Ned Chatelain

2020 Cape Cod Real Estate Market Recap Part 2

FOR PART 1 IN THIS SERIES CLICK HERE

The big question is “what about 2021?” Will the strong market hold?  Will prices continue to climb?  Or are we in a bubble whose collapse is imminent?  The short answer is, as always: “we have no idea.”  But for a long answer, here are some factors we see swimming around in the crystal ball on Agnes’ desk:

1) COVID generated an incredible demand for properties on Cape Cod, driven largely by out-of-area buyers.  Many of these were shopping for second homes to escape the pandemic shutdowns in urban areas and retained their off-Cape home as their primary residence.  But many made the move to Cape Cod permanently, attracted to the high quality public schools, phenomenal outdoor recreation, arts and culture scene, and of course, fried fish.  The extent to which either group will remain in the marketplace is the single greatest X-factor in predicting 2021 market performance.

2) Regardless of what happens with COVID demand, we are not generating enough new units on Cape, so we expect continued inventory problems.  This has been the story for 25 years across MA, and lack of new production has been driving median home prices to exceed median income by incrementally greater and greater margins every year.

3) The Fed's buying has contributed to massive amounts of cash in the marketplace, which even apart from COVID has been putting significant upward pressure on assets like real estate, bonds, gold, art, wine, etc... Everything we are reading suggests that this stimulus will continue.

4) Likewise, the Fed is signaling that they will keep the benchmark rate near 0% for the short-medium term, which favorably impacts mortgage rates and again puts upward pressure on real estate prices.

So what’s the roundup?  Items #2, 3 and 4 combine to suggest a continued strong market in the short term.  #1 is a wild card.  If things return to 'normal' and folks suddenly decide they no longer need or want that second home, or that they can no longer rationalize the expense, we may be in for a buyer’s market in the near future.  Only time will tell how things will play out.

2020 was a crazy year.  2021 is starting off on the same foot.  We have no idea what the future will bring.  But we do know this with 100% certainty: whatever the market brings, your Realtor will be a vital resource and ally ushering you through the buying, selling, or renting process, and there are no better agents out there than those at Chatelain Real Estate.  So pick up the phone, drop us an email, or stop by the office any time to discuss your needs -we’re here to help!
 

2020 Cape Cod Real Estate Market Recap Part 1

There are no two ways about it.  2020 was a remarkable year for the Cape Real Estate market.  We started off the year in familiar territory with January and February showing roughly the same level of market activity as in recent years.  But when the COVID pandemic took hold in March we saw a sudden slump in both pending sales and new listings – by the end of April new listings for single family homes were less than half of what they were in April 2019.  Things started to turn around in May, and by the end of July first quarter losses had already been erased and year-to-date median sale price and closed sales were up.  This trend continued until the end of the year, with record-setting monthly numbers in Q3 and Q4 eventually leading to a full 17.9% increase in median home sale price, and 19.8% increase in closed sales.

 

This 19.8% increase in closed sales happened in spite of inventory continuing to lag behind demand (see graphic above).  For example, buyers came back to the market in force in May. However, new listings of single family homes continued to drop until June, and by the end of the year never reached up to 2019 levels.  The most obvious effect of this low inventory is higher prices (a whopping 17.9% higher).  But it also leads to a faster and more aggressive market.  Total days on market was down this year, and homes are fetching closer and closer to asking price as time goes by.  A seller in today’s market can expect to receive 98.2% of asking price for their home, which is a significant increase over past years. 

What does this mean for buyers in today’s market?  Low inventory and high list/sale price ratios mean buyers should expect multiple offer situations with many homes selling for over asking price.  And the ever shortening days on market means buyers have to be ready to strike when the right home comes on the market.  Buyers should be pre-approved by a reputable local bank, and have a crack Realtor (like those from Chatelain Real Estate) on their side to help them move quickly and decisively.

For sellers, the takeaway is: sell!  Please!  We need more inventory in the marketplace in order to balance out surging demand.  Continued low inventory will only keep pushing prices higher, further exacerbating our already crisis-level affordability issues.  And with so many buyers out there, you are sure to get top dollar for your home.

