Buying during a pandemic
Updated: May 25, 2020
Are we on Week Ten? Eleven? Infinity? The bottom line is we’ve been here for a while now and things aren’t going back to normal any time soon. What does this mean for the Boston area real estate market?
We live in a part of the country with notoriously high housing prices and, for years now, a very low inventory. High demand and low supply means multiple offers, sale prices well over asking, all-cash offers, and buyers waiving home inspections and mortgage contingencies. And, at least in Cambridge and Somerville, the novel coronavirus doesn’t seem to be moving the needle all that much. Yes, it adds a (thick) layer of uncertainty, and the economic effects are substantial for many small businesses and individuals, but this is still Boston, and whatever easing of pressure we may feel probably won’t last for long.
Lessons from 2008
During our last recession, which was caused in large part by sub-prime mortgage lending resulting in a housing crisis—prices dropped for only a few months before slowly starting to bounce back. Although we don’t know how the pandemic will play out, Boston area real estate has proved in the past to be one of the first to get busy after a quiet period.
Will prices be plummeting in Greater Boston?
Most likely, no. Comparing condominium properties in Cambridge from April of this year to April of last year, both the average list price and the average sale price actually went up. In Somerville, while the average list price went down a bit, the average sale price is up compared to last year.
How about competition? Maybe I can avoid a bidding war?
Yes, there are fewer buyers out there now, as everyone practices social distancing and agents have been working on protocols to keep tours safe for everyone involved. But there’s also way less inventory. So, the demand is low, but the supply is proportionately low, making competition for what’s still on the market that much fiercer. And signs are that as soon as people feel protected, buyers will be out looking again, and sellers will be getting their homes on the market.
For now, here is what we see:
If you’re serious, get pre-approved now. You might need to move fast.
Mortgage rates will most likely be, and stay, low while our economy shrinks.
Under-asking bids will most likely be rejected. Things aren’t that bad for sellers.
Open houses have moved to the virtual realm; be on top of listings, and if you love a place, ask for a private showing. This is possible, but only for serious buyers. Don’t waste people’s time and health with tours of places you know you’re not interested in.
Extensions on mortgage contingencies and even closings might be needed because of illness. If a buyer or seller contracts COVID-19, everyone will need to be flexible!
Closings are virtual, and they go quite well, in fact.
For Smoke Detector/CO inspections, the responsibility may now be the buyer’s—every community is different.
For those of you who love a good data crunch, feel free to dig into these numbers...and ask us for more! We feel the best way for you to make a wise decision about your housing plans is to know the facts. And we’re here to help you interpret them so don’t hesitate to reach out.
Year Over Year Information for Our Market Area: Arlington, Belmont, Brookline, Cambridge, Medford, Somerville, Watertown
Here are market snapshots for two of our busiest areas: Somerville and Arlington. If you'd like to see reports for another area, just let us know and we'll get right back to you.
On Market Snapshot: Comparing today to this date one year ago, both the median and the average list price for property is UP. Days on market is also UP, most likely due to restrictions on showings causing properties to be less accessible. The number of listings over our market area is DOWN by 67%, a substantial drop.
Closed Sales tell a similar story. Using the last 30 days as a time frame for comparison, 2019 saw 336 properties sold, with an average number of days on market of 21 and an average sales price of $912,380. This year, the number of properties is DOWN (220, or 65%), days on market is SIMILAR, and average sale price is UP to $1,016,965.
Pending Sales: The number of units that go under agreement in any given time period is also a good indication of activity. Last year, during the period of April 13–May 13, 532 properties went under agreement, with an average list price of $993,568. This year during the same period only 262 properties went under agreement (DOWN), although the average price remained similar at $959,941 (SIMILAR).
New Listings: The last 30 days saw 336 new listings hitting our market, as compared to 598 properties this time last year, so inventory is DOWN. We hope to see this start to change as restrictions are lifted and people start to feel more comfortable with having strangers in their homes...although there is no guarantee that lifting restrictions will have this effect.
Price Reductions: It’s interesting to note that the number of price reductions this year to last is almost the SAME percentage of listings: 18 out of 336 in 2020 and 37 out of 598 in 2019.
Cancelled and Withdrawn: As is to be expected, the number of listings that were cancelled or taken temporarily off the market increased substantially this year as compared to last. For this comparison we went back one extra month in order to cover the entire time of the quarantine: 3/13 to today. This year there were 166 properties that were either cancelled or withdrawn, whereas last year there were only 68. So this number is, predictably, UP.
As always, contact us if you have any questions, or if you're ready to get started buying. We're here to help.