In February I mentioned that signs were pointing to a healthy spring market. I was cautiously optimistic as I had two concerns: the extremely low inventory in February and I thought that interest rates would rise.
The low inventory could have led to asking prices rising too quickly and higher interest rates would have meant fewer buyers. What actually happened surprised even the most seasoned Realtors.
Interest rates remained low, which kept the buyers in the market. More importantly, even though many would say there was not enough inventory that came on this spring, we are on track to have the best year since 2002 in number of sales transactions. It was a very active spring market with some amazing numbers and stories.
We have not reached the peak of 2006 in average sales price, but we are close with an 11 percent increase over last year. Current average price in Newburyport is $524,446.
Most spring markets taper off mid-June; this year it went well into July.
The ratio of list price to selling price is 98 percent; the last time we reached this was 2004.
The DOM (days on market) of 106 is trending lower to the best since 2005 and is 50 days lower from 2008 (the highest and worst).
There were many multiple offers on properties. I’ve heard of one buyer that made eight offers at asking or over asking. For the first seven the sellers refused, as they received better offers. The buyer was successful with the eighth (well above asking and waiving the home inspection). The first seven sellers had buyers with extremely favorable financing packages. For the most part the buyers were well heeled this year; many cash offers.
The story that raised most eyebrows was the sale of two properties. It was not the sales price that was of interest as much as it was the price per square foot. Some background knowledge and perspective … everything being equal, understand that smaller properties generally have a higher price per foot than larger properties because of fixed construction costs. That cost is absorbed or watered down in larger properties.
The other considerations that come into play with price per foot would be the condition of the property, quality of workmanship and location. The average price per foot in Newburyport for the last six months is $269. If you isolate Plum Island, it goes up to $401, as properties are generally smaller out there and the water influence will raise and justify the higher price.
If you take out all the Plum Island sales and any properties that have direct water influence for the last 10 years, there were only 15 properties that sold over $400 per foot. Until now!
This spring we had two that broke the record of $466 per foot set in May ’05. Not only did they break the record, they shattered it. The two properties of interest sold at $504 and $545 per foot respectfully.
These properties couldn’t be more different from one another … the $504 property was only 704 square feet but was in a great location, and the $545 was 2,300 square feet, superb location and dressed to the nines.
The other interesting storyline to these is that they both received multiple offers and the two successful buyers did not require lender appraisals as a condition of the purchase. This is important, as lenders would have had a very hard time justifying the price (finding other recent sold properties that are similar).
The buyers wanted these properties at any cost. It is important to also understand that these two properties are not a trend, as the average price per foot has not really changed much in the last 10 years, but more of an anomaly.
These stories show how strong our local real estate market has been this spring and summer. This fall market should be a continuation of the spring market, as the demand for housing will outpace supply.
There will be new buyers and the buyers who did not buy in the spring will be re-energized. The only concern is how much farther the interest rates are going to rise from Bernake’s tapering of quantitative easing and if it will have a drag on our local market. The 30-year fixed mortgage rate last week was 4.5 percent, up a full point since May. The higher interest rates will only add fuel to the market, as the already nervous buyers will fear that they will not see better rates if they wait.
Newburyport real estate agent Bill Barrows has been a Realtor for 22 years