Ellen Coleman, a broker with RE/MAX Real Estate Center, has never seen a situation like this in her 15-year career. Last Thursday (March 25), she listed an older Washington, DC home for $275,000 to be repaired, and as of Sunday night, had received 88 buyer offers. “The offers are flying in one after the other, it’s outrageous.” Of those 88 offers, 76 were cash deals, meaning the buyers were solid and willing to sign purchase contracts with no strings attached, in such a tight timeframe that many of them hadn’t had a chance to see the house.
An old house sold for more than the asking price
Up nearly 70%
The four-bedroom, 1,800-square-foot home sold for $460,000, up nearly 70 percent from the asking price. The winning bid was not the highest price, but it was a cash sale, she said. Allen said the buyer was an investor who would probably renovate the house and resell it for a profit.
She said, “This house is underpriced for the area and is an exception to the rule, where many of the buyers are using it for self-occupancy, where housing is scarce. Other properties may have gotten nearly 15 offers.” In fact, the inventory of homes for sale in many areas across the U.S. is now at historic lows, which has increased buyer competition and pushed up home prices. With market demand still strong, it’s hard to imagine when the market will become more affordable, leaving many homebuyers confused about whether they should buy now or wait a little longer.
A year ago, the situation was very different. The Great Communist Viral Plague struck and the housing market fell off a cliff by as much as 40% for buyers. But when the market began to rebound last May, housing has not been able to keep up until now, and as a result, prices have skyrocketed. So says Chris Stroud, head of research at HouseCanary Real Estate Technology and Analytics.
From last year to now, mid-priced homes are up 16 percent. According to the National Association of Realtors, some areas across the United States are up even more. For example, the Northeast and West have reached 21 percent. Meanwhile, housing inventory has been hovering at its lowest point. in February, inventory was down nearly 30 percent from a year ago. Desperate buyers are asking themselves, “When will the madness in home prices stop?
“Mortgage rates are expected to rise later this year, and that will throw a little cold water on the market,” said Brad Dillman, chief economist for Cortland Real Estate Development Group Inc. “Homes will stay on the market longer, inventory will grow, home building will continue, new home listings will increase, and moderate home price growth will continue.”
Why there are currently no homes to buy
Last year, millions of home buyers refinanced at the lowest interest rates, a group of homeowners who won’t be moving out anytime soon, said Liz Brent, founder of GoBrent Real Estate. In addition to 2.57 million homeowners in the forbearance programs, that is, if they encounter financial difficulties, can be deferred mortgage payments, these people may sooner or later have to change to cheaper homes to live, but not now.
Data from the U.S. Department of Commerce show that the number of homes built last month has fallen to a six-month low, although homebuilders have made great strides in increasing inventory. This is partly related to the bitter cold and partly related to the plague. Either way, it has exacerbated the housing inventory challenge. The unfortunate thing is that when you have five 15 buyers offering, the only ones who win, are the ones who are financially wide open,” Brent said.
Either buy now or wait and see
Carlo Siracusa, president of Weichert. residential brokerage, said buyers continue to swell despite shrinking inventory over the past year. He said, “Inventory is going to continue to be tight for a while because all these buyers, city dwellers and first-time buyers are looking for more space or a new place.” Caro believes it’s pointless to wait if you can buy now. Interest rates will rise. But there’s no sign that real estate prices will fall: Demand is strong and listings are scarce.
More inventory is expected later this spring, says Danielle Hale, chief economist at Realtor.com. That will increase choice but not necessarily ease the price problem. More sellers usually show up in early May, but there will still be more buyers than homes, so sitting on the sidelines waiting for lower prices might be disappointing, she said. “At some point, the market demand frenzy will slow down. Buyers will exit the market when people can’t get a mortgage, or when renting is more affordable. But prices will remain stable or continue to rise because there will still be more buyers than sellers and interest rates will rise,” she said.
While rising rates could eventually lead to lower prices in the long run, hesitant buyers could brush up against the lowest rates ever and lose out, said Melissa Cohn, an executive at William Raveis Mortgage, “If you find a house you like and you can afford it, that house won’t be around for long. When it’s time to make a move, make a move! Interest rates are definitely going up.” Usually when interest rates rise, she says, home prices will fall, or at least stop rising like crazy, but there’s a time cushion and the housing market will eventually cool off. But that doesn’t mean prices will drop 20 percent.
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