It's a seller's market: Real estate is in short supply

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Thanks to inflation, rising interest rates and inventory issues, finding that “home sweet home” has gotten a lot less sweet. Area lending and real estate experts said many industry- and nationwide factors have combined to create a sellers’ market.

According to the March Realtor report, “nationally, existing home sales dropped to a six-month low, falling 7.2% as buyers struggled to find a home amid rising prices and historic low industry. Pending sales are down, declining 4.1% … according to the National Association of Realtors. Builders are working hard to ramp up production — the U.S. Census Bureau reports housing starts are up 22.3% compared to a year ago — but higher construction costs and increasing sales prices continue to hamper new home sales, despite high demand or additional supplies. Monthly payments have increased significantly compared to this time last year and, as housing affordability declines, an increasing number of would-be homebuyers are turning to the rental market, only to face similar challenges as rental prices skyrocket and vacancy rates remain at a near-record low.”

The report notes, too, that “prices moved higher as the median sales price was up 2.9% to $175,000, (with) days on market decreased (by) 13% to 143 days (and) months supply of inventory down 24.6% to 4.3 months.” In March, the report states, interest rates nationwide hit 4.6%, a 1.4% rise since January and “the highest rate in more than three years.”

Area experts said, though affected by the COVID-19 pandemic, the current market wasn’t caused by it.

“If there was anything good about (the pandemic), it was that it was actually a positive for our market, because so many people … started to work remotely,” Selina Gelatt, a Community Bank mortgage loan consultant, said. “Now you have this influx of people wanting to come to our beautiful rural areas out of the cities. There were houses for sale, rates were down and (last year) was a great year for the housing industry. A lot of people were wanting to purchase either second homes … or they completely relocated. We are still seeing a little bit of that, but now we have the issue of inventory being low.”

“There’s a whole lot of factors that contribute to the market right now, but we were starting to see slightly low inventory pre-COVID,” Becky Thomas, broker-owner with Benson Real Estate in Oneonta and multi-listing service chairperson with the Otsego-Delaware Board of Realtors, said. “When things opened back up, there was a whole pipeline of people that had been sitting back, not able to do anything for a three-month period, and it started then. We saw people wanting to head out of bigger cities … and head in a direction where they could buy land or that sort of thing, so it started then, but it’s just kept on because of that; it’s gotten crazier and we’re still not seeing it level off.”

Community Bank Consumer Real Estate Sales Director Craig Lonsinger said today’s market is part of a cycle. Lonsigner has been in the industry for more than 30 years.

“When the pandemic hit … our initial instinct was, ‘this is going to be very bad for housing,’” he said. “What the government did and the federal reserve, it’s something you can go back to the 2008 recession and see is very similar. These folks dropped interest rates, quite frankly, to the lowest point in history and you had a lot of very cheap money and a lot of folks saying, ‘This makes my purchase more effective; I can go out and borrow at 2 or 2.5 or 3%,’ and folks did that, they did it in droves. You had a vast amount of people refinance into rates they never thought they would have and that, in part, has contributed to the low supply we’re seeing today. And folks are not selling, they’re improving and staying in their homes and those homes are not going on the market. I don’t think the market we’re talking about is unique and we’re experiencing the same thing, whether in a large metro market or a small market. It truly is a sellers’ market, and the number of buyers continues to be very robust, but you’ve also got a shortage of homes available.

“The other piece to that story is the money supply,” Lonsinger continued. “Not only did the feds reduce rates, they also pushed a significant amount of money into the economy. The money supply went up very drastically, so now we’re kind of receiving the other end of that, which is inflationary, and you’ve got the feds coming back in and trying to pull inflation by raising rates again, so it’s a little bit higher interest rate environment and folks are sitting in incredible loan terms where they really don’t want to move. We’ve been seeing many of the things we’re talking about now happening over the course of the last year or two.”

Thomas also reminded buyers that interest rates are relative.

“Rates have been low for a good two, two-and-a-half years and they kept saying they would go up, but because of COVID, they didn’t want to make that leap,” she said. “Now, since that’s over and the economy is changing, they have to up those interest rates but, relatively speaking, the interest rate being 5.5 is still a pretty low rate, technically. It’s not like 3, where you can definitely afford to buy more house, but it is still a good rate.”

Thomas said she’s seen the impact of such trends locally in Benson’s 30- to 40-mile coverage area in and around Oneonta.

