It’s a seller’s market in the post-pandemic world of real estate, according to numerous trade publications and news outlets keeping tabs on housing prices that are skyrocketing since last May. Those tied to the local real estate market confirmed, Parkland-area home sellers are enjoying the national trend.
Eric Kofron of Midwest Real Estate in Farmington said he’s watching the trend with some amazement.
“I’ve got a deal going that’s not closed quite yet, but these people bought their house in ’14, haven’t done anything major to fix it up, but they’re going to come out with about $94,000 more than what they paid for it,” he said. “And it’s been a multiple-offer situation, with two buyers fighting to buy it at those prices.”
Kofron and other real estate agents in the area are seeing a seller’s boom they haven’t seen before, he said.
“I’ve never seen anything like it,” he said. “Title companies have been overworked, home inspectors are backlogged. We typically have a 10-day inspection window, we’ve been extending that by five days.”
Missouri REALTORS® on Tuesday released a report comparing May 2020 with last month’s sales numbers in the state, showing increases of 22% in average sale prices. In May, Missouri realtors sold 8,247 residential properties, a 27.2% increase compared to May 2020. Of those sales, the average residential property sold for $261,341. Compared to the average sale price of $214,764 in May of 2020, this was a 21.7% increase. The median residential sale price also grew substantially, from $182,000 in 2020 to $220,000 in 2021, an almost 21% increase.
According to Realtor.com, “Nationally, the inventory of homes actively for sale in May decreased by 50.9% over the past year, a lower rate of decline compared to the 53.0% drop in April, but it remains far from the trajectory needed to relieve the historically tight home supply.”
To put this into perspective, Realtor.com calculated that 523,000 fewer homes are for sale on a typical day in May 2021, compared to May 2020.
Matt Herbst, owner and broker of Triple Creek Realty in Farmington, said the demand for houses is real.
“Interest rates are still low, and the price of lumber means people might be hesitating to build right now,” he said. “Millennials are moving out of their parents’ homes, people who are renting are ready to buy.”
Herbst said new people are moving to the region, as well.
“We’re also seeing East and West Coast people selling their houses, especially people from Illinois,” he said. “And now that they can work remotely, we’re seeing people from California, Utah, Texas, New York, New Jersey. They’re coming in as cash buyers, since they make enough money on the sale of their house out of state. We have a couple from Utah, they’re buying 200 acres and a farm outside of Greenville. The purchase power is so much stronger here.”
Kofron said the scarcity of houses for sale is the inverse of what happened after the housing crash of 2008.
“Then, you had a lot of people with bad credit getting bad loans, and then trying to sell off their house,” he said. “Right now, banks are not writing bad loans and homebuyers’ credit scores are OK, so the payments are still going to be affordable. Banks are seeing a huge increase in loan applications and people are getting approved, but finding a house is a whole other thing.”
Kofron said before the pandemic, it would be typical to have as many as 15 houses for sale in the $150,000 range.
“Now, there might be a single house on the market that draws a battle,” he said, referring to the bidding wars that are becoming more common in the local market. “As an agent you want to do right by your client, and you have to go back and ask if they really want to increase their bid, but sometimes you have to save them from themselves. I don’t want them to be payment-broke every month, but I can’t just tell them, ‘You’re not buying this house.’ All I can do is advise them.”
Tonya Sanders, another real estate agent, said the housing market is "sizzling hot, resulting in higher home prices and quick-selling homes."
"Our housing supply still remains short," she said. "As long as there's a shortage of houses, this is going to continue."
Jim Eaton, regional market president for First State Community Bank, said he’s never seen houses in this area consistently selling for way over asking price.
“People know they’re paying a premium, but they’re still getting the loans, rates are so low,” he said. “They’re weighing those payments and making the decision to buy.
“I think some of what’s driving housing prices, too, is that construction prices are so high, people can purchase a house cheaper than building it. We’ve really seen a decrease in construction loans because of the cost of building materials.”
