Daily Local News (West Chester, PA)
‘IT MAY NEVER COOL OFF’
Realtors say surge in house prices in Chester County likely to continue
WEST CHESTER » As mortgage rates continue to inch up, prospective homeowners who don’t lock in on a house soon may never be able to afford one, local realtors warn. The seller’s market, at least in this region, looks to be around for quite some time.
“What am telling my buyers is that (demand for houses) may never cool off in this area,” said Steve Laret who heads up the Steve Laret Team with Vanguard Realty Alliance in West Chester. “I know that’s a bold statement. But for every home we create, we have two people who are moving into this area. We in an unrecoverable spin.”
In March, Chester County home prices increased 9.6 percent compared to last year, selling for a median price of $460,000. Homes in Chester County sell on average after just 17 days, compared to 28 last year. And there were just 398 homes in active inventory in Chester County in March, compared to 705 in 2021.
Demand is up, supply is down, and it’s the main reason houses are appreciating in value so fast not only in Chester County, but across the nation. Houses in housing development off Route 303 near the Boot Road exit
in West Goshen were selling in the $450,000 range two years ago. Today, it’s $650,000.
And buyers, anticipating their house will quickly appreciate, are overpaying.
“We just settled on one a few weeks ago that was priced at 600,000, and it settled on $710,000,” Laret said. “It’s crazy, but it really comes back to supply and demand. We have been under producing houses less than the 50-year average for two decades, and COVID by no means led to where we are at today.”
Tammy Duering, realtor with RE/MAX Excellence in Kennett Square, said she expects Chester County to stay in a seller’s market well into next year.
“We just sold one in the Unionville School District last week, cash offer, that was $50,000 over (asking price),” she said. “In certain areas, people will still overpay. It will level off and continue to be a seller’s market because there are too many buyers for the number of homes available.”
Historically low interest rates have been the driving force behind the home buying frenzy, but that could change as the Federal Reserve is making moves in an attempt to curb inflation. The 30year fixed rate mortgage averaged 5.27 percent in the week ending May 5, up from 5.10 percent the week before, according to Freddie Mac, a publicly traded, government-sponsored enterprise. It is the highest in 13 years and well above the 2.96 percent average from this time last year.
Laret said two factors are working against prospective home buyers. Homes have been under produced for the past two decades, and a tipping point has been reached in regard to population growth, especially in this region.
“Those two factors are compounding to create this pressure cooker,” Laret said. “Meanwhile, all demand that existed that created an extreme sellers market, all those buyers, they don’t’ go away. Then we open up the building industry to supply chain issues and inflated material costs and sourcing other materials — all those costs are going through the roof. Scarcity drives the market.”
Chester County is where people want to live, and it’s reflected in the numbers.
The median list price of a house in Chester County last month was just over $495,000. In neighboring Delaware County, it’s $324,000 and Lancaster County, $314,000. Current median listing price in West Chester is $500,000, Downingtown, $440,000, Malvern, $650,000 and Coatesville, $265,000.
As house values continue to skyrocket, it’s taking a toll on the rental market.
“As housing becomes less and less attainable fort the average and as inflation kicks in, rents will continue to go up,” Laret said.
The average rent in the first quarter of 2022 in Chester County was $1,788, according to the National Low Income Housing Coalition. It’s a 12.7 percent increase from the first quarter of 2020. It means renters need to make more than $24 per hour to afford the apartment.
Like other realtors, Laret is urging prospective owners to take action now, if they can, before they get locked out of the market due to skyrocketing prices.
“Get anything you can, literally that is the advice I am giving my friends and family,” Laret said. “Get an $80,000 house in Pottstown, it doesn’t matter. It will be worth 150 grand in no time. If you bought a $10,000 house in West Chester in 1950, that same house is worth a million bucks today. It has four bedrooms, 2.5 baths and keeps you dry at night. With the historical devaluation of the dollar, the only way to hedge against it is to buy real estate.”
Some realtors in Chester County are seeing parents liquefying their 401k retirement accounts, giving cash to their children so they can compete in the market, buy a house with cash and have the kids turn around and do a cash-out refi and refund their parents.
“In today’s housing market, millennials are in big trouble,” Laret said. “There’s a chasm between the haves and the havenots is getting ever larger. The haves will be the people who have real estate and the have-nots will be the ones who never endeavored to do so.
And what about those savvy buyers waiting on the sidelines right now, just waiting for the bubble to burst and housing prices to stabilize?
“Buyers waiting on the sidelines waiting for things to do down are shooting at a target that is moving away from them,” Laret said. “They will get hurt.”