When Patty Riley and her husband began house hunting in Wilmington two months ago, they knew the real estate market was going to be competitive. But after touring more than a dozen houses and making three unsuccessful purchase offers, they’ve been left scratching their heads.
“We knew that the housing market was hopping here,” she said, “but I did not expect to look at something, put in an offer and not get something — not even a counter offer, nothing.”
The couple are looking to move out of their rental in Leland into a single family home near Myrtle Grove or Monkey Junction.
“We wanted to get closer to the water but knew that getting much closer than Myrtle Grove, Monkey Junction area would probably be too expensive,” Riley said.
The couple put in an offer at asking price for the first home they toured.
They later found out that house closed at $22,000 over asking price, Riley said. Riley said she doesn’t want to pay over the value of a home or end up in a “bidding war” with other prospective buyers.
Their experience has prompted Riley and her husband to reconsider buying.
“It’s almost made me say, ‘I’m done looking at existing homes. I’m just going to go build one,'” she said.
Across the Cape Fear region, buyers like Riley are navigating the new realities of the area’s housing market.
The market in Wilmington has been strong for years, but it hasn’t always drawn the “frenzy of buyers” that it has today, said Kathleen Baylies, the broker in charge at Just for Buyers Realty.
In previous years, the market “was more balanced,” Baylies said. “Properties were selling at a healthy pace, but it didn’t feel frantic.”
Amber Harris, a realtor with Intracoastal Realty, noticed the demand for homes start to really pick up at the beginning of this year. Low interest rates have pulled buyers who may have been “on the fence” into the market, she said.
1. A supply and demand mismatch
The competitive real estate market stems from a mismatch in supply and demand.
On the supply side, shortages and high costs of building materials have limited the ability of local builders to keep up with demand while some prospective sellers decided not to put their homes on the market because of COVID-19-related concerns, Baylies said. Both factors have contributed to a low inventory of homes in the area.
The COVID-19 pandemic has also prompted some people to leave metropolitan areas for coastal Carolina. Remote work has also given some employees more freedom to work and live in the Wilmington area, Baylies said.
2. Not a ‘fun time’ to be a buyer
In Wilmington, it’s definitely a seller’s market.
As Riley and her husband discovered, sellers are getting offers thousands of dollars over their asking price. That gives sellers a lot of power.
With the price of offers climbing, sellers have little incentive to work with buyers, said Garrett Huffman, the vice president of mortgage lending at Guaranteed Rate in Wilmington.
“These values are just getting pushed through the roof overnight, and sellers understand it now,” he said. “They understand what they have and they don’t really need to work with buyers.”
A multiple offer situation gives sellers more leverage, making it more difficult for buyers to negotiate on repairs following the inspection process, Baylies said. “It’s not really a fun time to be a buyer,” she added.
3. Getting in the game
Wilmington’s hot real estate market is forcing buyers to make offers — and fast.
Buyers who live outside of the Wilmington area often resort to a virtual tour of a home via their realtor, so they can decide whether they want to make an offer.
In the past, clients typically had a few days to think about whether they wanted to make an offer on a home, Baylies said, but not anymore.
“You don’t have that luxury in today’s market. You pretty much have to make an immediate decision on, ‘Yes, this can work, and I’m moving forward,'” she said. “Because there’s going to be a deadline for offers, and if you don’t meet that deadline, you’re not even in the game.”
4. Cash is king
Because sellers now receive multiple offers, buyers need to be competitive and strategic about the offers they make.
“It is a very fierce competition out there for buyers and they’re really having to come out of the gates very strong,” Harris said.
Buyers in today’s market are paying high non-refundable due diligence fees to sellers. “The amount of money that’s at risk has gone up substantially,” Baylies said.
The amount paid in due diligence fees can signal to the seller how serious a buyer is about purchasing the home, Harris said. Regardless of the amount paid in fees or offered, cash offers are more likely to be chosen by sellers than those that require financing.
“Despite some of these really strong offers, sometimes the cash is king,” Harris said.
5. Check your emotions at the door
Buying a home is stressful, especially if your offers aren’t being accepted.
“The hardest part when I’m talking to buyers is just the emotional pressure, the psychological stress of it,” Baylies said. “Buying a home is a really big deal.”
Harris tells her clients to be prepared to compete with other buyers and remain persistent.
“It’s very disheartening when folks lose out five or six times and they feel like they’re never going to win, but there will be that time,” she said. “It’s an emotional time, but you also have to check some of your emotions at the door.”
6. The new benchmarks of success
New market realities have changed how realtors, sellers and buyers are measuring their success.
Even a year ago, success was accepting an offer at asking price on a home, Huffman said..
“Getting asking price for your home was considered to be a great deal,” he said. “Now, every house that goes on the market in Wilmington, from what I’m seeing at least … has between 10 and 25 offers go in on it.”
Baylies said she used to write one or two offers for a client before they closed on a home. Now, she’s writing between four and eight offers.
In the past, success was getting a “deal” for her client on a home like getting an offer accepted under asking price.
“Those aren’t the benchmarks of success in today’s market, it’s did I get the house?” she said.
7. Covering the difference
Financing an offer that’s made above the asking price of a home has posed challenges for some of Baylies’ clients.
Mortgage lenders will only finance a certain percentage of a home’s appraised value. When a buyer pays more, they need to have the funding to cover the difference between the price they paid and the appraisal.
8. Light at the end of the tunnel?
Wilmington realtors say they don’t see signs of the market slowing down.
Some of Harris’ clients have considered building new homes to avoid the competitive market. But building comes with its own costs as material shortages continue.
The future of the housing market is difficult to predict, Harris said.
“At this point in time, I can’t tell them when things are going to flip and it’s going to be more of a buyers market for them,” she said.
When Baylies works with buyers she asks them to evaluate how long they will likely live in the home. If it is less than a few years, she suggests they consider waiting until the real estate market shifts. But that, too, is risky because interest rates could increase.
“Real estate markets for eternity have been going through cycles and this will cycle through as well,” Baylies said. “But is that cycle going to suddenly shift in the next few months? I don’t see any evidence of that happening.”
Reporter Emma Dill can be reached at 910-343-2096 or email@example.com.