Some buyers have seen tons of homes, put in multiple bids, lost out each time, gave up and signed another one-year lease. That doesn’t mean they don’t still dream about owning a home; it means they’re burned out on the buying process and will be back after they recuperate.
NEW YORK – Amber Otto hadn’t considered buying a home with any urgency until the pandemic forced her to start working out of her 630-square-foot apartment in Seattle last year.
In the past 18 months, she’s seen more than 50 homes in the $300,000 range, made offers above asking price on four of them and been shut out of several more as bidding wars drove prices out of reach. Then there was the accepted contract that fell through two weeks before closing day.
The 37-year-old Seattle resident has now decided to put her frenetic search for a home on hold and renew her apartment lease.
“I’m just exhausted, honestly,” says Otto, who designs training materials for nurses and managers at a medical center. “Being told that you can’t afford it, or you can’t compete. I mean, it’s just draining.”
As home prices continue to rise with demand far outpacing inventory, Otto is not the only one grappling with what real estate agents and experts are calling “buyer fatigue.”
In fact, the share of respondents who believe it is a bad time to buy rose to 66% in September, up from 63% a month earlier, according to the Home Purchase Sentiment Index survey by Fannie Mae released this month. Last September, only 38% of respondents thought it was a bad time to buy. The home purchase index, which is constructed from consumers’ answers to topics including whether they think that it is a good or bad time to buy or to sell a house, the direction they expect home prices and mortgage interest rates to move, and concerns about losing their jobs, is at its lowest level since last December, data shared by Fannie Mae shows.
“The September measure of consumer sentiment about homeownership may have been eroded by concerns about home prices,” says Doug Duncan, the chief economist at Fannie Mae. “While mortgage rates are low by historic standards, home prices have risen steadily.”
The median existing home price for all housing types in September reached $352,800, up 13.3% from September 2020, marking 115 straight months of year-over-year increases, according to the National Association of Realtors.
But some homebuyers are hopeful the hot market will cool.
The Fannie Mae home purchase index survey found that the percentage of respondents who say home prices will rise in the next 12 months fell to 37% from 40% while those who say mortgage rates will decline over that same period increased four percentage points, from August to September of this year.
That might explain why some buyers are hitting the brakes on their home purchase plans.
“The recent past spring buying season was extremely heated. Multiple offers automatically mean multiple losers,” says Lawrence Yun, the chief economist for the National Association of Realtors. “And there are people who have submitted bids four or five or 10 times and lost on every single one,” he says, adding that “some of these homebuyers are feeling dejected and taking a timeout.”
Yun believes people who have put emotional energy into searching for homes and making contract bids are serious buyers.
“So even if they say they are taking a timeout, they’re constantly looking for that inventory to show up,” he says. “They’re looking at the mortgage rate and waiting for a better market condition to buy.”
Nish Shah and his wife, Niyati, who live in a townhome in Old Bridge, New Jersey, started looking for single-family homes in 2019, scouting various towns and paying particular attention to highly ranked school districts for their two children, ages 9 and 5.
By the time they had homed in on a couple of towns, including Westfield and Summit, the pandemic had supercharged the housing market in the area. But with the two children learning remotely at home and his wife working part time, Shah says their need for a single-family home became a priority.
“I was constantly going from one room to a basement, to other rooms to take my calls,” says Shah, a partner at EY. “It became very clear that I needed a working space.”
What followed was a rude awakening. The Shahs, who are looking for a home in the $1.4 million to $1.7 million range, found that the houses they’d seen just months before the pandemic were suddenly selling for $200,000 to $400,000 more. The exodus of people from New York City to the suburbs looking for more space has driven up property values in New York, New Jersey and Connecticut.
“It’s the same neighborhood, similar houses. There’s no difference outside the pandemic,” says Shah. “I keep asking myself, ‘Is this here to stay, or should I wait until this bubble bursts?’ he says. “To pay 30%, 35%, 40% more than what the price was just two years back is a very, very difficult decision to make.”
After losing multiple bids, Shah offered $1.75 million for a home listed for $1.675 million.
He lost the bid. The house was sold for $1.825 million.
The frenzied pace of home sales and the lack of room for negotiations were sources of anxiety. Since August, Shah says he stopped looking aggressively.
“My wife and I still talk about homes we wish we could have gotten,” he says.
When Sammy Arroyo put her house on the market in San Antonio after a breakup with her partner this summer, she said she couldn’t believe the offers pouring in.
“We had six offers on the first day,” says Arroyo, who works as a paralegal.
Eager to close that personal chapter of her life, Arroyo picked the offer that was most over asking.
But finding a place of her own would prove daunting. After seeing close to 15 homes in the past four months and being outbid on six, including one where she offered $15,000 above asking, Arroyo says she’s weary.
“I don’t want it to be like 2008 when the housing bubble burst,” she says. “This is very stressful for me.”
She’s now planning to put her house-hunting efforts on hold until next spring when she hopes there will be more inventory.
“I am just waiting to see if the market changes,” she says.
The average price of a home in San Antonio rose by 15% from September 2020 to September 2021, according to the San Antonio Board of Realtors. Liza King, the real estate agent who has been helping Arroyo, says the city is at 1.2 months’ supply of single-family homes.
“Anything below four months is a sellers’ market,” she says. “We are having 10, 20, 30 offers on each of the homes that are coming on the market.”
Otto, of Seattle, was all set to move into her new home. But two weeks before the closing, the seller told her he couldn’t kick out the tenant because of Seattle’s eviction moratorium, which is still in effect.
“I can’t afford to buy a house and not live there,” she says.
The furniture she’d ordered arrived and was sitting in unopened packages around her small apartment.
“I’ve got two 24-foot monitors and my computer desk fits in between my couch and my kitchen,” says Otto. “It’s two steps to the kitchen and two steps to the couch. It’s basically here in my face all the time.”
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Author: kerrys