As we reflect on 2022 real estate sales data, trends show a slowing sales pace into 2023 from the peak of pandemic buying. While we did not maintain the rapid market of 2020 and 2021, we note that the number of properties sold and the dollar volume transacted still greatly outpace all previous years. The total number of real estate transactions topped 2,388 in 2021, and this year sales dipped by 17 percent to 1,977. With a total market volume now exceeding $773 million dollars transacted in 2022, real estate sales were robust, despite a one-year comparison that is down from a record breaking high of $891 million dollars sold. Many factors are impacting the market, including low inventory, higher mortgage rates, inflation, talks of nationwide recession and, overall, more cautious buyers than in the previous year.
- Despite the total number of sales falling 17 percent to 1,977 transactions compared to last year, this still outpaces sales rates in years prior to 2020. Dollar volume of transactions follows the same trend—higher than in years past but a 13 percent decrease when comparing to last year alone.
- The prediction of a market correction rings true. With inventory remaining a challenge, high building costs, rising interest rates and inflation on the rise, sales are changing to a more balanced pace from the wild market of 2021. We see now more than ever that looking at specific property types, locations and price ranges is critical to understanding the buyers remaining in the market and where the housing gaps are that can be filled with our current inventory.
Residential Sales Market:
Overall, the number of home sales in 2022 decreased 15 percent over the previous year, from 1,571 down to 1,342. North County sales started robust but fell in the 3rd quarter, with a net decrease of 11 percent. North Berkshire dollar volume of single-family residential sales was just shy of last year, with $97 million in sales, a modest decrease of 1 percent. This is reflected in rising average sale prices. In middle Berkshire, both the number of sales and the dollar volume fell compared to last year, with a very modest increase in the average selling price of homes. In southern Berkshire, a double digit decrease in the number of homes sold was buffered by a modest retraction in the dollar volume of homes sales compared to last year. As pointed out previously, the huge overall influx of money into the residential housing market over the last two years has been significant.
Condo Sales Market:
Condominium sales in middle and southern Berkshire County slowed considerably in 2022 compared to 2021 sales rates. North Berkshire trends were the opposite, with similar gains in the number of condos sold and double-digit gains in the dollar volume transacted. Price appreciation surged in northern Berkshire condo sales, up to $327,976 on average. In middle and southern Berkshire, condo sales slowed considerably, with the greatest impact felt in the southern Berkshire market. It is to be noted that the middle Berkshire condo market has fallen lower than pre-pandemic sales rates, down to only 82 condos sold in 2022, compared to 100+ pre-pandemic.
Multi-Family Sales Market:
The bright light in our 2022 market, overall multifamily number of sales dipped slightly with a market slowdown impacting the countywide averages. The dollar volume of sales however rose in north and middle Berkshires to far exceed both pandemic and prior sales rates. This has pushed the multifamily selling prices higher on average as well, up 12 percent in middle Berkshire and 16 percent in northern Berkshire. Southern Berkshire multifamily sales retracted considerably, with a decrease of over half from the previous year and lower than pre-pandemic markets.
Land Sales Market:
Land sales in 2021 were hard to beat, with surging sales in all parts of the county. This year, we see a large retraction of sales countywide, but still very strong when looking at years past. Middle Berkshire parcel sales rose considerably in the first part of 2022, but then plummeted in the final quarter to reflect a final decrease of 30 percent. With building costs an unknown going forward, it is important to maintain a close eye on permits and building opportunities to help alleviate pent-up buyer demand for existing homes in popular price points. It remains incredibly hard to build needed workforce-priced housing with current costs and codes.
Commercial Sales Market:
Despite a commercial market heavily impacted by work-from-home and business closures, commercial sales rose in 2021 and yet started to fall this year. Central Berkshire had a level number of transactions, while north and south both dipped to pre-pandemic levels. All parts of the county noted falling dollar volume of sales as well.
