The housing market in Delaware picked up significantly in recent months.
People selling a house in the first few months of 2020 often had their choice of offers. And for buyers – it’s been a “you snooze, you lose” proposition.
Contributor Eileen Dallabrida examines the state of the market in Delaware and what is driving it.
Jermaine Brown, a would-be buyer from New York, found what he thought would be the ideal home, a townhouse in impeccable condition in suburban Newark that had just been listed for sale in the mid-$220,000s.
“My agent sent me the listing on a Sunday, we went to look at the house right away, and loved it,” he recalls.
Brown and his wife decided to make an offer on the spot. But the pre-approval paperwork from a lender had not yet been processed. With multiple bids on the table, the seller chose another buyer, a bidder who already had financing in place.
That scenario is being repeated throughout New Castle County, where buyers greatly outnumber sellers. Inventory is at rock bottom, with active listings falling 34.4 percent in the past three months, according to Bright MLS, a residential real estate listings service.
With mortgage interest rates hovering around a record-low 3.2 percent, demand also is high in Kent and Sussex counties. Inventory is not as tight as in New Castle, but it’s still a seller’s market, real estate agents say.
Coronavirus and home sales
With the coronavirus pandemic sparking global trepidation, the vast majority of prospective buyers (78%) say the crisis hasn’t diminished their interest in finding a new home, according to the survey by the National Association of Realtors (NAR). The survey also found that 87% of agents believe the disease is not a factor in inventory.
However, the pandemic is impacting the way homes are shown. Nearly one of four sellers is making some sort of change, including suspending open houses, requiring would-be buyers to wash their hands or use hand sanitizer, asking buyers to remove shoes or wear footies.
‘Excruciatingly low’ inventory
Across the country, the market is struggling with the lowest inventory of existing homes for sale since 1999, according to the National Association of Realtors.
Not surprising, homes are selling more quickly, with the median number of days on the market a scant 27 days in New Castle County in February, compared to 106 days for the same month in 2011.
In the North Wilmington communities of Brandywood and Beacon Hill, two homes recently sold in less than a week and a house that languished on the market last spring went under contract. The market for homes priced at less than $300,000 is red hot, with townhouses in Pike Creek and Middletown selling in only a few days.
Prices are inching up, too. The median home price in New Castle County was $236,000, a 4.9% increase over February of last year, according to Bright MLS.
At the same time, homeowners are clamoring to refinance.
“With super low interest rates, refinancing is off the charts,” says Richard Pollack, sales manager at Union Home Mortgage in Newark.
At the recent 2020 Economic Forecast at the University of Delaware, Patrick Harker, CEO of the Philadelphia Federal Reserve Bank and former UD president, predicted that 60% of current mortgage holders would refinance within the next two years, realizing about $2,000 in savings to their annual budget.
Although statistics aren’t available, Pollack and other leaders in the lending industry believer the ability to refinance is contributing to what he calls “excruciatingly low” inventory in resale homes. In short, homeowners who might otherwise downsize or rent are keeping their properties because refinancing is reducing their mortgage payments.
“If the house payment is low enough, a lot of people will just stay put,” he says.
We’re not moving
Overall, Americans are moving less often, which means fewer homes come up for resale. In the early 2000s, owners stayed in their homes for an average of seven years before moving on, according to government statistics. Now, the average is almost 13 years.
Healthier, more active seniors also are contributing to the shortage of inventory, industry watchers say. Instead of moving into assisted living facilities, they are maintaining their homes longer or buying smaller homes.
“We are seeing older people downsize, going from 3,400 square feet to 1,800 square feet,” says Peter Shade of Burns & Ellis in Dover.
Here’s a sampling of homes that are available throughout the state:
- In Middletown, a townhouse built in 2015 in the Bayberry North development has three levels, with the main living area on the second floor above the garage and first-floor foyer. There’s a deck for grilling and a small yard that can accommodate a trampoline. It’s listed at $255,000.
- On historic State Street in Dover, a six-bedroom, four-bathroom Craftsman-style house built in 1928 features the original hardwood floors, leaded glass windows, extensive millwork and a new kitchen that’s open to the family room. An easy walk to downtown, the house is listed at $360,000.
- In Rehoboth Beach, a 5,000-square-foot house on 1.5 acres between Rehoboth Bay and the golf course at Rehoboth Country Club boasts a stacked stone fireplace, gourmet kitchen with commercial-grade fridge, and a luxury master bath with soaking tub and towel warmer. The $2.15-million price tag includes a pool, a dock and boat lift.
In Kent County, sales volume is up, with 405 homes in the Capital School District that have sold or are pending in the last 180 days.
There’s a boomlet of buyers looking for restored properties in the City of Dover, especially people who want to walk to shops, restaurants or jobs in state government. Delaware’s middle county also offers lower home prices than tony beach communities in Sussex County or New Castle County’s rarified Chateau Country.
“In Kent, the point when the market starts to get cold is $400,000,” Shade says. “The vast majority of homes are priced below that.”
Cash is king
New construction in Sussex County is easing low inventory in Delaware’s southernmost county. But developable land east of Route 1 is scarce, creating a paucity of inventory in beach communities, says Carol Materniak of Long and Foster.
She sees this seller’s market as much different than the buying frenzy of the early 2000s, where homes were snapped up as soon as they were listed. In this market, price and condition are determining factors.
“Buyers are very savvy and they are not overpaying,” she says. “If a house is overpriced or in bad condition, it’s going to sit on the market.”
Materniak also is seeing an uptick in cash buyers, many of whom have sold pricey homes in New Jersey, New York and the Washington D.C. area and are retiring to Sussex County.
“Money is so cheap you think you would have more people taking out a mortgage but we still see people paying cash,” she says.
Bypassing the need to finance is an edge for buyers in a competitive market, says Madeline Dobbs, a realtor and market strategist with More Brandywine Valley Homes/COMPASS and the author of How to Sell a House in 30 Days.
“Cash offers are most attractive,” she says. “Waiving home inspections or offering to absorb the first $2,500-$5,000 in repairs also is an option that appeals to sellers.”
To keep up with competing bids, Dobbs advises buyers to set up an escalation clause that allows for incremental price increases in offers to the seller. In essence, the buyer is authorizing the agent to offer more money—typically increments of $2,000-$5,000—to rapidly compete with other buyers.
Home at last
After losing out on the home in Newark, Brown kept looking. A few weeks later, a townhouse in Bear came on the market. It was the right size, three bedrooms and three and a half baths, and located near his wife’s sister.
Brown texted his agent and asked him to walk through the property, make a video and send it to him right away. The agent dashed to the townhouse and rushed the video to Brown, who immediately made a full-price offer of $229,000 for the home, sight unseen.
The next day, the agent contacted the Browns with good news. Their offer had been accepted.
“You have to be decisive because good properties get snatched up quick,” he said. “I knew if I waited until the weekend, the house would have been gone.”
