The bad news: I recently surveyed MLS for Cambridge single-family homes and found only five on market.
The worse news: Last year, 10 sold in the next 30-day period.
What happens when you mix a bunch of super-well-prepared, super-well-qualified buyers, with a market where inventory has been described as “alarmingly low”? The Cambridge single-family market has the answer: “real estate battle royales.”
According to some agents, demand has completely outstripped supply in Cambridge since January 2012. And as we have seen in many Hub markets over the last few years, a lack of inventory causes properties to be bid up. What separates the Cambridge single-family market from other markets, however, is how much the inventory gets bid up. For example, I once charted Hub over-ask sales by how much over-ask they went – $25,000, $50,000 or $100,000 – but when I got to reviewing Cambridge single-family sales, I had to create a new over-ask category.
Going way, way, way over-ask to help buyers pursue a single-family home in Cambridge is a situation with which Hammond agent Max Dublin is quite familiar. His advice to new buyer clients is: “Grab a good, strong hold; it’s going to be a bumpy ride.” Dublin told me he had buyers lose a single-family bid – “and they were maybe $150K over asking with no contingencies.” The problem, according to Dublin, was that “they needed to be more like $200K” over-ask. Of course, $200,000 more than list is both a dream come true for a home seller and an unfathomable offer in most mortal real estate markets. But truth be told, $200,000 over ask can still be a loser in Cambridge.
Breaking Records
Lauren Holleran, a Cambridge agent who is very active in the single-family market, had two Cambridge single-families come to market last year on the exact same day (April 30) for the exact same price ($1.048 million). They both received 10 offers. What was the result of having 20 ready, willing and extremely able buyers in exactly the same price range? One home closed at $267,000 over-ask and the other closed at $380,000 over-ask. I’m guessing $380,000 over-ask is a winning bid in almost any single-family market in the country, but … you guessed it!
Of the 119 MLS listed Cambridge singles that sold in 2014, 27 went at least $200,000 over-ask, 12 went at least $300,000 over-ask and two lucky Cambridge sellers went to the registry to cash in offers that were more than $425,000 over-ask. Hey, $425K is a lot over-ask, right? Hell yes! Yet even the $450,000 more than list paid for 18 Hilliard in Cambridge in 2014, the highest over-ask offer received by a Cambridge seller last year, doesn’t accurately reflect the extreme lengths super-well qualified Cambridge buyers will ante up for the right home. That’s because in 2013, the winning bid for 66 Sparks in Cambridge went $1.3 million over-ask. You read that right: $1.3 million over-ask.
Will the over-heated, over-ask market for Cambridge singles top out at $1.3 million? Maybe, but maybe not. A Forbes article indicates that more than 10 percent of U.S. billionaires graduated from Harvard University; clearly, even if the inventory isn’t there, the ability to pay for it is.
It might be natural to think that the incredible premiums being paid for Cambridge single-families would cause more inventory to come to market. That doesn’t seem to be the case. One MLS breakdown I did showed only two of 2014’s Cambridge single-family sales were from new construction. In fact, scarily, the lack of inventory might be perpetuating a lack of inventory. Gary Vrotsos, a Cambridge agent with more than 30 years of experience, says the overheated market that has created a “nightmare” for buyers has made some potential sellers reluctant to list their current home to move up the property ladder.
It may come as no surprise that listing agents are pretty happy about the situation. On occasion, these agents persuade sellers to list at a “restrained price” instead of the market price and let the super-hot market conditions do their magic. A restrained listing price not only attracts more buyers, it can cause buyers to overlook negative attributes of a home, attributes that may have handicapped the home’s marketing efforts at a more aggressive price. One agent told me how an attached single-family on a busy street with aluminum siding that didn’t have parking was listed below its perceived market value and, as a result, was bid up well over market value.
So, here’s a riddle: What do you get when you cross alarmingly low inventory with super-qualified buyers and restrained list prices? … A spring full of ultra-over-ask offers.
David Bates is a broker with William Raveis Real Estate and author of The Bates Real Estate Blog, www.BatesRealEstateReport.com, and a recently published e-book, “Context: Nine Key Condo Markets, 2.0.”
