The housing market was one of the strongest areas of the economy in 2020.
It really comes down to what we learned in Econ 101 – a classic case of supply and demand. In this instance, low supply and maximum demand. The market was also fueled by rock-bottom mortgage rates and an ensuing shift away from urban areas due to the COVID-19 virus.
Locally, we have all heard of various tales of how strong the real estate market has fared this past year, with multiple offers, quick sales and high prices.
Two worth mentioning: a property in town that received 21 offers and sold for 12% over asking, and a property in Newbury that received 13 offers and sold 9% over asking. I wonder about the inverse of these examples.
What happened to the 32 parties that didn’t have the winning bids? There are also some instances of buyers making full-price offers, sight unseen.
The ballooning demand has also led to a surge in homebuilding. The National Association of Home Builders confidence index (an index that measures builder confidence in the market) reached an all-time high of 90.
As a reference point, December 2019, the index was at 76 and December 2018, it was just 56. Locally, this acceptance of new construction can be seen at the development at Colby Farm Lane, where 15 houses went under agreement before the first was even completed.
And over the past few years, we have seen houses being completely gutted or even torn down in place of a new house.
Last year, we set another record in the average sales price for single-families and condo sales (up 8.36% and 2.75%, respectfully).
The only reason we didn’t sell more is because the inventory was low. Properties were not only selling at record levels, they were selling quickly. “Days on Market” have been dropping like a lead balloon over the years. It's not a strong market — it’s a hot market.
Look at the numbers: For single-families, the average selling price was within 1% of its asking price and 52% sold at asking or above, and condos also sold within 1% with 62% at asking or above. As for price increases over the past few years, since 2016 we have seen a 37% increase for both.
As for 2021, it will be another year of breaking price records (but not number of transactions).
We are starting out the year with virtually nothing on the market, so as properties come on the market, they will go under agreement in record speed.
This shortage of inventory will also accelerate pricing. That, combined with low interest rates, the vaccine being distributed and people feeling more secure, should stimulate the market. I would not be surprised to see another 8% increase.
Bill Barrows has been a Realtor for 27 years. He can be reached at email@example.com.