The coronavirus pandemic hasn’t made the Buffalo Niagara housing market sick.
As illogical as it sounds at a time when unemployment is in the double-digits and higher than it has been since the early 1980s, the local housing market is hot and it keeps getting hotter.
“Don’t write off the Buffalo housing market,” said Susan D. Lenahan, a broker for MJ Peterson Real Estate who has been selling houses for going on four decades. “It’s never been stronger.”
Just how hot? On Thursday afternoon, Lenahan was heading out to meet with one determined – but frustrated – buyer. He had made offers on four homes – each one for more than the list price – and had been outbid each time. He is still looking, and hoping that the fifth time will be the charm.
He’s not alone. Buyers are scrambling for homes in a market where sellers simply aren’t selling.
“There’s nothing for sale,” said Jerrold Thompson, who owns Century 21-Gold Standard in East Aurora.
Few homes are up for sale
Over the last four months – when the home selling season typically starts ramping up to a peak during July – the number of houses for sale across the region is down by a little more than 30%. That’s a huge drop, especially at a time when the supply of homes for sale was already at its lowest since the late 1990s and probably long before that.
“While buyer activity continues to be robust, seller activity continues to be a bit softer,” analysts at the Buffalo Niagara Association of Realtors said in a report last week on the local housing market.
“Sellers remain reluctant to list their homes due to continued concerns over Covid-19,” the analysts said. “Until sellers regain confidence, housing inventory will continue to be constrained.”
And that means sellers will have even more of the upper hand in negotiations with buyers.
In most instances, a plunge in the economy as steep as the one since the coronavirus lockdown began in March would slam the brakes on the housing market.
Unemployment topped 14% in May after peaking at a record high of more than 19% in April. People who don’t have jobs don’t buy houses. And usually, when times are tough and uncertainty is high, even people who are fortunate enough to hang on to their jobs think long and hard before they make the type of big financial commitment involved in buying a house.
But this time is different – at least for now. Record low mortgage rates are a powerful incentive for buyers to buy now. And buyers don’t seem scared by the economic turmoil caused by the pandemic.
“There’s not a lot of people who are buying who lack confidence,” Thompson said.
Home deals on the rebound
Home sales are down 16% this year because of the pandemic, which stopped many home showings this spring. But pending sales, which covers deals that have been signed but haven’t closed, shot up by 14% in June. The nearly 1,500 deals that were signed in June was the most for any single month in the last 22 years.
Demographics are helping, too, with millennials who are aging into their late 20s and mid-30s ready to trade their apartments for a home of their own.
“It seems like there’s a surge of young people in the market,” Thompson said.
All the while, there just isn’t much for buyers to choose from. Even though sellers started to put homes on the market at a more normal pace during June (new listings were down just 3% from a year ago, after being down 50% during April and May) the number of homes for sale is lower than it has been since the real estate group starting keeping the data in 1998.
In all, only a little more than 2,000 homes were on the market during June. Just four years ago – in June 2016 – there were more than twice as many homes on the market. And 10 years ago – when the market was still feeling the pinch from the Great Recession – buyers had more than three times as many homes to choose from.
“It’s a lack of inventory,” Lenahan said. “There is no inventory. We’ve had pent-up buyers for some time.”
Local real estate agents have plenty of stories to tell about homes that sell for more than their asking price. Data from the real estate group shows that homes sold so far this year are going for a little more than 1% less than their most-recent asking price.
Another study, by real estate firm Zillow, found that just 4.5% of all homes for sale during June had their price cut. A year ago, 6.6% of the homes for sale during June had price reductions – another sign that sellers aren’t feeling as much pressure to budge from their asking price. List prices are up more than 8%, Zillow said.
“The market has been remarkably resilient,” said Jeff Tucker, a Zillow economist.
Tucker thinks one reason sellers have been slower to come back to the market is simply because they can’t react as quickly as buyers once they decide now is the time to act. While buyers can start looking right away, sellers have to clean up their home, find a real estate agent and do other things before their house can hit the market. The federal stimulus program and forbearance programs put in place by lenders to help homeowners who are suddenly unable to make their mortgage payments also have helped ward off the distress sales that often flood the market during a recession.
Lenahan thinks there’s another factor at play. With the market tilted so strongly in favor of sellers, prices have been steadily rising to record highs. The median price of homes that sold during the first half of this year is up more than 5% compared with a year ago, extending a steady rise that started in 2017 and hasn’t stopped, pushing the median sale price, which had been around $130,000 in 2016, up to $158,000.
Home prices keep rising
Those higher prices, Lenahan theorizes, might be discouraging older homeowners from downsizing. Thompson said the shortage of homes for sale pits downsizers against entry-level buyers, adding further to the price competition.
“They look at the prices on the downsizing place that they want to buy and they say, Wow, that’s almost as much as what I’m selling,” Lenahan said. So, many downsizers are deciding to stay put, further limiting the supply.
And that means buyers likely will keep having to hustle to find a home.
“As soon as we put it on the market, with the right price, with the right location, with the right marketing, it sells,” Thompson said.