If you’re thinking about moving, be advised the local real estate market is in an abnormal state right now.
These days, selling your current home while buying a new one is an intense roller coaster ride not for the faint of heart. What you’ve heard about it being a seller’s market is accurate. My wife and I had to frequently leave the house so 30 different potential buyers could look at it. We got two offers and we have a buyer.
Then the struggle began.
Walking through a whopping 26 different prospective homes for sale, then suffering the crushing defeat of getting outbid on five formal purchase offers, is way beyond the pale. But in this chaotic market, it’s what you can expect.
Scott Geller, a Jamison-based RE/MAX Realtor and past president of the Bucks County Realtors Association, estimated that for each house on the market, there are three or four interested buyers. Buyer bidding wars are going on for any worthwhile property. Winning bidders make offers well above the asking price and even waive important home inspections. Geller commented that inspection waivers are “reckless on everybody’s part.”
Also, these buyers tend to pay with large amounts of cash (which comes from a wide variety of sources) to circumvent possible pushback from an appraiser who might say the home isn’t worth the inflated sale price. Geller, who is also a certified residential appraiser, estimated area property appreciation values are around 11 percent.
“If they’re paying that much over the asking, they’re just paying next year’s prices today,” Geller said. “The definition of market value starts out with the most probable price that a property would bring. And the seller has no interest in the most probable price. (They) have an interest in the highest price.”
“If you put that much money down on a home and things change with your career, or circumstances change and you need to sell, you could … lose money on that sale,” said Josh McKnight, a realtor based out of the Keller Williams Real Estate Horsham office who is also chairman of the Malvern-based Tri-County Suburban Realtors Association.
According to the April 2021 Bright Multiple Listing Service (MLS) Monthly Market report for the Philadelphia metro area, median home sales prices are $370,000 in Bucks County, $409,400 in Chester County, $289,300 in Delaware County, and $360,000 in Montgomery County.
What’s going on
The Bright MLS report indicates an all-time high in Delaware Valley home buyer demand, especially for townhomes and “higher-priced” single-family homes. According to McKnight, buyer demand is being fueled by low-interest rates, plus buyers “want to move out of Philadelphia, possibly into a suburban or rural setting, because they don’t have to commute to work” due to the normalcy of remote work brought on by the pandemic.
Geller added buyers are looking for homes with adequate space for a home office and/or classroom and more outdoor space than what they currently have.
“If you have an open floor plan, you can’t have two kids in class and a husband and wife, each with their at-home job,” he said. However, the available housing inventory isn’t even close to keeping pace with demand:
Not counting 2020’s COVID-ravaged market, the last time the number of new for-sale listings in the Delaware Valley was lower than this (11,139 across the metro area) in the month of April was 2012.
The median days a house is on the market in Bucks, Chester, Delaware, and Montgomery Counties is six. For this area, that’s the all-time slimmest window for the time it takes a property from officially being for sale to reaching under-contract status.
“It’s true, inventory is very low, and so there’s a tremendous amount of competition out there for homes that are for sale,” said Pamela Croke, CEO of the Bucks County Association of Realtors.
Inventory is low because new home construction is down — partially due to the high cost of materials — and many homeowners are reluctant to have strangers touring their home because of COVID-19 risk.
McKnight is optimistic that as more people continue to get vaccinated against the virus, housing inventory will slowly come back into alignment.
“Hopefully, we’ll see it ease up next year. The real estate market’s very forgiving, if you give it time,” he said. “What also may happen …is as prices start increasing because of the inventory shortage and interest rates start going up, it’s going to squeeze some of the buyers who are on the fringes of their price point. That might knock some people out of the marketplace,” McKnight said.
Geller, who predicted 2025 as the year the market returns to normal, added warmer weather stimulates interest in house hunting – especially among buyers with school-age children who want to settle into a new house before the next school year starts.
Pro tips from Delaware Valley realtors
Have your Realtor draft a seller’s contingency that ensures you have a place to live before settlement.
Evaluate the need for a post-settlement occupancy addendum in case you have difficulty finding housing. This allows you to temporarily rent your home from the new buyers.
Find out what your Realtor’s strategies are to make your offer to a seller stand out against your competitors. How creative is the agent?
Consider a home inspection of your property to better inform your seller’s disclosure and protect you from potential liability from waived inspections by a buyer.
Know the highest amount you’re prepared to offer on a property before walking away.
The silver lining
Here’s some good news for potential first-time homebuyers in Coatesville. Chester County Commissioners recently granted $50,000 in support for the Movement Community Development Corporation’s (MCDC) Coatesville Home Ownership Made Easy (CHROME) program, which provides outreach and budgeting guidance for those seeking to buy their first home in Coatesville.
“Homeownership remains one of the best long-term investments, but affordability and access, especially in a county like ours, can be a tremendous challenge,” Chester County Commissioner Josh Maxwell said in a press release. “This $50,000 contract will fund core services to help identify and support those who want to purchase a home in Coatesville for the first time, with important tools to help achieve it.”
In the same release, MCDC founder and president Alphonzo Newsuan commented, “Understanding the complexities and the stress that comes along with purchasing your first house, MCDC will be there to help navigate you through the process, before, during, and after.”
The $50,000 contract was awarded by the county through the Chester County Department of Community Development, using Community Services Block Grant funds and CARES Act funding.
Chester County Commissioner Michelle Kichline added, “While the financial investment in a home can pay dividends over the long term, just as important is the emotional impact that owning a home can have. We applaud the efforts of MCDC to help the residents of Coatesville find a way to move from paying rent to pride of purchasing their own home in the community that they love and want to see continue to grow and prosper.”
For more information on the CHROME program, call (610) 496-2801.
Meanwhile, as of Friday, May 14 my wife and I submitted offer No. 6 on buying a house. Keep your fingers crossed for us!