Amherst House Prices Shoot Up

by Nick Grabbe

A flurry of home-buyers caused sale prices to jump in Amherst this spring, with houses often selling for more than their asking prices.

“It was such an unusual time, and we were all walking around scratching our heads,” said Kathy Zeamer, a spokeswoman for Jones Realty. “Even realtors who have been in business for 40 years said they’d never seen anything like this.”

“Frenzy” isn’t too strong a word for the bidding wars that real estate agents saw over houses that were well-maintained and priced reasonably, she said. She offered some eye-popping examples:

  • A two-bedroom house on East Pleasant Street (shown at left) was listed for sale at $299,900. In three days, there were 50 showings and nine offers, and it sold for $345,000 to an out-of-town buyer.
  • A house on Middle Street was listed for $599,900, and someone bought it the first day it was on the market, for $612,500 – in cash.
  • A house on Amity Street was listed at $665,00 and sold for $708,800 in four days.

(For a list of recent sale prices of single-family houses in Amherst, click on “Recent House Sales” at left.)

If you already own your house, this white-hot market means it is now likely worth more than a year ago, and your net worth just went up a notch. My own Amherst house, which I bought for $66,000 in 1984, is now worth about six times as much. This hot market also works well for people who have just sold a brownstone in Brooklyn for $2 million and want to buy a house in Amherst and still have plenty of money left over.

But for middle-income people and first-time home-buyers, it’s been a frustrating time. And this price run-up has increased the already-wide wealth gap in Amherst between people who own homes and those who rent.

During the pandemic, many people living in urban areas and working from home figured they could do that just as easily in Amherst. Some were attracted to the cultural and outdoor activities in the area, and some had family members here, Zeamer said. Many sales this spring were to buyers from urban areas.

“They come with a lot of cash, and look at the prices of properties here, and it looks like quite a bargain,” she said.

It’s hard for a local buyer to compete, Zeamer said. Presented with a cash offer, many sellers don’t want to take the risk that a bidder won’t be able to get financing. It can take four to six weeks to get a mortgage commitment.

Some bidders have taken to writing letters to the sellers pleading their cases, or even agreeing to waive inspections or pay closing costs, she said. But many companies counsel against writing letters to sellers “due to the possibility (or even the perception) of favoritism that may be interpreted as discriminatory,” Zeamer said.

One buyer sold his house in California for $5 million and bought a house in Amherst for $1.4 million, said real estate agent Nancy Hamel. “A first-time buyer putting down 5 percent might as well not even make an offer,” she said. “FHA buyers don’t have a chance. How do you compete with that kind of money?”

Another reason for the frenzy is that there have been fewer houses for sale than usual. Normally, there are about 100 houses for sale in Amherst. By mid-June, there were around 10.

“Many homeowners did not want people coming through their homes during the pandemic,” Zeamer said. “Since vaccines have become available, people are more relaxed about opening their homes.”

Another attraction for buyers is that mortgage interest rates are very low now. Many people worry that inflation will cause them to go up next year, so they figure that now is a good time to buy.

Although your house is worth more now, you are paying taxes on only a portion of its value. But that will change.

Many houses have sold in the last few months for 30 percent more than their assessed value, which is Town Hall’s estimate of how much a house is worth. It is calculated to determine how to distribute the property tax burden, but it takes a while for assessed values to catch up with increasing sale prices .

For example, a house on Aubinwood Road, assessed at $338,900, recently sold for $485,000. A house on Baker Street, assessed for $290,300, sold for $450,000. A house on South East Street, assessed at $365,800, recently sold for $532,000.

Property taxes are due Aug. 2. Your annual property tax is calculated by dividing your assessed value by 1,000 and then multiplying by the tax rate, which was $21.82 in the fiscal year that just ended. The tax rate for the new fiscal year has not been set yet.

The median assessed value for a single-family house is $365,650, with an annual tax obligation of $7,978 in the fiscal year that just ended.

