By EILEEN SMITH DALLABRIDA • APR 7, 2017 (Delaware Public Media)
A decade after the housing bubble burst, home sales are buoyant with some parts of the First State experiencing the most exuberant spring in 40 years.
In suburban Newark, a freshly refurbished home priced at $299,999 in the Drummond North development sold in a single day.
A three-bedroom townhouse in Wilmington’s upscale Highlands neighborhood didn’t last much longer. Priced at $359,900, it was snapped up in less than a week.
In North Wilmington, where there are more would-be buyers than sellers, a cape cod listed at $399,000 attracted eight showings and three offers on its first day on the market.
And in eastern Sussex County, new construction and an influx of out-of-state buyers are resulting in multiple offers.
“It was the best March we have seen in 40 years,” says Lee Ann Wilkinson of the Lee Ann Wilkinson Group in Lewes. “We had five multiple-offer situations, with some of them going above the asking price.”
So what is propelling the market?
One factor is a slight uptick in mortgage interest. Buyers also have expressed concern that inflation will push home prices higher.
“There is apprehension that rates are going to go up and inflation will continue—and that includes increases in mortgage rates and home prices,” says Richard Pollack, regional manager, Union Home Mortgage in New Castle.
He is shopping for a home himself in the $300,000-$400,000 range, where there is intense competition for properties.
“I get the new listings every day,” he says. “I will click on a property I think is promising and it will say ‘PENDING.’”
Investors interested in short sales and foreclosures are still part of the mix, “buying distressed properties.”
But they are competing with Millennials who had been renting and are now coming off the sidelines. And the bump in the entry-level home market is propelling activity up the housing ladder.
“The emerging market—people who are buying homes for the first time—is very strong,” Pollack says. “We also are seeing move-up buyers, those people who are selling to first-time buyers.”
Buyers from across the river are making an impact, too.
“In New Castle County, we are getting people who work in New Jersey but want to live in Delaware because the property taxes are so much lower,” says Eddie Riggin, a REMAX broker in Hockessin. “Any properties that are $400,000 and below are quickly getting into multiple contract offers. If it’s between $200,000 and $300,000, there is even more competition.”
Still, there are properties that are sitting on the market. Riggin says homes in poor condition, especially those with outdated kitchens and baths, are languishing. Sales in western Sussex County and parts of Kent County are lagging behind the rest of the state.
The current hotspots of activity: coastal Sussex County, Pike Creek, Newark and North Wilmington.
‘There is a shortage of available homes in North Wilmington, which is why that area gets much higher pricing,” he says.
Demand thins out dramatically for homes priced beyond the $400,000 threshold. And the higher the price tag, the smaller the pool of would-be buyers.
“Anything over $700,000 is very difficult to sell in New Castle County,” he says.
Rhonda Shin, a Berskshire Hathaway agent, says home shoppers accustomed to being in the driver’s seat have had to adjust their mindset. With multiple offers, would-be buyers are pressed to make decisions quickly.
“I was out with one of my buyers on Sunday to see a townhouse and it went under contract on Monday while she was still thinking about it,” she says.
Shin worked with a young couple house hunting in North Wilmington for the past several months.
“When we started looking, the market was much slower,” she recalls.
But in March several homes the couple was interested sold before they made an offer.
“So when we found a very nice house they made a decision the first time they saw it because they knew it wouldn’t last,” she says.
As predicted, there were other offers. But the couple wound up getting the house.
In Newark, a bank-owned property priced in the high $200,000s attracted a lot of attention from bargain hunters, logging 45 showings and multiple offers in two days on the market.
“Real estate veterans tell me it’s a similar feeling to the boom in 2006, except the banks aren’t making loans the way they used to,” she says.
Pollack says government guidelines dictate that lenders document a buyers’ ability to repay the loan. In addition to income-based loans documented by 12-24 months of pay stubs and tax returns, lenders are offering the option of bank statement loans, which look at income deposited into the buyer’s accounts.
The current average rate for a 30-year, fixed-rate mortgage is 4.14 percent, compared to the 52-week low of 3.34 percent, according to Mortgage News Daily. The 15-year, fixed-rate is 3.36 percent, compared to the 52-week low of 2.69 percent.
While loan standards remain stringent, there are opportunities for buyers who don’t have a significant down payment.
Buyers who qualify for U.S. Department of Agriculture and Veterans Administration loans can buy a home with no money down. The Delaware State Housing Authority and New Castle County are offering similar programs for low-income buyers. Freddie Mac and Fannie Mae are writing mortgages for buyers with as little as 3 percent down.
“My advice to anyone who is looking for a home is to get pre-approved now so when they do find the house they want they can pull the trigger without hesitation and make a strong offer,” Pollack says.
Wilkinson says new construction is fueling the boom in resort communities at the beach.
“Coastal Club has been very, very hot,” she says. “It’s appealing to people buying retirement homes, people buying second homes. And anything that is priced between $250,000-$350,000 sells quickly.”
She says home shoppers are keeping a close eye on mortgage rates.
“Interest was so low everyone got spoiled,” she says. “I don’t think we are going to see 2.7 percent loans again for a long time.”
Todd Stonesifer, broker at The Moving Experience in Dover, says would-be buyers in Kent County also are motivated to lock in mortgage rates.
“We are definitely seeing an absolute flurry of activity, including multiple offers,” he says. “Increasing interest rates are getting a lot of people off the proverbial fence.”