Bidding wars. Buyers paying cash. Homes selling for more than asking price.
Are we entering another housing bubble? No. But prospective buyers in many markets may be shocked at the competitive nature of the home-buying process these days.
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The number of homes for sale fell to a 13-year low in January, leaving would-be buyers chasing a shrinking supply of homes just before the spring selling season.
“On a national scale, the market is clearly rebounding,” says Greg McBride, senior financial analyst at Bankrate.com. “It’s not that the prices are crazy, but the buyers outnumber the available homes for sale.”
There was an average of 4.8 months of supply of existing homes for sale in the fourth quarter, according to the National Association of Realtors (that is, it would take 4.8 months to sell off the inventory at the current pace).
Six months’ supply is closer to normal, says Celia Chen, a housing economist with Moody’s Analytics, an economic research firm. In 2010, it went as high as 10 months. “Prices are starting to rise as a result of the strong demand relative to low supplies,” says Ms. Chen.
That said, prices still are about 30% below their peak, she says. And the reasons for the slim pickings aren’t good news. Lenders are taking their time putting bank-owned properties on the market, in part to keep prices up.
Plus, prospective sellers are waiting until prices rise before listing their homes for sale. About 11.9 million homeowners are still underwater—that is, they owe more on their mortgage than the home is worth—according to estimates from Moody’s Analytics.
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