Just a few weeks ago, Sarah Hordusky became a licensed real estate agent.
But she has been watching the local real estate market for years and is very aware of the latest trends, she said. That’s why she and her husband Bruce didn’t think twice about it a few weeks ago when they found a home they liked in Summit Township.
The property was listed on a Friday. The Horduskys saw it on Saturday and later that day made an offer for a little more than the asking price.
Sarah Hordusky said she would have liked to think about it for a day or two. But that didn’t seem like a wise choice, she said.
“I was aware of the need to act quickly,” she said.
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Not enough inventory
The reason is simple: in a county of nearly 270,000 residents, the Greater Erie Board of Realtors recently had only 303 properties up for sale.
This is a decrease of more than 55% from the same period in 2020. More dramatically, the number of Erie County listings fell 79% from 1,854 to 391 between the fourth quarter of 2015 and the end of 2020.
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Past experience suggests little about the scarcity of homes.
“It was a little unusual,” said Marsha Marsh, founder of Marsha Marsh Real Estate Services in Erie.
Indeed, there is a historical and predictable link between tough economic times and the appearance of sales signs outside of single family homes.
Experian, the credit bureau, explains it this way: “During a recession, expect foreclosure rates to rise, property values flat or even declining, lower home sales volumes, and longer periods of homes for sale.”
The most recent recession may be over – it is too early to say for sure – but the troubled times continue. A year of wrestling with a deadly pandemic, and the shutdowns and crowd restrictions that came with it, left 15 million Americans jobless. On Thursday, the State Department of Labor & Industry reported that Erie County’s seasonally adjusted unemployment rate rose to 8.8% in January.
But the downturn has not produced the usual number of sales signs.
Five years ago, the Greater Erie Board of Realtors typically had an eight-month inventory of homes for sale. At the end of 2020, the inventory was only 45 days.
Much of what real estate agents and potential buyers see in Erie is the history of the country’s real estate market.
A recent article in the New York Times features this report: “Much of the housing market has disappeared. On suburban streets and in many neighborhoods, in large and medium-sized subway areas, many houses that have normally been for sale across the United States Last year never did. Even in cities with a pandemic of empty homes and falling rents, it has become incredibly difficult to buy a house. “
And that’s the shape of things in most of the US real estate markets.
“We see this all over the country. Erie is no exception. The market is insane,” said Helen Hanna Casey, CEO of Howard Hanna Real Estate Services in Pittsburgh, the fourth largest real estate company in the country.
Marsh sees indications of the lack of offers almost daily. There are houses that were sold before they were officially listed. She has seen many examples of sellers receiving multiple offers and even bid war cases.
“I hate a bidding war,” said Marsh, who fears that a few years later buyers may find that they have paid too much.
While working with potential buyers, Marsh said she even inquired on their behalf about homes that weren’t even on the market.
Other factors play a role
There is more than one theory to explain the lack of listings and what they mean.
At least part of what has changed can be traced back to the COVID-19 pandemic, Marsh said.
“People are in their homes and the kids are going to school (online). They don’t want people to come into their house,” she said. “It’s inconvenient for her to sell her house and be interrupted every day.”
Casey sees a couple of other explanations.
It starts with the US not building new homes fast enough to keep up with demand. In fact, new construction, which increased steadily through the late 1990s to its peak in 2006, has still not returned to a level close to that level after 15 years.
“We still don’t build a lot of houses,” Casey said. “A lot has to do with the construction costs and the price of the land.”
Casey, along with a few other experts, also points to a collision between Baby Boomers and Millennials.
While millennials are looking for starter homes or even second homes, baby boomers have been slow to abandon their homes for smaller homes or assisted living facilities. The normal movement of houses from one generation to the next does not take place at the normal pace.
In other cases, Casey said, elderly snowbirds have been holding onto two homes, making it harder for buyers to find homes.
Ralph McLaughlin, chief economist at Haus, a real estate finance start-up, has written extensively about the housing shortage. He has pointed out the persistence of the problem and noted that potential sellers resent finding their next home and withdrawing from the market.
Earlier this week he noted on Twitter: “Last week a whopping 43% of homes were sold in 28 days, the highest in history.”
Is there a housing bubble ahead?
The scarcity of supply has led some to worry about a housing bubble, which Investopedia defines as “an increase in property prices fueled to collapse by demand, speculation and exuberant spending”.
Casey does not share this concern.
Prices are rising, she said, in a way that is good for both buyers and sellers. Sellers get more for their homes thanks to increasing demand. For example, the Greater Erie Board of Realtors reports that median sales prices rose 11.2% in the fourth quarter.
But with interest rates as low as 3.3%, buyers will pay less in the long run, she said.
Casey worries about finding enough offers, but not that the 2008 real estate crisis will repeat itself.
“It’s really not the same,” she said. “The problem with the previous bubble was that Wall Street was pooling mortgages that should never have been taken out. We’re not seeing that right now.”
Hordusky, who now works as an agent for Marsha Marsh Real Estate Services, said buyers may have to adjust.
If she had the choice of buying her own house, she might have offered a little less and waited. But that might not always work in the current situation, she said.
“A few years ago you could look at a house and think about it for a few days,” she said. “Given the current market and low inventory, you have to be willing to make an offer.”
Jim Martin can be reached at 870-1668 or at firstname.lastname@example.org. Follow him on Twitter at @ETNMartin.