Hey, potential and prospective home buyers! This may well be your time to shine! Beyond the fact that the peak winter months are generally less competitive with fewer active buyers, we are witnessing deals to be had due to an overall shift in sellers’ expectations. We believe those who buy in 2023 are likely to feel very good about their basis when they look back in 3 or 4 years.
Why buy now?
- Sellers are coming to terms with a new reality. Increasing interest rates and macroeconomic conditions have lessened demand and sellers are faced with the fact that there are fewer active and motivated buyers as compared to years past.
- Sellers are motivated to sell now rather than hold a property and carry costs through the winter. Historically, there is a considerable decline in seasonal buyer activity through the peak winter months. Sellers are often inclined to take a “bird in the hand” today versus waiting for the spring market. Anecdotally, we’ve seen sellers with carry costs of $5-10,000 per month who were willing to take a $100k “discount” on their sales price versus carrying a property for an extra 3-4 months with an undetermined outcome at that time.
As a result of these market forces, sellers are demonstrating a willingness to negotiate deal terms (including price, timing, inspection, financing contingencies) in ways that they have not in many years. Ten percent (and greater) discounts are occurring in much greater numbers than we’re accustomed to seeing.
We saw a significant increase in the number of heavily discounted sales in the 4th quarter of 2022 when compared to previous years. Our data was gathered from sales in the following neighborhoods: Back Bay, Beacon Hill, South End, Midtown, Waterfront, West End, North End, Waterfront, Seaport, Fort Point, South Boston, and Charlestown.
In the fourth quarter of 2022, 48 of 369 properties that traded hands saw a discount of 10% or more off the original asking price. Compare this to 2021’s fourth quarter, when only 32 of 536 properties sold were at a discount of 10% or more.
Major discounts of 20% or more off the original asking price had an even greater jump during these time frames: 10 out of 369 transactions in 2022 were discounted at least 20% compared to just 2 out of 536 in 2021.
We represented the buyer for unit 1 at 52 Beacon Street and worked to get them an outsized discount on their purchase. Knowing the market well, we were able to target a home that was above our buyers budget because we knew the seller was extremely motivated. Our buyer’s offer went in at 29% less than the property’s original asking price and 12% less than the current asking price when we made the offer. Specifically, the price had already been improved by $1,000,000 from its original ask and the buyer’s offer was another $490,000 less than the new asking price. Check out the visual below for more notable discounted sales from around the city this past quarter.
As we head into 2023 we anticipate these new levels of seller motivation to carry over. Sophisticated buyers will take the time to identify sellers who have a weaker hand. Some of these sellers may not be openly on the market with their properties in the deep winter months of January and February. Working with an agent who is plugged into hyper-local areas will inevitably surface opportunities that are not otherwise apparent by scouring Zillow, Redfin, etc.
Look, demand is not dead in Boston but it is definitely muted. Buyers can exert leverage if they’re savvy and timely. Once the spring market arrives (March), we expect demand to pick up a little more and sellers to regain some of their footing.
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