“It’s definitely a sellers’ market and it’s a crazy market unlike anything I’ve ever seen in my 25-plus years of real estate,” she said. “Right now, in Oneonta schools, there are 15 active listings and that is really, really low. So, if anybody is looking for a house in Oneonta that needs to be in Oneonta schools, there’s 15 houses to choose from and the lowest price is $89,900, and the next goes to $149 (thousand), so there’s nothing between that $90,000 to $150,000 price range. It makes it so that, when things come on the market, it’s like a feeding frenzy; you’ll get 10 to 15 showings in the first couple days and three or four offers in the first couple days and more cash offers, which is definitely appealing to a seller. And we’re seeing things like escalation clauses in the offers, where somebody is willing to pay $10,000 to $30,000 more than the asking, so it makes it very, very hard for the average buyer who might be only able to go up to a certain amount and maybe doesn’t have a lot of money saved. We’re seeing buyers that have lost out on five houses, but still need one.”

Such factors, experts said, have impacted how much bang buyers get for their buck.

“Certainly, when interest rates go up, then people can’t spend as much as they could have even four or five months ago,” Thomas said. “That affects how much house somebody can afford. The other thing in our area that makes us a little different from maybe Albany or Syracuse is, we don’t have a lot of building going on, so we recycle the same properties over and over again. It’s not like we have new housing developments being built, so that doesn’t offer us new inventory. The last time was Winney Hill Commons, in the early 2000s … and now is not the best time for people to start thinking (about) doing a housing development, because building supplies are off the charts.”

“We’re still seeing all different types (of homes) in our rural area,” Gellat said. “Everything from the beautiful single-wide trailer that someone is going to fall in love with … to your gorgeous $500,000 or $600,000 dream house; we’re still seeing that, it’s just that there’s less available. Because of the hike in rates, I think your borrowers are not going to be able to afford as much of a house, because now their payment is a little higher. In our area, we have it all — double-wides, modulars and I’m seeing more of the double-wides and modulars on the construction side than I am the stick builds, but as far as purchases, I get calls on all of it, every day.”

Despite market trends, experts said prospective buyers shouldn’t be discouraged.

“One of the best things I think for people to understand and take steps to do is be proactive in creating your own path,” Gelatt said, noting her experience of 25-plus years. “If you want to go toward homeownership, which is obviously the American Dream, it’s still out there and attainable. The best way to navigate is to just get the best team together. Your loan officer is going to be a very important part of that and (buyers) are going to want somebody by their side to answer questions and be available.

“It’s tricky out there right now, so part of their team should be a realtor that’s good, seasoned and savvy about what’s going on in the market and, last but not least, an attorney,” she continued. “That’s how I would say to move forward: be proactive and don’t give up. They just need to get the right people on their side. It’s just invaluable to speak to a local lender who is going to educate you and walk you through each step. It is absolutely critical, especially now, that borrowers are sitting down and talking to someone who can counsel them and who has their best interest in mind and not just the interest of writing a loan. One of my favorite parts of my job is getting in front of that customer and walking them through each step. Sometimes, I’ll even say, ‘This is an overwhelming process; you just have to take it one step at a time.’ I will walk you through it, and you’re not going to get that with an online (lender).”

“I do think it’s really important (to know) that buying a home is still, regardless of what market we’re in, one of the best investments one can make,” Lonsinger echoed. “It is critical to understand that, while there are lots of lenders in the market offering standard products, Community Bank has taken a step back and really constructed some of our products around providing the buyer or the borrower with more flexible options or improvements.”

“Be patient,” Thomas said. “Things will level off and turn around, but it might take a while. And if anybody out there is on the fence about selling, get off the fence.”

Experts said they, too, remain optimistic.

“We’ve still got a tremendous amount of demand in the market,” Lonsinger said. “A lot depends upon the inflation environment we’re in and how bad that gets, because that’s going to dictate how high rates get … but all things balance out. On the pricing front, I don’t know if we’re going to see them come down, but it’s going to start to level out. We’re all very hopeful.”

“Nobody has a crystal ball,” Gelatt said. “I could say that maybe rates will taper … but maybe that’s wishful thinking on my part. As a cycle, you hope that’s what’s going to happen, so the sticker shock is gone and people come out of the woodwork and say, ‘I can breathe now’ and look to borrow.”

“Usually, this time of year — between April and mid-May — we see more people putting houses on the market,” Thomas said. “Winter is not when pictures look the nicest … so some people will always wait until spring, so that’s generally when we see an influx of listings. We haven’t seen that yet, so we’re still hoping we’re going to see some things open up. And as more listings come on, prices will level off.

“One of my favorite things is just seeing people happy with getting into a property or helping people achieve their goals, either buying or selling,” she continued. “It’s a nice feeling to be able to help (buyers) get into their first home or guide them through the process.”