With mortgage rates hovering near historic lows, demand has increased beyond expectations, fueling some of the hottest homebuying competition in decades.
Combined with historically low levels of inventory, it’s a recipe for pandemic pandemonium – a virtual tidal wave of increased competition.
Buyers sidelined by the virus this spring are jockeying with those who planned to buy in the summer. And they’re competing with those who previously had no plans to move: Until the pandemic stirred their desire.
Potential homebuyers have precious little time to mull choices, sometimes making offers well over asking price, waiving inspections or getting into a bidding war with other shoppers.
One recent survey showed more than 40% of buyers between January and May got into at least one bidding war.
Some Northeastern housing markets devastated by strict lockdowns in the spring have rebounded as summer case counts fell. But demand is also surging the West and Midwest, where infections are rising.
Existing home sales rose 8.7% in July, but analysts it will take builders years at a faster pace to make up for the imbalance between supply and demand, keeping competition hot into 2021.
Suburban areas outside of the densely packed cities where buyers can get more square footage and outdoor space are among the hottest commodities.
Home prices in many affordable areas have moved higher as buyer demand increases. Prices of the most affordable homes in the U.S. climbed 5.5% from a year earlier during the 12 weeks ending May 31, Redfin data shows.
Affordable Rust Belt cities Cincinnati and Cleveland saw impressive price growth, and Pittsburgh, PA, led all U.S. metros, hitting a median high $249,950.
Prices also grew by double-digit percentage rates in traditional hotspots like Los Angeles, Philadelphia, San Francisco and Boston.
Prices will likely continue to grow faster for at least the next few years given this lack of supply, experts say.
The wild card is ongoing high unemployment. If there aren’t enough qualified buyers, it could inevitably slow or halt price growth.