Buyers are continuing to pull out all the stops in an effort to gain winning bids amid the coronavirus pandemic and inventory plunge across the regional housing market, Lehigh Valley real estate agents say.
That passion is not expected to cool down in the colder months -- a time when strong buying activity notoriously has slowed down.
Justin Porembo, chief executive officer of the Greater Lehigh Valley Realtors, said what is unique in 2020 is a striking market turnaround that began once the pandemic shutdown started in March. Buyers, he said, have surprisingly proven resilience in an “unusual and volatile year.”
Northampton and Lehigh counties in September data -- the most recent available by the group -- shows surges nearly across the board. There was an increase in new listings by 12.8% to 1,049 units. Closed sales also increased 23.2% to 897 units and pending sales jumped 28.7% to 915 units. The median sales price also spiked 14.8% to $236,000.
Inventory levels in September, however, continued to shrink by 51% to 917 units, leading to a “months supply of inventory” that was down about 46.2% to 1.34 months. In real estate, months of supply is a measurement of how many months it would take to sell the current inventory of homes – in a market balanced between buyers and sellers, it would be about six or seven months.
“The mix of surging buyer demand and low inventory has put our industry in uncharted territory," said Jack Gross, president of the Greater Lehigh Valley Realtors.
The lack of inventory across the Lehigh Valley also continues to drive some buyers into Carbon County, in which closed sales were up to 91 units in September. Carbon County also had a spike in pending sales, increasing to 112 units in September. There were 112 new listings with the inventory in Carbon County now dropping to 142 units for September and leading to a months supply of inventory of 1.9 months, according to the group.
Creighton Faust, a real estate broker with RE/MAX Central, told lehighvalleylive.com while inventory tends to drop even lower during the holiday season, 2020 has proven to be one of the most abnormal housing markets he’s even seen. He expects some sellers not to wait until January or even spring given the hot seller’s market.
“I’m still seeing plenty of people looking in the Lehigh Valley,” Faust said.
Home buying wars
Home buying is becoming an all out war as properties continue to rise. It’s even proven more problematic for first-time home buyers, real estate agents say.
“(It’s) threatening to ‘chock off’ first-time buyers,” Gross said “That said, mortgage rates remain at record lows and the unemployment rate is slowly rebounding from the early days of COVID-19. We are seeing buyers out in full force this fall, showing amazing spirit and perseverance in working toward their dreams of homeownership.”
A major obstacle for first-time homebuyers is they likely won’t be seeing much in terms of a seller’s assist, said Faust, the broker with RE/MAX Central. However, he said there’s also an advantage because first-time home buyers don’t have a house contingency and can beat out other buyers because of that scenario.
“The biggest fear for would-be sellers is that ‘they won’t have any place to go,’ which is keeping a lot of them on the fence,” said Rebecca L. Decker Francis, who leads The Rebecca Francis Team affiliated with Berkshire Hathaway HomeServices Fox & Roach. “And for a buyer that has to sell a home in order to purchase -- a home sale contingency -- it’s just not going to happen.”
Buyers meanwhile continue to come up with savvy strategies in order to seal deals. Faust has seen anything from finding creative way to pay some of the seller’s costs to filling appraisal gaps. “Love letters," in which a buyer writes the seller a handwritten letter expressing their passion for the property, also are happening.
“Of course, there’s also just trying to appeal to the seller’s terms, too, like offering them to stay in the house after settlement if that is beneficial,” Faust said.
Francis warns not all these strategies will work if another potential buyer in the game has a better idea.
Francis had a prospective buyer in a multiple offer situation this past week on a property with an asking price tag of $550,000. In an effort to win out over the other bidders, the buyer attempted an escalation clause, which took them to $50,000 over the asking price. The buyer also agreed to bring any excess money to the table if it didn’t appraise, and they agreed to lease it back to the owners until they could find suitable housing.
In the end, the buyer lost out to another bidder who was willing to waive all inspections, Francis said.
“Inspectors are now feeling the brunt of the low inventory -- although you would think they are busy, I’ve heard that many are having a rough time because so many transactions are taking place without inspections due to multiple offer scenarios,” Francis said.
Buyers could be paying too much for a home currently in the hot seller’s market, Francis said, noting appraisals can leave some buyers paying more than a property is actually worth.
“I think what we’re going to find at the end of this is people that paid too much for their homes will be stuck in them for longer than they may want simply because they can’t afford to move," she said.
For sellers, Francis also is seeing an uptick in folks that simply “want to see what will happen” if they list a home. Those who may not have made any updates or changes to their homes since purchasing, now want to put their homes on the market for significant premiums.
“That being said, the old adage rings true -- homes that are in good condition, in a good location, and priced right -- sell,” she said.
Record-low rates
The good news is mortgage rates continue to drop to all-time record-lows.
The 30-year fixed average was at 2.84% and a 15-year fixed average was at 2.34%, as of Thursday, according to Freddie Mac, the government-sponsored Federal Home Loan Mortgage Corporation.
“For buyers who are fortunate enough to get a home in this market, the low rates neutralize the equation of the higher prices that come with lower supply,” Faust said. “A buyer’s affordability has increased this year due to the record low rates.”
However, while rates remain low, the Mortgage Bankers Association reports lending standards are tightening. This makes it more difficult for some buyers to qualify and unemployment also remains substantially higher than a year ago due to the coronavirus pandemic, the Greater Lehigh Valley Realtors group said.
Gregory J. Case, an agent who works for RE/MAX Central in the Upper Saucon Township area, said this has made it even more challenging for a buyer that is trying to use a Veterans Affairs or Federal Housing Administration loan or one that is putting a small amount down to try and acquire their new home. In the past, those profiles were not only accepted, but more of the norm. In current times, these buyers are struggling to compete with conventional loans or cash.
Frank DiMaio, senior vice president and director of sales for mortgage banking at Univest Bank and Trust Co., which has a a regional center in Allentown, as well as smaller branches in Allentown and Bethlehem, said some larger national banks made early moves during the coronavirus pandemic to limit lending. This mostly happened in the home equity and jumbo lending space, which DiMaio said is normal with the economic uncertainty facing the industry.
Many smaller lenders and banks also made adjustments to their lending parameters, but according to the Mortgage Bankers Association those lenders are poised to close more mortgage loans in 2020 than any other year historically nationwide. Even with these restrictions, estimates project more than $4 trillion in new mortgages will close in the challenged year driven by the historic low rates and a very robust real estate market, DiMaio said.
“Due to the ongoing pandemic and economic uncertainty, we expect these Fannie Mae adjustments to remain in place into 2021 and will more than likely remain in place until the full financial impact of COVID-19 is better understood in our financial markets,” he said.
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Pamela Sroka-Holzmann may be reached at pholzmann@lehighvalleylive.com.
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