The big question is “what about 2021?”  Will the strong market hold?  Will prices continue to climb?  Or are we in a bubble whose collapse is imminent?  The short answer is, as always: “we have no idea.”  But for a long answer see part 2 --HERE-- with the most significant factors we see swimming around in the crystal ball on Agnes’ desk:

Realtor Case file #57 – why local relationships matter

Whether you are buying, selling, or renting your home, one of the most important decisions you will make is who will represent your interests during the transaction. Those representatives should always be experienced local professionals with strong relationships in the community. I recently closed a transaction that perfectly illustrated just how important those relationships may end up being. Take a look:

Three days before closing on a seller client’s home the buyer’s attorney discovered two title issues which were going to prevent us from closing: an undischarged mortgage and an outstanding right of first refusal from the original developer. Title issues are always trouble but this was particularly troubling because my sellers were using the funds from their sale to purchase another home on the same day – a delay on the sale would cause serious complications for everyone involved. But my clients had done the right thing – they had carefully selected a team of experience professionals with strong connections in their respective professional communities. Here’s what happened:

We were in a rush so the attorney asked me (as the seller’s agent) to work on the right of first refusal while she and the sellers dug in on the mortgage. Because of my local knowledge, I happened to know who the developer was, and that he had retired and sold his business about 15 years ago. I also happened to know who he sold the business to, and have a working relationship with that person. So I called him up and got the contact info for his predecessor. I then spoke with the developer who sent me to his attorney here in Yarmouth. I called the attorney, with whom I have closed dozens of deals and asked for a favor. That afternoon the document was prepared and signed. First problem solved.

But what about the second problem? The mortgage on the home had been paid off for 10 years, but the bank never recorded the discharge. [Editor’s note: this happens ALL THE TIME. Always call your bank to make sure they recorded the discharge after your last payment to avoid this issue yourself]. The mortgage was, sadly, with a large national bank, so my sellers’ tearful trip to the branch was useless. So they regrouped and, on a lark, called their financial advisor. At dinner time on a weeknight. He picked right up. They explained the situation and he said, “You know what, I know someone who works in the mortgage department at that bank’s headquarters. Let me reach out to him.” By noon the next day they had satisfactory documentation of the discharged mortgage in hand, thanks to their finance guy’s local relationship within the bank.

We sent the completed file to the buyer’s attorney, the transaction closed as scheduled on Friday, my clients bought their new house that afternoon, and everyone walked away happy. Disaster averted.

So what was the trick? Local relationships. My clients had carefully selected a team of local experts and it paid off big time. Think about it like this – what if their Realtor hadn’t been local? Would the seller’s attorney have known and trusted him to solve part of the problem, or would she have had to extend the closing date to give her time to do it herself? Would the agent have known immediately who to call to track down the long-since retired out of state developer? Would the developer’s attorney have been willing to do the agent a favor by rushing the file? What if their financial advisor had been a nameless associate at a large firm who they couldn’t reach after hours? Or who didn’t have personal local relationships within the industry? Would they have still closed on time? Maybe. Maybe they would have gotten lucky. But why leave it to chance? Real Estate is a team sport – when you assemble your team, make sure to pick local professionals who have the experience and relationships in their industries to give you the best representation possible.

April 3 COVID-19 Update

Here at Chatelain Real Estate we are taking the current social distancing guidelines very seriously. We've put the following services in place to make sure we are able to keep everyone safe while also providing essential services to our clients.

If you have a transaction in progress, we have the capability of disclosing all documents for electronic signature - all from the comfort of your home.  All closing functions (lending, attorney services, etc...) are designated as essential by the governor, so there should not be any major disruption to your closing.

If you are a buyer, please don't hesitate to call and ask for a remote viewing of any properties you may be interested in.  We'll be happy to set up a video conference link and conduct a live 'virtual showing' at your convenience.  

For short-term renters, we have revised our refund policy to allow for a full refund of any booking up to 30 days before occupancy.  So book now - we're all going to need a vacation when this is over.

And the office may be closed, but we aren't letting the cobwebs grow - during the shut down we are expanding into an adjacent suite to more than double our current office space - when things get back to normal, we'll look forward to seeing you at our new and improved digs!

As always, if you have questions about how COVID-19 is affecting the market, your search for a home, or the timeline for selling your current home, please don't hesitate to ask.  We are here to help however we can.

Until then, stay safe.

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    Cape Cod Affordable Housing Update | Feb 2020

    We get a lot of questions from folks interested in the issue of housing affordability here on the Cape, so we thought we’d give a quick overview of the issue and some of the potential solutions being discussed.  

    What exactly is meant by “affordable”?  The benchmark for housing affordability is 30% of a family’s income.  Here on Cape, the Area Median income (AMI) from 2014-2018 (per census) was $70,621 (see here for census data).  During the same interval the median home sale price was $367,700.  The total monthly payment on a median priced home comes to approximately 28% of median income if the buyer has a traditional 20% down payment (jump to our math below).

