WEST CHESTER — As mortgage rates continue to rise, prospective homeowners who don’t lock in a home soon may never be able to afford one, local estate agents are warning. The sellers market, at least in this area, seems to have been around for quite some time.
“What I tell my buyers is that (the demand for homes) may never calm down in this area,” said Steve Laret, who leads the Steve Laret team with Vanguard Realty Alliance in West Chester. “I know that’s a bold statement. But for every house we create, we have two people moving into that area. We are in an irrecoverable spin.
In March, Chester County home prices rose 9.6% from a year ago, selling at a median price of $460,000. Homes in Chester County sell on average after just 17 days, down from 28 last year. And there were just 398 homes in active inventory in Chester County in March, down from 705 in 2021.
Demand is up, supply is down, and that’s the main reason homes are appreciating so quickly, not just in Chester County, but across the country. Homes in the Route 303 subdivision near the Boot Road exit in West Goshen were selling in the $450,000 range two years ago. Today it’s $650,000.
And buyers, anticipating that their home will appreciate quickly, are paying too much.
“We just picked one up a few weeks ago that was priced at $600,000, and it’s set at $710,000,” Laret said. “It’s crazy, but it really comes down to supply and demand. We’ve been underproducing homes below the 50-year average for two decades, and COVID has by no means led to where we are today.
Tammy Duering, realtor at RE/MAX Excellence in Kennett Square, said she expects Chester County to remain in the sellers’ market until next year.
“We just sold one in the Unionville School District last week, a cash offer, that was over $50,000 (asking price),” she said. “In some areas, people will still pay too much. It will stabilize and continue to be a seller’s market as there are too many buyers for the number of homes available.
Historically low interest rates have been driving the home-buying frenzy, but that could change as the Federal Reserve takes steps to try to rein in inflation. The 30-year fixed-rate mortgage averaged 5.27% in the week ending May 5, down from 5.10% the previous week, according to Freddie Mac, a publicly traded company sponsored by the government. This is the highest in 13 years and well above the average of 2.96% at this time last year.
Laret said two factors are working against potential home buyers. Housing has been under-produced for the past two decades and a tipping point has been reached in terms of population growth, especially in this region.
“Those two factors compound to create this pressure cooker,” Laret said. “Meanwhile, all the demand that was there created an extreme seller’s market, all those buyers, they’re not going away. Then we open up the construction industry to supply chain issues and inflated material costs and sourcing other materials – all of those costs are exploding. Scarcity drives the market.
Chester County is where people want to live, and the numbers show it. The median list price for a home in Chester County last month was just over $495,000. In neighboring Delaware County, it’s $324,000 and in Lancaster County, $314,000. The current median listing price in West Chester is $500,000, Downingtown $440,000, Malvern $650,000 and Coatesville $265,000.
As home values continue to soar, this is weighing on the rental market.
“As housing becomes less and less affordable for the average person and inflation sets in, rents will continue to rise,” Laret said.
The average rent in the first quarter of 2022 in Chester County was $1,788, according to the National Low Income Housing Coalition. That’s a 12.7% increase from the first quarter of 2020. That means renters need to earn more than $24 an hour to afford the apartment.
Like other real estate agents, Laret urges potential owners to act now, if they can, before they are forced out of the market due to soaring prices.
“Get all you can, that’s literally the advice I give to my friends and family,” Laret said. “Buy an $80,000 house in Pottstown, it doesn’t matter. He’ll be worth $150,000 in no time. If you bought a $10,000 house in West Chester in 1950, that same house is worth a million dollars today. It has four bedrooms and 2.5 bathrooms and keeps you dry at night. With the historic devaluation of the dollar, the only way to protect yourself from it is to buy real estate.
Some Chester County real estate agents are seeing parents liquidate their 401(k) retirement accounts, give their kids money so they can compete in the market, buy a house with the money and ask the kids to turn around and refi and refund Their parents.
“In today’s housing market, millennials are in big trouble,” Laret said. “There is a chasm between the haves and the have-nots that is getting bigger and bigger. The haves will be those who have real estate and the have-nots will be those who have never tried to do so.
And what about those savvy buyers who are sitting on the sidelines right now, just waiting for the bubble to burst and house prices to stabilize?
“Buyers waiting on the sidelines waiting for things to happen are shooting a target that’s moving away from them,” Laret said. “They’re going to get hurt.”