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'That house sold for how much?' Sizzling housing market pushes prices to new highs

'That house sold for how much?' Sizzling housing market pushes prices to new highs

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Western New York's red-hot housing market has been sizzling all summer, sending prices soaring through the stratosphere to levels never seen locally.

Home prices through July are up by more than 18% and the median sale price – which means half the homes sold for more and half for less – has reached a record high of just over $190,000, according to the Buffalo Niagara Association of Realtors.

With homes for sale scarcer than they have been in decades, the competition among buyers, especially for homes in good condition in sought-after neighborhoods, has been intense, pushing prices higher and higher.

So intense is the market that it's now common for sellers to list their house midweek, hold an open house during the weekend and sort through offers early the next week, skipping the individual showings that once were the main way buyers shopped.

As a result, many buyers are still paying tens of thousands of dollars over the asking price.

Homes that have sold during the last 13 months across the Buffalo Niagara region have gone for prices that have, on average, topped their most recent asking price, according to the Realtors group's data. In July, homes sold for an average of 9% more than their asking price – the highest premium since the group started publishing that data.

"It’s still pretty crazy," said Susan Lenahan, a longtime city agent with M.J. Peterson Corp. "It’s just still very, very active, and I don’t see that changing anytime soon."

It has also changed the way homes are valued. Pricing guidelines that seemed high a year ago now are, in many cases, way too low.

"It was just so hard to keep track of the market at the time," said Jerry Thompson, broker-owner of Century 21 Gold Standard in East Aurora. "Pricing a house was like trying to price Bitcoin on a surge. The market was so hot it was driving it through the roof."

Eye-popping prices

It's no secret to anyone who has tried to buy a house in Western New York – or anywhere in the country – that the market has been overheated for the past few years.

The Covid-19 pandemic only exacerbated conditions with a brief shutdown last spring and new pressures on both buyers and sellers.

But the stage was already set for prices to increase because of the strong demand for homes during most of the past decade and the record low mortgage rates that have made financing less of a burden.

A market where buyers and sellers were roughly in balance as recently as 2015 now is heavily tilted in favor sellers as the ample supply of homes has been steadily whittled down over the last six years to an all-time low.

As buyers pay less in interest because of the low mortgage rates, they can afford to pay higher prices and still keep their payments within their financial reach.

As a result, the imbalance in supply left buyers chasing the same homes, driving up prices as they try to outbid the competition.

Industry observers have long expected circumstances to eventually change, relieving the pressure. But instead of loosening up over time, it has only gotten worse, forcing bidders to pay more and more, while pushing the tire-kickers to the sidelines.

"The buyers that are looking are more serious buyers," said Brian Hillery, an agent with Hunt Real Estate Corp. "If somebody isn’t serious, they’re getting weeded out rather quickly."

The data shows it, especially as spring turned to summer.  The median sales price in the Buffalo Niagara area has topped $200,000 for three straight months – the first time that has ever happened – and hit a record $225,000 in July, according to the latest report from the Realtors group.

July prices were up 27% from July 2020, and sale prices were up more than 20% during May and June, too.

"I can’t believe what’s happening," said Peter Scarcello, Hunt's general manager for the Buffalo Niagara region.

“These prices are not logical,” said Vienna Laurendi of Howard Hanna Real Estate Services. “The demand is consistent. The inventory is just nonexistent.”

Each of those increases are virtually unheard of in Western New York over the last 21 years, as the region is accustomed to slow but steady growth, not the rapid increases associated with warmer climates like Florida, California and Arizona.

The last time the Buffalo Niagara area broke the century mark for the median price – in summer 2005 – it took another five years before that measure topped $125,000.

Of course, the Buffalo Niagara region is still one of the most affordable areas in the country, especially among major metropolitan areas. The national median home price was $374,900 as of the second quarter.

"We're undervalued as a region," Scarcello said.

Sanity returning?

Agents say the pace of activity may be slowing down, with fewer offers hitting the table then during the peak a few months ago. But it is still common to receive multiple offers – it's just that it's now only a handful, instead of dozens.

"We may have multiple offers, but we're not seeing 30 to 40," Thompson said. "You're seeing three, four or five – a more traditional market."

Supply has also increased. Sellers are again listing homes at a steady pace, consistent with prior years, so the total inventory of homes for sale is picking up from its nadir of 1,233 houses in February – barely enough for about five weeks of sales. 

"We do have more houses coming on the market, which is great," Lenahan said. "People are able to look at more things."

But at just over 1,700 homes on the market, it's still down 15% from a year ago and 43% from two years ago – which means it is nowhere near the level needed to sustain a healthy market.

"People have been so frustrated," Scarcello said.

 

"I'm seeing less outrageous multiple offers, because pricing has begun to adjust to the market," Thompson said. "I'm seeing houses that are getting priced more appropriately."

Several months ago, Hillery listed a house at $250,000, had 30 showings within a day, and raised the price to $280,000. It ultimately sold for $315,000.

More recently, though, he listed one house at $200,000 and another at $350,000. They sold for $230,000 and $366,000, respectively – still higher than asking, but not driven up as much as earlier in the year because of fewer offers.

"Houses are still selling quickly, but we’re not seeing houses with 30 to 40 offers on them. We haven’t seen that in a while," Hillery said.

"It’s definitely calmed down as far as the amount of offers and the crazy bidding that was necessary," he said. "But it’s definitely still a very strong seller’s market, that’s for sure."

The Buffalo News: Good Morning, Buffalo

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