Editor’s note: This is the first of a two-part series on the impact of shrinking inventories on buyers and sellers. In Part 1, Inman News reporter Andrea V. Brambila looks at how the scarcity of of listings in many markets is affecting buyers. Part 2 will look at impacts on sellers.
Homebuyers nationwide are discovering their self-appointed task is not for the faint of heart. Nearly every major market has seen double-digit declines in inventories of for-sale listings, making multiple-bid situations common.
According to Realtor.com, which receives listings data from nearly all of the nation’s multiple listing services, there were fewer homes for sale in August than at the same time a year ago in all but two of 146 metro areas tracked.
Inman News asked real estate agents and brokers in markets with shrinking inventories how they’re coping, and found that many are dealing with at least one consequence of the shortage: thwarted buyers.
Downtown Raleigh, N.C. Photo credit: Mark Turner/Wikimedia Commons.
"The buyers tend to become a little frustrated as they are seeing homes that they want to ‘think about’ and before they can even get home to discuss it there are already multiple offers on the property," said Sheri Moritz, a real estate broker with Keller Williams’ Wake Home Team in Raleigh, N.C.
According to statistics compiled by Realtor.com, the Raleigh area saw a 21 percent annual drop in listings in August.
"I counsel buyers to be patient, and not get discouraged, that it may take extra time to find the suitable property," said Tom Avent, broker-owner at Tom Avent Real Estate in Fresno. "I have also seen some buyers give up looking, frustrated with low inventory and losing out in multiple-offer bidding."
Realtor.com statistics show the Fresno metro area experienced the third-largest drop in listing inventory nationwide in the past year, down 43.1 percent in August. Active inventory currently stands at a 1.5 months’ supply — far less than the six-month supply many analysts see as a balance of demand from buyers and sellers.
A recent survey of buyers by brokerage Redfin found inventory shortages and bidding wars dampening buyer enthusiasm during the third quarter. Less than half of survey respondents said now was a good time to buy, while there was an increase in those who said now was a good time to sell — an indication that would-be buyers think the market may be shifting against them, Redfin said.
The survey also found a reluctance to engage in multiple-offer situations: seven in 10 of those surveyed said they’d encountered competition on at least one offer, and 31 percent said they’d back off when faced with multiple-offer situations, up from 28 percent during the second quarter.
California State University, Fresno image via Shutterstock.
One of Avent’s clients, homebuyer Nicki Sullivan, 57, a human resources professional in Fresno, sold her 1,700-square-foot house recently in order to downsize to a lower-maintenance home.
She got a $211,000 cash offer the first weekend the home listed, which surprised her, and she began looking for a replacement home. She quickly turned to the new-home market after not finding any resale homes to her liking.
"I bought a move-in-ready home with a very short escrow. It is very easy, no multiple bids. The lender was on site that day and I got all my paperwork done in one weekend," Sullivan said. She considered the price, $205,000, "very comparable" to existing homes.
While only the lowest-priced properties used to generate bidding wars, now homes in nearly all prices ranges attract multiple offers, according to several real estate pros.
"We’re seeing multiple offers for well-priced properties all the way through $500,000," said Charles Roberts, a director at the Denver Board of Realtors and co-owner of Your Castle Real Estate. "Two or three years ago the recovery was happening at the lower end, below $200,000 and most strong at the very low end."
In the past nine months, the higher end of the market "has seen a very strong recovery," Roberts said. "At one time there were seven years of inventory of $1 million-plus homes. That’s down to 10 months or so."
Homebuyer Cori Ward, 35, a financial and administrative services manager in Salt Lake City, decided to dive back into the housing market after selling her home four years ago to travel abroad.
"Prices seem good and the interest rates are low. I have excellent credit, so now that I’m back in Salt Lake City long term, it just doesn’t make sense to rent," Ward said.
Salt Lake City, Utah. Photo credit: Skyguy414/Wikimedia Commons.
Ward started looking in her current price range in mid-April. She’s made an offer on only one home so far — a multiple-bid situation that spurred her to be more aggressive than she thought she would have to be when she first started her search.
Ward offered full price, but lost out to an offer of $15,000 above the asking price, all cash.
"I thought it would be quicker to find a home to buy," she said. "I just signed a three-month lease on Sept. 1, but am hoping I find a house and won’t have to extend it."
Ward is the first to admit that, in addition to the low inventory, "buyer pickiness" has been a factor in her search. She said she now accepts that she may have to compromise to find a home.
