The first quarter of 2021 is just about over and the Cape Cod real estate market has continued to frustrate buyers, thrill sellers, and leave EVERYONE, including top economists, wondering how long the supply & demand imbalance will continue. Understanding the primary source(s) of the imbalance is key to crafting an informed opinion. So let’s dig deep into the numbers and see what we find.
We’ve heard it said over and over again that inventory is critically low, and that is, in fact, an understatement. As of today (3/29/21), there are 322 single family Cape Cod homes actively on the Cape & Islands MLS. At this same time last year, just as Covid was becoming a real concern in the U.S., there were 1471 homes on the market, and 1846 during the “more normal” 2019. That’s roughly an 80% drop from the average of 2019 and 2020. Too few sellers and too many buyers are both significant contributing factors to the lack of inventory, a problem that is unfortunately (for buyers), only getting worse.
Consider the 2020 market. While Covid brought the market to a screeching halt in the spring, it made a tremendous recovery in the 3rd and 4th quarters. Buyers began coming out in droves during the summer and by the end of the year, closed sales were up 20% compared to 2019 and median sale prices for the year were up 18%. End-of-year inventory was down 60% compared to 2019, due almost entirely to increased buyer activity, as opposed to shortage of listings. In fact, by the end of the year, the number of new listings in 2020 was only off by 3% compared to 2019.
Moving on to 2021, we began the year with the above-mentioned 60% fewer homes (compared to January 2020) and added 40% fewer new listings. Pending sales were up 33%, digging into the inventory even further. The downward inventory trend continued in February with 43% fewer listings than February 2020 and 15% more pending sales. New listings in March will be down roughly 20% compared to 2020, and roughly 40% compared to 2019.
The key question raised by the 2021 numbers thus far is why aren’t more sellers selling? The market has never been more in their favor. 12+ offers on every property is becoming commonplace, as are over-asking bidding wars and contingency-free terms. There are, of course, many answers to that question. Many sellers don’t want to move during Covid. Where are they going to go? Some have decided to use the Cape home themselves. Others cannot travel to the Cape to empty out the house. Some don’t want buyers parading through their house during Covid. And the list goes on.
With so many buyers still out there attending every open house and submitting more offers than they can remember, the buyer pool is not likely to dry up anytime soon. Sure, interest rates have risen a bit, but they are still historically low and not expected to soar anytime soon. Plus, a large number of today’s Cape buyers are paying with cash.
That leaves sellers as the key to balancing the market. Until seller activity returns to more normal levels, the current market conditions will linger. Because seller activity is so heavily tied to Covid, we are likely to see the imbalance continue until at least the late summer or early fall.
If you’re a buyer, be prepared to put your best foot forward on every offer. The competition is stiff. Consider looking at homes that have been on the market for more than a few weeks to be sure you haven’t missed one that might meet your needs. Also, keep in mind the following:
- Open Houses are typically mob scenes, with standard Covid protocols in place. Many are by appointment only. Make sure you are working with a Realtor who can help you set up all your appointments in advance.
- Know what you are looking for and have your financing all lined up. Most new listings are requesting best and final offers from all interested buyers within 24 hours (or less) after the last Open House.
- If there is a lot of activity on the first Open House weekend, be prepared for a bidding war if you plan to make an offer.
If you’re a seller, there may be no better time to reap the most return on your house than right now. Please contact us for a free, in-depth comparative market analysis of your home in today’s market.