Winter can’t cool off a hot market
Pandemic leads to nearly 20% rise in median sale price of Lehigh Valley homes over a year
Sharon Markham and her husband lost out on one house because they wanted to see it a second time before making an offer, and someone else snatched it up. On another, they bid $27,000 over the asking price — but someone else bid $35,000 over, in cash.
The latter example, a $350,000 house in Upper Saucon Township, is the closest the Catasauqua couple feels they’ve gotten, after 10 months of looking. Even after taking a risk and agreeing to forgo an appraisal, Markham had a hunch it wasn’t going to turn out in their favor.
For the couple who just wants to retire after renting for years, it’s been frustrating.
“We just want to have a house of our own,” she said.
The bidding wars of several spring seasons in a
row are in full force this winter in the Lehigh Valley, which is experiencing an overheated housing market despite — and in part, because of — the coronavirus pandemic.
What is normally one of the slowest months of the year in real estate, December, instead saw homes fly off the shelves astoundingly quickly in the Lehigh Valley, leaving inventory at dismal levels and forcing buyers to pay at least the full asking price to land a deal.
This has pushed the median sales price of Lehigh Valley homes to $235,000 last month, 17.5% higher than the year before, according to the Greater Lehigh Valley Realtors association. There were only 623 homes on the market in December, less than one month’s supply of inventory and 56% fewer than the previous December. There were 832 closed sales in December, about 26% more than last December. Homes were only staying on the market an average of 19 days, though homes in the most in-demand range of roughly $175,000$400,000 often sell in a few days, agents say.
The region’s statistics are even more extreme than the national housing market’s, which in December saw a 13% year-overyear increase in home prices and had a two-month supply of inventory, according to the National Association of Realtors. The number of existing home sales completed in December was the highest since 2006.
Contributing to the imbalance in the Lehigh Valley are two phenomena related to the pandemic, experts say: an influx of residents from New York and New Jersey looking for more space after quarantining in cramped quarters, and residents locally who’ve been able to not only keep their jobs, but are saving more money than ever before.
With interest rates still historically low, even people who might not have planned a major move for another year or two may say, “You know what, the time is now,” broker Carlos Nunez of Allentown City Realty said.
Enough would-be buyers have adopted that attitude that his brokerage’s clientele has grown by nearly 50%, he said.
Bret and Patricia Sauerwine didn’t picture themselves making a winter move from their Fullerton home of 17 years. They wanted a home with more land since before the pandemic — they started looking at real estate websites 2½ years ago, when the Lehigh Valley market was still a battlefield of bidding wars, but were hesitant to list for fear of selling their home without finding another quickly enough.
Around Halloween, they decided to take the risk, figuring now is the time to get the most out of their current house while capitalizing on a low interest rate. After three four-hour open houses, they had 17 showings and eight offers — some sight-unseen, some cash, some with no contingencies.
“It blew my mind that people had that kind of money sitting around,” Bret Sauerwine said.
What they listed for $229,000 sold for $245,000 to a buyer who was renting month to month and gave them the flexibility to find a new home.
Because pickings were slim, they landed on a home in Lehigh Township that required some renovations. But it had more space, and for an only slightly larger monthly payment.
“It was a no-brainer for us,” he said. “It was all about timing.”
The amount of “forced savings” consumers are experiencing now, from reductions in travel to entertainment to eating out, is historic, said economist Kamran Afshar, director of the Kamran Afshar Data Analytics Center at DeSales University.
“What do you do with your savings? Buy stocks or real estate,” he said.
But while workers who kept their jobs have been saving cash, those who’ve lost jobs due to the pandemic — like those in service industries — have been scraping to make ends meet. The pandemic has only widened this gap, Afshar said, creating a dichotomy in the economy: a real estate and stock market blossoming during one of the worst recessions since the Great Depression.
For those with means, it’s a good time to pull a financial trigger.
“The buyers you see out there, it’s people realizing how much they’re paying in rent and seeing a mortgage can be less,” Greater Lehigh Valley Realtors President Tim Tepes said.
Tepes said he’s seeing a mix of prospective buyers in this situation, from downsizers to firsttime buyers to ex-New York City residents.
Homes are selling at record prices all over the Lehigh Valley, with no particular hot spots, he said. It is just as intense in the Poconos, where associate broker Alexa Sanchez with BAIRO Real Estate is seeing many city buyers looking for second homes with more space.
She’s noticed that open-concept design is no longer as popular, as buyers opt for traditional colonial-style homes with more walls so family members working and learning from home have more privacy.
The New York buyers in particular, who might sell townhomes in the city for more than $1 million, “have no qualms about overpaying for homes,” said broker Jack Gross of Better Homes and Gardens Cassidon Realty.
One of his agents sold a condominium in Hellertown for more than $250,000 to one such buyer, despite it being worth $225,000.
The New York City influx is unique to the Lehigh Valley as opposed to other parts of the state, he said, owing to its location.
“So our market is a strong sellers’ market on steroids,” he said.
Interest from out-of-state buyers was even more intense in late spring, once Pennsylvania’s real estate industry reopened after a two-month state-enforced lockdown. Nunez said he saw New York and New Jersey residents buying homes in the Lehigh Valley virtually sight-unseen.
While he isn’t seeing that anymore, the fierce competition means many first-time homebuyers — who often use less-competitive, government-backed loans — lose out.
On a $150,000 home, if they can’t offer $7,500-$10,000 over the asking price, they probably won’t get it, he said.
After this happens three or four times, he said, “for some of them, it’s painful.”
How long these competitive conditions persist is a tough call. One source of relief would be a boost in construction, which has been held up by stalled supply chains and soaring prices of materials. Another could be the waning of the pandemic, which would mean more money spent on travel and entertainment and diverted from real estate, Afshar said.
This winter, housing prices in the Lehigh Valley exceeded what they were in 2007, just before the Great Recession. Economists don’t predict the bottom falling out this time, but Afshar said he does foresee some flattening of the price curve — which is currently a straight line up.
With the unknowns, the Markhams are taking their time, not only because the market is slim, but they want to do it right and without risking it all.
“We’re tired of it,” she said. “But I know we’re not alone.”
The Markhams relocated from West Virginia to a rental in Catasauqua last March, right as the pandemic hit. The plan was to rent until they could find a home to buy and make their final move.
They’ve owned homes in multiple states, but have been renting for the last seven years.
The last home they sold, in Georgia around 2014, they lost money because they paid too much when they bought it.
“We got burned,” she said. “So we don’t want that situation again.”