Well, we all know there was nothing normal about 2020 and the housing market was no exception! Below are my market predictions based on Massachusetts’ performance stats. However, Massachusetts market behavior for 2020 is relative and consistent with what is happening throughout the country, so the same principles and predictions apply across our country.
The year started with the market on fire. January sales were up more than 5% over January 2019 and February buyer activity was extremely strong. Then March came and the world turned upside down. When everything shut down, many were predicting that this would be a dire 2008 scenario for housing once again. I was fascinated by how fast so many well-educated people in this industry were convinced of this. The market reflected the exact opposite and I was 100% certain that it would not be another 2008. The inventory of homes for sale was going down due to the virus scaring so many from listing which made inventory scarce and drove prices up which is the opposite of what happened 12 years ago. The only way housing would have crashed is if inventory of homes for sale increased dramatically from where they were which would have driven prices down.
To further eliminate any chance of a repeat of 2008 interest rates dropped as fast as the stock market increasing the purchasing power of nearly every buyer in the market thereby increasing buyer demand as a whole. Once things finally opened back up in June and safety measures were put in place, it was pure madness and became a frenzy for months of bidding wars and multiple offer situations especially for single-family homes. The virus seemed to have made many people avoid condos especially those in the City of Boston and set up a run on Single families. Most who were planning to leave Boston for the suburbs in the next few years decided to leave sooner in search of more distance and space. Even now, there are no signs of interest rates rising anytime soon. In fact, the Federal Reserve has made it clear that they plan to keep buying mortgage back securities to keep them as low as possible. See the chart below, 30-years are in blue. Hover your mouse over the chart to see more information.
By year’s end, even to my amazement, home sales appear to only be a bit short of 2019 levels (the final numbers will be out in a few weeks in our 2020 housing report). This is incredible considering how we lost out on about six weeks of the year during the shutdown. However, this market left a lot of unsatisfied buyers, many of who have made multiple offers on multiple homes and could not get one accepted. This leaves us with a massive number of buyers still looking for homes. Take this plethora of buyers and put them on top of the new crop of buyers that will come out after the new year and we will again be faced with a madness that really has not stopped, only this year demand will be higher than ever.
As I type this at 11 PM on New Year’s Eve in Jay Peak Vermont with my family, I just pulled an “On Market Snap Shot” MLS PIN report and it is showing that there are currently 7,023 homes (singles, Multis, Condos) for sale compared to 10,389 a year ago at the same time. That is a 32% decrease. Now when I change the report to only look at single families there are currently 3,317 for sale compared to 6,928 a year ago today. That is a 52% decrease which truly mind-blowing. We live in a state of about 7 million people and there are this few homes for sale? If you are hoping prices go down on single families forget it- it’s not happening!
When people fight over homes there is only one direction the prices go…UP! As I said above the numbers aren’t final, but it appears that prices will end the year up about 7-8% and over 13% for single families. Where are all the naysayers that said prices would crash?! One thing I was certain of is that they wouldn’t and you can see that they didn’t even once since the shutdown.
When will it end?
I am sorry to say that it won’t end any time soon. Sellers just do not list early enough each year. April is the soonest that we will begin to see slight relief for buyers (especially those buying single families), but it won’t be overnight. It will take time to take effect but by late summer buyers will notice relief with more options and slightly less competition. Sellers who list in the next three months will likely see multiple offers because droves of buyers always come out every year before sellers. I have been telling sellers for years to list in the winter to make more money and maybe only 10% listen to me! Most would rather wait till their flowers are up but what they don’t realize is by that time, there is a lot more competition from other sellers. If you are a seller, list your home as soon as possible and you will be happy you did so long as you don’t push your luck with your price. Sellers can’t get crazy and list for what they think they should get in this market. List it for the right and appropriate price and that’s when you see over-asking sale prices. List too high and the home will sit and likely need a price adjustment.
What about condos and multi-families?
They have been hit hard especially those closer to Boston due to people being more concerned about living in close proximity to one another as well as all the social unrest over the summer in many major cities only added to many wanting out. Cities will begin to see a recovery by spring as the vaccine comes out and buyers become less concerned with shared common spaces and multis will improve once eviction moratoriums end and colleges start talking about being back in session in September. They will both end up making up the ground they lost by year-end. Those who want a condo should buy NOW. I see many buyers missing good opportunities right now while there is less demand. It will not last and cities are not dead so don’t listen to that misinformation.
Will 2021 be bigger than 2020?
Yes. 2021 will be the biggest year for home sales since 2005. I am convinced of it. We will break the 100,000 sales in a year barrier here in Massachusetts that we haven’t broke in 15 years. Here is why; we are now in a situation where we have a massive buyer demand for the reasons I mentioned above. But we also have a massive wave of sellers who did not list who will really begin to list in mid to late spring (April). This will create more home sales from about May/June through the end of 2021 which will create the biggest year for overall sales since 2005, likely rising about 100,000 sales but not likely to actually beat 2005. There was so much new construction that closed that year and that is why there were so many sales. In my 2020 Predictions I had predicted that we would exceed 2019 sales and we are falling short- 2019 ended with 91,925 home sales and 2020 is looking like is going to land right under 90,000 but it’s still too soon to tell, it’s going to take a few more weeks for the numbers to be final for 2020. Obviously, when I wrote the 2020 Predictions, I had no idea we would end up with a global pandemic, however, I had predicted that prices would rise at least 5%. I was right about that!
January, homes sales will be up, February will be even with 2019, from March on will be up dramatically. Remember we basically lost 6 weeks in late March and April in 2020. Yes, homes still were listed and sold but it was extremely slow. That won’t happen in 2021. Even if we have a shutdown in January or February it will not be as slow as it was at the start of the virus in March. Prices will rise even more in 2021, especially for single-family homes.
If you are a buyer don’t get discouraged just get yourself in a position that you are Ready to Strike when the right house comes up. Eventually, it will so keep at it!
If you are a seller list soon, don’t go overboard with your price and list with a Realtor and Real estate brokerage who will market your home the best.
Good luck and happy home selling and buying! Happy New Year!