Homebuyers are increasingly willing to pay above asking price
LOS ANGELES (AP) – The boiling US housing market is widening the gap between what a home is objectively worth and what willing buyers are willing to pay.
Fierce competition amid an extremely low inventory of homes on the market is fueling bidding wars, prompting a growing share of potential buyers to sweeten bids far beyond what sellers are asking for. Home prices have hit new highs and many homes are selling for more than their appraised value.
“It is perhaps the most competitive housing market we have ever seen in the United States, at least in modern times,” said Jeff Tucker, senior economist at Zillow.
The share of U.S. homes bought above their list price has been rising steadily since the start of last year, after the housing market began to rebound after a brief slowdown in the first few weeks of the pandemic. According to Zillow data, an average of 20.3% of homes sold last year exceeded their list price, compared to an average of 14.2% in 2019.
Homebuyers don’t seem any less eager to soften offers this year. An average of about 28% of homes sold above their list price in January and February.
The trend is evident in the country’s most expensive housing markets. Some 54.4% of homes sold in San Francisco in February exceeded advertised value, while 51.6% did so in Seattle. Some 42.1% of homes sold above their list price in the vast metro area of Los Angeles, Long Beach and Anaheim, California.
Yet even in cheaper housing markets, bidding wars drive up prices. Some 41.2% of homes sold in February in Wichita, Kansas were above the list price, and 60.5% in Boise, Idaho, Zillow said.
As sales of previously occupied U.S. homes slowed in April for the third consecutive month, the shortage of properties on the market pushed prices up to new highs. Last month, the median home price in the United States jumped 19.1% from the previous year to a record high of $ 341,600, according to the National Association of Realtors.
The houses are destroyed in a few days. Almost 90% of homes sold in April had been on the market for less than a month, according to the NAR.
Meanwhile, the growing willingness of buyers to outbid their competitors is distorting the objective measure of home values.
Last month, 19% of homes saw their appraised value below the contract price, according to data from CoreLogic. In the same month the previous two years it was 8%.
“The frequency of buyers willing to pay more than what the market data supports is increasing,” said Shawn Telford, lead valuator at CoreLogic.
When a home purchase is financed by a bank, the lender usually requires an appraisal to ensure that the home’s estimated value matches the agreed price. Appraisers determine a property’s value by looking at recent sales of comparable homes.
In cases where the estimated value is lower than the contract price, the buyer must make up the difference between the sale price and the amount greater than what the bank is willing to lend.
Regardless of the fact that appraisals don’t match what buyers are willing to pay, the war-fueled auction prices that homes are currently selling for will help set the benchmark value of homes for years to come. .
“The sale prices recorded now will definitely help anchor people’s ideas of ‘OK, that’s just how much a house costs on this block, that’s how much it sold last year,” Tucker said. . “I suspect sellers will start to expect to receive so much if they go out and decide to sell their home next year.”
Copyright 2021 The Associated Press. All rights reserved.