While so many parts of the US economy have been met with challenges over the last year, the housing market has stayed strong, and even more so on the Island. But will it last? That is the question. Martha’s Vineyard Real Estate – Is The Current Real Estate Market Going To Fall
When we experienced COVID-related shutdowns last March, the real estate community, brokers, agents, and clients, were quick to respond. The initial closed doors led to an almost halt in the market. But it quickly changed with Martha’s Vineyard being seen as a “sanctuary.” Many people wanted out of cities and populated areas. The island became a real estate hotbed for sales and even rentals. The tight inventory has gotten smaller and smaller.
Now, as the spring market approaches, you may be wondering whether the good times can continue to roll on. If you’re a homeowner or second homeowner, should you take advantage of this opportunity to sell with the costs of homes increased? If you’re a buyer, should you buy now and risk paying too much? Below we answer some of your most pressing questions.
Martha’s Vineyard Real Estate – Is The Current Real Estate Market Going To Fall – What Is The Difference From The 2008 Meltdown?
At the beginning of the pandemic, fears of an economic recession and an ensuing mortgage meltdown were top of mind for homeowners all across the country. For many buyers and sellers, the two seemed to go hand in hand, just as they did in the 2008 economic crisis.
In reality, however, the conditions that led to 2008’s recession were very different from those that triggered the current downturn — and this time, the housing market is the source of much of the good news (1). This is in line with historical patterns, as housing prices traditionally hold steady in the face of recession, with homeowners staying put and investors putting their money into bricks and mortar to ride out uncertainty in the stock market.
This time around, because of lessons learned in 2008, banks are better funded, homeowners are holding more accrued equity, and, crucially, much of the economic activity is focused on financial factors outside the housing market. As many industries quickly pivoted to work-from-home, early fears of widespread job loss-related foreclosures have failed to materialize. Federal stimulus payments and the Paycheck Protection Program also helped to offset some of the worst early effects of the shutdown.
Martha’s Vineyard Real Estate – Is The Current Real Estate Market Going To Fall – Are We Facing a Real Estate Bubble?
A real estate bubble can occur when there is a rapid and unjustified increase in housing prices, often triggered by speculation from investors. Because the bubble is (in a sense) filled with “hot air,” it pops — and a swift drop in value occurs. This leads to reduced equity or, in some cases, negative equity conditions.
By contrast, the current rise in home prices is based on the predictable results of historically low interest rates and widespread low inventory. Basically, the principle of supply and demand is working just as it’s supposed to. In addition, experts predict a strong seller’s market throughout 2021 along with increases in new construction (2). This should allow supply to gradually rise and fulfill demand, slowing the rate of inflation for home values and offering a gentle correction where needed.
Martha’s Vineyard Real Estate – Is The Current Real Estate Market Going To Fall – Effects Of Low Interest Rates
According to Freddie Mac, rates are projected to continue at their current low levels throughout 2021 (3). This contributes to home affordability even in markets where homes might otherwise be considered overpriced. These low interest rates should keep the market lively and moving forward for the foreseeable future.
Martha’s Vineyard Real Estate – Is The Current Real Estate Market Going To Fall – Effects Of Low Inventory
Continuing low inventory is another reason for higher-than-average home prices in many markets (4). This should gradually ease as an aggressive vaccination rollout and continuing buyer demand drive more homeowners to move forward with long-delayed sales plans and as new home construction increases to meet demand (5).
Martha’s Vineyard Real Estate – Is The Current Real Estate Market Going To Fall – Aren’t Some Markets Looking Less Strong Than Others?
One of the big stories of 2020 was a mass exodus from attached home communities and high-priced urban areas as both young professionals and families fled to the larger square footage and wide-open spaces of suburban and rural markets. This trend was reinforced by work-from-home policies that became permanent at some of the country’s biggest companies.
Speculation then turned to the death of cities and the end of the condo market. However, it appears that rumors of the demise of these two residential sectors have been greatly exaggerated.
