Region’s hot real estate market favors sellers
It took only six hours on a Friday afternoon last month for Mike and Laura Miller to sell their three-bedroom home in West Mifflin. They canceled the open house set for that weekend after they got an offer late Friday for $20,000 more than the $250,000 asking price.
“Who wants to deal with listing the house all weekend when you can get it sold in one day?” asked Laura Miller, 31.
During the current housing boom, it’s now normal for homes to sell at warp speed for more than the asking price. The
combination of low interest rates and the most lopsided housing supply-and-demand dynamics in Pittsburgh history has caused a feeding frenzy.
Inventory of available homes for sale has never been so low. There are only 3,019 active listings in the 17county area covered by West Penn Multi-List. While the pickings have never been this slim, the number of active real estate agents in this region has never been this high — currently 8,231, and the number had continued to grow by hundreds each month as of April 7.
By comparison, in 2016 there were nearly four times as many homes on the market — 11,705 active listings — and only 6,486 active real estate agents registered on the West Penn Multi-List.
Inthe hottest communities and the best school districts, every listing is all but guaranteed to get multiple offers. Local agents said it’s not unusual for a home to get up to 30 written offers within two days of hitting the market.
Bidding typically starts at a price above the home’s list price. But even the highest offer doesn’t always win.
“It’s all about how you structure the offer. I’ve had situations where there were 10other offers and we weren’t the highest, but my clients won,” said Julie Welter, an agent with EXP Realty who works in Upper St. Clair.
She said a buyer in Upper St. Clair offered to pay the full real estate commission and also pay the seller’s transfer taxes. Although it wasn’t the highest offer, the seller took it because it was a $500,000 cash deal.
Sellers love cash buyers, and agents say there are plenty of them making offers on houses in all price ranges. Cash purchases are quick and clean, and they eliminate the uncertainty that a bank might reject a mortgage loan if the house is appraised for lessthan the negotiated price.
Meanwhile, families are making the most expensive purchases of their lives in high-stress negotiations that can be as intense as a bar fight. Real estate agents say the emotional management of the deal-making process hasnever been so extreme.
“What you rarely see anymore is a buyer who sees a house, makes a bid and gets it,” said Mike Netzel, a managing partner at Keller Williams Realty in Shadyside. “Everything is a competitive bid now. I can’t remember the last time we didn’t have multiple bids. But what will winover the other is different everytime.
“For every deal that’s won, there are three people who didn’t get the house, and they have to explain that to their wife or their kids or their inlaws,” Mr. Netzel said. “There’s a ripple effect. This market is hot, no doubt, and some people are getting fried.”
Neighborhood matters
Jacob and Marie Miclot won a bidding war against 27 others for their Blawnox home. It’s a small house with only1,200 square feet of living space. But it has a big yard, an in-ground swimming pool and a view of the Allegheny River.
The house was listed for $199,500. They offered $220,000. There were higher offers, but the sellers were moved by a personal letter the Miclots submitted along with their offer.
“I was pretty sure we wouldn’t get it, being in the Fox Chapel school district,” said Ms. Miclot, 31, a makeup artist. “Everybody wants to bet here.”
While the market for sellers is hot, there are cooler spots.
The newlyweds have been paying two mortgages since October because they bought the Blawnox house before they sold their Shadyside home. They didn’t expect the three-bedroom home on Ivy Street to take five months to sell. They listed it for $650,000. It sold for $562,000 in February.
“We noticed a lot of other houses in our neighborhood took longer to sell as well,” Ms. Miclot said. “Expensive homes in the city are a tougher sell with the COVID19 pandemic and so many restaurants closed.
“We took a hit, but I don’t regret it at all,” she said. “We absolutely loved Shadyside, but both of us being self-employed in the pandemic made us refocus our priorities. We have two dogs — a boxer and a French bulldog-pitbull mix. We wanted less house and more yard.”
Although average prices have shot up, low interest rates have made mortgages more affordable for higherpriced homes. Mortgage rates set new all-time lows south of 3% in December and January. They have crept up to about 3.25% for a 30-year mortgage today.
“Yes, mortgage rates are higher now than they were at the beginning of the year, but they are still not so high that it’s really going to dramatically affect the housing market,” said Jeff Ostrowski, a mortgage analyst at financial websiteBankRate.com.
