It was an amazing year for sellers in 2021.
Homes sold in days, not weeks. Offers were made with normal buyer contingencies such as “inspections” or “must appraise at or above sales price” entirely dropped. Many offers were made with buyers promising to cover a certain percentage of any or even all appraisal deficiency.
Closing dates were at the pleasure of the seller. Home sale contingencies on the part of buyers needing to sell their own homes first in order to buy became problematic for many as cash buyers abounded and competition was fierce with escalating offers being made, with average offers being 4% to 12% over asking price.
On Jan. 10, I ran the search with the following criteria:
■ Listing status: Active.
■Price: $250,000 to $400,000.
■ State: New Hampshire.
■ City: Antrim, Bennington, Dublin, Francestown, Greenfield, Hancock, Harrisville, Lyndeborough, New Boston, Peterborough, Temple, Weare.
■ Property Type: Single-family.
There were zero search results for this search. In other words, there were no single-family homes actively for sale on the MLS for the entirety of the towns listed in this search. Yes, I realize that normally there are more homes listed in the spring, but serious sellers have always been aware that wintertime buyers were serious buyers, buyers that needed to buy or buyers out to beat the springtime influx of competing buyers.
So I ran the following search, exactly as the former search, except that I added no upper limit on prices. The search resulted in 18 single-family homes for sale, and only four of them were priced in the $425,000 to $500,000 range. Two were priced in the $550,000 to $599,000 range, and three were in the $619,900 to $679,000 range. Two were priced from $7750,000 to $779,000, one was priced at $899,000 and all the rest were priced between $1.699 million and $3.25 million.
Yes, we have all seen more out-of-state plates lately, as these price levels are not historically normal for the Monadnock area. The buyers are largely retirees or those that can work remotely. Out-of-state money from buyers fleeing the cities/COVID and industry acceptance of remote work arrangements has largely become the norm in these days of continued COVID and COVID variants.
The run-up during the past years of investment portfolio values due to “quantitative easing” policies of the Federal Reserve, which essentially gave the economy a giant boost by all but guaranteeing low interest rates, meant that second homes were also in huge demand from out-of-state buyers. The real estate market took off, including in the Monadnock region.
Note that many of the towns in even the revised search above had zero homes listed. Note that even with no cap on the search for higher-priced homes, that across all towns, 18 homes for sale is not an inventory-rich situation.
So what are the issues causing this lack of inventory across all price ranges and these higher prices?
Largely, the situation is one of supply and demand being out of whack for an orderly market. Demand vastly outstrips supply these days, and buyers essentially need to wait for more inventory to hit the market. Prices have also gone through the roof, pricing most “move-up buyers” (those looking to sell in order to buy something at the next-higher price range) out of the market. There is no substantial inventory available right now in this next step-up range for most lower- to mid-range buyers, thereby keeping middle-of-the-road-priced homes from coming onto the market. Buyers are afraid to list because they are concerned they won’t be able to find a home to buy.
Rising inflation of late does not help, as the cost of building new has also risen. Backups due to COVID make building materials even more expensive, and inflation translates into higher mortgage rates on top of higher building material costs.
I foresee a correction in pricing soon on the part of sellers as buyers simply cannot afford to keep chasing homes that are overly priced. Any stock market correction will further push out any natural balancing of supply and demand. Yes, there are out-of-state monied buyers still, but even they are beginning to see that prices are getting silly to the high side and that choice is small.
Middle-of-the-road-priced homes from $250,000 to $450,000 are what builders should be building, as there is a large gap in that range to fill with a lots of pent-up demand. Sellers too will soon need to consider other than “cash only” offers and drop their prices as buyers stop chasing upwards.
The balance between buyers and inventory will take some time to get to stasis. I look for a more orderly market in the second half of 2022, with additional inventory becoming available from builders building to the gap and from lower expectations on sky-high pricing from sellers as buyers stop chasing prices upward.
Harold Pope of Francestown is a Realtor of 20 years, working at Bean Group. He can be reached at buddy.pope@beangroup.com or at 603-562-5186.