Berkshire real estate sales surged in 2021, and so far in 2022, the market in all regions and property types is beginning to slow from the frenetic pace during COVID. The historical market beyond a one year comparison is essential to understand the market we are in today. The full report is included here, but the summary that follows highlights key changes between January-June sales in 2022 versus 2021. January – June sales volume was down by 8% countywide and the number of sales was down by 12% compared to the same period in 2021. Get the full Market Watch report!
The market is surely slower than last year, but the number of sales and the dollar volume transacted are at extremely high levels, when looking back over the past several years. Consider that 2018 was the first year we hit $200 million in sales during the first 2 quarters of the year. This “slowing year” in 2022, we tracked $352 million in sales. Real estate remains a huge part of the Berkshire economy.
Many factors are impacting the market, including low inventory, higher mortgage rates, inflation, talks of nationwide recession and overall, more cautious buyers than the previous year. With a total market dollar volume of $380 million dollars transacted so far this year, it is still a stellar real estate year to date for the Berkshires.
- Despite overall sales falling 12% to 935 YTD transactions compared to last year, this still outpaces sales rates in years prior to 2021. The same trend follows the dollar volume of transactions, with a 9% decrease in the transaction values, yet exceeding years past.
- As the trends show, the prediction of a market correction rings true. With inventory remaining a challenge, high building costs, rising interest rates and inflation on the rise, sales are changing to a more balanced pace from the wild market of 2021. We see now more than ever that looking at specific property types, locations and price ranges is critical to understanding the buyers remaining in the market and where the housing gaps are that can be filled with our current inventory.
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The inventory of Berkshire County residential inventory of homes on the market follows seasonal patterns each year. In 2020, there was a blip when the pandemic hit and sales stalled, yet the market quickly rebounded. With huge demand, inventory levels fell to historic lows. While the market is correcting and REALTORS report fewer bidding wars and more adjustments in listing prices and appraisal values, we still note an overall lack of inventory of homes for our workforce.
Residential Sales Highlights:
Overall, the number of home sales from January to June of 2022 decreased 10% over the previous year. North County sales remained robust while south county sales retracted the most, with central county reporting fewer sales with higher transaction costs. Sales in 2021 broke every record, with a 21% jump over the previous year and 659 sales county-wide and this year, the dollar volume of $269 million dollars of residential sales broke records. With a decrease in number of homes sold, the dollar volume also modestly decreased 5% over the previous year, yet historically high. With low inventory, rising interest rates and a cooling market nationwide, economists point to a market correction. Buyers are savvy to the shift in higher housing purchase costs, while sellers are just starting to adjust to a market that is balancing.
Condominium Sales Highlights:
Condominium sales in south county slowed considerably in the first 2 quarters of 2022 compared to 2021 sales rates. North and Central Berkshire reported opposite numbers with double digit gains in both the number of units sold and the dollar volume transacted in the condo market. Despite an overall decrease countywide, condo sales are robust when looking at the historical sales rates and volume.
Multi-family Sales Highlights:
Overall, multifamily sales dipped slightly with a market slowdown in northern and southern Berkshire impacting the countywide averages. Both regions had major growth last year, and that slowed this year. Looking back over 2 years, both had sales within a consistent range that is typical of the region. Central Berkshire has the most multifamily units and continues to have strong activity in the multifamily market. Sales rose 6% in the number of properties sold, and 30% in dollar volume, with Pittsfield the dominant part of the market.
Land Sales Highlights
Land sales in 2021 were hard to beat, with surging sales in all parts of the county. This year, we see a slight retraction of sales countywide, but still very strong when looking at years past. With building costs an unknown going forward, it is important to maintain a close eye on permits and building opportunities to help alleviate some pent-up buyer demand for existing homes in popular price points. It remains incredibly hard to build needed workforce priced housing with current costs and codes. In May 2022, 11% of builders dropped prices on newly constructed homes, according to building consultancy Zonda. An additional 70% kept them flat compared with May.
