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Matthew and Carina Hensley offered $10,000 more than the asking price for a three-bedroom house in suburban Seattle, then lost out to one of seven other bidders. Their $270,000 proposal in February came with a family portrait and a letter introducing the couple, their eight-month-old daughter, Harper, and their desire to build a family in the Renton (Wash.) house with a yard backing onto a woody hillside.
“We understand there is going to be fierce competition in the offers made for your house but Carina and I both felt very strongly about letting you know what it would mean to us if we were given the opportunity to live in your gorgeous and charming house,” wrote Matthew, 33, a credit union branch manager whose wife is a dental hygienist, to the sellers. Such letters from eager buyers were common during the housing boom.
Bidding wars, absent from most parts of the U.S. residential market since 2006, are making a comeback, from Seattle and Silicon Valley to Miami and Washington, D.C. Nationwide, the inventory of homes hovers close to a six-year low, while an increase in jobs and record affordability tempt buyers. The number of contracts to buy previously owned homes jumped 14 percent in February from a year earlier, the National Association of Realtors reported on March 26.
While listings of homes for sale will probably rise as banks accelerate foreclosures and sellers gain confidence in the market, the U.S. metropolitan areas with the strongest economies may be ready to absorb the additional inventory, says Mark Zandi, chief economist for Moody’s Analytics (MCO). Low values and interest rates have made buying a better deal than renting in 98 of the 100 largest metropolitan areas, according to Trulia, a real estate information website.
The bidding wars seen in such cities as Seattle aren’t found everywhere. In Atlanta and California’s Riverside and San Bernardino counties, housing remains weak as high unemployment and falling prices deter first-time and move-up home buyers. Overall prices are still down a third from their July 2006 peak and will probably dip 2 percent more before rising next year. A shadow inventory of some 1.6 million homes either facing foreclosure or already repossessed by banks has been held off the market.
Yet more buyers find themselves bidding for the best properties. Agents encountered multiple bids on about half of offers in Seattle, Boston, Washington, D.C., and Oregon this year through March 15, says Tim Ellis, real estate analyst for Redfin, an online brokerage.
In the San Francisco area, Redfin agents reported that three of four offers involved competition, Ellis says. One home in Palo Alto received 38 offers and sold for $1.6 million, $452,000 above its asking price, according to Ken DeLeon, a real estate broker in Silicon Valley since 2002. Palo Alto prices are hitting all-time highs in the 94301 and 94306 Zip Codes, where buyers are rushing to purchase in advance of an expected flood of newly minted millionaires when Facebook has its initial public offering, DeLeon says. (Facebook headquarters is in nearby Menlo Park.)
In Phoenix the average home’s time on the market fell to 90 days at the end of March from 114 a year earlier. The median sale price rose to $126,000 from $110,000, according to the Cromford Report, a Phoenix area market research service. Contributing to the higher prices and faster sales were brisk activity by investors, first-time home buyers, speedier short sales, and an improvement in shopper sentiment, says Cromford publisher Mike Orr. In a short sale, a property is sold for less than the amount owed on it.
The median home price in Washington, D.C., rose 6.6 percent to $405,500 from a year earlier in March, and homes sold after a median of 38 days on the market, a 28 percent decline, says Metropolitan Regional Information Systems, a real estate listing service. In neighborhoods such as Capitol Hill, sellers are prompting bidding wars by asking less than they expect to receive, says Sean Aalai, an agent with Lindsay Reishman Real Estate. “They’re purposely pricing a little low,” says Aalai. “Buyers walk in and fall in love, and the property starts getting bid up.”
The Hensleys, meanwhile, haven’t given up on living in the Renton area, where their own parents have homes. The winning bidder offered $15,000 above the asking price and didn’t make the sale contingent on successful financing or inspection, according to Kimberly Hobbs, the broker who represented the seller. “From this experience we learned that we have to move fast, especially if a house is nice,” says Matthew Hensley. “The competition is fierce out there.”
The bottom line: The number of contracts to buy existing homes has jumped 14 percent over the past year, a sign of recovery in the fragile housing market.