The Pandemic and Vermont Real Estate05/26/2021 04:09PM ● By Jennifer Goss Duby
In February of 2020, Vermont had eight months of inventory of homes for sale. Months of inventory is a measure of how fast homes that come on the real estate market are selling. An inventory of eight months means that it would take eight months to sell all the homes on the market at that time. According to the National Association of Realtors, an inventory of six months indicates a moderate price appreciation, and the lower the inventory the more rapidly prices will go up.
There was a sharp drop in inventory in March, when the COVID-19 pandemic first began to make waves. This was followed by a brief rally, but by July the inventory was dropping to a mere two months’ supply. Throughout the rest of 2020, the monthly supply of homes for sale was never more than two months.
A number of factors contributed to this crunch. First, interest rates have been incredibly low, making financing very accessible. Then, of course, there’s the COVID-19 pandemic. Some sellers dropped out of the market as a result, and combined with that there was an influx of people from other states who wanted to relocate here. Inventory dropped, prices spiked, and the work of buying and selling homes was made very difficult.
It’s no secret to Vermont residents what makes this state great to live in. And apparently it wasn’t a secret to the wider world either. The things Vermonters love—the lack of development and urban sprawl, the low population, the beauty of the natural scenery, outdoor recreation opportunities—were appealing to people coming from more populated areas. When the pandemic took hold and many workers were sent to work from home, the geographic requirement to live in a certain location suddenly evaporated.
“Vermont has seen such an increase in out-of-state buyers because they value recreation within closer reach [to home]. So, mountains, lakes, skiing, hiking, biking. People are asking about those things, prioritizing those things,” says Robin Hall, a Realtor with Coldwell Banker Hickok & Boardman Realty. Similarly, Susannah Kelley, a Realtor and sales manager at Vermont Real Estate, notes, “People are looking for places with land. Being able to spend time on their property became important, especially when it came to being locked down. I think people were stuck in their apartments. Properties that came with land were really popular.”
On top of that, numbers of incomers were choosing Vermont over where they came from because of it offers freedom from risks they wanted to escape. “We are a safe state, safer from the pandemic,” notes Staige Davis, president of Four Seasons Sotheby's International Realty. “We attracted a lot of people for that reason. But we’re also safe from the unrest of the cities. We also had some people come here from the fire zones in California.”
Buying and Selling in a Pandemic
So how do you show a house during a pandemic? The entire state was shut down from the middle of March through April. This meant offices were closed and houses couldn’t be shown. Even after things began to open up, there were challenges. How do you allow a stranger into someone’s home and keep everyone safe?
With guidance from the state of Vermont and the CDC, agencies found ways to make it possible for interested buyers to see homes. “Everybody that sees a house is required to fill out the form with the COVID questions. Masks are required. A lot of times, sellers will put out hand sanitizer or wipes and booties for shoes. We’re limiting the number of people in a home at one time,” explains Robin. “As agents and sellers, we’re trying to have [buyers leave] doors open and lights on so we don’t have to touch as much.”
Even though the state of Vermont required people coming in from other states to quarantine for two weeks, unfortunately not all complied. “Some agents felt unsafe,” says Staige. “Some people would come to us and not be truthful about whether they had quarantined. We have 205 associates in all of our offices. Communicating what was going on in the pandemic and caring for our clients and agents was paramount.” With most offices closed, “We would have closings in lawyers’ offices parking lots.”
Virtual showings proved to be helpful. The electronic age has made it possible to share a lot of information about a house virtually, including being able to see the inside, albeit remotely. “Agents have done a good job responding to the pandemic in providing additional information online,” says Robin. “Including pictures and videos and floorplans.”
Nobody Expects a Pandemic
Nobody realized how quickly the novel coronavirus would spread, or how serious COVID-19 would be. And no one could foresee the vast impact the illness and its attendant consequences would have on every corner of our lives. One result was that, “It became an insane seller’s market,” says Susannah.
With so little inventory, and an increase in buyers from out of state, the market became the scene of bidding wars, cash offers, and various extraordinary strategies. “I’ve been in this [business] since 1980. I’ve never seen anything like this,” says Staige. “If you have an open house and it’s reasonably priced, you’re going to see a huge number of people come to your house, and multiple offers.” Clients needed to be prepared to make offers as soon as properties came on the market, and needed to be prepared for disappointment. They might have to make 10 or a dozen offers before they got an acceptance. “For a lot of customers and clients it was frustrating. People would get very frustrated with their associates because they would lose out on one property after another,” says Staige.
For sellers, it was no cakewalk either. They might be able to sell their house easily, but then what? Now they are in the buyers’ market, competing for those scarce properties along with everyone else.
There have been a lot of buyers coming in with cash offers and buying homes sight unseen. Buyers have had to be very creative in order to compete in that kind of environment. “What we’re seeing is that buyers are either waiving inspections, or doing inspections on a pass/fail basis. When it comes to appraisals, if they are financing a home, they’re offering what’s known as an appraisal gap,” says Susannah. An appraisal gap means that if the selling price of a home is greater than the appraisal value, which can easily happen when bidding wars drive the price above the original asking price, the buyer agrees to come up with the balance over the amount a bank has agreed to loan. Another tool in the creative buyer’s toolbox is to use an escalation clause, which stipulates how much over a bid the buyer is willing to increase if the seller receives multiple offers.
So how do agents help clients navigate these choppy seas and keep their spirits on an even keel, when it’s so difficult to make an offer that will be successful? “It’s difficult helping them keep a positive attitude about having to make multiple offers. It’s definitely difficult for buyers who have a tight timeline and need to be in somewhere. We’re struggling with the fact that there isn’t much for them to make an offer on and things that do come on are going to have multiple offers. It’s really managing their expectations right off the bat. If they have a tight timeline, you have to be realistic with them and say, ‘We have to be really aggressive with our offers.’ And we have to look at properties well under their price range so they can bid over asking,” says Susannah.
Some buyers may be faced with the reality that now is not the right time for them. “I have told people that it’s OK to sit out,” says Robin. “If they don’t feel like they can present a strong offer or if they don’t want to be in a competitive bidding situation. But the question becomes, when do you not sit out? When will that end?”
Fall and winter are typically slower months in the real estate market. Who wants to move when the kids are in school or during the snowstorm season, after all? “But the factors that are driving the market—the low interest rates and the low inventory and the increased numbers of buyers interested in being here—those factors may not go away in the fall,” Robin explains. “That’s the problem with telling people one strategy may be to sit it out.”
Of course, no one has a crystal ball to forecast the next trends in real estate, but it seems likely prices will continue to increase. “It’s a supply and demand routine,” says Staige. “There are still a lot of buyers out there, and not enough inventory.”