The Bucks County real estate market is experiencing an unprecedented boom in recent months due to a perfect storm of falling interest rates and low inventories.
The question is: can this boom last or is a collapse imminent?
âIt’s definitely a steroid seller’s market,â said Joy Zwicker, manager of the Southampton office of Berkshire Hathaway HomeServices Fox & Roach Realtors. âThe actual cost is so difficult to determine in this market because the selling price and the actual final price are further and further apart from each other. Low stocks and lower interest rates mean people can buy more homes, even if they pay more.
“They pay more, but get even more house.”
At the end of December, 35% of suburban homes were selling above the list price in the Northeast, according to economists at Zillow.
Data from the Bucks County Realtors Association shows that just about every month real estate statistics are on the rise. The latest data set available is from March:
- New listings: up 59.9% from February
- New suspensions: + 56.7%
- Closed sales: + 44.5%
- Median selling price: + 3.4%
The median selling price in Bucks County is $ 367,000, compared to the listed median price of $ 355,000 in February and $ 335,000 in March 2020.
The latest available data also shows that the number of properties sold overall in March 2021 in the 12-county area of ââPhiladelphia was up 9.8% from the same period last year, according to the report by Fox & Roach HomExpert Market in March. There were 7,247 homes sold in March 2021, up from 6,600 in March 2020.
The market has even avoided potential buyers like Diana Newkirk.
Newkirk was looking to buy a house in the Levittown area, but instead decided to stay in his current home.
âI couldn’t buy a house because the market was intense and I was outbid by crazy sums,â Newkirk said. âSo I decided to keep the house we were in and renovate it. People were going so far above the asking price and the sellers gave up on inspections. It turned into a bidding war. . “
The boom isn’t just happening in Bucks County.
In Pennsylvania, the number of properties sold increased an average of 12.6%, with 4,323 sold in March 2021, compared to 3,838 homes sold in March 2020.
âThere is pent-up demand,â said Tina Llorente, president of the York-Adams County Real Estate Association. âWe have a lot of millennials living in their parents’ basements. They had been saving and saving. No offense, but 24-7-365 with mum and dad has become a bit too much.”
Philadelphia County had the largest increase, up 35.5%, and Delaware County had the second largest increase, up 4.8% from March 2020. Montgomery County had recorded a 3.7% increase from March 2020 and Chester County increased 1.6%.
âAs we enter the spring buying and selling season, homes are selling fast with prices rising, fueled by a continued shortage of homes to sell,â said Joan Docktor, president of BHHS Fox & Roach. âThe current demand for available housing cannot be met because there is simply not enough housing for sale. Prices are going up and there are several offers on many homes. The homes available continue to evolve rapidly. “
Quick visit, faster decisions
Buyers should be prepared to jump when they find a home. Stories of multiple offers and broken contracts have become commonplace.
List price of a home is just a starting point in today’s tight real estate market. Not only are the deals greater than the price, but potential homeowners are even more likely to get the home they want.
âOnce the house hits the market you have to walk into the house to review it within 24 hours and then turn around and put the offer in, I would say, around 12,â he said. Davis. âAnd for all the houses we’ve been through so far, you have to know that you are going to leave the inspection and the eventuality of a mortgage, and you have to be prepared to go high enough for the asking price.
Some people forgo the possibility of evaluation. This conditional clause gives the buyer a way out of the transaction, if the fair market value of the home – decided by a state-approved appraiser – is less than the sale price. When a buyer waives this possibility, the bank will generally not pay this additional amount; the buyer will.
Home inspections were also canceled, estate agents said.
“People are forgoing their inspections, which makes me uncomfortable. Buyers have to take a risk right now, and they’re taking a big chance,” said Jim Priar, Berkshire Hathaway agent in the Harrisburg area. . “I think later on we’ll see a bunch, in my opinion, of lawsuits or people going to mediation on this, for things that weren’t disclosed.”
âThere is a tightening of stocks in some states like Pennsylvania because we have been closed for a while. It’s like playing catch-up since we were able to reopen the market, and we haven’t caught up yet, âsaid Christopher Raad, president of the Pennsylvania Association of Realtors.