Commercial Sales Highlights
Despite a commercial market heavily impacted by work-from-home and business closures, commercial sales rose last year and yet started to fall this year. Central Berkshire reported double digit gains in the number of sales and the dollar volume of those transactions. North and South county saw declining commercial sales as reported to the MLS, yet not significantly different than historical averages.
The Experts Weigh in on Trends
We have identified several key trends and have included opinions from national experts and economists to share the national data and insights that may affect our market moving forward:
Vacation home sales:
NAR Chief Economist Lawrence Yun says, “An interesting development in vacation home sales is that buyers are showing greater interest in them. Eight percent of all transactions were classified as vacation home sales in the latest data. Usually, vacation home sales would comprise four or five percent, so a rise to eight percent is a meaningful increase.
Working from home for some people can also mean working from a vacation home. So clearly a preference for wanting to live in either a mountainous area close to the lake, or somewhere close to the ocean where people view that working from home can be a pleasant experience.
Another reason for an increase in vacation home could also be due to the fact that inflation is beginning to perk up. When higher inflation occurs, some people want to have a tangible asset as a hedge against inflation. So, it is also possible that buyers want a second property as a hedge against inflation.”
Inflation is rising better than four percent from one year ago. Gasoline prices are up 23 percent from one year ago and at a six-year high. As Dr. Yun points out, “Certainly, this is beginning to hit REALTORS®’ pocketbooks because REALTORS® drive more frequently compared to the general population.
Also as related to moving, moving trucks along with appliance prices are rising much faster than broader consumer prices. So please advise your clients that it’s not only about the cost of buying and selling homes – they should also be prepared to pay more for moving trucks, the prices of which are rising about seven percent from one year ago, as well as appliance costs rising close to 10 percent from one year ago.”
Important to many Berkshire County south county sales, cash is king. Lawrence Yun’s national trends also show, “Cash transactions are indeed picking up. Last year only 13 percent of transactions were cash. Now in the latest data they were at 25 percent, essentially doubling. It could be due to the fact that given heated multiple-offer situations, some buyers want to present more attractive offers. From a seller’s perspective, cash offers remove those mortgage contingencies and that has some buyers thinking they have an advantage by offering cash so we are seeing this rise in cash transactions.”
It is important to know, to address these trend, many mortgage products and programs are being developed for buyers to be competitive and jump into the market when possible. We always advise talking to a local lender to determine what loan opportunities exist today for a full understanding of the market.
The cost of buying a single-family home jumped more than 20% nationwide in April from the same month last year, according to the latest S&P CoreLogic Case-Shiller Index. Higher mortgage rates added to the cost of buying a home, as they rose sharply in May; however, those big spikes may level off. Nadia Evangelou, senior economist and director of forecasting at the National Association of Realtors (NAR), says rates should average around 5.7% by late 2022.
The Mortgage Bankers Association recently reported that a steep decrease in mortgage applications to buy and refinance “pushed the market index down to its lowest level in 22 years.” These higher costs are putting pressure on the housing market.
“While housing costs remain high, pushing home shoppers to make tough choices about their budget priorities, the number of homes for sale is expected to continue to grow, building on the turnaround begun in May,” according to the latest Realtor.com housing report.
As REALTORS in the Berkshire discuss local trends, a common conversation is how aware the buyers are of the shift in the market and the higher cost of home loans, while sellers are still thinking the market is where the sky was the limit on prices, favorable seller terms and quick cash closings. “A lot of homeowners are still pricing homes based on the market of six months ago,” says George Ratiu, manager of economic research for Realtor.com. “There is a gap between what homeowners are asking and what they’re getting.”
Possible help on the horizon:
A plan by the U.S. Department of the Treasury allows the use of $350 billion in American Rescue Plan funds by state, local, and tribal governments toward the development, repair, and operation of affordable housing units. While we work with local groups, legislators and housing professionals, inventory for our workforce is still at critical low levels and many markets where the inventory is starting to build isn’t in the more popular priced markets. Keeping our focus on developing new and repairing our existing housing stock is important.