THE SAGE REPORT [WINTER 2022]
This is a republishing of The Sage Report, my quarterly newsletter. To subscribe to The Sage Report, click here.
THE SAGE REPORT
WINTER 2022
Hi All!
I want to wish everyone a happy, healthy, and peaceful 2022! I hope you had a chance to recharge with family and friends this holiday season and are energized for the coming year!
With Omicron in full swing as of this writing, there’s a lot of unknowns about the future of the housing market as we head into 2022. My thoughts on 2021 and where I expect things are headed in 2022:
If you’re a landlord, 2021 was a year of ongoing adjustments in the rental market. Average rental prices in both Somerville and Cambridge were down year-over-year. In Cambridge, 2021 average rent prices were slightly lower than 2017 average rent prices. In Somerville, 2021 average rent prices were slightly lower than 2018 average rent prices.
We also saw a spike in rental price adjustments in 2021. Rental price adjustments refer to a change in the initial advertised price. A large volume of adjustments signal a rental market in flux and owners/agents trying to meet tenant side price expectations - in this case in a mostly downward direction. In Cambridge there were 902 price adjustments in 2021 on the rental side, up almost 50% compared to 2019, but still down almost 50% compared to 2020. In Somerville, there were 763 price adjustments, up over 50% compared to 2019, but down about 25% compared to 2020.
Combined, this data paints a picture of landlords trying to find their footing in a new rental landscape heading into 2022. There is no question tenant pools are smaller than they were pre-COVID, which I largely attribute to chunks of young professionals who have moved to more affordable towns as their work has gone full-time remote.
On the ground today, I see a rental market that is in recovery. I expect avg rent prices to climb during the busy spring rental season and for end-of-year 2022 avg rent prices to eclipse 2020 highs and perhaps even 2019 highs, depending on how COVID plays out over the coming months.
If you’re a tenant, right now through end of March may be your last chance to lock in solid rental pricing. It’s a double-edged sword this time of year, as you’ll see limited inventory through March, but also limited competition and more flexibility from owners overall.
Barring a major surprise, I would be prepared for the rental market to move closer to 2019 rental price highs, more competition amongst tenants, and less steals to be found, especially as we enter the April-August busy season.
For home buyers, 2021 was a challenging year. If you were fortunate enough to purchase a home with me last year, you know that the buy-side market has been competitive and we patiently worked together to put in the right offer on the right property. What's driving this competition? One word: INVENTORY. Take a look at the graphs below:
Months of inventory refers to the number of months it would take for the current inventory of homes on the market to sell, given current sales pace. This means if months of supply is equal to 1, it would take 1 month to sell all existing inventory. In 2021 what did the numbers look like? In Cambridge it was 0.36 and in Somerville 0.64. As you can see, there isn’t enough inventory to support the demand.
Even with interest rate hikes potentially as high as 4% in 2022, I expect inventory to remain low. Sellers will have a hard time finding a new home to buy right now and are disincentivized in giving up record-low interest rates for significantly higher rates. My advice for buyers? Work patiently with an agent who lives and breathes the local market every day, so you can put in an offer that maximizes your chances of winning and also protects you from an overbid that could destroy your built-in equity for years to come. Whether that’s myself or another agent, it is critical you work with a qualified agent who truly understands the Cambridge/Somerville market dynamics at play today.
And if you're a seller, you’re in a position of strength. Depending on your financial and personal circumstances, you have multiple options. You could sell and almost certainly capture a healthy return. It is not uncommon right now to see a seller who has owned for ~5 years walk away with $200k, $300k, even $400k+ in gains. Take a look at the averages below:
You also may be able to rent out your existing property and hold for the long term. Or you could simply continue to live in your home and position yourself for solid returns for years to come.
I hope this information is useful to you! If you have questions, please do not hesitate to reach out by email: Sage@CambridgeSage.com or cell: 617-833-7457 any time. And if you would like to see more of something else for the spring issue, please ping me - I am constantly looking to improve and add value to this newsletter. Thank you and I’d like to wish everyone and their family + friends a happy, healthy, peaceful and relaxing 2022!!
All my best,
Sage
Santos
For this edition of The Sage Report, I am recommending Santos, my go-to handyman. Santos was born in Honduras and moved to the US in 1988. Santos is extremely honest, hardworking and competent. He has helped dozens of clients, as well as my parents in Salem, MA and myself in Medford, MA. He can paint, fix broken couches, change disposals, repair siding, landscape, and dozens of other projects. If you’re thinking of working with Santos, shoot him a text and tell him I sent you.
Are you familiar with Tenancy at Will agreements? The vast majority of landlords sign fixed term agreements, which are typically 6+ months. But there is also the option to sign a Tenancy at Will agreement, which allows either the landlord or tenant to provide 30 days notice and end the agreement. Keep in mind, if you provide notice in the middle of a month, the 30 days notice period typically will begin from the 1st of the following month.*
If you are a landlord, a Tenancy at Will agreement does not make sense in most scenarios. Why? A tenant could leave in the dead of winter, leaving landlords in a tough spot to find a tenant quickly or at on-season rental market rates. There are some advantages to Tenancy at Will agreements, namely that either party can quickly end the agreement if either side decides it’s not working out for any reason.
Plant Pub // Vegan Pub // Kendall Square, Cambridge
Sally's Sandwiches // Sandwiches // Harvard Square, Cambridge
Las Palmas // Dominican // Harvard Square, Cambridge
Bar Enza // Hip Italian // Harvard Square, Cambridge
Try the Lobster Ravioli, Ciabatta Sticks w/ ricotta or Arancini! Great place to take your parents visiting from out of town or for a chill date night during the week!
Geppetto // Hip Italian // Kendall Square, Cambridge
Mimi's Chuka Diner // Japanese adapted Chinese // Central Square, Cambridge
Zoe’s Acai Bar & Juicery // Acai bowls + smoothies // Porter Square, Cambridge
Waikiki // Poke Bar // Davis Square, Somerville
Try the Volcano Bowl - light, refreshing and just the right amount of spicy.
Dear Annie // Natural wine bar + snacks // Porter Square, Cambridge
Judy’s Bay // Japanese inspired seafood // Central Square, Cambridge
Koshari Mama // Vegan Egyptian // Union Square, Somerville
Shirley // Farm to table snacks // Union Square, Somerville
Kushari & Grill // Egyptian // Tufts Area, Medford
Looking to sell, buy or rent your property?
Have general real estate questions?
Give me a ring, text or email
Sage@CambridgeSage.com
617-833-7457