People are waiting to visit a home for sale in Floral Park, Nassau County, New York, USA on September 6, 2020.
Wany Ying | Xinhua News Agency | Getty Images
Presidents Day weekend marks the unofficial start of the spring housing market, but if you want to get in this year, hold on to your wallet. Bidding wars are off the charts even as house prices are soaring.
The main reason why people who have been looking for a home for a long time have not yet bought a house is because they are constantly outbid. About 40% of potential buyers said so in a new survey from the National Association of Home Builders. The reasons are reversed from a year earlier, when 44% said unaffordable prices were the main reason they hadn’t bought yet, and 19% said they were outbid.
More than half of all buyers, 56%, faced bidding wars on their offers in January, according to a study by Redfin. That is up from 52% in December. More than half of the homes are now under contract in less than two weeks.
“With so few new listings coming to market, I expect bidding wars to become more common and involve even more potential buyers as we enter the spring home sales season,” said Daryl Fairweather, chief economist at Redfin.
She advises buyers to be ready to start viewing properties as soon as they come on the market and to get a mortgage up front.
“But know when to back off if the price escalates more than you’re willing to pay,” Fairweather added.
Competition is fierce across the country, but worst in Salt Lake City, where 9 out of 10 offerings faced competition, according to Redfinin’s survey of 24 major markets. It was followed by San Diego (78.9%), the Bay Area (77.1%), Denver (73.9%), and Seattle (73.8%).
The problem is supply, or lack thereof – record low supply. Sudden strong demand, driven by the stay-at-home culture of the Covid pandemic, quickly hit the already low supply due to lackluster housing construction. The record high mortgage interest rates only increased demand.
Paul Legere is a buyer agent with the Joel Nelson Group in Washington, DC. He says his job is only getting more difficult.
“The low cost of money means that buyers are now able to be more aggressive and willing to overpay for properties. As a buyer’s agent, tasked with helping customers find value, that part of the equation is nearly impossible,” said Legere. . “It’s a constant struggle and scrambling to find desired goals.”
Sellers have also backed out, as they didn’t want to experience the ordeal of marketing their homes during Covid. According to realtor.com, the number of newly listed homes fell 29% year over year in January, bringing total inventory down 47%.
House prices had risen by double digits every week for 26 consecutive weeks until January. The median listing price for a home was almost 13% higher than in January 2020.
“Lower mortgage rates make monthly payments for higher-end homes more manageable,” said Danielle Hale, chief economist at realtor.com. But finding a home that ticks the right boxes amid a limited supply, and saving for the larger down payment needed with higher home prices, remains a challenge, especially for first-time buyers who haven’t built their own home equity as prices soared . “