Alexis Agnello has lived through a whirlwind. The 32-year-old commercial banker and her husband, a 33-year-old landscaper, bought a house in North Buffalo, sold their old house – and had a baby – all in three weeks.
The couple lived in half of a two-family home but were tired of being landlords. Two days after an open house, they had three offers. The house they bought – after just five days on the market – had six offers. They won the bidding war by offering nearly $28,000 more than the listing price.
Welcome to real estate these days in Buffalo, long considered a sleepy market immune to the booms and busts that roil the rest of the country. Thanks to a big drop in the number of homes for sale, coupled with a rush to get low interest rates before they are gone, Buffalo and Western New York are living a seller’s market not seen in years.
The result is a buying frenzy – and price increases that are distinctly un-Buffalo. Realtors talk about listings that drew half a dozen offers. The median sales price has risen each of the past 12 months and is up 6 percent just since January. Hunt Real Estate Corp. agent Robert Blake had a client offer $340,000 on a $315,000 home in the city – and still not get the house. Matthew Hamed and his fiancee, both pharmacists, found only about six homes in their price range in the city and not that many more in their preferred suburbs. Some bidders are paying all cash upfront, then refinancing with a mortgage after the deal closes. Others are forgoing inspections and other contingencies – or turning a blind eye to problems – just to get ahead.
“I personally have had some buyers who have really been through the wringer,” said Robyn Cannata, a real estate broker at Hunt in Williamsville. “I am representing some buyers who have put in four offers, on four separate houses, and had to deal with multiple offers each time.”
Said Susan Lenahan, head of the city office for M.J. Peterson Corp.: “It’s crazy. I’ve been in business for over 30 years. I’ve never seen a market like this.”
Rabbi Adam Scheldt, the new assistant rabbi at Temple Beth Zion in downtown Buffalo, experienced the listing shortage this spring when he came from Brooklyn for a weekend of house-hunting before starting his job. The 34-year-old Illinois native, who focused his search on North Buffalo, Kenmore and Tonawanda, lost the first house before getting his second.
Otherwise, he said only one other home fit his price, location and needs. “There wasn’t a lot available,” he said. “I’ve been very blessed in the whole process and search, but there was not a lot in my price range that was really worth buying.”
Kristin St. Mary and fiance David Barber liked a three-story, white-and-gray home for sale on Bird Avenue, west of Richmond Avenue. The kitchen had been upgraded. The bathrooms were updated. The owners had added a mudroom. The house was well-maintained.
The $169,900 asking price was less than others the newly engaged couple had looked at. “We’ve seen other houses that needed more work,” said St. Mary, 36, a local attorney and Syracuse native. “This house was great. It’s move-in ready.”
But although the house was listed only a day earlier, there was already one offer and another showing later in the evening. And the couple had lost out on another house after bidding $25,000 above asking price, only to be beat by a similar offer in cash. They eventually decided not to bid.
“People are snatching things up quickly,” St. Mary said. “There’s a lot of pressure.”
Demand is up …
Unlike the “sand states” – California, Arizona, Nevada and Florida – Western New York never experienced the housing boom before the recession and didn’t suffer the bust, either. The sales volume is consistent, and builders are cautious. Prices appreciate here, but not by extreme rates or to extravagant levels.
Nevertheless, the current activity reflects some changes from recent years.
For one thing, interest rates, while they remain at low levels historically, have ticked up and are widely expected to rise further as the economy recovers. That provides an incentive for buyers to act now.
“I’m very encouraged by this set of circumstances, but it can’t last forever,” said Peter Hunt, CEO of Hunt Real Estate. “So if you don’t take advantage of it now, you may miss out.”
And buyers feel more confident. Economic and jobs reports are better, stock prices are rising, and steady home price growth around the country means people “aren’t worried they’ll lose their shirt if prices go down,” said Ken Fears, an economist with the National Association of Realtors.
