'Off-Market' Builders are actively reaching out to homeowners and aggressively pursuing the increasingly elusive conforming lot. As a result, 38% of those off-market homes were sold to builders for development. Mid-to- higher priced off-market sales were more apt to involve an agent who did not offer the property to all buyers. That’s certainly beneficial for one agent and one buyer who didn’t have competition, but not always advantageous to a home seller. Those sales prices don’t fit the definition of ‘fair market value’ so their numbers are not included in our table. However, we did examine the sales price to assessment ratios of these sales and compared them to MLS sales. The differential was often considerable. When applied to a $2.5M home, it equates to $350K less for the off-market sale than when marketed via MLS and its aggregator sites. What HAS happened? Already experiencing a supply shortage, what happened to accelerate it was best described in Fortune: “A perfect storm. That's the best way to describe the red-hot housing market we've seen from coast-to-coast during the pandemic. It was spurred by a combination of low mortgage rates, remote work, and a demographic wave of first-time millennials entering the market. Of course, years of under-building means there simply aren't enough homes available to meet this demand. Cue record price growth.” Buyers paid more, bought sooner than they planned, searched in the suburbs and exurbs or all of the above. First-time buyers increased to 34 percent last year, up from 31 percent in 2020. The typical first-time buyer was 33 years old. Nationwide, a ‘calming down’ occurred during the fall market from that of spring 2021. In October, 60.3% of sales involved a bidding war and while remarkable, this was down from the all-time April high (74.5%). Our local markets demonstrated this pattern as both prices and buying activity spiked during Q2. The odds of getting an offer with the incredible terms we were seeing (i.e., stunningly over asking price, no contingencies, etc.) in the Spring market was not a certainty by Fall. What WILL happen? According to the CPI, inflation is at its highest level in 40 years. As the Federal Reserve raises rates to control it, 30-year fixed mortgages are predicted to increase to at least 3.5% by the end of 2022. Buyers will want to consider buying as early as they can in 2022. These increases will of course be of greatest impact to young, first-time buyers who are stretching to buy a home. Prices are expected to climb but at a slower pace than over the last two years. The National Association of Realtors surveyed more than 20 economic and housing experts to gauge their expectations of price growth, new and existing home sales for 2022. Sales of new homes are forecast to rise to 920,000 in 2022, up from 2021, which was roughly 800,000. The boost is expected to come in the second half of the year when a modest increase of new homes will be completed. Sales of existing homes are anticipated to hover just under 6 million, at or nearly the same as 2021. New Construction: There is low inventory and strong demand. However, starting from a position of ten years of underbuilding builders cannot correct the imbalance quickly. Supply chain problems are limiting the pace and causing prices to rise. From appliances to lumber, materials are more expensive. The last two administrations increased tariffs on Canadian lumber. Robert Dietz, Chief Economist from the National Home Builders Association stated, “More than 400,000 jobs are open now and the industry needs to add 740,000 workers a year to make up for retirements and industry’s growth. Single-family home starts in 2022 will be a little over 1.1 million, just a 1% growth in production levels. That's down significantly from the 13% growth in 2020 and the 9% growth in 2021.” This won't provide a sufficient solution to what is a severe shortage. 781-237-5000
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