By Shaina Mishkin
April 26, 2021
The most popular season to buy a home is approaching—and competition to buy a house looks stiffer than ever.
The U.S. housing market throughout the Covid-19 pandemic has been characterized by low mortgage rates, elevated buyer demand, and a historically low inventory of existing homes for sale—a formula that has resulted in swiftly rising home prices. The S&P CoreLogic Case-Shiller Index, which tracks home prices nationally, grew 11.2% annually in January, according to the S&P CoreLogic Case-Shiller Index—significantly faster than the historic 3.9% average.
Other, more recent data have shown a continuation of the trend. The price of an existing home grew a record 17.2% annually in March, according to the National Association of Realtors’ existing home sales report.
Competition for homes remains strong too. Data provided by real-estate brokerage Redfin show 43% of homes in March sold above listing price in the large metros it tracks. That’s the highest percentage since the company began collecting the data in 2012. The median home in the brokerage’s universe of metropolitan areas with more than 750,000 people and sufficient data sold for 1.29% above its list price.
That’s significant since homes often sell below listing price, Redfin lead economist Taylor Marr said. “You have more buyers per home out in the market, and they are bidding up prices, ” Marr told Barron’s.
But sellers in some markets saw higher premiums compared to list price than others. Of the 10 markets with the highest premium on listing price, home buyers in San Jose and Oakland, Calif., saw the greatest difference between listing prices and sale prices. The median home in those places sold for an average 8% and 7.9% above its median listing price in March, respectively, according to the company’s data.
Those differences are partly attributable to local market characteristics. The median home in both areas sold above its listing price in 2020 as well, according to Redfin’s data. While Oakland’s premium grew year over year, San Jose’s fell.
It’s also part of a larger shift in housing preferences from major city cores to surrounding areas, Marr said. “Buyers have really shifted their preferences towards single family homes and more space, and where that’s increasingly found is outside of San Francisco,” he said. Of the top 10 metropolitan areas where homes are selling the highest above asking price, only San Francisco and San Jose saw their premiums decrease year over year.
A larger migration trend towards so-called secondary cities outside of major metropolitan areas has also boosted premiums in places like Tacoma, Wash., Rochester, N.Y., and Sacramento, Calif., Marr said. “They’re just gaining an outpouring of households looking for more affordable homes where they can either work remote or maybe commute in just one or two days a week,” he said.
On a year-over-year basis, Rochester saw the second-highest increase in premium paid on listing price. “A lot of people that move to New York are moving back to Rochester to buy a nice affordable home,” Marr said. “Relative to New York prices, it looks very cheap.”
Write to Shaina Mishkin at firstname.lastname@example.org