benedek / Getty Images
The ongoing fallout from the coronavirus pandemic has exacerbated the years-long supply and demand problem in the U.S., which has seen chronic lack of inventory driving up prices in nearly every corner of the market.
The problem is especially acute in major cities, and with a global pandemic added to the mix, high-end buyers have a host of reasons to consider taking their searches to secondary markets and smaller cities, which in many cases have more coveted single-family home inventory, and at relatively reasonable prices.
“The inventory shortage has been with us for a few years, and the pandemic [combined with interest rates dropping] has really accelerated this imbalance,” said realtor.com senior economist George Ratiu. “With quarantines lifted, sellers have still been on the sidelines, with buyers now returning really strongly back to the market, and it’s putting a lot of pressure on prices.”
Among the places where opportunities exist is Naples, Florida, according to realtor.com data produced for Mansion Global on U.S. metros that have the highest ratios of high-end listings on the market. For this data set, that means the number of $1 million-and-up listings per 10,000 households in June 2020.
Naples topped the list, with 83.7 listings available for $1 million-plus per 10,000 households in June, and 1,354 such listings in total. However, those numbers represent a 15.4% drop in inventory from the previous year, as the data revealed that even in the markets with relatively high supply, inventory is seeing steep drops, as buyers rush to secure properties before a potential second wave of Covid-19. At the same time, many would-be sellers are still taking a wait-and-see approach, exacerbating the supply problem.
Across the board, even metros with comparatively high supply levels are seeing inventory fly off the market, meaning that buyers looking to snap up deals may want to move quickly.
Other cities that had relatively high ratios of high-end listings—and therefore opportunities for interested buyers—include:
-
- The Bridgeport-Stamford-Norwalk section of Connecticut, with 2,516 listings available for $1 million-plus, or 72.9 per 10,000 households, a 24.2% year-over-year drop in inventory.
- Barnstable, Massachusetts, which had 69.2 luxury listings per 10,000 households and 667 in total, a 22.6% annual decline.
- Kahului, Hawaii, which had 65.6 luxury listings per 10,000 households and 393 in total, a 17.2% decline.
- Santa Barbara, California, which had 48.3 $1 million-plus listings per 10,000 households and 720 in total, a 13% yearly decline.
Ratios of High-End Listings in Small Cities in U. S.
“We’ve been tracking it weekly, and total inventory has been accelerating on a downward trend, meaning it’s evaporating from the market faster than it did a year ago,” Mr. Ratiu said. “In the first two weeks of March, new listings were growing 5% year-over-year. In the week ending July 25th, new listings were down 11% year-over-year.”
Though markets are evolving rapidly (and inventory is moving accordingly), this data can offer a jumping-off point to buyers and investors looking for better value than what’s on offer in the biggest luxury markets, and a potential upside if prices continue their upward push over the next few years.
‘Secondary’ Markets With Strong Fundamentals
Brokers in the cities that topped the list confirmed that since stay-at-home orders were lifted, buyer demand has more than made up for the months when transactions were on hold, and market activity is brisk.
“The trend is toward lower density combined with an attractive location,” Mr. Ratiu said. “All of these [cities] are places where people want to be for the location and what it offers.”
While there is still inventory to be had (particularly when compared to options in larger cities), deals are moving quickly, and in many cases, time that properties spend on the market has decreased. All of which means that time is of the essence for would-be buyers who may otherwise be tempted to wait and see how markets play out as the crisis wears on.
“In Santa Barbara, for June, July, and the beginning of August, we’ve seen what we’d normally see in the spring, times 10,” said Maureen McDermut, an agent with Sotheby’s International Realty. “There are multiple offers, at all price points. Everybody has said, ‘We’ve never seen anything like this in our history of selling in this area.’”
In Naples, sales for single-family homes between $2 million and $5 million are up 14%, and days on market for these properties has edged down, from a typical pace of 120 or 130 days to something closer to 108, said Florida-based Compass agent Dennis Bowers.
“With Covid-19, there was initially the perception by some that the market was going to tank. The reality is that sellers pulled back more than buyers did—the buyers have returned,” said Mike Dodge, director of market research at John R. Wood Properties/Luxury Portfolio International in Naples. “Of the sellers who removed themselves from the market in March, I figure about 40% have yet to return to the market. Year-over-year new listings are down as well, while there are increases in buyer activity.”
Similar stories are unfolding in luxury markets across the country, as high-end buyers seek space to ride out any future shutdowns, homes that can double as vacation destinations in lieu of traditional travel, and the added upside of diversifying their investment portfolios in a volatile financial market.
“Generally speaking, our inventory has gotten very tight. We have communities that are down by 50%, it’s a dramatic change. I’ve seen clients lose two or three houses because they were outbid,” said Connecticut-based John DiCenzo, director of sales for Westport & Wilston at Halstead, which is merging with Brown Harris Stevens.
There’s still opportunity to be found in the area, however, particularly for buyers looking at higher price points. “The higher end had been the soft part of our market for a decade,” Mr. DiCenzo added. “We’re seeing more energy there [now] than there has been.”
Bidding Wars Haven’t Translated to Huge Price Hikes—Yet
Though tight inventory and high demand have led to frequent bidding wars in these markets, there’s still a broad sense that buyers aren’t willing to overpay, and prices have yet to notably increase. But the longer term is likely to be a different story.
“I’m not convinced that we’re seeing upward pressure on price yet,” Mr. DiCenzo said. “We’re definitely seeing a boom in closings. You have to have transactional volume rise first before prices rise, and we’re in the first phase of that. If we sustain this for a reasonable period of time, we’re going to see the impact on pricing.”
Even with the recent rush of buyers into the Santa Barbara area, Ms. McDermut said, “certainly sellers are taking advantage of the fact that there’s low inventory. But buyers are not going to overpay just because the sellers have put these higher prices. There is pressure, but you can’t just put any price on the market.”
However, these smaller markets are poised to see steady appreciation, a strong potential draw for luxury buyers looking with an eye to value and investment stability.
“The astute, optimistic investor, might find some good deals over the next two years,” Mr. Ratiu said. “Realistically, this combination of remote work plus newfound appreciation for quality of life will continue to favor some of these smaller markets for at least two to possibly even as long as four years. In the medium term, I see these markets seeing continued interest.”
Mansion Global is owned by Dow Jones. Both Dow Jones and realtor.com are owned by News Corp.
The post For Buyers Ready to Leave Major Markets, Smaller Cities Offer (Relatively) High Supply appeared first on Real Estate News & Insights | realtor.com®.
source https://www.realtor.com/news/real-estate-news/for-buyers-ready-to-leave-major-markets-smaller-cities-offer-relatively-high-supply/
No comments:
Post a Comment