Ep #12: Emerging From COVID: My Real Estate Predictions for 2021 and Beyond

Welcome to Your Real Estate Connection in Westchester, a show for people looking to buy or sell homes in the Northern Westchester County area. Join local real estate expert Harriet Libov as she shares her professional advice on the local real estate market, connects you with knowledgeable community residents, and gives you helpful insights behind the home buying and selling process. Now, let’s dive into today’s episode.

Unless you’ve been in a cocoon, you know that the real estate market has been insanely good for sellers this year, and quite difficult for buyers to navigate. It’s hard to know exactly why the COVID-19 pandemic was the catalyst to this movement, but it’s happening all over the country. Fresh air in the suburbs, more space, and staying at home for a year certainly changed how people want to live.

Sellers who have a place to go listed their homes. Other sellers would like to sell but don’t have a place to go. They would like to take advantage of this market, but don’t want to get caught up in this buyer frenzy to find their next home and there is little for them to buy. When will it end? When will we see some balance? Will prices hold for sellers? Real estate experts all have their own opinions. I have lived through the last year in the thick of it, and I know I certainly have my own opinion that I will share with you today.

We will also speak with Barry Graziano, my manager and a regional manager at Houlihan Lawrence to speak to this very current topic. So let’s settle in and begin the conversation.

When the stay-at-home orders opened up last June and the real estate market took off, no one knew how long it would last and how it would play out. Certainly no one could have predicted how the pandemic would change everyone’s life outlook in general. I think we will see many lifestyle changes once this movement evolves completely, but today’s focus is on real estate.

I speak for many real estate agents. Yes, a lot of the top producing agents are benefiting greatly monetarily from this moment, but we are tired and running as fast as we can. My perspective is greatly enhanced by the fact that I list properties and work with both buyers and sellers. Sellers have gotten the memo, and they want to sell. Some have gotten a little greedy and need guidance on how to sell their home for the best dollars in a bidding war.

Buyers have lost many homes in bidding wars because of the lack of inventory. They are either bidding very high hoping to finally get a house or they have dropped out hoping this moment will pass. A lot of buyers are taking a lot more risk in their offers and dropping contingencies on mortgage, appraisal, and even inspection. Ultimately a house is worth what someone is willing to pay for it.

Year to date 48% of Houlihan Lawrence listings have sold at list price or over list price in multiple offer situations. That is an astounding number. As you have heard me say before, real estate is local. Houlihan Lawrence is local. Westchester, Putnam, Duchess, and Connecticut. So what am I seeing in northern Westchester? When do I think it will kind of balance out? I’ll share my thoughts with you today.

It’s early July, and the school year will hopefully be normal in September. Most parents are tired of their kids having no sense of normalcy, and they want stability for them. In a typical year, we have a spring market that ends in July so buyers can have their families settled for the school year. I think we will see more of that trend in 2021 than 2020 when remote learning had a big impact on that timetable and was not as much of a concern for parents.

I have listed properties in late June, and they are still selling quickly and for good prices. My recommendation to my seller is to price with a bit of an increase from last year, but to let the market take the price up in a bidding war to the best possible price. Pricing too high could result in a home languishing on the market if the buyers don’t see the value.

I do anticipate there will be new listings through July, and that August will be a traditional quiet month as everyone takes a much needed vacation before the school year and the fall begins. I also anticipate that there will be a strong fall market in 2021. Sellers will be less concerned about the COVID-19 virus and be more open to letting people in their homes to show it. Sellers are beginning to be more open about making an interim move if they have to in order to get a good price for their home, which had not been the case earlier this year.

There will be buyers in the fall that are still in rentals. They don’t have school age kids yet, or they are local and trading up or down in the school district. Our inventory is so low that even if it builds slightly in the fall, the prices will remain stable at this new high point in my opinion. Thanksgiving through the New Year will be quieter, as it always is. So where will 2022 land? Will prices hold?

If I had to make my best educated guess, I would advise sellers to get on the market in early 2022 for the buyer who wants to be in by school in September 2022. I think prices will remain strong through the next year when inventory builds in late April, May, and June, and then a more balanced market will occur. Will prices hold?

I think some of the crazy bidding wars will result in some buyers overpaying on their homes long term. There are always a few sales that just don’t make any sense. However, northern Westchester homeowners have not seen any appreciation to their homes in a very long time. I do believe these new comparable home sales will stick for sellers within a reasonable margin. The buyers are qualified, and the banks are not doing crazy lending like we had in 2009. For the most part, bank appraisals have been okay.

So that’s my take. Let’s speak to Barry Graziano, a regional manager at Houlihan Lawrence who has a pulse and an opinion of what’s to come.

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Harriet: Hi Barry.

Barry: Hi Harriet. How are you?

Harriet: Good. So we’re talking about the market today, and I thank you for joining me. I know you speak to so many agents and managers and sit in meetings for Houlihan Lawrence corporate suite planning. I’m out there in the field every day, seven days a week, in this market. I certainly have a pulse as well. So I thought we’d put our heads together, and it would be interesting to hear your thoughts on the current seller’s market, and any interesting stats on northern Westchester sales that you can share with us. Armonk, Bedford, Chappaqua, Katonah, Pleasantville, all the areas that I cover.

