Hudson Valley Market Update: A New Normal for Interest Rates

By   |     |  Hudson Valley Real Estate Market

British real estate tycoon Harold Samuel was famously quoted as saying that the most important factors when buying real estate are location, location, location. Of course location is still important, but Samuel might tweak his quote today to inventory, inventory, inventory or interest rate, interest rate, interest rate.

Interesting Interest Rates

“It’s a tough market right now,” says Steven Domber, president of Berkshire Hathaway HomeServices Hudson Valley Properties in Fishkill. “It seems like the interest rates have gone up almost weekly for the past six months.”

According to, as of November 1, the average 30-year fixed mortgage interest rate was just over eight percent, up two basis points since the same time last week.

Looking back just two years ago, Domber reflects on how interest rates hovered around three-and-a-half percent. “It’s a pretty big increase from that and they are as high as they’ve been in almost 25 years,” he says.

Based on mortgage rate charts, interest rates were previously at a high of just over eight percent in 2000. “The rate environment is getting cranky, and I don’t see any signs of it coming down,” says Domber. “I think we will be in a period of high rates for at least the next two to three years. That’s okay if the economy is humming along and people are making money and have jobs. We just have to adjust to the new normal.”

Domber says that high-interest rates are demotivating current homeowners, who might have purchased their homes at record-low interest rates during the pandemic, to sell. “They’re locked in at a rate that, in most cases, is under four percent and some are under three percent, so it’s hard to create motivation to sell, especially when there is so little inventory,” says Domber. “If they do sell, their rate is going to triple in some cases if they buy another home.”

Domber states that at the end of September, there were only 450 listings available on the Mid-Hudson Multiple Listing Services.

“That’s down 30 percent from the year before,” he explained. “I’ve been in this business for 45 years and I’ve never seen inventory levels as low as they are right now. So we have a lack of inventory, high-interest rates, and because there is such a lack of inventory, supply and demand is keeping the prices up.”

Ulster County

In one area, Domber says there is less of a downturn. “Ulster County has a few more months of inventory than Dutchess does and I constantly see more sales in the high end still occurring,” he said. “There is a nice group of well-educated upscale people coming up from the city and Brooklyn that came to Ulster as a second home area because it was relatively affordable. Some of the estate properties are just magnificent, with ponds on sizeable acreage, and it’s a great lifestyle with very pretty towns like Woodstock, New Paltz, and Stone Ridge.”

Domber understands that real estate is as cyclical a business as they come, and every cycle has a different twist to it, so this too shall change. “This low inventory cycle will work its way through; it just takes time,” he said. “However, I don’t ever think we’re going to see interest rates under three percent again in my lifetime. The bottom line is there are still good opportunities to own real estate, but you have to work much harder to find them.”

Changes in Sullivan County

Chris Ogden, broker/owner at RealtyPromotions in Middletown, was just getting into the market in the early 2000s. At that time, he remembers having an average of 80 to 90 listings. “On average for the last three years, I’ve carried 25 to 30 listings, and that’s a lot,” he says. “It was also taking four or five months to sell a property where it takes four to five days now.”

But those aren’t the only changes that Ogden has witnessed over the last few years.

“Sullivan County has been predominantly a secondary housing market,” he says. “During the pandemic you saw a huge insurgence into Sullivan County with a lot of people looking for vacation properties in the lower Catskill region. With the rise of interest rates, it has really hurt that market.”

On the other hand, Ogden explains that areas like Wurtsboro are seeing a bit of an uptick in buyers because they are being pushed out of Orange County. “It’s gotten too expensive, so they are starting to travel into lower Sullivan County for affordability,” he explains.

The lack of inventory has also hit Sullivan County. “It’s a challenging time for a buyer’s agent with a lack of inventory and competition for the existing homes,” he says.

In Orange County, Ogden says the market looks a bit different. “Orange County is uniquely positioned, because we get buyers that commute back and forth into New York City,” he explained. “If you have the product, you’re still getting into bidding wars, homes selling over asking price, both existing and new, believe it or not. And that’s because there’s just so little to choose from. The increases we’ve seen in sale prices are pretty staggering.”

For example, Ogden explains that a home he could sell for $400,000 two years ago could sell for nearly $600,000 today. “We’re starting to hit that ceiling where you’re not going to be able to get much more for these properties, but Orange County has quickly become Rockland County.”

With a lack of inventory, Ogden sees an increased demand for new construction in Orange County. “I just listed a 15-lot subdivision near Mount Hope two weeks ago and we already sold seven houses and there’s not even a shovel in the ground,” says Ogden. “There’s definitely a need for land to build on, but there’s so much involved in New York to build homes, and developers don’t seem to want to do it.”

Looking into his real estate crystal ball, Ogden believes that the feds are going to slow the rise of interest rates come second quarter of 2024.

“The whole point of raising interest rates was to curb inflation, and I think they’ve done that successfully,” he says. “But if they continue to push on the interest rate, we will see a slowdown in the housing market. It’s pricing out so many potential buyers.”

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