Homes Sell in Two Weeks With Low Supply for Spring Buyers

The U.S. housing market, entering its
busiest season, is tipped so far in favor of sellers that almost
a third of listings in areas from Washington, D.C., to Denver
and Seattle are under contract in two weeks or less.

One home in Washington attracted 168 offers in December and
sold for almost twice the asking price. About 70 people lined up
last month for a lottery to select buyers for four available
houses in a San Ramon, California, subdivision where, in August,
bidders camped for weeks to secure purchases.

A plunge in U.S. home listings to a 12-year low is driving
up prices and preventing transactions from returning to
historically normal levels. Many potential sellers are holding
off until values rise more, while investors are snatching up
distressed properties before they reach the market. Builders,
reporting their best orders in years, can’t increase production
fast enough. As buyers seek to take advantage of record-low
mortgage rates, the supply and demand imbalance threatens to
further limit deals as the key spring selling season approaches.

“There is just no inventory for buyers,” said Bob Cilk,
an agent with Re/Max Accord in Pleasanton, California, where
only 27 single-family houses are available for sale, about a
third of the normal level. “There are lots of losers in the
marketplace now. When you have multiple offers, there are
several losers and only one winner for each home.”

Price Gains

U.S. home prices rose 5.5 percent in November from a year
earlier, the biggest annual gain since August 2006, the
SP/Case-Shiller index of values in 20 cities showed last week.
Existing home sales fell 1 percent to a 4.94 million annual rate
in December as tight supply put a lid on deals, according to the
National Association of Realtors. A normal level is 5 million to
5.5 million transactions, said Walter Molony, a spokesman for
the group in Washington.

While rising values eventually compel would-be sellers to
list their homes, inventories may remain tight for a year or two
because prices need to rise another five or 10 percent before
enough sellers can cover mortgage and transaction costs, said
Mark Zandi, chief economist for Moody’s Analytics Inc. in West
Chester, Pennsylvania.

“Nobody wants to sell at the bottom and everybody wants to
buy at the bottom,” said Paul Diggle, property economist for
Capital Economics Ltd. in London. “That might create some kind
of standoff until home prices rise sufficiently so that sellers
come back to the market at a larger scale.”

Biggest Concern

About a third of homeowners say their biggest concern about
selling now is that they will miss out on future price gains,
according to a January
survey by Redfin, a Seattle-based
brokerage. That surpassed the economy as the top worry.

New listings in 21 of the largest U.S. cities plunged 21
percent last month from a year earlier, led by declines of more
than 35 percent in the San Francisco Bay area, Las Vegas and
Atlanta, Redfin said. At the end of 2012, about 28 percent of
home listings nationally went under contract within 14 days,
with cities in California’s Silicon Valley and Los Angeles areas
exceeding 40 percent. In Washington, Seattle and Denver it was
more than 30 percent.

While more homeowners usually list properties after the
start of the year, the buyer and seller logjam probably will
continue into the spring as the appetite for real estate
increases, said Jed Kolko, chief economist of San Francisco-
based Trulia Inc. (TRLA), which operates an online property-listing
service.

“Inventories start growing in February and peak in July,
but without even more new construction and more homeowners
willing to sell, inventory will stay tight through this housing
season,” Kolko said.

Homebuilder Demand

For homebuilders, the spring selling season is
traditionally viewed as starting the weekend after the National
Football League
’s Super Bowl, which was held two days ago. The
companies can’t increase production fast enough because of labor
shortages and rising competition for lots in the best locations,
said Brad Hunter, chief economist of Metrostudy, a Washington-
based research firm that tracks construction.

“They’re barely keeping up with the demand and their
backlogs are growing,” Hunter said. “And that emboldens them
to raise prices.”

PulteGroup Inc. (PHM), the largest U.S. homebuilder by market
value, is “purposefully slowing our rate of sales as we focus
on maximizing margin over driving volume,” and raising prices
in areas such as Phoenix and Florida, Chairman and Chief
Executive Officer Richard Dugas said on a conference call with
analysts last week. The Bloomfield Hills, Michigan-based company
reported a 27 percent jump in fourth-quarter orders as profit
quadrupled.

Distressed Decline

Much of the dropoff in listings of existing properties is
tied to fewer foreclosure deals and short sales, where the
homeowner sells for less than is owed on the mortgage, said Tim
Ellis, real estate analyst with Redfin.

