In some regions, the shortage of goods is felt. With each sale, “there is a winner and 20 losers”, explains the founder of a real estate agency, as there are so many buyers in the face of the few properties on the market.
“For sale, house, 3 bedrooms”. To become the proud owner, it will be necessary to make an offer without delay, and outbid by 100,000 dollars. Prices are at an unprecedented level in the United States and buyers are now also faced with soaring interest rates.
“I have visited about 150 properties since 2019,” Liz Stone, who has wanted to buy a house in the suburbs of Washington for three years, told AFP.
She presented four offers. All above the asking price, even up to $100,000 extra. All rejected, despite a strong case. In the region, real estate sells for a price 4 to 5% higher than the starting price, explains Liz Brent, founder of the agency Go Brent, in Silver Spring (Maryland), in the inner suburbs of Washington.
She cites the example of a house displayed at 840,000 dollars and finally sold for more than a million. At each sale, “there is a winner and 20 losers”, so many buyers are faced with the few properties on the market. You have to be prepared to “take significant risks”, she says, such as making an offer without a withdrawal clause, without even ensuring that the house is in good condition.
Soaring interest rates
To have the necessary contribution, Liz Stone had sold her apartment near the Capitol in Washington a year ago, and took a rental in Silver Spring. “I was thinking of moving quickly into my next accommodation without having to rent”, or just “in the short term”. But since then, prices have continued to climb. And despite smiling broadly, Liz Stone says she feels like she’s “missed” the opportunity to buy a house.
Because since January, buyers have had to contend with soaring interest rates after falling to historic lows for two years. At 5.11% for a fixed rate loan over 30 years – the most common term in the United States – this is unheard of since 2010, compared to 2.96% on average in 2021. This further reduces the purchasing power, and it takes today, to buy the same typical house as a year ago, “to earn about 25,000 dollars more” per year, explains Nadia Evangelou, economist for the American Federation of Realtors (NAR).
Rory Molleda, 30, and Stuart Malec, 29, were luckier: It took them just four months, and three bad offers, to find an apartment in Washington. Two bedrooms, a small balcony, parking, “we are delighted”. But between the start of their research in October and the signing in February, the rates soared. “With each apartment visited, it increased a little” more, they say. Ultimately, the rate is 4.1% against 3.5% at the start of their research.
“Not enough goods on the market”
The combination of exorbitant prices and high interest rates should discourage many buyers and ease the pressure on the market. Price increases could thus be contained to only 5% this year, according to Lawrence Yun, chief economist of the NAR. Much less than the +16.9% of 2021 or the +9.1% of 2020.
“There just aren’t enough properties on the market,” says Liz Brent. According to her, the deficit is such that returning “to a healthy level” seems impossible. “And prices will continue to rise.” The situation has been exacerbated by the pandemic, but the problem has been going on “for at least 10 years”, she points out. One solution would be to build double houses where individual houses are destroyed, she says.
This shortage everywhere in the United States is consecutive to the real estate crisis of 2007, when “many builders went bankrupt and never returned” to the market, recalls Lawrence Yun. In addition, building regulations have been “tightened”. But unlike Officer Liz Brent, he expects improvement to come in the Washington area. On the other hand, demand will jump in “affordable” cities, where employment is growing strongly, and in those that attract retirees who buy without borrowing, such as Atlanta (Georgia) and San Antonio (Texas) in the south , or Indianapolis (Indiana) in the north.