Sky high listing prices and bidding war frenzies are leading many Lehigh Valley buyers to give up all together and halt their housing hunts, area real estate agents say.
Low interest rates and limited housing inventory continue to fuel record high sales prices. In May, the Greater Lehigh Valley Realtors reported median existing home sales exceeding $350,000 -- a 24% increase and the largest year-over-year increase since 1999. The group tracks properties across Northampton County and Lehigh County, as well as neighboring Carbon County.
The Realtors group attributed the jump to eager buyers making multiple offers -- some for well over asking price -- while others are making offers on homes sight unseen. The increase in sales prices, however, comes with a slight decline in existing home sales nationwide, as homebuyers struggle with declining affordability amid a growing lack of inventory.
In the Lehigh Valley, inventory levels shrank about 33% to 756 units in June, the group reported. It forced some buyers to simply wait it out in hopes of more inventory and less competition.
Rebecca L. Decker Francis, who leads The Rebecca Francis Team affiliated with Berkshire Hathaway HomeServices Fox & Roach, said she’s definitely seen a pause this summer with the willingness of buyers to compete.
This is even happening with buyers who have a significant amount of finances to play with, she said.
“It seemed that there was more panic amongst buyers who were willing to waive inspections, appraisal contingencies, among other things,” Francis said of spring. “Now, we’ve found buyers dropping out of the market saying that they want to wait until the market cools off.”
Frustration and fatigue
Homebuyers are simply fed up being burned in the scorching hot market, especially with sellers not even accepting solid offers.
There have been scenarios on the national level, where area real estate agents say they have heard upward of 70 house tours with inspections waived and more than a dozen offers made with not one accepted.
Creighton Faust, a real estate broker with RE/MAX Central, told lehighvalleylive.com he’s had a client himself lose out on five offers in bidding wars before finally sealing a deal just this past week.
“That particular one stayed the course and kept trying,” Faust said, noting sometimes it’s best just to wait it out. “I am still seeing a strong seller’s market, but I am seeing the number of offers on properties decreasing.”
Francis said sellers not grabbing onto any of the multiple offers -- even those above asking price -- isn’t as uncommon as a buyer would think, especially in the booming current market.
“Sometimes sellers are throwing numbers out there that they are unlikely to get,” Francis said. “In an effort to get a listing, the agent will go along with it ‘hoping’ that someone comes along willing to pay what the seller wants. But when the seller doesn’t get all the terms they want or the price isn’t pushed far enough upward, they change their minds and don’t accept any of the offers on the table.”
Additionally, Francis is seeing some sellers not realizing how quickly a home will sell and then having nowhere to go. That also puts them on the fence in accepting a deal.
“In situations like this, the seller has very little choice but to back out,” she said.
The Hunger Games-style fight in return is causing a series of emotions for area buyers.
There’s fatigue and frustration and sadness and heartbreak that goes along with the mental energy of throwing everything into an offer and still being turned away, Francis said. She described the hunts as becoming part-time jobs with buyers spending hours scanning online listings throughout the week and writing what’s known as “love letters” to sellers, expressing passion for properties. Buyers can spend entire weekends visiting multiple open houses back-to-back.
For first-time buyers, its even worse, Francis said, noting it can feel like they may never get beyond the frenzy to finally own a home. Newlyweds often get approved on average around $200,0000 for their first purchase but in the current market, they need to actually look $50,000 to $100,000 below the maximum purchase price, she said.
“It’s a rude awakening,” Francis said. “They may have to go up that much over asking in order to get the home they want.”
Agents additionally are feeling the heat, becoming more like therapists to clients than ever before. It takes extra hand holding to deal with the burnout and heartache when bids fall through, Francis said, noting many buyers put their hopes and dreams on the line and those emotions are heightened when large sums of cash are at stake.
“Some people have no choice but to sell or buy in this crazy market and it’s sometimes a project trying to keep a client’s hopes and energy up when they’re losing out on multiple homes,” she said.
There are also buyers who have bought and sold in the past not taking into consideration a very different current market. It’s not uncommon to visit an open house and have a seller tell the buyer they already have an offer and they have to beat it, basically. There are times there are lines out the door and buyers need to make a decision within minutes, Francis said.
“To win in this market, it takes a buyer that’s willing to do whatever it takes,” she said. “That might mean dropping everything to go to a showing when it’s convenient for the seller or getting on a plane and flying out to see a home the day if it goes on the market. That’s the way you’ll get the property you want.”
“Those who wait and say, ‘We’ll see it on the weekend as we have a lot going on this week,’ often don’t even have the opportunity to see it as homes have been moving so fast,” Francis added.
Hot rental market
As more and more potential buyers put a pin in searches this summer, the real estate market is starting to stabilize in some areas, agents say.
This is mainly due to the dwindle in buyer activity, which is causing the rental market to heat up, said Tim Tepes, president of the Greater Lehigh Valley Realtors and co-owner of Northampton Borough-based Assist 2 Sell Buyers & Sellers Realty.
Tepes, a landlord of about 80 Lehigh Valley units, told lehighvalleylive.com those without the financial means to have a stake in the bidding game are instead putting their items into storage and renting until the market cools. Landlords who used to receive $1,600 monthly for rent now are being offered $1,800 to $2,000 monthly with many tenants willing to pay a full year up front, Tepes said.
“Landlords are seeing a high spike,” he said. “It’s ridiculous with the rentals, as well. It’s a sight unseen.”
Tepes is not surprised by the cooling off period, describing total absurdity in some major cities nationally, in which listings going for $400,000 can receive up to $650,000 for the property. While the Lehigh Valley hasn’t experienced anything that drastic, Tepes has seen at least $40,000 to $60,000 over the asking price in some towns.
“Local people are definitely getting fed up with it,” Tepes said.
And even the historically low interest rates no longer are attracting folks into the frenzy.
The 30-year fixed average was at 2.78% and an adjustable, 15-year loan, was 2.12% as of July 22, according to Freddie Mac, the government-sponsored Federal Home Loan Mortgage Corporation.
But the Fannie Mae Home Purchase Sentiment Index showed in June despite these rates being at a record low, 64% of survey respondents said it’s a bad time to buy a home. This is up from 56% the month before.
Lawrence Yun, chief economist for the National Association of Realtors, who spoke at Greater Lehigh Valley Realtors’ general membership meeting recently, said the Lehigh Valley is short in both housing and rental stock.
“Sales in the $1 million-plus are clicking along because there is inventory,” Yun said for both national and local sales. “Where we don’t have inventory -- lower price points -- sales are not moving, and that is why it is critical that we bring more inventory ... If we have more inventory, prices will not shoot up so high. So, it makes affordability more manageable.”
National home builders meanwhile are trying to meet the increased market demand, with housing starts up 3.6% in May from April, according to the U.S. Department of Commerce.
In the Lehigh Valley, Tepes pointed out some larger developments with already approved lots. These include the Estates at Willow Brook in North Catasauqua and a 55-and-over subdivision in East Allen Township. There’s also been new housing developments and commercial opportunities along the Charles Chrin Interchange on Route 33 in Tatamy, as well as in Forks Township and Palmer Township, which has a growth path already created by the Route 33 and Interstate 78 corridors.
“Home builders are clearly trying to meet the increased market demand,” Tepes said. “I don’t think that’s slowing anytime soon. It’s pretty solid.”
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Pamela Sroka-Holzmann may be reached at firstname.lastname@example.org.