If it feels like a lot more for-sale signs are popping up in your neighborhood, it's not your imagination: A lot more houses are going up for sale than were a year ago, according to end-of-year data from Zillow. And those for-sale signs are coming down almost as quickly as they go up.
Nationally, pending home sales dipped slightly from November to December of last year. But they were up more than 20% from 2019. It's a sign the hot housing market is unlikely to cool anytime soon. Pending sales figures, which include homes under contract but not yet finalized, give a more up-to-the minute snapshot than completed sales, which can take one to two months to finalize.
The national averages, however, don't do justice to the hottest markets in the country, like Washington, D.C., where pending home sales were almost 85% higher in December than they were at the end of 2019, and Philadelphia, where they were up 75%.
In total, 22 metropolitan areas — more than a third of the total that Zillow tracked for the report — beat the national average for pending home sales. Of those, 12 saw increased selling volume of 30% or more at the end of 2020, from San Francisco to Cleveland to New Haven, Connecticut.
The pandemic depressed housing inventory last year, just as new buyers, driven by historically low interest rates and remote work, began flooding the market. The result was a classic supply-and-demand scenario where scarcity drove competition (and subsequently, prices) to new highs.
However, the area-specific data, particularly about the number of homes under contract, illuminates just how intense the volume is, especially in Washington, D.C. Pending sales in the nation's capital were almost four times the national average in December.
That's particularly surprising because December is usually not a robust month for listings in the nation's capital, says Tyler Jeffrey, a real estate agent in D.C. and neighboring Maryland and Virginia. However, Jeffrey describes his current volume of business "like drinking from a fire hose."
"I've been doing this for 12, almost 13 years," Jeffrey says, adding, "I have never experienced a market like this."
He attributes his robust business to low interest rates and the ability of many federal workers who easily transitioned to remote work without losses in income. The result has been a new crop of buyers entering the property market.
"If people are working, they feel wealthy," Jeffrey explains, and, once the initial shock of the pandemic subsided, "consumer confidence remained really high here."
Because potential homebuyers are deep in a seller's market, Jeffrey stresses that it's important that their expectations be in line with the competition they're about to face. In the last six weeks, he's begun to modify the advice he's giving his buying clients.
"Whatever your budget is," Jeffrey suggests, "shop at 90%, because you've got to be ready to escalate. And if you're going to have to compete, you want to give yourself about a 10% margin."
However, just because it's a seller's market doesn't mean that buyers are completely shut out of setting some terms. Jeffrey says that sellers should be ready to put some money into improving their properties before listing their homes.
"Budget to do things to fix your house," Jeffrey says, because the new crop of buyers, many of whom are millennials and older Gen Zers, "do not want to do any work. They have money, and they want to buy something that's ready to go."
The days of buyers making lowball offers for houses with problems but potential are over, Jeffrey says. The current trend among buyers is to pay the money upfront to do as little work as possible.
They "hear seller's market, and they think that they can just dump their house that has a bevy of problems, and they can't," Jeffrey explains. "Buyers won't show up for those."
Video by Richard Washington
While the fundamentals of homebuying, like having good credit and a solid down payment, continue to be key in this ultracompetitive market, there are a few tricks that can help your bid float to the top of the pile, real estate professionals tell Grow.
- Get a preapproval letter from your lender. Before you even start looking at houses in a competitive market, get a preapproval letter from your lender that you can whip out if you want to move on a property, said Debra Hall, a real estate agent in Northern Virginia. "A preapproval letter is when you have reached out to a lender," Hall said. "They've checked your credit. They've verified your employment. They've looked at your bank accounts, and they deem you truly qualified to buy a house." Putting that effort upfront can save you valuable time and put you in front of other offers.
- Don't forgo the home inspection. The tight housing market has driven some anxious buyers to skip home inspections in order to seal the deal, but that's a very risky move, said Sue Riley, a real estate agent in Northern New Jersey. "You never want to forgo an inspection. Ever," Riley said. "There's a lot of hidden things that can come up, and you don't want to be on the losing end of that."
- Write a note. When you write a personalized note introducing yourself to a seller, it creates an emotional connection between the two parties, said Leigh Marcus, a real estate agent in Chicago. "When a buyer writes the letter — the kind where the sellers can see who they were when they were buying — that resonates a lot with them," Marcus said, and taking that extra step can put you ahead of your competition.
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