Competition for houses was intense as pandemic changed mindsets; the market should remain good in 2022
OCEAN CITY — Homebuyers faced a market so hot in 2021 that one agent quipped that you couldn’t find a doghouse on the island for less than $1 million. That certainly was hyperbole, but if the doghouse could be torn down and two put up, perhaps a deal could be struck.
According to the 2021 third-quarter Ocean City Real Estate Market Update from Goldcoast Sotheby’s International Realty, demand was high and inventory low throughout the year, as evidenced by the 31.3 percent decline in number of sales. That resulted in escalating prices, with the average purchase price rising 13.9 percent to $871,939 and the median price rising 21.7 percent to $740,000.
“The 2020 to 2021 comparisons for single-family homes also reflects the low housing inventory with a 31.3 percent decrease in properties sold but a 24.5 percent increase in the average purchase price and a 25.5 percent increase in median price year over year,” report author Burt Wilkins said.
New construction helped contribute to strong condominium sales, with the market improving 6.9 percent with 638 units sold through September.
“The average purchase price of $871,939 showed an impressive increase of 16.1 percent and median price increased by 22.4 percent,” he said, adding that overall average prices are the highest ever.
Mark Grimes, a top agent with Berkshire Hathaway HomeServices, Fox & Roach Realtors, said 2021 was “probably the best year of my 35-year career.”
“As soon as the holidays were over, that’s when everything took off, everything went up 30 percent,” Grimes said, noting sellers were making deals without their properties even hitting the Multiple Listing Service and at record prices.
As an example, he said he sold a beachfront home on the Goldcoast for a record $9.2 million, resold it for a record $12 million, and now has the listing for $17.5 million.
“People were stepping over each other trying to get houses,” Grimes said. “Frustrated buyers were getting beat out on deals.”
John Walton of Keller Williams Jersey Shore said the inventory was so low and demand so high that many potential buyers just couldn’t get a deal done. He called it a seller’s market like none other.
“What I never saw before in Ocean City real estate, buyers were not only waiving inspections and other contingencies, but letting the seller have their rentals, which is their income, or agreeing to close in September,” Walton said. “The seller was 110 percent in the driver’s seat. Some buyers were putting in an accelerator clause, which means if someone else outbids them in the best and final scenario, they will give the agent permission to go $5,000 over the best bid. That’s how crazy it got.”
To understand why, he said, it’s necessary to look back to 2020, when the COVID-19 pandemic began, forcing many people to hunker down at home for long periods.
When remote instruction and working from home became the norm, those with second homes at the shore realized they could do everything in America’s Greatest Family Resort.
“2020 was extremely surprising. COVID actually enabled or suggested itself for people to come down and work in their homes and perhaps buy second homes and work mobile, and that stirred record sales,” he said. “I can’t think of a top agent who did not have a record-breaking year, and many of us left just as much on the table because as listings went up, there were seven, eight, nine … multiple offers and properties were selling up and above the asking price.”
Emily Wilkins, broker/owner with Goldcoast Sotheby’s International Realty, said the pandemic forced many to rethink their priorities.
“People decided if they don’t have the beach house they want, they now are going to get it,” she said.
Wilkins said people who owned a condominium now wanted a single, some wanted to be closer to the beach and others, who suddenly were spending extra time on the island, wanted a more year-round neighborhood.
It also gave rise to a whole new set of buyers, she said.
“People who never spent any time here are looking to invest $1 million in real estate, they’re ready to put money into real estate and buy something their family would love,” she said.
As the calendar turned to 2021, the available housing inventory fell to what could be an all-time low. Walton said he remembers there being just 103 total listings in March, compared to “hundreds and hundreds, well over a thousand in a buyer’s market.” He said there are 22,000 dwellings on the island.
Record-low interest rates also played a large part in the story.
“Affordability to borrow money and a severe lack of inventory drives prices up. What we had was all of those ingredients, the perfect storm. The seller got what they wanted, the buyer could afford it,” Walton said. “When you combine all of that together, it’s like being in the deli — you have to take your number at the causeway.”
“Interest rates are so incredible, it’s helping people realize now is the best time to buy,” Wilkins said. “Prices may be up but it helps keep properties affordable to purchase.”
Sales were so hot that people started paying cash to make their offer more desirable, and potentially quicker.
“That just continued to fuel the prices because there weren’t as many bank checks, approvals needed for financing,” Walton said, noting his records show cash sales increased 20 percent to 25 percent over 2020.
He said July and early August was “when frenzy left the station.”
“There were just properties selling in two hours,” he said.
Walton said from a seller’s perspective, multiple bids are great for price but pose potential problems.
“Multiple bids are very interesting and need to be navigated by professionals with experience,” he said. “You must educate them if they need it or want it and how a best and final offer is handled.”
Walton said a cooling period settled in in late August through the first week of September but sales picked back up and continue to be strong.
“Instead of two hours and eight to nine offers, we now have two days and four offers,” Walton said. “If you have a desired product that’s reasonably priced in a decent location, the demand is 4-1, not 10-1, but still a seller’s market.”
He said the inventory has climbed to an average of about 300, still well below a normal market.
Walton sold six out of every 10 listings went under contract since the summer with an average number of days on the market of 18 at an average sale price of $877,000.
Looking ahead, Walton said he expects prices to level off and inventory to rise, but with more people rethinking their lives and spending more time at the shore, anything could happen.
Wilkins said the industry is confident 2022 will be another great year. She said the island’s demographic is growing a bit, with people who have been priced out of the markets near New York realizing Ocean City is a great destination.
Wilkins also said many are realizing how terrific the city is in the fall and winter, with mostly mild weather and far fewer people on the beach and boardwalk. She said the season is extending and people are buying not just to be here in the summer.
“They’re excited about everything the city has to offer,” she said.
By CRAIG D. SCHENCK/Sentinel staff