The real estate sector is seeing more competition in suburban markets. Grady Trimble from FOX Business with more.
Less than a day after realtor Andrea White listed a three-bedroom home for sale in Sacramento, California, in March, she received a cash offer. The buyer – who hadn’t even seen the house in person – was ready to pay $ 520,000, White said. That was $ 21,000 above the asking price and 37% more than what the seller paid for the farmhouse just two years ago.
Accepting the offer was the easy part. Mrs. White then had to call 17 other agents who had scheduled visits to the house to let them know that she was out of the market.
Mrs. White, who works for brokerage Redfin Corp. and has been an agent since 2014, he has never seen anything like the sales craze taking over his northern California city. “It’s exhausting,” she said. “I am at a loss for words. It is painful for buyers; it is a celebration for sellers.”
FIRST TIME BUYERS OF REVIVAL FUEL FROM THE MANHATTAN HOUSING MARKET
Last year was the hottest year for sales activity in 14 years. House prices are rising in virtually every corner of the U.S., and average selling prices in dozens of metropolitan areas have seen double-digit percentage increases since a year ago, according to Zillow Group Inc. In Boise, Idaho, the average selling price increased by almost 25% in January compared to the previous year, while in Stamford, Connecticut, it increased by 19%.
“Prices are rising virtually everywhere,” said Mark Vitner, senior economist at Wells Fargo & Co. “It is surprising to see house prices rebound so quickly, at this magnitude, so early in an economic recovery.”
Although the pace of rising house prices has been staggering, it is not difficult to understand what is causing this frenzy. Mortgage rates are close to historic lows. Millions of millennials are entering their 30s, the typical age for first-time home buyers. And the pandemic has sparked new demand: some buyers want more space to work from home, while others are willing to move further away from their offices. Many workers who kept their jobs in 2020 were able to save for upfront payments due to stimulus checks, tolerance for paying student loans and less spending on travel and entertainment.
The supply, in turn, has never been so tight. Construction of new homes plummeted during the 2007-09 recession and remained low for years to come. Owners are also staying longer in their homes, in part because older baby boomers are getting healthier later in life and choosing not to downsize. The number of homes for sale in March was about half what it was a year ago, according to Realtor.com. In Austin, Texas, Jacksonville, Florida and Raleigh, North Carolina, the year-on-year inventory drop reached 70%. (News Corp, parent of The Wall Street Journal, operates Realtor.com.)
The market has rarely been so competitive, especially for first time home buyers or those on a budget. Bidding wars are common and new ads don’t last long. Almost three out of four houses sold in February were on the market for less than a month, according to the National Association of Realtors.
SELLING HOUSES FASTER THAN EVER
Prices for single-family homes across the country rose 12% in January from the previous year – marking the biggest annual increase in data since 1991, the Federal Housing Finance Agency said this week. All nine regions of the country monitored by the FHFA registered price gains of more than 10% year-on-year.
In February, the average price of an existing home increased by 15.8% over the previous year, to $ 313,000, NAR said.
But even as house prices skyrocket, many homeowners are reluctant to sell because they fear competing for another home in the same market, said Daryl Fairweather, chief economist at Redfin. With mortgage rates so low, many families decided to refinance last year instead of moving.
More inventory could hit the market this spring, which is usually the busiest season for home sales, real estate agents say. But it is unlikely that there will be enough new ads to cool the market. Nationally, there was a two-month supply of houses on the market at the end of February, according to the NAR, close to a historic low.
Even high-priced cities, where sales plunged last spring, are showing signs of growth. Sales of cooperatives and condominiums in Manhattan in the first quarter of 2021 exceeded the levels of the previous year for the first time in four quarters, according to brokerage Douglas Elliman. In San Francisco, home sales in February increased 19% over the previous year, according to Redfin.
Construction companies are trying to increase construction to meet growing demand. New construction has recovered from its recessionary casualties in recent years, but the country still has a shortage of millions of units. House building activity declined last spring and increased during the summer. But the pace of construction is limited by the high costs of wood, bottlenecks in materials and a lack of land and labor, according to builders and economists. The interest in buying is so great that many builders are restricting the number of houses they sell at a time. They want to be sure that they will not sell more than they can build.
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Economists and executives expect demand to remain robust this year and predict that the demographic-driven force will continue for years to come, as the great generation of the millennium and Generation Z age. Still, there has been some recent evidence that price growth may slow as more homes hit the market. Rising mortgage rates – which have been at their highest since June and have been rising steadily in recent weeks – could take some buyers out of the market this year.
Even buyers enthusiastic about the prospect of owning their first home were wiped out by the venture. Samantha and Doug Hawkins, both 32, moved out of their one-bedroom apartment in Boston when the pandemic hit Hawkins ‘parents’ home. They increased their savings by not paying rent, and Ms. Hawkins paid off her student loans.
But when they started looking for a home last year, they found it difficult to compete with other bidders. They were told that sellers would not accept offers with less than 20% down payment, said Hawkins, who works with human resources.
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After increasing their budget and expanding their search area, the Hawkins had their sixth offer accepted in March, for a four-bedroom home in Westford, Massachusetts, further away from Boston than they originally appeared. They are under contract and expect the deal to close in June.
“We are very proud to be able to do this and excited to take the next step in our lives,” said Hawkins. “But to be such a competitive market … it’s just a little bit of joy out of the process.”