Likely to be a hallmark of this year’s spring homeselling season: Bidding wars. As home listings are scarcer and buyer demand remains high, home shoppers are finding a lot more competition this spring, particularly in hot markets like the San Francisco Bay area, Denver, and Boston.
“Home buyers are going to find this spring that, in a lot of markets, the inventory of homes priced and sized at price levels they were hoping for will be very limited,” Thomas Lawler, a former Fannie Mae economist who’s now a housing consultant in Leesburg, Va., told Bloomberg. Even “unlikely places are getting significantly tighter.”
An improving job market, growing consumer confidence, and the threat of rising mortgage rates have Americans flocking to housing. But many markets remain tight for listings. Housing starts remain well below levels prior to the recession and are geared more toward the higher end of the market. Homeowners also are reluctant to sell their existing home because they’re unsure of where they’d move to with the dearth of listings.
Homes are selling at a rapid clip in places like Denver; Seattle; Oakland, Calif.; Grand Rapids, Mich.; Boise, Idaho; Madison, Wis.; and Omaha, Neb., according to the real estate brokerage Redfin.
Grand Rapids has seen a 27 percent decrease in the number of homes for sale over the past year. One listing alone reportedly attracted 40 bids.
“People need to get their houses on the market, but they’re gun-shy,” Tanya Craig, an associate broker with the Katie K team at Keller Williams, told Bloomberg. “Unless they know where they want to go, everyone is hesitant.”
Home buyers certainly aren’t being hesitant, if they can find a home they want. They’re in a rush for financing too. The 30-year fixed-rate mortgage has risen by more than half a percentage point since November 2016. The Federal Reserve last week voted to increase its benchmark interest rate by a quarter point and strongly hinted it would do so two more times this year.
The 30-year fixed-rate mortgage is expected to increase to 4.7 percent by the end of 2017 and could reach 5.5 percent next year, according to Lawrence Yun, the chief economist for the National Association of REALTORS®.
“In today’s market, many buyers think the trough in rates is over,” says Sam Khater, deputy chief economist at CoreLogic. “If you don’t get in now, it’s just going to be worse later. Rates will be higher, prices will be higher, and maybe inventory selection will be lower.”