Well-priced homes are here today, gone tomorrow

Low inventory prompts lightning-fast offers…and a surge of interest in building

04/25/2016

Well-priced homes are here today, gone tomorrow

Real estate agent Travis Derby tells the story of the home listing he and his mother, Sue Derby, posted on the MLS system at 10 a.m.  one morning earlier this month. Within a few hours, they had 15 showings scheduled for that day. By the next morning, they had seven offers. “And they were all beautiful offers,” said Derby. “The seller would have been happy with any of them.”

They chose the one they thought was best, which included a tight deadline for responding. By 4 p.m. on Day Two, the home was sold.

“What we’re seeing is that, if you have a home that’s typical – that fits the standard of what most people are looking for – and if it’s priced appropriately, it should not be on the market for over a week,” said Derby, who works out of Shorewest Realtors’ Waukesha office.

Agent Lori Fritz, with First Weber’s Lake Country office in Delafield, agreed. “We’re beginning to see a bit of a frenzy,” she said.  “The demand is very high and the supply is low. I don’t know what sellers are waiting for. I just had a very high-end listing that I was able to list and sell within two days because the buyers were waiting and waiting for the right home to come on the market.”

Buyers who are less patient increasingly are opting to build, fueling a 26% increase in housing starts around the four-county metro area in the year’s first quarter.

“People aren’t finding what they want so they’re turning to new construction,” said Alexis Ruzell, an agent with Realty Executives Integrity serving the North Shore suburbs. “We’re even seeing first-time homebuyers look at new construction, which is not the traditional path.”

When it comes to getting construction financing, there’s a catch for consumers who already own a home:  Taking out a construction loan on top of their existing mortgage would mean a temporary ballooning of their debt-to-income ratio that could keep them from qualifying for the loan.
Several years ago, when home sales were slow and many home values were “under water,” that might have been an automatic deal-breaker. But today, lenders see enough strength in the market to take a more accommodating stance.

As an example, North Shore Bank recently introduced a new construction loan product that features a variety of enhancements including more flexible underwriting standards for borrowers who have at least 20% equity in their current home.

“We are seeing a big bump in the number of people coming in for home construction loans,” said Chris Boland, vice president and mortgage loan production manager at North Shore Bank. “You can see consumers’ confidence in the market, where they’re willing to start construction projects or buy a new house before selling theirs. We think that confidence is well founded. It’s a very healthy market. So we’re doing everything we can to provide attractive financing to these folks and to facilitate transactions for builders.”

The inventory shortage is nudging prices – and monthly payments -- higher, according to the North Shore Bank/GMAR Home Affordability Report for the first quarter of 2016.  A few year-to-year comparisons: For the average high-end home sold in Greenfield during the quarter, buyers who took out 30-year fixed rate mortgages with 20% down are averaging payments (including principal, interest and property taxes) of $1,151 a month, versus $1,055 a year earlier. Buyers of a lower-end home in Brookfield have a monthly payment averaging $957, compared with $908. For higher-end home on Milwaukee’s West side, the payment averages $867 versus $837.

Ruzell said the likely explanation for the mostly modest increases is that, despite the hot market, “Buyers are still very conscientious about not overpaying.” Agreed Fritz, “There are still those properties that are over-priced and they’re sitting.”

Given how fast well priced homes are selling, the agents say would-be buyers should take two steps before starting to look:  Obtain a solid letter of pre-approval from a lender [see accompanying story] and find the right agent to represent you.

“If you’re serious about buying, don’t just call off the yard sign,” said Ruzell. “Get yourself a good representative, or you may find yourself missing out on the best listings. Same goes if you’re a seller. Do your homework, interview several agents, ask good questions, and hire someone who’s going to help you make this most of this extraordinary market.”

Related Blog Posts

6 Tips for Your Financial Spring Cleaning

How to organize your finances for good Full story...

Is Social Media Marketing Worth the Cost?

Full story...

Maximize the Value of a High-Yield Savings Account

<div> You can reap the rewards of this high-interest account</div> Full story...