Here are other factors of the high demand:
- Low interest rates: Rates are currently between 3% and 3.25%, “which is absolutely unbelievable,” Llorente said. “If the rates were to rise to 15% tomorrow, we would see more inventory in the market.”
- Desire for more space: Working and going to school from home made many people want more living space, which pushed them to the suburbs. âWe want a little more space. We want a little more elbow room. We want trails and parks, âLlorente said, homebuyers said.
- Telecommuting has changed the rules: Residents of neighboring states are moving to Pennsylvania, Raad said. Communities across the state are seeing an influx of residents of Ohio, West Virginia, Maryland, New Jersey and New York because telecommuting has given workers more potential points on the map .
- Suburbs seem more attractive to urban residents: There is a trickle of urban residents moving into more spacious suburban homes since the start of the pandemic.
Where are the houses?
The 2008 financial crisis led to a slowdown in housing construction, which reached its lowest point in 2010 and 2011, according to the Center for Economic and Policy Research in Washington, DC.
This is one of the reasons new homeowners have the hardest time finding a home: there isn’t enough.
As home construction has resumed, the three-year drop is affecting current inventories. An analysis by Freddie Mac estimated that the United States was short of 4 million homes by demand from buyers, the Wall Street Journal reported.
Here are other reasons, according to experts:
- Baby boomers don’t leave their homes: At the age when some people consider communities over 55 and senior residences, older baby boomers are staying at home, reluctant to move into cluster housing.
- Second Home Purchases: Finding rentals on the beaches this summer will be more difficult, in part because beach homes are selling to second home buyers. This market is particularly hot now, according to Zillow economist Arpita Chakravorty.
- New construction: Although home construction is once again vigorous, it has been slowed this year by shortages of lumber and other materials. âAlmost any building material you could want is sadly delayed,â Raad said.
Reversing a property or viewing buying as a method of earning short-term gains has also taken a hit in this seller’s market, Zwicker said.
âIt’s harder for investors to buy because their margins are going to be a lot thinner. So investor buying isn’t as high in this market because they won’t want to overpay,â Zwicker said. âOur buyers and agents do a great job of educating the buyer. We will tell the buyer today that if you are looking for a deal, this is not the market for you. If you are looking to sell in less than five years is probably not the market in which to buy a home.
“So if you pay 10% more than the current price and cautiously say the market has gone up 2-3% year over year, it’s almost like buying equity. of the home. It’s the education we give to the buyer to make sure they don’t put themselves in a prejudicial position. “
This position can lead to an underwater mortgage, which is a loan on the purchase of a home where the principal is greater than the free market value of the home.
But there is hope for sellers and buyers, real estate professionals said.
They say homeowners generally like to sell their homes during the warmer months, so more homes could be added to inventory in May and during the summer.
Chakravorty said the market is expected to balance further by the end of the year.
The luxury market at Bucks is not slowing down
Even with this caveat, the market is evolving, which includes the âluxuryâ segment.
In Bucks County, a luxury market house starts at $ 700,000 and goes much higher. In Montgomery County and Philadelphia, the luxury market is closer to $ 1 million.
âEven these homes in what we think of as the luxury market, before (current market conditions), these homes were on the market for a year and sometimes longer; now even the ones have sold,â Zwicker said. âWe are two or three stocks away from these luxury houses. And that’s because the money is so cheap for mortgages. And then you have jumbo loans, which have an interest rate similar to traditional conventional loans.
“This gives the buyer a greater opportunity to move forward. This is a very interesting and unprecedented time in real estate.”
A symbol of the real estate boom can be found in the new Grove Valley Farm multi-home complex in Warrington. It is touted by developer JP Orleans as an âintimate community of just 39 hospitality sites,â located in a prime Bucks County location.
Grove Valley Farm will consist of three new house models, each with four or five distinct elevations, and will range from 3,200 to 5,120 square feet.
Prices will start in the top $ 700,000, perfectly suited to the Grove Valley farm in the luxury segment.