Homebuyers face competitive market

Finding, affording houses difficult

Nathan Long, a video game writer, walks outside the garden at his apartment complex in Glendale, Calif. He and his wife, Lili Chin, have been unsuccessful so far in their search for a home in Los Angeles.
(AP/Damian Dovarganes)
Nathan Long, a video game writer, walks outside the garden at his apartment complex in Glendale, Calif. He and his wife, Lili Chin, have been unsuccessful so far in their search for a home in Los Angeles. (AP/Damian Dovarganes)

LOS ANGELES -- Nathan Long and Lili Chin have struck out so far in their four-month search to find an affordable home in the Los Angeles area -- a cold streak that threatens to mess up their anniversary plans.

The housing market has been a pillar of economic strength during the pandemic, but many would-be homeowners, particularly first-timer buyers such as Long and his wife, have met with frustration because of a low number of homes for sale and consistently rising prices.

The couple made a major concession to the virus pandemic in August when they got married via Zoom. They planned to make up for the lack of in-person nuptials by hosting a wedding party at a new home on their one-year anniversary. But so far, the market won't cooperate.

"We go out and we don't find many places at all," said Long, a video-game writer who rents an apartment in the suburb of Glendale. "I'm not hopeful that we will find anything for a while."

Homebuyers are facing the most competitive U.S. housing market in decades this spring. To put that in perspective, the inventory of homes for sale nationally fell to a record-low 1.03 million units by the end of February, or about 30% below what it was a year earlier, according to the National Association of Realtors. That amounts to a two-month supply, well short of the six-month supply economists say is needed for a balanced market. Homes in February typically sold within just 20 days of hitting the market.

Meanwhile, the national median sale price of a single-family home climbed nearly 15% to $315,900 in the last three months of 2020, according to the association. That works out to about four times the U.S. median family income of $77,774, according to data from the Realtors group. The gap can become a chasm in cities like Los Angeles or Boulder, Colo., where home prices can be double the national levels.

So, from Los Angeles to Boston, those homes on the market are selling in a heartbeat, often fetching multiple offers well above what the owner is asking. A surge in millennials eager to become homeowners, plus a growing number of people who work remotely and are able to move to more affordable areas, are expected to keep the market running hot.

Homebuyers still have low mortgage rates on their side, providing them with a measure of financial flexibility, though rates have been creeping higher. The average rate on the benchmark 30-year loan moved above the 3% mark early last month for the first time since July 2020. It stood at 3.13% this week, according to mortgage buyer Freddie Mac, though that's still down from 3.33% a year ago.

"We expect homebuyer demand to remain strong this spring, but it will be tested by higher mortgage rates," said Danielle Hale, chief economist at Realtor.com.

The ultra-competitive housing market trends are prompting many aspiring homeowners to flee pricey coastal markets for the Midwest and South. For millions of Americans, the pandemic normalized working remotely and that trend helped power U.S. home sales last year to the highest level since 2006, the height of the last housing boom.

Mark Wolfe, a broker-owner with Re/Max in the Dallas area, jokes that one in 10 homebuyers there now is from California.

"Dallas is about as Southern as Minneapolis anymore," he said, noting that the price increases that have resulted from the influx of buyers from other states makes it tougher on local buyers. His advice to them: Make your search area much wider.

The hurdles to home ownership remain highest for first-time buyers who don't have profits from a previous home sale to compete in bidding wars. Their inability to find an affordable home is likely to widen the financial gulf between perennial renters and homeowners, who have reaped a windfall in equity gains over the past decade.

The pandemic has made the low supply of homes for sale worse, real estate agents said, because some sellers don't want to allow prospective buyers in their homes. Plus, many homeowners are staying put after refinancing to a lower mortgage rate and cashing out equity to spruce up their homes.

But in areas where builders are putting up more homes, buyers like Kevin Muglach are at least able to sidestep the bidding wars of the resale market.

The 23-year-old tile installer, who had been living with his parents and saving up for about a year for a down payment, landed a three-bedroom, three-bath new-construction home in Orange City, Fla., near Orlando, after bumping up his price range to $230,000 from around $200,000.

Muglach said a number of homes he looked at sold in a day. He might have given up, save for some motherly persuasion.

"I can't tell you how many times I've been just like, 'Screw it, I'm going to go rent,'" he said. "Then my mom tells me: 'No.' She definitely kept me in the game."

Nathan Long, a video game writer, poses for a picture inside his rental apartment in Glendale, Calif., Thursday, April 8, 2021. He and his wife, Lili, have been unsuccessful so far in their search for a home in Los Angeles. (AP Photo/Damian Dovarganes)
Nathan Long, a video game writer, poses for a picture inside his rental apartment in Glendale, Calif., Thursday, April 8, 2021. He and his wife, Lili, have been unsuccessful so far in their search for a home in Los Angeles. (AP Photo/Damian Dovarganes)
First-time buyer Kevin Muglach stands in front of his new home, Tuesday, April 6, 2021, in Orange City, Fla. Homebuyers are facing the most competitive U.S. housing market in decades this spring, as surging prices and a record-low number of homes for sale narrow the already difficult path to home ownership for many Americans. (AP Photo/John Raoux)
First-time buyer Kevin Muglach stands in front of his new home, Tuesday, April 6, 2021, in Orange City, Fla. Homebuyers are facing the most competitive U.S. housing market in decades this spring, as surging prices and a record-low number of homes for sale narrow the already difficult path to home ownership for many Americans. (AP Photo/John Raoux)
Nathan Long, a video game writer, stands inside his rental apartment in Glendale, Calif., Thursday, April 8, 2021. He and his wife, Lili, have been unsuccessful so far in their search for a home in Los Angeles. (AP Photo/Damian Dovarganes)
Nathan Long, a video game writer, stands inside his rental apartment in Glendale, Calif., Thursday, April 8, 2021. He and his wife, Lili, have been unsuccessful so far in their search for a home in Los Angeles. (AP Photo/Damian Dovarganes)
First-time buyer Kevin Muglach stands in front of his new home, Tuesday, April 6, 2021, in Orange City, Fla. Homebuyers are facing the most competitive U.S. housing market in decades this spring, as surging prices and a record-low number of homes for sale narrow the already difficult path to home ownership for many Americans. (AP Photo/John Raoux)
First-time buyer Kevin Muglach stands in front of his new home, Tuesday, April 6, 2021, in Orange City, Fla. Homebuyers are facing the most competitive U.S. housing market in decades this spring, as surging prices and a record-low number of homes for sale narrow the already difficult path to home ownership for many Americans. (AP Photo/John Raoux)
First-time buyer Kevin Muglach stands in front of his new home, Tuesday, April 6, 2021, in Orange City, Fla. Homebuyers are facing the most competitive U.S. housing market in decades this spring, as surging prices and a record-low number of homes for sale narrow the already difficult path to home ownership for many Americans. (AP Photo/John Raoux)
First-time buyer Kevin Muglach stands in front of his new home, Tuesday, April 6, 2021, in Orange City, Fla. Homebuyers are facing the most competitive U.S. housing market in decades this spring, as surging prices and a record-low number of homes for sale narrow the already difficult path to home ownership for many Americans. (AP Photo/John Raoux)

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