Emily Reuter and Kyle Skellchock,with their dogs Wilson and Leo walk in… (Katherine Frey/THE WASHINGTON…)
After months of frustration, first-time home buyers Emily Reuter and Kyle Skellchock finally found a house they loved. As a bonus, they also fell in love with the sellers’ dog.
Buddy, a white and tan chiffon, turned out to be the deal clincher. Because their offer was nearly identical to another offer made on the home, the willingness of Reuter and Skellchock to take Buddy — the sellers were moving to Florida and couldn’t bring the dog with them — made all the difference. Reuter and Skellchock got the house.
These days, buyers are having to come up with more and more creative ways to win the bidding wars that are breaking out again in the Washington area real estate market.
“Multiple contracts have been popping up the last [several] months as the inventory shrinks in the marketplace and there’s more competition for getting a house,” said Holly Worthington, a Long & Foster managing broker in the Washington area. “We have way more buyers than we have properties to sell.”
The heightened demand is fueled by record-low mortgage rates. Freddie Mac reported on Thursday that the 30-year fixed-rate average was 3.59 percent. The 30-year rate has been below 4 percent all but one week this year. The 15-year fixed-rate average has lingered below 3 percent the past 11 weeks. These low rates make homeownership more affordable. Many would-be homeowners, spurred by the low rates, are seeking to buy, but they aren’t finding much to choose from.
Typically, the number of listings swells after the new year and continues to rise through the spring selling season. This year, listings fell in January, dropped some more in February and rebounded slightly in March and April, according to data provided by RBIntel, a subsidiary of MRIS. Even with that slight improvement in the spring, the number of active listings in April compared with the figure a year ago was down more than 30 percent.
In June, the Washington area had its 16th consecutive month of year-over-year declines in active listings. The number of active listings in June shrank to a historic low, falling to 10,374, down 33 percent from a year ago. The 5,588 new listings entered in June are the lowest for the month of June since RBIntel started tracking the data in 1997.
Tim Ellis, a real estate analyst, monitors housing data for Redfin. “It’s a really weird dynamic this year,” he said. “What you typically see seasonally is really not what we’re seeing.”
The lingering effects of the housing bust are in part causing this stagnation in the market. Too many people can’t afford to sell their houses because they are underwater on their mortgages or they bought at such a high price they are waiting for the market to rebound. The continued economic uncertainly also makes people reluctant to make major purchases. And those who can sell are afraid there won’t be anything for them to buy, so they do nothing.
For those looking to buy a home, especially first-time buyers, it is a frustrating time. Ben Bennett, a 26-year-old teacher at a D.C. public charter school, has been house hunting for the past year without success. Bennett appears to be a perfect candidate for home ownership. He has no debt, he has saved for a down payment and his credit score is excellent.
One home he was interested in sold four hours after it came on the market. He never even got a chance to put a contract on it. When he heard about a fixer-upper in Eckington, a neighborhood in Northeast Washington, he and his real estate agent, Tim Barley, moved quickly. But despite the $50,000 escalation clause in his contract, Bennett lost out to an investor who paid cash.
“I feel like I’m at speed dating with an engagement ring,” Bennett said. “As somebody who wants to put some sweat equity into a home, it’s frustrating knowing you have to compete against people who can put cash offers up for the same property.”
Jenny Hughes, the listing agent for the Eckington house, said she felt bad that Bennett lost out.
“What breaks my heart is there are homeowners who are making offers on these places, too, that want to take out loans. They’re not getting the houses,” Hughes said. “It’s all about the cash. The seller doesn’t want to have to live through a financing.”
Hughes said she had 19 offers on the Eckington property, which listed for $250,000 and sold for more than $300,000. She had another property on Capitol Hill that drew more than 30 offers. “It was like the cast of ‘Ben-Hur’ came out,” she said. “What I find interesting is how many people in D.C. have so much cash. . . . The D.C. market is just so hot. There are so many investors with so much cash.”
Worthington has followed the Washington market closely for almost 30 years. She says this is the best time to get value in the marketplace.