In terms of dollar volume, Missouri real estate agents saw an increase of 54.8%. More than $2.15 billion in May was generated compared to $1.3 billion for the same time period last year.
“In May, the share of newly listed homes compared to active daily inventory hit a historical high of 44.4%, 17.3 percentage points higher than last year and 15.1 percentage points above typical levels seen in 2017 to 2019,” according to Senior realtor.com Economic Research Analyst Sabrina Speianu. “These numbers reflect just how quickly buyers will need to move when new listings are posted across the United States in this highly competitive marketplace.”
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 2.96% in May, down from 3.06% in April. By comparison, the interest rate in May of last year was 3.23%.
“There’s a fear it’ll come to a crashing halt, ‘what goes up must come down,’” Herbst said. “But as long as interest rates remain low … Lumber prices might come back within reason by the end of the year, and hopefully interest rates stay low, it’ll keep people buying. I’ve not seen anything like this before. There’ve been good times for sellers before, but not like this.”
Broker and owner of KBH Realty Group of Farmington, Kim Briese said she's noticing the seller's market beginning to soften.
"I think it is starting to shift a little. The seller’s market is starting to soften," she said. "We still have a shortage, but it’s getting better. I have several listings in the pipeline."
Briese said before, it was hard to get people to list their homes, since, in order to sell their homes, they'd have to find their next residence.
"Some are looking into renting, but there’s even been a shortage of rentals, especially if you have pets."
Like many of the other agents, she's seen a lot of clients from out of state or from larger cities, some of whom are interested in moving to a rural area with more purchase power, now that they're telecommuting for work. That also results in increased competition for houses, multiple offers and bidding wars.
"Last year, we could show 3-4 properties, they could pick one from the bunch. Now, everyone is fending for themselves — they have to. Sometimes houses are under contract before they’re even listed," she said.
Her advice? "Have your pre-approval ready to go, have your financing read to go, and be on call all the time," she said. "You have to be ready to go when something’s on the market that meets your criteria. In this market, if you see a house that’s been on the market for more than two weeks, there’s something undesirable about the property or the price is too high."
Briese said the hottest homes in the area, the homes that garner multiple offers, seem to be priced under $200,000.
"I have a list of buyers 20-25 deep, and they’re on an email campaign," she said, adding her clients sign up for email notifications when houses that meet their criteria area added. "When they get that email, they're ready to go."
Home inspector Jason Denby, who owns Big River Home Inspections and serves the area between St. Charles and Cape Girardeau, said he's amazed by what he's hearing from people not just in real estate and lending, but in other home-related industries.
He pointed out carpentry is likely to be in high demand as people make their new homes more amenable to their needs and tastes, storage units are filling up fast due to sellers not being able to find houses after they sell their own, rental houses are at a premium as landlords sell their rental properties and again, home sellers find themselves between houses since sometimes they can't afford the bidding wars that are becoming common.
"We're staying pretty busy, but I have heard many sellers are waiving home inspections," Denby said. "People are buying houses sight unseen, paying way more than asking price. Last month, an Illinois guy was there during a home inspection we performed, and it was the first time he'd seen the house. He paid for it, sight-unseen, $40,000 over asking. It was the eighth house he'd made an offer on, he'd gotten beaten out on seven other houses."
Lumber prices are increasing daily and it's impacting the prices of new homes. Source by: Stringr
Denby said usually, he might inspect one house in a year for a client hailing from California. "This year, it's 45," he said. "The housing market here has never seen such an influx of out-of-state buyers. This is an influx of people who are gobbling up the inventory. One Washington State buyer made a fortune on their house sale in their state, so here, in order to avoid the capital gains tax, they're buying two duplexes and a house for themselves.
"I've inspected five houses for buyers from Arizona. And two different ladies are moving because of the amount of people from California moving to their state."
Sarah Haas is the assistant editor for the Daily Journal. She can be reached at 573-518-3617 or at email@example.com.