    So with a good-sized down payment, the median priced home can be purchased by the median-earning household.  Good news so far.  Now let’s break down housing affordability for households earning below median income.  Take a look at the graph of residential price distribution in 2019.  Here we matched home prices to the income brackets in the next graph to determine how many homes are available to homes in their income price range.  Notice the steep decline in available homes below median income affordability of $367k.  Now compare that to the graph of income distribution.  Notice the mis-match.  If your household earns 68% AMI you may be only 32% away from median in terms of income, but 32% less than median home value equates to $250k, and there are almost no homes available in that price bracket.  

    In addition, these graphs don’t account for the quality of the housing at each price point.  A good-quality ‘move in’ condition home can be found around the median price point of $367,000.  However, once you get down to about the $300,000 mark it is extremely challenging to find a home that is not in need of significant repairs or upgrades before it is ready for occupancy.  (If we could graph housing quality against price point, it would show an even sharper peak than the price graph).  On the one hand, this presents an opportunity to a buyer who is willing to buy a fixer upper for a low purchase price, bang nails after work and build equity.  However, it also means that same buyer must budget for repairs in addition to down payment, which further reduces the price of the home they can afford.  And for the less hands-on households, it means a home purchase is a nonstarter.

    Ok, so it is a challenge for a household earning less than AMI to buy a home, so they decide to rent and save up to buy down the line.  Good plan – but let’s take a look at rental market first. Per HUD guidelines, fair market rent for a 3 bedroom house in Barnstable county is $1,919/month (reference here).  This is $264/month more than the same household would be paying for a median priced home of their own.  Why the mis-match? Barnstable County has a 1% vacancy rate for rentals, which represents a huge shortage – a healthy rate would be 7%.  This shortage translates to high demand, which translates to – you guessed it, high prices. 

    So let’s circle back to the median home value calculation above, which assumed that our median earning family had a 20% downpayment to apply to their median-priced home.  If a renting household is paying close to $300 (16%) per month more to rent than to own, it can be a real challenge to save enough money to put towards a downpayment.  They are stuck in a loop of paying too much for rent, while also pricing themselves out of the possibility of homeownership.

    So what is the solution?  There is no silver bullet, but bringing more rental units online is a big part of the answer.  One tool that has gained a lot of traction on the Cape is easing prohibitions on accessory apartments.  This is a minor change which can go a long way to bringing more small, organically affordable, market rate units into the market place.  Other initiatives include property tax incentives for landlords of long-term rentals, form-based code zoning reform to encourage multi-use and multi-family development, and raising density in areas where the infrastructure already exists to service a higher density of homes.  A lot of innovative work is being done to help restore a healthy, balanced real estate market to the Cape (and the nation).  It’s a topic that is near and dear to our hearts – if you ever have questions, please don’t hesitate to reach out.  We’d be happy to discuss in greater detail.


    Calculations

    Area Median income 2014-2018 (per census): $70,621
        • Average Median home price 2014-2018 (per CCI board of realtors): $367,700

    At today's conforming interest rate of 3.375% (CC5 2.06.2020) a mortgage on a $367,700 home looks like this:

        • 20% Down payment = $73,540
        • Loan Amount = $294,160
        • Principal/Interest monthly payment = $1,300.47
        • Taxes = $245 (assuming an imaginary town with 8/1000 mil rate and assessed value equal to purchase price {market value is typically actually 120%-124% of assessment for most towns in the mid-Cape})
        • Insurance = ~$110

    -----------------------------------------------------------------------

    Total Monthly Payment Estimate = $1,655.47

    Sounds of Summer

    Summer is in full swing here on the Cape.  And along with the gorgeous weather and crowds of happy beachgoers, the lively outdoor music scene is at its height!  

    Nearly every public outdoor space in the mid-Cape area hosts its own Summer concert series - the Dennis Port village green alone has twice-weekly free concerts, and Drummer Boy Park, Brooks Park, and the Dennis Village Green on 6A all host their own series. 

    So when you get off the beach, don't head right back to the cottage - swing by a park or green somewhere, pull up a beach chair, and enjoy the sounds of summer!

     

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      CHANGE COMING TO REAL ESTATE CLOSINGS

      Changes are coming on October 3, 2015 to real estate closing procedures and to the closing forms. These changes will impact buyers and sellers.  Extra time may be necessary between a deal being struck and the closing date in order to meet the new regulations.  Both buyers and sellers will be required to present documents requested in a very timely fashion. Otherwise, closings will be delayed. 

      In the past, estimates were given to buyers for their closing costs. Some wiggle room was allowed on those estimates.  Beginning in October, lenders will be accountable to the exact charges listed on the forms presented to buyers in the initial mortgage process and to come within 10% on many of the other charges.  Additionally, there will be no changes allowed to closing documents at the closing table. 

      So, everyone involved with closings will have to provide accurate documentation in a timely manner from the get-go in order for closing delays to be avoided.