“There were a lot of fence-sitters out there who were lacking the confidence to get back in the market, despite having low rates,” Fears said. “With the spectre of rising rates on the horizon, the fear of missing out has taken hold. Those who are on the fence have realized they have a small window here.”
... But supply is down
On the other side of the supply-and-demand equation, homebuyers have faced a smaller and declining inventory of good homes on the market, as sales increased but new homes weren’t being added to the market fast enough to replenish it.
Nationally, the inventory in April was down 13.6 percent from a year earlier and the pace of sales means the current supply would run out in 5.2 months – well below the “neutral” pace of 6.5 months.
In Western New York, the pace of sales means the current supply of homes would run out in 5.8 months – down from 7.5 months a year ago. At its trough in December, the inventory locally was at its lowest point since March 2005.
“The market’s hot, the listings are down,” said Philip L. Aquila Jr., general manager of residential real estate for M.J. Peterson, and former president of the regional multiple listing service. “We’re back to where we were pre-recession.”
Return to normal
So what causes the low inventory? Aquila said it is a return to normal. During the recession, many people were forced to put homes on the market because they suffered financial trouble. Foreclosures soared, and banks eventually listed properties for sale, flooding some markets. And the struggling economy meant homes weren’t moving.
Western New York was affected to a lesser degree but still experienced those factors. Now, though, there are fewer troubled homeowners under pressure to sell. Banks have worked through many problem loans and cleared out their inventories. And while there is still a risk of more foreclosed homes coming onto the market – the so-called “shadow inventory” – New York’s slow legal process means it is unlikely to be a sudden flood here.
“I just think we’re getting back to the normal buying and selling and listing houses before the recession,” Aquila said.
There are other factors, too. Until recently, many homeowners chose to stay put and refinance their existing mortgages at lower rates. “Those people have taken themselves out of the market for a year or two,” said RealtyUSA CEO Merle Whitehead.
“Sellers won’t sell because they have to pay so much more to upsize or downsize,” Lenahan said. “It’s so hard to replace what they have.”
New homes selling, too
For homebuilders, it has turned into a seller’s market, too.
At Marrano/Marc Equity Corp., the region’s No. 1 home builder, sales were already up 35 percent from a year ago before June – then the firm sold 31 homes in June. “I haven’t been able to go back far enough to see the last time we did that,” said John Manns, vice president of sales and marketing for the builder. “We’re having a terrific year.”
The builder constructs 40 “spec” homes every year, just to have a steady inventory of finished homes available when people come calling, so they don’t have to go through the building process. This year, the firm has been “eating up that inventory,” Manns said. And inquiries by realtors are up 40 percent,
“It’s certainly a different picture today than it was a year or two ago,” Manns said.
Essex Homes of Western New York had nine finished homes ready, “and they were all gone within two months,” said President Philip J. Nanula. The past few years, buyers were cautious and wouldn’t approve construction until their current home was sold. Now they move forward regardless, Nanula said.
“People are concerned that their house is going to sell quickly and they want to get started with construction,” he said. “They’re more confident now than they have been in the last three years.”
The scarcity factor
Homes that are maintained or updated, if they are priced appropriately, get multiple offers and tend to sell quickly. Others just sit on the market for a while, although even some of those are getting second looks because the pickings are so slim. But those who qualify to buy them financially don’t always have the money to spend on updating roofs, fixing mechanical systems or making other improvements.
That has created a scarcity factor for desirable homes – and the sellers know it. Indeed, instead of taking the first offer that comes to them, even if it is above the asking price, they sometimes counter and wait to see what else comes along.
Or, even if they have an offer in hand, they may still go ahead with an open house to drum up other interest. Some brokers even advise clients to offer high initial bids just to discourage such tactics by sellers.
“I really think we’re seeing a really, really short supply of good homes, and when they are listed and listed at a good price, people are getting their price and sometimes more and multiple offers,” said Annabelle Aquilina, a broker at Hunt, who has been in real estate for 28 years. “It’s a great market.”