Home prices soar in supply-starved US market

Boston

LAST year's pandemic housing rush is now this year's end-of-lockdown feeding frenzy.

Across the United States, house hunters are fighting for scraps in a market picked clean of listings during the key spring home-buying season. Bidding wars are the norm. Strategies like waiving inspections to secure deals, common for years in hot West Coast tech hubs, are popping up in places from Buffalo, New York, to Salt Lake City.

Demand is so fierce that almost half of US homes are selling within a week of hitting the market, a record pace, according to Redfin. Annual price growth reached 17 per cent in March, the highest in data going back to 2012. Urgency is amped up, with real estate agents commonly limiting bidding to a few days and then pitting buyers against each other.

"New listings get snatched up right away," said Daryl Fairweather, Redfin's chief economist. "First it was, the faster you move, the more of an edge you have. Now if you don't put in an offer five days after it's listed, you're not going to be considered at all."

This clamour is intensifying a pandemic boom that began last year, fuelled by record-low mortgage rates and demand for bigger houses in a remote-work world. Now, growing optimism about an economic recovery - as well as the prospect of rising borrowing costs - is bringing out Americans who are flush with savings from a year of staying home. Some employers also are signalling long-term job flexibility, enabling buyers to move to the suburbs or cheaper locales.

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At the same time, the supply of homes is shrinking fast. Inventory in the warmer months typically expands because sellers like to list in the spring to have deals closed by summer, when families can settle in before school starts. But in March, the number of active listings dropped by more than 40 per cent from a year earlier to the lowest level on record, according to Redfin.

Builders can't build fast enough, so many are jacking up prices to boost margins as costs climb for materials, land and labour.

Supply is scarce, in part, because home owners are reluctant to put their properties up for sale because they may struggle to find something they can afford to upgrade to. But those who do sell are getting rewarded handsomely.

Buyers are bidding high and waiving inspections and mortgage contingencies even if that results in them having to make up the difference if the home value appraisal falls short. They're doing what it takes to stand out, said Jim Black, a broker who works in Worcester, Massachusetts, about an hour west of Boston.

"Most houses, halfway decent, are selling in a couple days with multiple offers, sometimes 10 per cent over list price," he said. "It's as crazy as it has ever been."

In Atlanta, some buyers are trying to win bidding wars by writing personal letters and even offering sellers gifts of as much as US$2,000 just for accepting their offer, said Andrew Kolodey, a Redfin agent in the city.

The boom threatens to extinguish itself with soaring prices pushing homes out of reach for would-be buyers, especially as mortgage rates rise off record lows. Inventory might also grow after the pandemic subsides, as those who postponed moves could decide to put homes on the market.

For now, demand is surging practically everywhere. For the first time ever, the average US home is selling for above its list price, Redfin data shows. In Austin, Texas, possibly the hottest market thanks to a flood of transplants from expensive areas like Northern California, homes sell for 107 per cent of asking prices.

Of 429 large counties measured by Redfin, 310 saw median prices jump at least 10 per cent in February from a year earlier. Only 17 had declines, including the counties that comprise San Francisco and the biggest outlier of them all, Manhattan. The pandemic badly damaged the New York market - yet competition in the suburbs is stiff.

Buyers from New York and California who are getting the green light from employers to work remotely are bidding up prices in cheaper cities such as Atlanta, Dallas and Grand Rapids, Michigan. BLOOMBERG