However, the Martha’s Vineyard real estate market definitely saw a quick uptick as a popular real estate market for both people looking to buy not only a second home — but to call the island their home. Also, many home sellers saw it as the perfect time to place their home on the market.
With the first vaccine rollouts, renters have begun returning to major urban centers, attracted by the sudden rise in available inventory and newly discounted rental rates (6). In addition, buyers who were previously laser-focused on a single-family home responded to tight inventory by taking a second look at condos (7). While nationwide condo prices continue to lag behind those of detached homes, they’ve still seen significant price increases and days on market reductions year over year.
Martha’s Vineyard Real Estate – Is The Current Real Estate Market Going To Fall – Has COVID Affected The “Seasonal” Real Estate Market?
Frequently, the real estate market is seen as a seasonal phenomenon. However, the widespread shutdowns in March 2020, coming right at the beginning of the market’s growth cycle in many areas, has led to a protracted, seemingly endless “hot spring market.”
While Fannie Mae’s chief economist Douglas Duncan predicts slower growth from 2020’s historic numbers, the outlook overall is positive as we embark on the 2021 spring selling cycle (8). Duncan anticipates an additional lift in the second half of 2021 as buyers return to business as usual and look to put some of their pandemic savings to work for a down payment. Thus we could be looking at another longer-than-usual, white-hot real estate market like we have seen over the last several months on Martha’s Vineyard.
Martha’s Vineyard Real Estate – Is The Current Real Estate Market Going To Fall – Will A New Administration Affect the Real Estate Market?
Projected policy around housing promises to be a boost to the real estate market in many cases (9). While some real estate investors bemoan proposed changes to 1031 Exchanges, the Biden plan for a $15,000 first-time homebuyer tax credit aims to increase affordability and bring eager new home buyers into the market. In addition, Biden-proposed policy pinpoints low inventory as a primary driver of unsustainable home values and is geared toward more affordability through investments in construction and refurbishment.
Overall, according to most indicators, the real estate news looks overwhelmingly positive throughout the rest of 2021 and possibly beyond. Pent-up demand and consumer-driven policies, along with a continued low-interest-rate environment and rising inventory in some markets should help homeowners hold on to their increased equity without throwing the market out of balance. In addition, the increase in long-term work-from-home policies promises to give a boost to a wide variety of markets, especially Martha’s Vineyard, both now and in the years to come. People can make living on the island a year-round reality.
Still Have Questions – Point B Has Answers
While economic indicators and trends are national, real estate is local, especially here. Each sale has its own challenges and successes which can be very different for other markets. At Point B Realty, our team of real estate experts is here to answer your questions and help you understand what’s happening in each neighborhood and town. Contact us today, if you’re wondering what your home is worth or you’re looking to buy on the Vineyard. You can text or call us at (508) 687-5760 or email sales@pointbrealty.com.
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Sources:
1. New York Magazine –
https://nymag.com/intelligencer/2020/06/why-this-economic-crisis-wont-be-as-bad-as-2008.html
2. Washington Post –
https://www.washingtonpost.com/business/2021/01/11/2021-housing-market-predictions/
3. Freddie Mac –
http://www.freddiemac.com/research/forecast/20210114_quarterly_economic_forecast.page?
4. Wall Street Journal –
https://www.wsj.com/articles/housing-market-stays-tight-as-homeowners-stay-put-11611226802?mod=re_lead_pos1
7. Washington Post –
https://www.washingtonpost.com/business/2021/01/07/condo-sales-rebound-amid-dwindling-inventory-houses/
8. Mortgage Professional America –
https://www.mpamag.com/news/fannie-mae-chief-economists-forecast-for-us-economy-housing-market-in-2021-244045.aspx10. Inman –
https://www.inman.com/2020/11/09/what-a-joe-biden-presidency-means-for-real-estate-and-housing
9.Inman –
https://www.inman.com/2020/11/09/what-a-joe-biden-presidency-means-for-real-estate-and-housing/
