In the last two years, the real estate market has changed fundamentally, affecting all of us. So, it’s worth taking a look at the state of the market at the end of this year, 2021.
Both the residential and commercial sectors saw robust activity this year, carrying momentum from the previous year. And, in both sectors very strong demand dramatically increased the dollar volume of land sales, as buyers’ needs were not fulfilled with current inventory. Always wanting to know the speed and direction of the market, brokers and clients alike should be well aware of certain key metrics.
Inventory levels, already historically low before the pandemic, continued to drop relentlessly this year, creating a frenzied buying process for some, and paralysis for others. “Days on market”, or DOM, a measure of the average number of days properties were on the market before going to a pending state, dropped from 21 to 17 days in 2021, nationwide. In York county, the DOM average dropped in some locales to seven days! Locally, prices have increased by 12% over last October, and sales volume dropped by 6.3%, accelerating the supply/demand dynamic that has pushed values higher by 30% over the last two years. The forecast for next year is more of the same, but we all know these numbers are unsustainable.
In the commercial world, the pressures in the market have brought about systemic changes in some urban markets, and as in residential, land sales have exploded to alleviate the shortages in the industrial market with new construction. Cash is plentiful in all deal-making right now, and building something new, although expensive, is still a viable option. This will hold up as long as the economy continues to chug along with low unemployment and low-interest rates.
There are market segments that are suffering, though. Exacerbated by the pandemic, the hospitality sector has an especially acute problem: workforce shortages. But, this is not the only sector affected. Indeed, labor shortages have touched any business that requires relatively unskilled labor, across the economy, forcing business owners to consider selling. The problem there is: who will buy their business to face the very same issue? Making a profit for these businesses becomes extremely difficult when the labor needed to push sales volume just isn’t there. So, very often these businesses limp along, hoping for a sea change, but many fear that none will materialize.
I’ve asked everyone whom I thought would know the answer, but no one seems to truly know why, with 4.8% unemployment (higher than pre-COVID), we don’t have enough people to work where work is needed. Furthermore, absent an answer to that, predicting the future is impossible.
Some businesses have too much business, like UPS. Markets that have features as we do in Maine—spectacular beauty, fresh air, uncongested roads, etc., are faring unusually well, attracting millions of people away from the cities, and away from climate change calamities. The pandemic’s biggest contribution might be that big business has realized that productivity was unchanged by working at home. Now, the reconfiguring has begun, and the cities are scrambling to find long-term solutions. In the meantime, finding a home will continue to be a challenge, for a while at least.