Pandemic feeds a real estate surge

ONE OF THE hotter segments in Addison County’s real estate sector is new construction, such as this in-progress home on Commodore Drive in Vergennes. That For Sale sign is rare right now, as inventory is tight in a market that favors sellers.

I have seen more out-of-state buyers in the past year than I have ever seen in any other year, and I have been selling real estate over 40 years.
— broker Nancy Foster

ADDISON COUNTY — When veteran real estate appraiser Bill Benton left his Vergennes office one recent morning, one of his stops was to appraise a Weybridge home that had been placed on the market for $435,000.
It was under contract for $475,000, without a financing clause that would make the sale depend on Benton’s appraised value matching the agreed-upon price.
Benton recalled the seller asking him if it was anything he had seen before in his four decades of evaluating Addison County real estate.
“I said, no, it isn’t,” he recalled. “COVID has made a big difference.”
What Benton described is part of a larger trend, according to real estate experts and hard data: Home prices are rising, inventory is scarce, and buyers are scrambling to find what they want. And Benton said this market is different.
He said pre-pandemic real-estate markets were affected by traditional factors, which he listed as, “younger people getting first homes and then selling them and getting a bigger house, and then getting older and buying a smaller house. Interest rates, and recessions coming and going.”
Now, there is a pandemic.
Of course, Benton has data as well as anecdotes.
A half-dozen cases where the same property same property was resold over the past 15 months show a provable increase in values of 3% to 4% “in most markets,” in Addison County, he said, notably in its northern two-thirds.
That rate of increase is also reflected in most towns’ Common Level of Appraisal (CLA) numbers as calculated by the Vermont Department of Taxes. Current CLAs reflect a three-year rolling average of sales and are compared to municipal assessments to create fair market values for setting school tax rates.
But, Benton said, other data suggest appreciation (the increase of real estate’s value) could be higher, at least in some county areas and sectors, closer to the 10% now seen in some areas of the nation.
For example, he pointed out current CLA numbers are based on sales from 2017 to 2019, and are likely to show more growth once 2020 is included.
And he notes in a quarterly data sheet that he sends out to clients that the median sales price of a homes sold in the first quarter of 2021 rose by 29%, that coming after an 10% rise in all of 2020.
“We are seeing houses selling for 10%, 15% more than a year ago,” Benton said, while stopping short of saying there are enough sales to say that defines the entire market.
In 2020 there were also strong percentage increases in sales of homes in the $300,000 to $400,000 and $400,000 to $500,000 ranges.
And Benton pointed out while 2019 saw one county sale top $1 million, six did so in 2020.
The difference? Almost certainly COVID-influenced buyers.
“That huge gain in the median sales price, I really think that has to do with that COVID influx of people from out of this market that probably are coming from a higher value market,” Benton said. “And therefore they have either more equity, more cash in their pocket, or they feel there’s more value in their pocket than where they’re coming from.”
Others also see both out-of-town buyers and a sellers’ market. Several county brokers recently submitted advice to buyers and sellers and thoughts about their sector.
Jeff Olson of Addison County Real Estate told a tale often repeated in recent months: One of his listings drew offers from eight buyers. And veteran broker Nancy Foster of CV Properties offered perspective.
“I have seen more out-of-state buyers in the past year than I have ever seen in any other year, and I have been selling real estate over 40 years,” Foster wrote.
Amey Ryan of IPJ Real Estate pointed out that as of Feb. 18, there were 64 residential listings in Addison County, compared to 147 in February 2020 and 213 in February 2019.
Ryan explained the supply-and-demand factors:
“Some sellers are reluctant to list their homes for sale for fear that they won’t be able to find a suitable replacement home here, or in another location. Additionally, we’re seeing an uptick in interest from out-of-state buyers who are anxious to establish roots in Vermont in either a purchased or rented home. Lastly, some of the properties that have languished on the market have since sold.”
Benton said as a result of the lack of existing inventory, two sectors have seen more activity than usual: new construction and bare land. For example, he said, this past year in Middlebury about a dozen building lots in the South Ridge development on Middle Road sold for between $90,000 and $150,000 after being on the market for up to five years.
And in Vergennes, six newly built homes in the Claybrook residential subdivision off West Main Street sold in 2020 for between $373,000 and $394,000.
“Typically he’s been advertising them, starting them, and they’re under contract before they’re finished,” Benton said.
Lakefront sales have also spiked, with significant increases north of the Lake Champlain Bridge, and sales on the lake’s southern end are up as well. 
“We have (appraised) a number of them in Ferrisburgh, Panton and Addison, and a handful of them further south,” Benton said.
Brokers and appraisers agree this current situation is unlike earlier periods of appreciation, even though Chris von Trapp of Coldwell Banker Hickok & Boardman wrote earlier in the Independent there are underlying strengths to the current market:
“Unlike the real estate bubble of the early 2000s, driven by speculative buyers and investors, today’s market is fueled by actual (not speculative) demand, low inventory, and mortgage interest rates hovering around 3%.”
Benton is not sure the economy ultimately can support the current rate of appreciation, however: He questioned if enough residents will be able to purchase more expensive real estate.
Benton also expects a slight increase in interest rates, and wonders if out-of-state demand might start to wane as the nation manages to control the COVID-19 pandemic.
He said he would love to revisit the question late this fall and see where his and other predictions about activity levels and market values end up.
“I don’t know how it’s going to play out. I think it’s going to be steady. But will it increase? I would say maybe not,” Benton said.
Regardless, he sees a bright side.
“Vermont has some new people. They’ve got some money,” Benton said. “Hopefully they’ll contribute to the economy and the community.” 

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