Charlene Haislip, a Re/ Max real estate agent in the Squirrel Hill office, said the rising interest rates have only heightened the sense of urgency that buyers feel to geta house under contract.
“We’re still getting 30 offers on houses, but it’s the pace that’s picked up,” Ms. Haislip said. “All the higher rates will do is put some people in a lower qualifying bracket. But it doesn’t mean there’s any less buyers looking. They will just be crammed into a lower price bracket.”
Standing in lines
What’s different about this housing boom is there isn’t enough inventory on the market for every agent to make even one sale. Sellers canbe choosy. And price isn’t always the most important factor.
Sellers are considering the total condition of the offer when a bid comes in above the list price. Is it cash? Or will the buyer have a mortgage? Is it a 20% down mortgage? A 5% down mortgage could indicate the buyer is less financially strong.
If there’s a mortgage, sellers prefer buyers with conventional loans instead of Federal Housing Administration (FHA) or Veterans Administration (VA) loans. Those loans guaranteed by the government sometimes require sellers to make repairs before the mortgage is approved. The buyers, in many cases, are willing to make the repairs at their own expense in order to stay competitive if they need to use a non conventional loan.
Howard W. “Hoby” Hanna IV, president of O’Hara-based Howard Hanna Real Estate Services, said he has never seen a housing market so hot that 25 people will calmly stand in line to tour a house while agents restrict the number of people allowed to come inside.
“I’ve seen people remove mortgage contingencies and go completely cash because they want a house,” he said. “I’ve seen buyers remove their inspection altogether, or say, ‘I only want an inspection of the roof and furnace.’
“Some buyers are saying, ‘I’ll buy a home warranty so I don’t need to have an inspection,’” he said.
Renting to the sellers
Sometimes the deal happens so fast, the sellers don’t have anywhere to move to and the buyers end up renting the house back to the sellers for a period of time.
That’s what happened when Mike and Laura Miller recently bought their home in Upper St. Clair. They’re leasing the house for two weeks after the closing while the sellers make plans to relocate.
“We were able to accommodate their move out,” Ms. Miller said. “That sweetened the deal for us and it helped us win the house.”
Agents also are seeing more buyers include escalation clauses in their offers. With an escalation clause, the buyer is willing to pay a certain amount over the highest bid up to a certain amount.
Another popular clause being used more often now is one in which the buyer agrees to pay the difference between the negotiated sales price and the bank’s appraisal price if the bank’s appraisal isn’t high enough.
Mr. Hanna said he is seeing buyers resort to desperate measures.
“I’ve had people call me who lost on a house and wanted to make an offer to either the buyer or the seller for significantly more and buy them out of the contract,” hesaid.
It might be something about the competitive nature ofthe current process.
“I’ve seen that maneuver used on rare occasions before,” he said, “But not to the propensity that we have been seeing it.”
The COVID-19 factor
The COVID-19 pandemic was a doubled-edged sword forthe housing market.
On one hand, it pushed up the demand for housing when people’s living space became more important. But it also made potential sellers leery of listing their house because they didn’t want strangers walking through and potentially bringing in the virus.
John Petrack, executive vice president of the Realtors Association of Metropolitan Pittsburgh, believes more houses will start coming on the market now that more people are getting vaccinated.
“Only time will tell,” he said. “Our fingers are crossed. It’s an unbelievably great time to sell. I’ve been in the business more than 40 years, and this is the strongest sellers’ market I’ve ever seen.”
David Onufer, an agent for Re/Max in Squirrel Hill, has been involved in bidding wars with up to 25 offers in recent weeks in communities including Bellevue, Ross, Highland Park, Lawrenceville Morningside.
The buyers are a mix of people — Pittsburgh natives moving from one community to another; out-of-town buyers from places like New York and California; and several boomerang Pittsburgh residents who were raised here, leftand want to move back.
“I had clients bid nearly $40,000 over the asking price for a Ross Township home recently and they didn’t get it,” Mr. Onufer said. “I don’t know how to explain it. This is truly bananas.
“Anything that’s priced right and in decent shape will move. And it will move quick.”