Listings for short sales fell in more than 60 percent of
102 major metropolitan areas in 2012 from the previous year,
matching the share for bank-owned properties, according to
RealtyTrac, an Irvine, California-based data provider. The
processing of delinquent loans slowed starting in late 2010
after allegations that lenders used workers to sign foreclosure
documents without verifying the paperwork.

Distressed listings may increase in 2013 because
foreclosure filings began picking up last year, especially in
states that require court approval for repossessions, such as
New York, New Jersey, Illinois, Ohio and Florida, said Daren Blomquist, vice president of RealtyTrac. It takes about 600
days, on average, from the time a property enters the
foreclosure process until a bank sells it, Blomquist said.

New Supply

“We would anticipate in the markets with the biggest
increases in foreclosure activity in 2012, the supply shortage
will be eased somewhat in 2013 as those properties are listed
for sale,” Blomquist said.

In Washington, a 2,850-square-foot (265-square-meter)
foreclosed home near Union Station went on the market in late
November for $337,000 and attracted 168 offers during a 10-day
bidding period that was closed to investors, said Michelle
Johnson of Tri-State Realty LLC in Bowie, Maryland, who is
representing the Department of Housing and Urban Development in
the sale of the property.

“When it was on the market, you could go there any hour
and you would think it was happy hour — there were always
agents and buyers there, even at night,” Johnson said.

Private Equity

Private-equity firms such as Blackstone Group LP (BX) began
purchasing thousands of foreclosed homes last year, taking them
out of the for-sale inventory and converting them into rentals.
New York-based Blackstone, the largest investor in the business,
has spent more than $2.5 billion on 16,000 homes and is buying
in nine markets, from Miami to Phoenix.

“The incredible emergence of big money is a significant
reason why we have less supply,” said Thomas Lawler, a former
Fannie Mae economist who’s now a housing consultant in Leesburg,
Virginia.

Rising prices may spur some investors to test the sales
market, along with “reluctant landlords” who needed to move
for jobs or family changes but chose not to sell during the
downturn, Lawler said.

Elyn Yao became a landlord five years ago after moving out
of her two-bedroom townhouse in Seattle’s Fremont neighborhood
to the Madrona area, seeking to be closer to her job at
Microsoft Corp. While the rent hasn’t completely covered her
costs, she was waiting for the market to improve. Her agent,
Kevin Lisota, listed the home in early January and it was under
contract four days later for $450,000, $5,000 above the asking
price.

New Places

“The market was starting to pick up and it was a good
opportunity to get out of the business of being a landlord,”
said Yao, who bought the property in 2004 for $452,000.

In the tightest markets, homeowners are worried that if
they sell, they may not be easily able to find a place to buy,
Lisota said. The improving job market and restrictive lending
standards are also pushing up rents for apartments across the
country.

“The seller’s No. 1 concern is, ‘Can I get the price I
want,’ followed up by ‘Will I be able to find a replacement in a
reasonable time frame,’ Lisota said.

In Silicon Valley, demand is so brisk that some buyers are
agreeing not to make deals contingent on successful financing,
inspection or appraisal, and are accepting properties in ‘‘as
is’’ condition, said Mary Pope-Handy, an agent in Los Gatos,
California. Some buyers are allowing sellers to remain in the
home after closing for months without paying rent, she said.

Camping Out

At the Solaire at Gale Ranch community in San Ramon,
prospective buyers camped out in tents for as long as two weeks
in August before the developer released nine houses for sale,
said Sonal Basu, an agent with Redfin.

The builder, Shapell Homes, shifted to a lottery system
this year after neighbors complained about people living
outdoors for weeks, Basu said. Last month, about 70 people
waited in line for the chance to buy four Solaire model homes,
ranging from $729,000 to $989,900, she said. A few dozen
families ultimately participated in the lottery.

‘‘In 10 minutes, they sold four homes for full price,’’
Basu said. ‘‘Buyers were lining up like crazy because there is
no inventory.’’

To contact the reporter on this story:
Prashant Gopal in Boston at
pgopal2@bloomberg.net

To contact the editor responsible for this story:
Kara Wetzel at
kwetzel@bloomberg.net


Enlarge image
Homes Sell in Two Weeks as U.S. Spring Buying Limited by Supply

Homes Sell in Two Weeks as U.S. Spring Buying Limited by Supply

Homes Sell in Two Weeks as U.S. Spring Buying Limited by Supply

Andrew Harrer/Bloomberg

A real estate for sale sign stands outside a house in the Logan Circle neighborhood of Washington, D.C..

A real estate for sale sign stands outside a house in the Logan Circle neighborhood of Washington, D.C.. Photographer: Andrew Harrer/Bloomberg


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