Real Estate Market Forecast:
As Lawrence Yun, chief economist and senior vice president of research for the National Association of REALTORS (NAR) eloquently stated, “2022 may be remembered as a year of housing volatility, but 2023 likely will become a year of long-lost normalcy returning to the market.”
While Berkshire County did not maintain the rapid real estate market of 2020 and 2021, the number of properties sold and the dollar volume transacted still greatly outpaced all years prior to the pandemic. Many factors impact the local market, including low inventory, higher mortgage rates, inflation, talks of nationwide recession and overall, more cautious buyers than the previous year.
Looking ahead, Yun forecasts that nationwide home sales will decline by 6.8 percent compared to 2022. “Half of the country may experience small price gains, while the other half may see slight price declines,” Yun said.
Interest Rates:
Industry experts believe that the Federal Reserve is signaling that they will stop raising interest rates to help fight inflation. NAR is forecasting that the 30-year fixed mortgage rate will fall below 6 percent in 2023; Fannie Mae predicts this will happen by the first quarter of 2023, yet the Mortgage Bankers Association by the second quarter of 2023 and back into the 4 percent range by 2024.
“As the mortgage market normalizes, it will be an opportunity for rates to decline even further,” Yun said, adding that he expects mortgage rates to settle at 5.7 percent by the end of next year.
Inventory:
Housing inventory is expected to remain tight in 2023, with new construction below historical averages due to persistent building material bottlenecks. In Berkshire County, after 2 years of rapid land sales, parcel sales stalled by 35 percent in 2022.
Adding to inventory pressures, it is projected that fewer homeowners will be willing to sell. Today, we have a two-month supply of homes on the market, which is about one third of what we need to satisfy buyer demand in a balanced market. Many believe that homeowners are unlikely to trade in their 3 percent mortgage for a new home with a 7 percent loan unless they absolutely have to, so mobility of existing homeowners will remain slow.
Home appreciation / prices:
Danielle Hale, chief economist at Realtor.com believes low inventory will keep home prices from falling too far. She thinks prices will tick higher during the first few months of the year before leveling off or going negative after mid-year, ending the year up by 5.4 percent overall. NAR’s chief economist Lawrence Yun believes there will be no significant change in home price appreciation due to expected market leveling in 2023.
Economic Factors:
The jobs market is a positive factor, with more Americans working today than at any other time in history due to 223,000 net new jobs in December, 4.5 million in the past year, 11.2 million in the past two years, and 23.2 million since the low point during the economic lockdown in April 2020. Wage growth over the past 12 months was 4.6 percent.
Job additions are critical for generating fresh housing demand as mortgage rates stabilize. Housing affordability remains a challenge for those renters considering buying a home. Yun expects rent prices to rise 5 percent in 2023, following a 7 percent increase in 2022. This is consistent with Hale’s forecast of a rental rise of 6.3 percent year over year in 2023. While painful, it’s also far below the double-digit jumps experienced earlier this year.
Berkshire Reflection at Year End:
Closing out December 2022 and going into January of 2023, the inventory of homes for sale in Berkshire County were down by 19 percent compared to last year, pending sales expected to close in the 1xt quarter of 2023 are down by 46 percent and new listings coming on the market are down 23 percent. The median list prices are continuing to reflect increases, but the actual median sales prices are falling slightly.
Yun predicts home sales to fall by 6.8 percent in 2023 compared to 2022, with the brunt of the slowdown to occur in the first quarter of the new year. Some of the softening can be attributed to homeowners who are unwilling to trade in for a higher mortgage rate, as well as economic uncertainty. Meanwhile, home prices in 2023 are forecast to reach $385,800, an increase of 0.3 percent compared to 2022.
The overall market will be challenging in the year ahead but now has many hopeful influencing factors. Our 2022 market is still historically unusual in the high dollar volume and the appreciation of our market and of our homes.
Click here for the full 2022 Market Watch Report PDF with graphs, infographics, historical data and town by town comparisons.
