The current state of home sales in Delaware

Joseph Herriman started his home search in 2022 in the most difficult market for first-time buyers in his young life.

Herriman, then 21, had a plan. He lived with his parents to save on rent. He landed a better-paying job so he could sock away more money. And he brought his wish list to Yvonne Hall of Keller-Williams Realty Central Delaware, who had represented his mom and dad in buying and selling homes over the years.

“Saving is a big part of it. When the right house does come along you want to be able to act on it,” he says.

Hall, who has been selling homes for 39 years, says this is toughest market for buyers she has seen.

“It’s an extremely difficult time for first-time buyers because there are so few homes in good condition that are priced below $250,000,” Hall says. “And it’s hard for first-timers to save because rents are so high, $1,500-$1,600 a month for an apartment.”

Meanwhile, home prices continue to rise. In Delaware, the median price was $367,146 in December, up 5.58% from the previous year. The cost of financing soared. Mortgage interest leapt from less than 3% two years ago to 8% last summer, before easing into the 6.5-7.1% range.

Rob Grant of Draper & Kramer has been in the mortgage banking business for 40 years and says bidding wars are changing the nature of home buying.

“Think of it as an auction and the listing price is the opening bid,” he says. “If you are bidding on a piece of furniture, you don’t expect to get it for the opening bid. That is what is happening with houses.”

Despite low home sales, mortgage bankers are seeing lots of would-be home buyers.

“We’re busy doing pre-approvals because we have people who are making offers all the time,” he says. “But in reality, few of those offers are translating into buying a home.”

Grant predicts demand will continue to rise because there is a lack of space available for new housing developments in New Castle County. But if mortgage rates continue to decline he expects more sellers to come off the sidelines.

“For someone who currently has a 3% mortgage it’s a lot more palatable to absorb that difference at 5% than it is at 8%,” he says.

Even in a strong sellers’ market, there’s a limit to what buyers will pay. Dennis Mellor of Pantano Real Estate in Wilmington says sellers accustomed to over-asking offers sometimes have unrealistic expectations.

“Overpricing is harmful in the end because you aren’t getting the home sold quickly. People see it as a stale listing and they offer less,” he says.

In beach communities, where prices have soared, there’s been a wavelet of price reductions on high-end homes. In Rehoboth’s tony North Shores community, a seven-bedroom, six-bath home with multiple decks and pond views sold for $4 million, $1 million less than the listing price.

In Lewes, a recently remodeled 2,500-square-foot house with two laundry rooms and a large, screened porch within walking distance to downtown fetched $1.75 million, $155,000 under the asking price. In Bethany Beach, a four-bedroom condo with ocean views at Sea Colony East sold for $1.1 million, $50,000 less than the listing price.

In a competitive market, buyers are intent on buttoning up solid financing. Cash buyers are kings of the real estate realm. Mellor says paying cash is unlikely to get a buyer a better price, but it will make that bidder a favorite with sellers.

“Cash is much less risky and has a greater chance of going to settlement. It increases the odds of your offer getting accepted,” he says.

To bankroll cash purchases, buyers are tapping profits earned in the stock market. Some are getting help from generous relatives. Others made money on homes sold in more expensive locations.

“People are coming in from New York and other high-end markets with lots of cash,” Mellor says.

Corporate transfers are prompting some listings in greater Wilmington, a hub for financial services. Those buyers are insistent on homes in move-in condition.

“They come in, they drop their bags, and they go to work. They do not want to renovate a house,” Mellor says.

Beyond sales involving divorce, career changes, and estates, many would-be sellers are making do and waiting for interest rates to improve. The Federal Reserve Bank has signaled that it is holding off on future rate hikes but that has yet to translate into significantly lower mortgage interest.

“The real sticking point is people who have a mortgage in the 2-3% range have to pay twice that to move up. You can’t get them to list until they have twins and have to move,” Mellor says.

Rising prices and lack of inventory are leaving many would-be buyers emotionally exhausted. Some are so discouraged they have given up.

“There are people who have been looking since the pandemic,” Mellor says. “I had a great $350,000 buyer who can’t buy a house because the house that was $350,000 when he first started looking is $500,000 now.”

For qualified buyers fortunate enough to find a home priced at $285,000 or less, the state is offering a zero-interest forgivable loan of $12,000. Each year the homeowner lives in the property as their primary residence, the loan balance will decrease by 10%. After 10 years, the loan is forgiven.

Hall and other real estate professionals say buying and selling homes requires a lot of hand-holding. It can be a long, stressful process.

“I tell my people to be patient and persistent and we will find them a home,” she says.

For Herriman, now 23, his patience and persistence were rewarded.

“We found him a cute little house in Felton with a two-car garage because he likes to work on cars,” Hall says.

The house has the three bedrooms that were on Herriman’s wish list. He was okay with the single bathroom and doing a bit of painting but made a compromise on the size of the lot.

“I was looking for half an acre and it’s only 0.4 acres,” he says. “But the garage has heating and air conditioning and the kitchen has been recently renovated so I got 95% of what I want.”

The property, priced at $226,000, drew five offers. Hall encouraged him to make an offer $3,000 over the list price to give him a competitive edge. Even with the boost, Herriman didn’t have the highest bid, but his rock-solid credit sealed the deal.

“It’s a sense of self accomplishment, to say I own a house,” he says. “I want to pay my own my mortgage instead of someone else’s.”