What used to be a buyer’s market with options across the board has slowly transitioned into a seller’s market. No longer are sellers desperate for buyers and settling for undercut offers.
A recent Bloomberg article found that in some areas, such as Brooklyn, properties are receiving an extraordinary amount of offers in a short period of time. According to the story, an open house for a brownstone property received 50 offers.
Even a multi-million dollar property in California received six offers during one month.
Despite significant offers for these properties, Drew Brahos, market strategist for Bank of the West, said the situations are unique to the individual properties and regions.
“It’s a situation where I believe it’s not so much the financial, it’s the fear of missing out on a great opportunity,” he said.
Brahos attributes the strengthening market partially to all-cash and nearly-all-cash purchases where larger investors buy multiple properties.
In the near future, a strengthened global economy would lead to a stronger growth of real estate in the United States as borrowers from around the world decide to purchase statewide.
“It’s going to be very important to see an improvement in the global economy,” Brahos said.
Looking at the overall market, Brahos said it is growing modestly, not as rapidly as other reports state. He said that regions with the strongest growth are in prime locations such as coastal areas where property is scarce.
Colby Sambrotto, CEO and founder of USRealty.com, said that a lot of pent-up demand has entered the country and turned the market into a “bidding war.”
“Buyers have largely been on the sidelines for the past four years,” he said. “You have demand that increases every year and the inventory has not grown to meet that demand.”
From a national standpoint, the market has virtually stabilized.
“There’s been a shift in perception that the real estate market has found its footing,” Sambrotto said.
In order to fully analyze the trends occurring throughout the United States, real estate agents and investors across the country described how their local markets are reacting to this recent upswing.
Locations across the country that were hit the hardest during the housing crisis are experiencing positive and much needed growth.
Dean Wegner, vice president of mortgage lending for Guaranteed Rate, said that Phoenix, AZ is now recovering from the housing crash. As competition values increase, people that were previously unable to move are now able to. Consequently, the buyer pool has expanded with eager buyers.
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Jacob Gabrie, president of Blackstone Realty Group in El Dorado Hills, CA, agrees. He said that homeowners in his area no longer feel “stuck” with their properties.
“There are options and it has been a growth spurt similar to the past real estate booms we have seen,” he said. “The catalyst for it here is that the consumers are confident that the home prices are steady and increasing as they built out this community.”
Gabrie attributes this growth to a reduction of the “fear of the unknown.”
Alan Glass, a residential and commercial real estate broke in Southern California, said the Los Angeles and Orange County housing markets have become bottlenecked.
“The influx of institutional capital into the single family rental market has swept up the bottom of our market forcing local mom and pop investors and rehabbers to compete for homes with regular home buyers,” Glass said.
Glass continued stating that these investors are usually cash buyers, which allows the sale to finalize in less than 30 days.
“Daily news stories about our housing recovery and double digit price appreciation [leave] many buyers feeling like they’ll miss the boat if they don’t jump in now,” Glass said.
For sellers in northern Kentucky, properties have sold 15 days faster this year, when compared to 2012 reports, said Matt Gerding, regional vice president for REMAX of Kentucky and Tennessee.
Despite increased sale time, there are 9 percent fewer listings available, and 24 percent fewer monthly supply inventory for the year.
In the southern area that Gerding oversees, he has not seen an increase in the multi-bid offer scenario, but he understands what creates them.
“There is a sense of urgency with buyers with record low interest rates and inventory levels and the chase to stay ahead of price increases,” Gerding said. “This creates bidding wars and multiple offers.
Many coastal and tropical areas are experiencing strong offers as well.
Scott Higashi, executive VP of sales at Prudential Locations in Hawaii, said that a recent listing received 30 offers.
“There is no doubt that our market is experiencing this phenomenon,” Higashi said.
He said that the “Months of Remaining Inventory” is currently at three months for both single family residences and condos. If no new properties entered the market today, the island of Oahu would theoretically sell out of properties in three months.
In contrast to mainland states, the Hawaiian Islands experienced a “rise and plateau” market. Higashi said that after the last housing spike, the Hawaiian housing market did not experience a huge drop in value.
“Because there is a natural limit to the amount of inventory that can be built on an island, we remained somewhat insulated from the problems that plagued other markets in the continental U.S.,” he said.
Construction has also increased in the area. Oahu alone is expected to receive thousands of new units in the next decade. Unlike other continental U.S. locations that could accommodate larger areas of construction, the small size of the Hawaiian Islands could cause the market to become oversaturated in the next few years.
“The amount of new construction planned or being discussed is actually unprecedented in our local market’s history,” Higashi said.
Even areas that remained strong during the housing crisis, such as metropolitan locations, are strengthening even further.
For both America Foy and Remy Weinstein of Better Homes and Garden Highland Partners, they have experienced multiple offers for most of the residential properties put on the market. Foy and Weinstein said that it is common to see properties receive offers of 10 to 20 percent over the asking price, usually after only one week on the market.
“We recently sold a home in two days, over asking, with multiple offers, loans, and no contingencies,” Foy and Weinstein said. “We were shocked.”
Despite having a significant turnaround, both realize that the reason behind the turnaround is simple: “The money is really cheap and the inventory is really tight.”
Buyer confidence has also improved the market, but it has made it more difficult for non-investor buyers.
“With more confident first-time buyers or buyers looking to purchase a home to live in, there is a frustration that they will not be able to compete with investor buyers,” Foy and Weinstein said. “The low inventory is driving the rebound in prices and making it difficult for all buyers.”
Ray Schmitz, a real estate broker with NYC-based Rutenberg Realty, said that the news makes it seem like housing numbers are up everywhere.
“Despite all the hype in the press, the truth is probably prosaic: a recovery is underway, but it is slow, uneven and likely to be long,” he said.
He said that multiple offers on a property are unusual, but it does not connotate a frenzy.
“Multiple offer anecdotes do prove that buyers are ready to make a deal,” Schmitz said.
In New York City specifically, the housing market is healthy and has turned into a seller’s market, despite being extremely expensive. Schmitz attributes it to a notion that creative thinkers and workers drive the value up in housing areas.
“Places that have no reputation for accumulating talent, such as Cleveland and Detroit, are not doing as well,” he said.
Although Schmitz said it is impossible to generalize about an entire city or state, location still matters in real estate.
“It really is location, location, location. That should be reassuring: there is no new bubble sweeping the nation. Whatever the reason, some places really are more in demand than others,” he said.