in the single-family-house sector prices were down by 6 percent compared to last year. The median sales price of a single-family house in Westchester was $684,005.

We wrote early this year about the luxury market in Westchester picking up and how the number of homes priced above $1 million or more was climbing. So, which price ranges are performing best in Westchester right now?

That price range, $1 million-plus, is accounting for 28 percent of all sales. That is a high ratio, [almost] as high as it had been during pre-recession times. It’s not so much that the high end is getting stronger — it’s that the moderately priced properties are having a harder time because they appeal to potential purchasers with lower incomes, who have a harder time gathering the cash needed for a down payment and getting financing.

Are you still seeing distressed sellers?

If you are talking about people going to foreclosure, the answer is yes. But Westchester doesn’t have anywhere near the problem that other parts of the country do. The county clerk reports foreclosure filings here, and this year they’ve been in the range of 130 to 150 foreclosure filings every month. That is actually not a lot in the context of the total housing stock in this county, and only a dozen or two actually get foreclosed [with] the bank [taking] ownership. Most of the others go through a short-sale process.

What is inventory like and how does that compare to the recent past?

There were 7,124 units for sale in the MLS database at the end of the third quarter, and that was a 3 percent decrease from last year at this time. The inventory has been in the range of 6,800 to 7,500 units for quite some time now. What we don’t have in Westchester is the overhang of inventory that’s driving prices down.

What’s going on with financing for residential purchases in Westchester?

It’s not that it’s difficult. I haven’t heard any stories of people being refused or unable to qualify. It’s just that it’s taking longer and the examination of their assets is more rigorous. The lenders look at employment more closely than they used to, but I can’t say that lending practices are blocking a recovery in the market.

There’s been a lot of merging and reshuffling of offices in Westchester in the last few years. Is the number of residential brokers expanding or contracting in Westchester these days?

The number of firms is about what it has always been. I hear larger ones are acquiring existing offices, but there are also small shops starting up. In terms of numbers of agents, there has been a decrease over the last couple of years. Membership in a realtor organization is a kind of proxy for how many people are practicing. A couple of years ago, before the recession, this organization was on the edge of having 8,000 practicing realtors. Today it’s about 6,700. That’s a pretty big decrease over the past three years. Most of the realtor organizations in New York and nationally are also experiencing decreases.

Cathleen Smith

president, Coldwell Banker Residential Brokerage, Connecticut/Westchester

Which Westchester towns and price ranges are performing best?

We have seen some brisk sales activity in communities in central Westchester, particularly in towns like Rye, Scarsdale and Larchmont. Homes priced within the median price range are getting the most attention. Properties that are priced between $1 million and $2 million are also seeing increased attention.

Are you still seeing distressed sellers in the market?

Unfortunately, we are still encountering home sellers who must sell because they cannot keep up with mortgage payments or because they are in danger of losing their homes. Since banks are being slow to release the foreclosed inventory, we do feel we will see more distressed properties coming on the market. We also see those who owe more than their properties are worth trying to move their properties. This will be part of our business going forward for some time.

How long are properties staying on the market in Westchester?

The amount of time it takes for single-family homes to sell has remained steady for the last three years. The average days on market for single-family homes in Westchester [is] approximately 140 days. In 2005, it was closer to 119 days.

What are the biggest challenges to selling residential property in Westchester?

One challenge is getting homeowners to adjust their expectations when it comes to pricing. We are still seeing homeowners who want to overprice their homes. Those homes, unfortunately, sit on the market. In addition, we have encountered issues with appraisals, especially in this environment, where we are dealing with new rules and guidelines.

Who are the most active buyers in the Westchester market right now?

We’ve seen a significant increase in investors. Young families are [also] looking for good deals, and we are also seeing [clients] who are deciding to rent because they are expecting prices to drop even further.

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Chris Meyers

CEO, Houlihan Lawrence

How are residential prices doing?

The median price year-to-date is $615,000 for a single-family home. In 2009, at the low point, [it] was $580,000, so we’re up from two years ago.

Which towns are performing best?

Southern Westchester has performed better than northern. Towns like Bronxville, Scarsdale, Larchmont, Rye and Irvington are strong markets on a relative basis. What seems to be driving that is the proximity to the city. Even within those communities, the homes that are closer to the train station tend to outperform those parts of town where you have to drive farther to get to the train station.

Which towns are struggling the most?

Towns that don’t have close access to trains and outlying areas of town. For example, Katonah, which is just north of Bedford in northern Westchester, [is] one of the markets that’s been struggling. And yet, within the town of Katonah, homes that are right in the village have really done very well.

Which price ranges are performing best and which are struggling?

Homes that are $5 million and up are having a pretty strong flurry of activity in the last six to eight weeks. There are currently six homes in Westchester firmly in contract that are over $5 million. A year ago at this time there weren’t any. And we have active negotiations going on a couple others in that price range.

How negotiable are listing prices in Westchester these days?

If you look at the data from the MLS, most homes are selling at roughly 95 percent of the last list price. [But] if you dig under that [to what] homes were originally listed at and marked down, there’s a big difference between homes that were priced properly when they first hit the market and homes that have had to be marked down. Roughly one-third of sales are happening without having been marked down [much] at all. On average, those are selling at 97 percent of list price. Roughly two-thirds of the homes have been marked down at least once — they are selling on average at 78 percent of the original list price.