"Maybe (I’ll) have to remodel a kitchen or something," she said.
Kevin Coyle, principal broker at SLC Homes, is Ward’s Realtor. He’s had 11 buyers in multiple-offer situations so far this year, and has won eight of those bidding wars.
"I learned something from the last boom," Coyle said. "When the market is going up, and it’s the beginning of a new boom, it’s OK to push a buyer to full market value if they love the house, you think it will appraise, and they’re willing to go there."
Ward said Coyle has advised her to "act fast" when a home comes on the market.
"We both look every day and if one comes on in the neighborhood we see it the first day," she said.
Swift, ready and aggressive
Several real estate professionals said swift, ready and aggressive buyers have an advantage in low-inventory markets.
To give their clients an edge, these real estate pros have them preapproved for a loan, familiarize them with the neighborhood, educate them on multiple-offer situations, and advise them on ways to make their offers more appealing — all before they even start house hunting.
"I always try to inform the buyers, before we start looking, it may take more than a few offers on houses to finally get an accepted contract," said Christy Brannon, an agent who is part of a team at Keller Williams Atlanta Metro East in Conyers, Ga.
"For some clients, the best method to find a home is making offers on multiple properties and see which one gets accepted first," Brannon said. "Before I will do that, I ask my clients to make sure they are committed to purchasing whichever house is the first to be accepted. I have had a few successes with this method, and the buyers feel like we are being proactive in the search for their new home."
She’s seen multiple offers come in on homes that have been listed for only a day or two.
"Very often now, I will be told by listing agents that they have multiple backup offers and they are either not accepting any more backups or they will take mine and add it to the stack," Brannon said.
She said multiple listings service hotsheets — a tool detailing the newest changes in a listing’s status — were becoming "vitally important" to compare to listings from Fannie Mae and the U.S. Department of Housing and Urban Development (HUD) "so you can see which homes have just been listed or are about to be listed."
Roberts said urgency defines the current market for buyers. "Gone are the days of looking at 50 homes and taking months to make a decision. If there’s a good property on the market, buyers need to act quickly, and yes, sometimes bid above asking price," he said.
"The educated, thoughtful clients are getting great deals with astoundingly low interest rates," Roberts said. "The clients that are still insisting on putting offers at 80 cents on the dollar are getting shut out of the market. They either learn that that strategy doesn’t work anymore or they keep on renting. Our job as real estate agents is to teach them what the market looks like and guide them in their decision-making."
Deidre Joyner, a real estate agent at Red Oak Realty in Oakland, Calif., recently represented two separate clients, each of whom submitted offers that were more than $100,000 above asking price.
One of the properties was a trust sale home listed at $295,000 that needed some work. The other was in a trendy, upscale neighborhood and listed at $825,000.
Both homes received multiple bids — one 25, the other 15 — and ultimately sold for 34 percent and 31 percent above list price, respectively.
In both cases, the winning bidders waived any inspection contingencies when they submitted their offers.
In a competitive situation, offering more than the asking price "is often not enough," Joyner said. "I am seeing large down payments and even all-cash offers. Some buyers are doing pre-inspections so they can write their offer without an inspection contingency."
Brian Copeland, a broker at Village Real Estate Services in Nashvile, Tenn., said his brokerage’s agents are "brutally honest" with their buyers, telling them not start seeing homes unless they’re ready to buy that day.
"Just this week, we sold two (homes) off of buzz without even hitting the MLS," Copeland said. "These stories must be shared with the buyers."
Whereas last year buyers tended to be "wishy-washy," now they understand time is of the essence, Copeland said.
Broker Brian Copeland at his recently purchased farm in Nashville, Tenn.
Village Real Estate Services has added another staff member just to handle additional paperwork.
"With more buyers comes more time out on the streets," he said. "With more homes sold come more inspections, releases and addenda."
Copeland himself just bought a home that had been on the market for more than a year. He said the sellers came down more than $35,000 from their asking price.
"Smart buyers are looking at old inventory and snapping it up, leaving room for more showings on the other inventory. It’s kind of like a going-out-of-business sale in its final weeks. The consumer doesn’t know exactly when the store is closing, but they know it’s soon," he said.
With interest rates so low, "I would have been crazy not to practice what I preach, and buy," he added.
CORRECTION: This article originally misstated Tom Avent’s brokerage affiliation and title.