Assessed values will likely increase next year to reflect higher sale prices this year. That will probably cause the tax rate to go down. But tax bills always go up because the amount the town needs to raise in taxation always goes up by slightly more than the 2.5 percent limit set by state law. Changes in assessments don’t directly cause tax increases and happen every five years or whenever the average sale price is more than 10 percent above assessed values.

The frenzy of buyers is now past. “It’s calmed down a little bit, and in the summer things slow down,” said Zeamer.

But the price of a house in Amherst is likely to remain high.

5 thoughts on “Amherst House Prices Shoot Up”

  1. The East Pleasant Street house was bought by “Eames Ave. LLC” presumably as investment property. That phenomenon–LLCs buying reasonably priced owner occupied houses and converting to rentals–is contributing to inflated housing prices and to a mismatch in housing availability.

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  2. Nick, thanks for writing about the real estate market in Amherst. It has always fascinated me because of the impact of the colleges on the town and its housing stock. However, Amherst is not alone in the real estate scramble, many parts of the Northeast have experienced the same conditions in their housing markets as a result of those fleeing large urban areas because of the coronavirus. That coupled with low interest rates has created the perfect storm. It’s a boon to realtors, but the bane of first time home buyers and almost anyone looking to purchase a house. Real estate has always been about supply and demand. In Amherst the supply is severely curtailed by the impact of students. Dozens if not hundreds of single family homes in town have been converted to two family student rentals, and thus those houses are no longer available for families to purchase. I am surrounded by former single family homes on Gray Street that are now rented to students. It is no longer a “family” oriented neighborhood because families cannot afford to compete with the high rents paid by students. Is this detrimental to the neighborhood? I do not know, but it has definitely changed its character and prevented anyone but students from living here.

    Middle income and first time homebuyers have long been shut out of the Amherst housing market. Just take a look at town employees. How many actually live in town? I do not know of any police officers, DPW workers, or fire professionals living in town. I suspect few working in town hall live here either. Maybe there are a few, but not many. This is not exclusive to Amherst. I lived in NYC for 26 years and always lived in Brooklyn. I could not afford Manhattan rents, and I was very content to stay in Brooklyn in a larger apartment for a lower rent. There were plenty of good places to live outside of Manhattan, and I was free to work or play in Manhattan any time that I wanted. There are alternatives to Amherst. I know many in town think that we are the center of the universe and nothing beyond our borders is habitable, but there are plenty of good places to live in the area. There certainly are more affordable housing opportunities if you decide to search outside the reach of UMass students seeking rental apartments.

    We do pay high taxes for the level of services provided by the town. This is another impediment to first time home buyers with the cost of insurance, a mortgage, and taxes adding to the cost of owning a home here. I know why taxes are higher in Amherst than in some of the surrounding communities, but that is a subject for another post. In part, the perceived quality of the school system also inflates housing prices. People want to live in a community with good schools. That is also a topic for another post.

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  3. Investment in housing in college towns has always been considered a safe haven during times of economic uncertainty. We have seen this over and over and there is not much that we or anyone can do about it. However, of greater concern to the Town of Amherst is that interest rates on projects like the library, schools, fire station, and DPW may go up starting in 2023. If we do not act now to lock in low interest rates, it will cost us (and our grandchildren) lots of money over the next 30 years. Please consider that failure to lock in low interest rates on municipal projects NOW is critical. These is no time left for delay. The time to stop talking and act is now. My $0,000,000.02 worth.

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  4. Without contradicting anything above, some things should be pointed out here, that perhaps many residents don’t know. By Massachusetts state law, the property tax rate cannot exceed $25 per thousand, so that’s a cap. Secondly, the changes in property values might eventually affect who pays what in town for property taxes, but the total amount of the levy, the total amount paid by property taxpayers, remains subject to the strict 2.5% increase plus new growth cap every year. In short, we need to remain calm about the tax implications on this. We can, of course, continue to be concerned about who can live here and who can’t, who can purchase property and who can’t. And, it is really important for every property taxpayer to understand what a debt exclusion override is and how it is distinguishable from the more generic kind of override. There is a lot of overheated rhetoric on this topic, and the admonition to “trust, but verify” is relevant here.

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