What are the most surprising trends in the Westchester market right now?

We have begun to see international buyers. Of those six deals I mentioned that are currently in contract above $5 million, three of them, that I am aware of, have buyers coming from overseas. A couple [of them are] from Asia, and both Russia and China are out there at the very high end. We haven’t seen that too much lately in the suburbs.

Who are the most active buyers in the Westchester market?

The families relocating from the city continue to be very important. In 2011, about 28 percent of all homes purchased were buyers coming from New York City. That is up from just under 25 percent at the peak of the market. The move-up buyers [within Westchester] are not as prevalent as they used to be. … Also, we have seen [that] White Plains and, more recently, New Rochelle — the cities of Westchester — have built a lot more condo product. Most notably, in White Plains there is the Ritz project in City Center and big growth in restaurants, shopping and theaters. There’s a lot more dynamic urban scene that is attractive to couples who are downsizing and young single people. There’s one project called Ridge Hill Village in Yonkers, which is unusual for this market. It’s a residential community that has a multiuse center and 1.2 million square feet of retail, with a Whole Foods, Lord & Taylor, L.L.Bean, Lands’ End and a cinema. The stores have just opened and there are 500 condominiums, which went on sale in the springtime. It’s already over 25 percent sold.

Is the number of residential brokers expanding or contracting in Westchester?

The number is down from where it had been. I think the last numbers there were 7,000 residential brokers active in Westchester today, and that is down from around 8,500 at the peak of the market. As far as brokerages and the offices, the large players have been relatively stable. The companies who have, say, 5 percent or more of market share have held pretty steady.

Chris Raveis

managing partner, William Raveis
Real Estate, Mortgage & Insurance

How is overall residential sales volume doing in Westchester?

With seven weeks remaining until the close of 2011, residential, single-family sales in Westchester are running pretty even to last year, with a 2 percent projected increase by year end. Unit sales are 21 percent up from 2009, but remain down 33 percent from the boom in 2005.

Which towns are struggling the most?

Katonah/Lewisboro and North Salem are the districts that [are struggling] the most.

Which price ranges are performing best in Westchester right now?

In terms of the over-$1 million home market, homes that might have sold just below $2 million in the past are now seeming to be a bargain in the mid-$1.5 million range. For those with high buying power, there are bargains to be had. The $300,000 to $500,000 range is also doing quite well.

Are you still seeing distressed sellers?

Westchester seems to have been hit last with the distressed properties. We are seeing them, not in major abundance, but at all ends of the spectrum. … The total number of short sales/foreclosures on the market in all of Westchester is 280 homes, or 7.4 percent of total inventory.

What are the biggest challenges to selling residential property in Westchester?

One of the biggest challenges today is convincing sellers to price their house fairly within recommended market ranges and to accept an asking price that may be 30 percent lower than at the peak of the market. The price of a house has to be sold four times — first to the homeowner, then to the brokerage community, the buyer and finally the lender. Another challenge is to persuade the seller to invest in their home in preparation of placing it on the market.

Who are the most active buyers in the Westchester market right now?

There are young couples or families from New York City. There’s still activity within the towns, but at a lesser rate. … Professional relocations [are also] picking up again — with business families moving to our area from other parts of the country. This is a positive note, as little to no activity was seen in this category over the past two years.

Can you tell us about a notable deal that illustrates the state of the market?

William Raveis’s Rye agent, Nancy Everett, represented the buyers in the highest recorded Rye city sale in MLS history. Her clients purchased an 8,000-square-foot, Long Island Sound waterfront home on 1.5 acres. The list price was $12.5 million and [it sold for] $11.6 million.

Mark Nadler

president/principal broker, Prudential Centennial

Which towns are performing best?

Scarsdale and Larchmont are doing well, relatively speaking. Last year there were 184 sales in Scarsdale, and as of Nov. 10, there were 186. So it’s comparable. The average selling price last year was $1.47 million, and again this year it’s $1.51 million — a 2.3 percent increase for single-family houses.

Which towns are struggling the most?

The New Rochelle market is awful, one of the worst periods I have seen. It’s a big city with a strong school system, but the market there is not doing well. Edgemont is also in a slump.

Which price ranges are struggling most right now in Westchester?

Probably the middle segment of the market and some of the upper niche markets. New construction from a few years ago might have been selling for $3 to $3.5 million. A lot of those properties are now selling at between $2.5 and $3 million. The new-construction market has contracted.

What are the most surprising trends you’re seeing in Westchester?

One of the things I have seen this year and last year is the number of rental properties have increased. A lot of people who couldn’t sell properties are renting them. Buyers who didn’t see what they liked or weren’t confident rented with the intention and belief that they are going to buy in six months to a year. We just rented a property two weeks ago, a six-month rental that can’t be extended because the owner is selling and the tenant is renting to give himself six months to find a house to buy.

Is the number of residential brokers expanding or contracting in Westchester these days?

The number of offices has probably decreased. The number of agents has stayed about the same or had a slight decrease. But the expectation is that in the next year or two, the number will go down.