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        Tough weather makes for a tough market

        Whether you are buying or selling a home this winter, you are no doubt frustrated by the slow market.  February usually marks the beginning of the Cape's busy spring market, but because of record snowfalls throughout the region (and more coming all the time), we have yet to see the usual uptick.

        The effects of the snows are shot through the entire market: sellers are delaying putting their homes on the market because of the difficulty of keeping their homes clean and ready to show; buyers are unable to make appointments to see homes because of the unpredicable weather; those buyers who do have the desire to see homes are struggling to actually make appointments because many homes here on the Cape are not plowed or shovelled out; if you already have a transaction in the works it can be difficult or impossible to inspect basements, crawl spaces, septic systems, and more because of the snow.

        All these factors have conspired to make February a very challenging month for the real estate industry.  However, with spring right around the corner, don't despair!  With interest rates still very low, a balanced market, and a predicted surge of inventory, we expect March and April to be great months to buy or sell a home.  

         

         

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          Things to do on Cape This Snowy Weekend

          With another 8-10 inches of snow coming this weekend, Cape Codders are buckling up and sharpening their snowshovels. But let's not forget that the Cape knows how to recreate in the winter as well as in the summer!  Below are a few ideas from the Cape Cod Times for activities to keep you out of the cold on this stormy February weekend.  Enjoy!

          February 14, 2015 - Happy Valentine's Day!

          Turtle love times two over Valentine weekend Saturday, 

          The Wellfleet Bay Wildlife Sanctuary will offer two distinct programs this weekend. On Saturday, children can become turtle researchers for a day and find out how stranded turtles are rescued, how to collect data, and how rehabilitated turtles are readied for a return to the water. On Sunday, sanctuary director Bob Prescott will present "Shellshocked: Reflections on the 2014 Sea Turtle Stranding Season," a review of the season's highlights and possible reasons for the huge increase in turtle strandings.

          When:  10 a.m. to noon Saturday; 1 to 2:30 p.m. Sunday
          Where:  Wellfleet Bay Wildlife Sanctuary, 291 State Highway (Route 6), South Wellfleet
          Admission:  Saturday: $9; $7 for members; Sunday: $12; $10 for members
          Information:  www.massaudubon.org or 508-349-2615

          Rhapsody in Bluegrass concert

          The Cape Symphony and the Annie Moses Band will join together for a musical tour of American music, featuring songs associated with each region of the country. Including music from New England, jazz from the Deep South, bluegrass from Kentucky and then music of Wild West, the concert will feature such well-known songs as "Summertime," "Shenandoah" and "Simple Gifts."

          When:  3 and 7:30 p.m. Saturday; 3 p.m. Sunday
          Where:  Barnstable High School Performing Arts Center, 744 West Main St.
          Tickets:  $30 to $69 (shows are nearly sold out)
          Information:  www.capesymphony.org or 508-362-1111

          Sunday, February 15

          Astronomy talk covers past, present and future

          The Cape Cod Museum of Natural History will host speaker Chuck Kunesh's presentation called "Planet Quest: The Search for Another Earth." His talk will cover our own solar system; what people from ancient times through the 20th century thought about the possibility of other solar systems; and astronomers' plans to find Earth-like planets and to look for evidence of life on those planets.

          When:  1 p.m. Sunday
          Where:  Cape Cod Museum of Natural History, 869 Main St. (Route 6A), Brewster
          Admission:  Free with museum admission (adults: $10; seniors: $7; children ages 3 to 12: $5; free for museum members, children under 3, Massachusetts Teachers Assoc. members and active duty military and families with current military I.D.)
          Information:  www.ccmnh.org or 508-896-3867, ext.133

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            Winter home ownership hazards

            This week's powerful Nor'easter has caused many second homeowners to bite their nails wondering if their Cape house survived the storm unscathed.  If you are in this category, don't forget that here at the Cape Cod Chatelains we provide a full-service realty firm, including property management.  Our weekly and post-storm inspections routinely help our clients to mitigate potentially disastrous circumstances.  Just yesterday we discovered that the furnace vent at one of the homes we manage had been covered by snow during the storm.  Sensing the blockage, the furnace had gone into emergency shutdown mode.  The temperature in the home was 42 degrees upon our arrival.  If we had not been there to check the house, unblock the vent, and allow the furnace to cycle back on, the home (which was built last year) could have sustained catastrophic damage due to a broken pipe.  Instead, a disaster was converted to a minor irritation.

            If you own a second home or investment property on the Cape which is vacant for long periods, we strongly recommend engaging a property manager to help manage the risk of leaving your home unattended.  We would be happy to answer your questions at any time.

             

            In the meantime, be safe and enjoy the sledding!

             

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