Page 6 - New England Condominiium December 2021

6 NEW ENGLAND CONDOMINIUM -DECEMBER 2021 NEWENGLANDCONDO.COM MARKET REVIEW The Year in (P)Review Multifamily Trends in 2021—and Predictions for 2022 BY DARCEY GERSTEIN Remember in 2020, when everyone was homebuying. so excited for 2021, “when all of this insta- bility and uncertainty will be over”? Right. oning that has come in the wake of the tragic Well, while there was some relief from pan- demic pandemonium as Americans started dominium in Surfside, Florida, this past June, to get vaccinated against COVID this past which has prompted a wave of reforms and spring and summer, the virulent delta variant a recognition of the advancing age of a large threatened to override the country’s hard-won portion of the country’s housing stock, as well progress and untold sacrifices. And while the as the role that climate change plays on struc- overall economy seems to be on an upswing tural integrity and the pitfalls of deferring with businesses reopening and consumers building maintenance for the sake of short- more inclined to leave their bubbles to make term financial savings. purchases, the major economic shifts needed to make enduring investments in our infra- structure, institutions, and the future of our campaign strategist James Carville made it a planet are just starting to emerge from a Con- gressional quagmire. What has all this meant for the multifam- ily market in 2021, and where do the pros see real estate, overall economic conditions are things heading in 2022? In a nutshell, it’s still both a driver and a byproduct of transactions. a topsy-turvy world out there. Cities, which A confluence of several economic factors some declared ‘dead’ when population density played into the rollercoaster year that 2021 was thought to be a major driver of coronavi- rus contagion, have shown a strong homebuy- ing revival in recent months as lockdowns and Jonathan Miller, president of New York-based restrictions eased and vaccinations continue appraisal firm Miller Samuel, the urban exo- to be administered. The bidding wars that sent dus brought about by the COVID-19 pan- suburban home prices skyrocketing in 2020 demic was preceded by more of a trickling, and early 2021 have resumed in the urban starting in 2018 when the Trump administra- markets—even in the luxury sector, which tion lowered the cap on the amount of state dipped significantly when the pandemic and local tax (SALT) deductions allowable on and other economic factors chilled high-end federal income tax returns. This legislation Adding to all this complexity is the reck- collapse of the Champlain Towers South con- It’s the Economy, Stupid Every bit as true as it was 20 years ago when central theme of Bill Clinton’s successful bid for the presidency, the U.S. economy dictates the country’s direction. In terms of residential was, and is likely to keep 2022 dizzying as well. According to residential real estate expert inspired residents of high-tax states like New with the demand. A pre-pandemic high-rise York to take up residency in states like Florida construction boom, along with the urban with lower taxes, especially those from Man- hattan, “because of the greater wealth and a steady pace of listings. It’s also kept prices mobility \[there\] than any other market in the somewhat stable—which has not been the region,” says Miller. “During the lockdown, case in the suburban and rural markets, where there was a tremendously significant pattern demand has overridden inventory and prices of outbound migration—not just to the sub- urbs, but anywhere in the United States, driv- en by the SALT tax.” The trend accelerated in 2020 and early tion back to co-ops and condos in cities. “As 2021, after the pandemic-driven abandon- ment of (and arguably, elimination of the started to normalize, the city woke up,” says need for) offices. Working remotely became Miller. “Whether we’re talking about Boston, the de facto norm in many fields. If regularly New York, or Florida \[housing\] markets, they commuting to a centrally located office was still display heavy volume with a return to no longer a necessity for many workers, those normal seasonal patterns.” He adds that pric- who could decamped to second homes (what ing is creeping up toward pre-COVID levels. Miller now terms “co-primary homes”), or to entirely new environs altogether. According to real estate experts, 2022 50 states and 19 countries, sees the same thing might see more of an inward migration and a happening in her region. In the early months more robust outlook overall. Among the rea- sons for their optimism, the pros cite remarks dus to the suburbs and rural America. Many from the Biden administration about raising \[Boston-area\] people moved to New Hamp- the SALT deduction cap, as well as the gen- eral economic recovery, bolstered by hopes took a hit because it was flooded with units of further reductions in COVID infections, for sale. It has started to pick up, though, and hospitalizations, and deaths. There’s also the buyers are coming back. There will always prospect of the easing of travel restrictions be people who want to live a downtown life- bringing foreign and out-of-state buyers back style—particularly younger millennials.” to urban markets. Yet another factor in play is the rise and fall of interest rates, which significantly af- fect sales volume. That’s particularly true in ing more space for incorporating work and the co-op and condo market, which tends to school (and gyms and media rooms…) into attract first-time homebuyers and others us- ing financing to make home purchases. With rates up and more awareness about the vi- interest rates falling to record lows over the rus and how it behaves, cities have made a past 18 months, along with rents rising con- siderably in many areas, younger and newer ing lasting changes to our built environments, buyers are entering the purchasing market at altering everything from ventilation systems a greater pace. “I don’t think enough credit is given to the choices. It has also accelerated the adoption intense demand that has been fueled by record of both technologies and policies that make it low rates,” says Miller. “Prior to the pandem- ic, the 30-year fixed over two years fell from ness from anywhere—allowing for the inte- around 5% to a little over 3%. And then after gration of home and work like never before. the lockdown, because of the pandemic, rates fell from the low to mid threes down to the “and that relationship between work and mid twos.” And with the 2008 economic re- cession and foreclosure crisis as pretext, lend- ers have enacted stricter standards and tighter That predicted early fall 2021 return to the underwriting procedures to mitigate another office environment keeps getting pushed housing bubble, which Miller contends bodes further into the future, “firming up the rela- well for market recovery as we head into 2022, tionship between work and home,” as Miller especially if demand remains high. Miller goes on to say that inventory in the home-as-workplace set-up, he suggests, the co-op and condo sector has so far kept up less likely it is we’ll ever go back to the pre- exodus earlier in the pandemic has kept up have soared out of reach for many. This is another reason why many younger and first- time home seekers have shifted their atten- the suburban frenzy waned and the market Dorothy Manning, a Boston-based realtor with eXp, an online brokerage with affiliates in of COVID, she says, “There was a mass exo- shire to work remotely. The condo market It’s Also the Pandemic COVID’s initial wave made people leery of dense, crowded living and sent many seek- their homes. A year and a half later, with vax comeback—but not without COVID mak- to apartment layouts to structural material possible to conduct much of the nation’s busi- “Remote work is here to stay,” says Miller, home is going to go through a process of be- ing sorted out over the next couple of years.” puts it. The further ensconced we get into the