As the residential real estate market heads into a second spring selling season amid the COVID-19 pandemic, buyers, sellers and agents continue navigating a supply-starved market.
Agents working in Maryland’s metro areas say the lack of inventory stretches across community types ranging from urban to exurban. Regardless of the jurisdiction or price range, residential real estate agents say homes hitting the market stir fierce competition in terms of price and concessions.
“There’s still such an extremely low amount of homes on the market … the competition is just insane right now,” Stephanie Bamberger, an agent at Cummings & Co. Realtors said.
The housing market in Maryland’s major metro areas has faced constraints consistently for the past several years. COVID-19’s outbreak locally caused uncertainty about the economy and resulted in even fewer homes going on the market.
New listings in March of 2020 fell by 2.5% from the year before. The following month the median change in new listings fell by more than 41%. May produced a small rebound, but the median adjustment in new listings still declined 32.5%.
While the spring 2021 selling season starts with more optimism because there’s now vaccines against the disease, so far that’s not translated into an influx of new homes for sale. In fact the situation early this year has worsened from the same point in 2020.
The amount of active inventory in the state, according to statistics from Maryland Realtors, fell to 6,723 this January, the most recent data available, compared to 18,367 from the year before.
New listings in the first month of 2021 were down by more than 300 homes from the same time in 2020. So far this year available inventory fell to less than a month’s worth of supply compared to 2.5 months of available inventory last year.
Such drastic constraints in supply have generated a market severely skewed toward sellers. That’s generating intense competition for nearly every property that goes for sale.
Add in the factor of interest rates remaining at or near historic lows, providing an incredible incentive to buy a home, there’s strong demand from not only first-time homebuyers but those looking to upgrade from their current residence.
“Most everything we’re seeing, city, county, multiple offer situations, houses are gone in less than a week,” said Mario Valone, an agent at Berkshire Hathaway HomeServices HomeSale Realty.
In a typical market, Bamberger said, she recommends buyers assemble a list of five or six properties they’re interested in seeing. Attempting to put together a list like that currently, she said, has become nearly impossible.
A buyer she’s representing recently sent a list of six properties in Columbia listed as for sale online. When Bamberger checked the availability with her Multiple Listing Service five out of the six were already under contract.
“It’s an insane whirlwind of a market right now,” she said.
As a result agents and buyers are making huge concessions on top of bidding well over listing price in order to secure a home.
Jason Filippou, an agent with his eponymous group via Cummings & Co. Realtors said buyers he represents recently offered competitive bids in terms of price and contingencies.
Those bids, one on a property in Ellicott City that was one of 35 competing offers, and another on the east side of Harford County up against 23 other bids, both failed.
“I’m hearing from other agents losing on offers going $100,000 over because they throw in post-occupancy agreements for up to six months,” Filippou said.
Despite the often frenzied bidding wars agents say home prices haven’t inflated out of hand, adding the market doesn’t feel out of control like it did roughly 15 years ago ahead of the housing bubble bursting ahead of the 2008 economic collapse.
Bamberger recalled one owner who purchased a home in Baltimore’s Butchers Hill neighborhood in 2001 for $250,000 that sold for $500,000 in 2005 without improvements.
“(The market) wasn’t right,” she said.
While the median price of a home in Maryland increased nearly 12.5% from last year agents say the current housing market is different from the housing boom that preceded the financial collapse.
Agents largely credited prices remaining in check, despite supply shortages, to greater scrutiny given appraisals as a result of the role inflated values played in the mortgage meltdown.
“A home I’m making a bid of $75,000 over (asking price) in an Ellicott City neighborhood, I think it would’ve been plausible in the mid-2000s we could’ve got it to appraise,” Filippou said.
Those assessments play a key role in slowing rising prices because banks won’t make a loan to cover the cost of a property if there’s a substantial difference between assessed value and asking price.
However, some well-heeled buyers in the current market are opting to pay the difference between price and their loan with cash.
While properties failing to appraise for a high bid remains a concern, Valone said, appraisers are becoming more aware of the influence multiple bids hold on market value. But it’s not just price, he said, that determines if a bid wins.
“The person with the most money tends to win out but … basically (it goes to) the person who is able to remove the most contingencies,” he said.
Agents said they expect demand, particularly with low interest rates, to remain high. But said they’re confident more supply will enter the pipeline well before the market becomes overheated.
“I have an enormous inventory of homes that will be coming on the market in late March, April, May, so I feel like there’s a ton of inventory that’s starting to come on the market,” Bamberger said.