In Boise And Grand Rapids, The Housing Market Looks Red Hot (#GotBitcoin?)
Many Midwestern markets have heated up so quickly they are now experiencing shortages of inventory and rising prices. In Boise And Grand Rapids, The Housing Market Looks Red Hot (#GotBitcoin?)
The housing market is booming. Just not in the places you might expect.
Homes for sale in small to midsize cities like Boise, Idaho; South Bend, Ind.; Columbia, Mo.; and Youngstown, Ohio, are enjoying a sustained upswing.
During the crucial spring selling season, only 10 of 178 metropolitan areas had double-digit annual price increases, down from two dozen in the second quarter of 2018, according to the National Association of Realtors. Nearly all of those high-growth areas were in less-expensive, smaller markets, where home prices are now rising faster than incomes, inventory levels are shrinking, and bidding wars are breaking out, especially for starter homes.
“We’ve seen this shift to the center of the country,” said Glenn Kelman, chief executive of Redfin, a Seattle-based real-estate brokerage. “It used to be flyover country, and now it’s saving our bacon.”
The national housing market and the economy have been on separate paths for most of the past year. Jobs have been plentiful and wage growth is picking up, while mortgage rates are at their lowest level in nearly three years. But existing-home sales are down 4% this year compared with last, according to an analysis of National Association of Realtors data by Ted Jones, chief economist at Stewart Title Guaranty Co.
That divergence has stumped economists. But the growing strength of housing markets in the heartland suggests that strong economic fundamentals are helping, just not where prices have already grown faster than incomes for seven years.
“Some of those [smaller] markets never saw a big boom coming out of the recession,” said Ralph McLaughlin, deputy chief economist at CoreLogic Inc. “This may be a rising tide finally reaching some of these secondary markets.”
Danielle Parent, a Redfin agent in Cleveland, said she is seeing an influx of buyers from expensive coastal cities. Home prices in Cleveland rose nearly 12% in June compared with a year earlier, according to Redfin. That was driven by a shortage of inventory, as the number of homes for sale declined nearly 7%.
“Every time I think my buyers have just a minute to think about buying a house, if you get the price right, it immediately sells,” Ms. Parent said. “It’s still very, very competitive.”
Julia Tiersky and Brian Tiersky spent about a decade in Seattle before deciding last month to move back to Cleveland, where Ms. Tiersky is from. The couple said lower housing and child-care costs sold them on the move.
In Hudson, a suburb of Cleveland where the couple decided to settle, they were surprised at how competitive the market was. “We’d find something we like and think we’ll go out in a couple of weeks. By the time we did that, things would be off the market,” Mr. Tiersky said.
When the couple found the right home, with a treehouse and proximity to Hudson’s downtown, Ms. Tiersky took a redeye flight from Seattle and went straight from the airport to see it. They made an offer a few hours later.
A long rally in hot spots like the Bay Area and Seattle has run out of gas. These markets are experiencing their first price declines in years, as homes linger on the market for weeks and would-be buyers balk at the still-expensive price tags.
It is unclear whether the sales growth in smaller U.S. cities will be enough to prop up the overall housing market, since slower growth or price declines in the biggest metro areas have weighed heavily on national home sales figures.
Many Midwestern markets have heated up so quickly they are now experiencing some of the downsides of a hot market: shortages of inventory and rising prices that are blocking first-time buyers from entering the market.
Anthony West, a Realtor in Kansas City, Mo., said the rise in competition and lack of inventory have prolonged the buying process for millennials and increased prices of lower-cost homes.
He said younger buyers are having to make compromises, such as choosing an inconvenient location, forgoing the inspection period, or stretching themselves financially to pay for homes.
“That’s got me concerned for them down the road as to will they recoup those extra funds that they purchased this property for?” Mr. West said.
Michelle Gordon, a Realtor in Grand Rapids, Mich., said there is strong demand for entry-level homes, especially with lower mortgage rates. “We have some buyers coming out of the woodwork,” she said.
Nathan Thornton, a 34-year-old general manager at a manufacturing company, and his wife, Clare Thornton, recently bought their third home in Grand Rapids since 2012.
The couple, who have three boys under 7 years old, were desperate for a second bathroom. They looked for a year-and-a-half but kept losing out in bidding wars. “There were a lot of over-ask cash offers that were gobbling everything up,” Mr. Thornton said.
Eventually, the couple found the perfect four-bedroom house with an attached garage and two bathrooms. Then they sold their own home in 24 hours.
“We had multiple offers coming in, but the first one was so good, we locked in right away,” he said.
U.S. Housing Supply Declines For First Time In A Year
But inventory of homes priced over $750,000 rose, according to realtor.com.
U.S. housing supply declined for the first time this year in August, largely due to a lack of available properties in lower price brackets, according to a realtor.com report released Tuesday.
The number of homes on the market last month dropped 1.8% year-over-year, the first drop within the last 12 months.
The report didn’t break out luxury data nor specify the exact number of homes available on the market.
The drop in housing inventory is more acute in the affordable housing market—defined as properties valued at $200,000 and under, which shrank 10% in August. A low mortgage interest rate in the U.S. has prompted buyers at this price level to snap up homes available for sale very quickly, said George Ratiu, senior economist for realtor.com.
“Lower interest rates have given buyers more purchasing power, which is contributing to August’s decline in national inventory,” he said.
On the other hand, the inventory of homes priced at $750,000 and above increased 7% last month.
The U.S. region with the highest inventory decline is the Northeast, which saw a 9.4% drop in August. Next was the Midwest, down 3.8%, followed by the South, down 1.3%.
Although declining inventory generally pushes up sales prices, demand is subdued due to economic uncertainty, Mr. Ratiu said.
“Concerns over trade wars and cutbacks in corporate spending are causing some buyers to postpone their search,” he said. “This is contributing to both the slowdown in prices, as well as the inventory decline, as buyers stay put in their current homes.”
The median listing price declined 1.8% from July to $309,000, the largest percentage of decline from July to August since 2012. Typically, home prices increase from June until September as many families spend the summer house-hunting, Mr. Ratiu said.
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