I know one of the things that we briefly touched on recently was how random this market is, and how different it is from market to market. I know from all my sellers that all of their friends are now real estate agents. They read the paper. They listen to the news. They tell them what their house is worth, and that they’re going to get 20 offers. Then we have to come in and bring some reality to this moment. So what can you share with me on the stats thus far here in 2021? It is now the middle of June going towards the end of June that we’re recording.

Barry: It’s interesting Harriet. One thing that you just said about how everyone’s talking about the market and sharing their personal, if you will, intel on the market. Then we have to go out and try to explain things a little bit more from the buyer characteristics, the trends that we see.

So everybody thinks that the real estate market is being quite a bit explosive right now when the reality of it is I think the buyers are looking to get into the market. They’re frustrated with low listing demand. And with the high buyer demand, they are still, I believe, being very logical, being very sensible. Looking for what they want, and somewhat being patient. When they find what they want or because of the low inventory, they tend to leap a little bit more than they should with their plan of being sensible.

So this is one of the first times in many, many years of this real estate market in the northern Westchester area where our high demand ratios are at a one across the board. Meaning high demand. It’s just that it’s really the amount of buyers that are out there compared to the listings that are out there that are setting the pace. But it’s funny how you talk about what people believe and how they come up with their own strategies based on the hype, if you will, throughout the marketing media mix about how it’s happening.

We still see some houses who are possibly maybe not priced right, maybe the location that are still sitting, and the buyers are not responding as well. So I think it’s just the formula of knowing what the buyer characteristics are, knowing where the buyers are, what markets we’re looking at, and coming up with the right strategy and the right pricing to drive that market, to drive that demand, if you will, from the buyers because they are still being quite savvy. Although, they definitely have a high demand of buying a home.

Harriet: So I hear everything you’re saying. I’m a listing agent who lists a lot of properties. I discuss it with my sellers prior to going on the market and hope that they’re the lucky ones. Yet sometimes I’m absolutely shocked by what price a house gets and how many offers, and sometimes I’m absolutely shocked in the other way when something that I thought was going to create that demand didn’t. So that’s where I personally feel the random comes in.

What about Armonk, Bedford, Chappaqua, Katonah, Pleasantville? Any difference in nuances that you’re seeing in those markets? I know Chappaqua, we have discussed, has been on fire, but a lot of it has to do with the fact that they have so many listings in their town that are in the $1 million range and or $1.1 and under, which is such a popular first time homebuyer price point. Any thoughts on other markets and how they’re reacting?

Barry: You know Chappaqua last year sold 323 homes compared to the 197 from the year before in 2019 and the 185 the year before that. I think it’s just that, Harriet. It had more of the home opportunities for the buyers at a different scale, if you will, that kind of drove that market. So what they had on the market going into the pandemic as opposed to then what quickly went onto the market, they had more opportunity than we do in the further northern areas like Katonah, Bedford, and Armonk. Perhaps just another step away from New York City.

When you look across the board this year going into the 2021 statistics, we’re all down about 38 to 34, 34, 35% on our listing inventory. But yet we’re still up 63%, 68%, and the highest percentage is right here in Armonk at 114.7% pending sales. So the sales are happening even though the inventory is down, and I think that that’s the, I guess, magic formula of trying to figure out what these buyers want to do.

The market has been exploding pretty much all year up until this month of June where it’s kind of calmed down a little bit. Three months ago we were looking at 10 offers, 15 offers on a home where now we’re looking at 5 offers on a home. So pricing is still key. Amenities are key. But it’s gotten slower into June. You know June, maybe you could speak about this, but I know we all know this in the real estate market. June is a busy month for people. The graduation, the proms.

Harriet: Baptisms.

Barry: The school year finishing up, everybody’s getting ready to send their kids away to camp, getting ready to prepare for holidays. So June has gotten a little slower. So I’m interested to see where the July and August markets bring us. But right now inventory is still down, and buyer demand is up. I think as long as that continues to go on, we’re going to see that strong market as far as the sellers are concerned, and we’re going to continue to see a little bit of a frustrating market that the buyers are experiencing because there just happens to be more buyers than houses for sale right now.

Harriet: I expect that July will be busy. I personally think August will be August. I think we’re gonna have another strong fall market if we get inventory. I think if we still have buyer demand and even if we get a little bit more inventory, I still think this fall will be strong. Then comes Thanksgiving, then comes Christmas. I’m pretty bullish on 2022. What are your thoughts?

Barry: My thoughts are you are exactly right about the upcoming market going into the fall and September and October, which are usually our second strongest market in the fall market. I think that it’s going to all depend on what the sellers plan to do as this pandemic is wrapping up if you will or going into a different area where people are starting to feel like they’re getting back to normalcy. The inventory is down, Harriet, because at the early onset of this year, people still really didn’t feel confident about the reality of what was going on.

