Pinnacle is a locally owned real estate business that is committed to our communities. Wellesley Real Estate News
Volume 29 February, 2022
Copyright 2022 Elaine Bannigan and Pinnacle Residential Properties. All Rights Reserved.
This Pinnacle Report examines 2021 residential property sales in Wellesley and Weston year over year from 2020. We always begin with a snapshot of statewide activity but remind you that data varies from town to town and one price range to another. The Massachusetts single-family median price rose 15% to $530,000. When the volume of sales changes at price extremes, it is reflected by an increase (or decrease) in the median – and thus does not provide an accurate measure of appreciation, although we often see it erroneously reported as such. It does show the composition of the sales. Housing Price Indices can provide more reliable estimates but, ultimately, matched sales provide the most refined data for changes in value. In 2021, the number of home sales over $3M rose 14% (more moderated growth than 2020, when sales rose 33% over 2019). In contrast, the number of transactions under $500,000 declined 14% (fewer homes, rising prices). The actual total number of sales was relatively flat. As we begin 2022, the total available supply is 27% less than a year ago. The resilient condominium and townhouse market, after a decline in 2020, has made a strong comeback. The overall sales volume has increased 19% and the median has risen 13%. The most remarkable increases have been in the luxury tiers, where the number of units that sold over $3M has doubled from 2020. As we begin 2022, the available condo supply is 40% lower than it was a year ago. Wellesley Single-Family: The total number of Multiple Listing Service sales declined 5% from 2020, the overall median rose 2.8% and homes sold nearly twice as fast. An examination by price range provides a more finely tuned perspective. The number of homes that sold for less than $1M dropped sharply – by nearly half - because of lack of supply. In 2020 there were 65 homes listed for sale with asking prices under $1M but only 34 in 2021. Many of these sales prices were driven well over $1M by multiple offers – 19 of them out of 29 sales. More young buyers are now entirely priced out of Wellesley. There were more home sales in all ranges except $1.5-$2M where 20% of those sales were driven up into the next tier by very active trade-up buyers in bidding wars. Prices rose from 3% to over 10%, depending upon the range and home condition. (We noted that if we isolated the sales that occurred during the second quarter, prices were higher to varying extents. Timing, as they say, is everything.) The Wellesley Supply Side: The total number of homes offered for sale in MLS was 378. With 329 sales, not all were absorbed by the market, demonstrating that even in these times of intense demand and a record low supply, effective marketing and accurate pricing remain essential to whether or not a home sells. Of all houses that did sell in 2021, ‘the off-market,’ or non-MLS sales represented 15% of the total (58), a slight increase from 2020. As we begin 2022, we have just 7 single-family homes on the market – down from 19 this time last year. It’s important to note that the supply had been dwindling well before the start of the pandemic in early 2020. In fact, in January 2017 there were twice as many homes offered for sale as there were in January 2019 (75 and 37, respectively). Weston: Due to space constraints, a discussion of year over year market activity is only available on-line or through one of our agents. Local Condos and Townhomes: In Wellesley, there were 42 MLS unit sales compared to 33 in 2020. The median price of those units rose just 2% but they sold 20% faster. Most of the luxury units at Fieldstone Way are still pending and will close in 2022. At other developments, brokers report that there have been many buyers reserving to-be-built luxury units that are optimistically planned for completion sometime late in 2022. This should be reflected by a significant rise in the median in our next report.
The following data for single-family properties was extracted from the Greater Boston Multiple Listing Service and includes the majority of fair market value sales in each town. (Non-MLS sales do not necessarily represent fair market value as these are properties that were not fully exposed to the open market.)
YEAR-END MARKET COMPARISONS**
TOTAL NUMBER OF SINGLE-FAMILY HOMES:
7,301 3,361 2021 2020 2021 2020
$ 0 -
800 - 1,000,000 1,000 - 1,500,000 1,500 - 2,000,000 2,000 - 2,500,000 2,500 - 3,000,000
14 41 30 24 20
74 57 24 42
Avg. Days on Market: 81 Median Sales Price: ($) 1,655,000 1,610,000 2,105,000 1,595,000 Lowest Sale: ($) 595,000 485,000 698,000 552,000 Highest Sale: ($) 10,305,000 8,750,000 10,500,000 10,900,000 Total $ Volume: ($) 645,893,583 633,674,058 433,060,800 346,476,169 32 57 64
**Sales from January 1 through December 31
Q4 2021 WELLESLEY SALE PRICES AS A PERCENTAGE OF NEW 2022 ASSESSMENTS (Averages based on town assessments as of January 2022) ON MLS OFF-MARKET
< - 1,000,000 1,000 - 1,500,000 1,500 - 2,000,000
106% 115% 116% 113%
121% 123% 127%
-- Insufficent data
Copyright 2022 Elaine Bannigan and Pinnacle Residential Properties
All Rights Reserved
'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
The most acute shortage: Disappearing Entry Level Homes A small single-family home, maybe 1400 or so square feet with a little yard - a patch of grass for a swing set or a garden. Young families yearn for this possibility. Yet, it’s vanishing in America. In 1982, 40% of the country's newly constructed homes were entry-level. By 2019, the annual share had fallen to 7%. The decline has been “as steady as a metronome,” says, Freddie Mac's chief economist. "It's a huge problem if you think about the fact that home equity accounts for the bulk of wealth for the overwhelming majority of Americans." Builders, housing advocates and policymakers agree about why entry-level homes have become so scarce: the cost of materials and labor, zoning regulations that discourage construction, and opposition from residents to increased housing density that would allow small lots suitable for entry-level homes. Then the biggest factor: the rising price of land. Space isn’t plentiful where jobs are and where people need to live. Land has become scarce, more restricted and more expensive thus making it impossible for builders to turn a profit on smaller single-family homes. They have to factor the land prices, carrying costs (higher and longer in some towns than others), and those skyrocketing materials and labor costs into their selling prices. “You must build a bigger home in order to recoup costs," says one New England developer. "But it's increasingly tough and more builders can no longer do it." We’ve seen this in our towns, where some of our smaller, local builders have just stopped building. Supply of existing homes: Insufficient Quantities The number of Millennials who can and want to buy is growing while many Baby Boomers, living longer than previous generations, choose or have to (insufficient resources/lack of affordable trade-down supply) age in place. At present, Boomers have an 80% home ownership rate and they own 41% of the nation’s homes, despite the fact that they are only 22% of the population. Those who have the resources and do move, often opt for a brand new townhouse or condo – thereby eliminating worrisome home maintenance issues. Some have chosen to rent instead of own. Millennials, ages 26 to 41 and numbering 72.1 have now surpassed Boomers, ages 58 to 76 and numbering 71.6 million, as the largest living generation. Gen X (ages 42 to 57) at 65.2 million will surpass Boomers in 2028. Homes presently owned by Boomers will become available by mid-century when their population is expected to dwindle to 16.2 million. Gradually, some of these younger people will benefit from a generational transfer of wealth from parents or grandparents. However, the American dream is becoming increasingly beyond the reach of many of the next generations. As every year, more homes will become available this Spring. It will be a solid sellers' market and strong sales prices are to be expected. Those who have been considering selling in the foreseeable future might want to capitalize on it now. We encourage you to call us to at least find out what your home might be worth. Author: Elaine Bannigan is the founder and owner of Pinnacle with over 35 years of industry leadership and expertise. She has been writing the Pinnacle Report for nearly 20 years.
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