It’s Time To Get Off The Fence

The Average Closed Sales Price in February 2022 on the Eastern Shore of Maryland was just short of
$400,000 ($397,348). Throughout COVID, the demand for rural houses has far exceeded the supply –
resulting in rapidly appreciating values.

Some Sellers are timing the market – waiting for eastern shore values to peak before coming to market.
Inventory in every major sub-market on the Shore has fallen to historic lows. In Talbot County for
example there were only 65 Active listings in February – down from 120 (-45.8%) from a year ago.
For all those Sellers “timing the market” its time to get off the fence. There are still a lot of Buyers in the
market – well-positioned new listings attract multiple offers in most cases, and it is not uncommon for
these listings to sell above asking price.

To illustrate: last Friday my associate Katie Moore brought a new
listing in Easton to market following 7 days in “Coming Soon” status. On Saturday Katie hosted an Open
House which drew 37 prospective purchasers. As of this morning, Monday, she has two offers in hand
and expects three more by the end of the day. Katie has every reason to expect that the winning bid will
be greater than 10% over the published asking price!

“But times, they be a changin’”. Recent rising interest rates have, so far, done little to temper demand,
but they will. At the mortgage market’s nadir towards the end of 2021 a qualified buyer could find long
(30yr) money at 2.5%. In other words, the average eastern shore improved residential property
($400,000) cost $1,580.48 monthly in principal and interest (PI) to buy – making even a $400,000 house extremely affordable.

But mortgage rates are on the move: currently nearing 4.5% – still low by historic standards but, still
costing the buyer of the average eastern shore house $2026.74 a month, or $446 a month more than
just six months ago. That’s $5,355 more a year!

Chairman Jerome Powell of the Federal Reserve Bank announced last week that he expects the Fed to
aggressively raise interest rates for the remainder of 2022 to fight rampant inflation. Local mortgage
originators like Jacob Bryan of Academy Mortgage expect long rates ” in the 6% range by the end of the
year”. In context a buyer can reasonably expect to pay $2,528 a month by the end of the year for the
same house.

This projected 60% increase in the monthly cost of home ownership is certain to dampen demand. We
don’t expect values to fall – there is just too much pent-up demand. We do expect that inventory will
start the slow climb back to historic levels.

What will this mean for sellers? Less demand and higher inventory means longer days on market. The
days of multiple offers are coming to an end. We don’t expect values to fall but the days of above asking
price offers are just about over. We expect the market to peak this Spring. For sellers who have been
sitting on the fence, now is the time to strike.

This is a good news/bad news scenario for Buyers. While more inventory means more choice, rising
interest rates mean Buyers will have to pay more. If you’re a Buyer who dreams of owning a house on
the Eastern Shore, a good real estate agent can make your dream come true.
Both Sellers and Buyers should take full advantage of the 2022 Spring market . You might not find a
better deal for the foreseeable future.