Now we see New York City is opening up a little bit. People are starting to move around a little bit. We’re at 100% capacity for sporting events and theater events and restaurants. So you’re going to start to see things loosen up a little bit. I think your forecast of going into the 2022 year, I think we’re going to see a lot more inventory that’s going to open things up a little bit.

I think you’re going to see a balance of the buyers saying, “Do I stay put now in the city? Do I move out? Do I go to the suburbs? Do I go north of NYC?” I think that’s where you’re going to see the balance of the market just kind of getting back to a more normal behavior, and you’ll start to see the change in the supply and demand. 

Harriet: Right. I think other than the crazy prices that some homes have gone for, I think the prices are going to hold. That’s my personal opinion. Quickly, bank appraisals? What have we been seeing?

Barry: Well, it’s funny because I’ll piggyback that ride into the conversation that we just wrapped up. You just said something really important about do I think the prices will hold. I think I agree with you. I wholeheartedly agree with you. I think the prices will hold because we do see from time to time some of these homes with the higher demand that are getting way over asking, but people think that that’s the common practice. It’s not really the common practice. They’re far and few in between.

Right now, let’s just say in Chappaqua, Bedford, and Armonk. We’re seeing roughly 99.6% of list to asking price for a median average for Armonk. We’re seeing 98.6 in Bedford, and we’re seeing 101.2% in Chappaqua. So those prices for the appraisers.

Harriet: Yes.

Barry: So you’ll see that it’s not like we’re 120% or 130% list to ask over where the appraisals are becoming an issue. But, you know, one of the more difficult things about the appraisals and tracking them are that the deals that are coming together are non-contingent on a bank appraisal. So we’ll still see them, but the deals are happening. But looking at the way these deals are closing, you’ll find that the percentile of things closing predominately astronomically over the list price is more like 10 or 15% where everything else is more balanced right in that area, if you will, of where the house was priced, whether it’s competitive.

Harriet: That’s the key point. That’s the key point. Because did the listing agent price it based on pre-COVID? Did they price it based on what we call a COVID bump? Did they stretch the price? So my theory is not to stretch the price and let the market take it. Yet at the same time, I think that is why you’re seeing things not go tremendously over asking because some agents are not doing that. They’re pricing it with an increase when they price it, and buyers are accepting that.

So I think it’s going to be very interesting with some of the bank appraisals that come in. Overall, I haven’t had very many problems. But I could see where if you get a tough random appraiser on one of these houses that are going hundreds of thousands over asking that there’s going to be a discrepancy there. So you’ve been in real estate such a long time. What do you think is the most unique thing about this moment?

Barry: I think the most unique thing about the market would be in favor of the sellers. They can perhaps get what they thought their homes were worth even going back two or three years ago when the homes were not kind of commanding those higher prices. So for the sellers, it’s a unique opportunity, I think, to come to the market right now and get your best value possible.

Harriet: Right.

Barry: If you can follow your advice of saying, “Let’s not capitalize on this market so much where we overprice our house. Let’s price our house where it belongs as far as the historical data that we have to show the fair market value.” If it carries, it will carry. If it won’t carry, then you’ll negotiate and you’ll sell your home at fair market value.

Harriet: Right.

Barry: I think that’s the most unique situation right now I would have to say in favor of the sellers. It’s not a unique situation right now for buyers because they’re having a tough time. They’re having a tough time figuring out how to get in and how to get their offers accepted and how to participate with so many different people in the market with competition for the homes.

Harriet: Right. I agree with you Barry. I think what is obviously unique about this moment is the pandemic, and that we will always remember how this changed the way we live, the way we want to live, what we value, etcetera. I think the bigger issue is when will sellers, who a lot of times are empty nesters, feel comfortable letting people into their homes completely because they have to figure out where to go. That’s the bigger problem that everybody’s now pondering.

We’ve all tried to figure out what our values are in the last year, how we want to live our life, what’s important to us. I think sellers are doing the same thing. I do believe though that 2022 will be bullish because I think we’ll get inventory. And I do believe there are so many buyers that are still in rentals that took a year off to figure this out, and then they’ll be back to the market.

So thank you. Thank you for joining me. Thank you for sharing your thoughts. I get to hear them every week at our weekly meeting, but I thought it would be so interesting for our listeners to hear what you have to say. So any parting remarks? 

Barry: You’re very welcome Harriet. It’s always a pleasure to talk with you about the market. I thank you for allowing me to have the opportunity to speak with you.

Harriet: Okay. All right. Have a great day, weekend. Thank you and we’ll talk soon.

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We have experienced a very unique moment in real estate since COVID-19 that no one could have predicted. There are differing opinions on how it will play out. Some people think it’s a bubble, but I personally do not. I do think it will all find a place, but bubbles pop and I don’t think that will happen. I’d love to hear your opinion. Please reach out by email to discuss or text me. Very interesting times. Thanks for listening and have a great day.

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