Combination of factors fueling the residential real estate frenzy> Columbia Business Report
By Christina Lee Knauss
Columbia real estate agent Graeme Moore, owner of The Moore Co., recently had an experience that would be considered highly unusual in almost any other recent era of real estate selling except this one.
He sold an expensive house to a couple who moved to Colombia from across the country for work who had never even physically seen the house before or walked around inside.
“We had met before and visited some homes in person, but on this trip they didn’t find anything that worked,” Moore said. “They couldn’t come back here due to issues with work and their children, so they ended up having to buy mostly on sight, using only photos and video.”
Buying a home without ever seeing it in person isn’t the only unusual thing happening in the real estate market these days.
More and more common among realtors are stories of buyers willing to go out of their way to get into a home, some even willing to forgo recommended precautions like home inspections.
What fuels such actions? Simply, there are more buyers than there are places to live.
It’s a seller’s market like few in recent memory – fueled by everything from low interest rates to pandemic-induced changes in preferences at work and at home.
The market is booming in Columbia, Charleston, Rock Hill and Grand Strand, as well as the Carolinas and the Southeast.
The wild market is also fueling an increase in cash deals for homes to generate quick sales. Recently, two companies specializing in cash offerings – Opendoor and Ribbon – expanded into the Columbia market after seeing strong demand for their product in other parts of the Carolinas.
“It’s a classic supply and demand situation, with a lot more demand from buyers than there is supply of housing,” Moore said. “These conditions have been present since before the pandemic and have only intensified in the past 16 months. With COVID-19, everyone got scared and interest rates fell, and many people took their homes off the market. Now more and more people are looking to buy because it is so cheap to borrow money and there are no houses on the market to meet the demand.
“Things are going to stay that way as long as interest rates stay low, the economy remains relatively healthy, and we are lagging behind in housing stock.”
According to the latest housing supply snapshot compiled by the South Carolina Association of Realtors, pending home sales in South Carolina overall increased 21% between June 2020 and May 2021.
The overall median selling price climbed 14.2% to $ 257,000, while SC’s inventory levels fell 54.7%.
Single-family homes are down 53.5%, according to the association, meaning that on average there is only enough single-family home supply to last 1.1 months in the current market, and a offer of 1.2 months of condominiums.
While much of the recent market frenzy is fueled by the pandemic, the seeds for it were sown during the Great Recession of 2007-2009, according to Morris Lyles, real estate agent and broker at ERA Wilder Realty in Colombia. and President 2021 of the South. Carolina Association of Realtors.
“After that 2008 crash, a lot of builders withdrew from the construction industry, and there was a hold back on people developing properties, and now we’re seeing a huge pent-up demand that’s been building up ever since,” Lyles mentioned.
“A lot of people put off buying homes because they were living at home with their parents, finishing college or other factors, and now they’re ready to go out into the world and buy homes. Now it seems like everyone is trying to do it at the same time.
Lyles said low interest rates are another factor in the buying boom, along with shifts in people’s priorities about what kind of house they want to live in and what kind of job they want.
Forced to stay at home due to the pandemic, many people realized that their current home no longer suited their needs, and the increased possibility of remote work has led many to seek out smaller, less stressful areas. where the cost of living is lower. Columbia fits that bill for a lot of people, Lyles said.
Those buying homes during the height of the pandemic often had to rely on home video tours and screenings, and this trend, although it eases a bit as society opens up again, is still a bigger factor in home sales than before the pandemic, Lyles says.
In the frenzy to grab the limited number of homes on the market, more and more buyers are willing to use video to determine if a home is for them, although Lyles said he is encouraging buyers to go out of their way to physically visit a home before purchasing. .
“We hear about people who occasionally buy a house without seeing it these days, and I recommend against that because you can’t get a good idea of a house without walking through it, and it’s very important to get it too. a home inspection. Lyles said.
The warm market is not only influencing buyers, but also causing some homeowners who want to get as much money out of their homes as possible to decide to sell.
Empty nesters, singles, and those changing locations due to remote working are part of the new generation of sellers, and new businesses are offering services aimed at getting sellers and homes to pay in the marketplace faster. possible.
On June 15, Opendoor, a San Francisco-based online company specializing in quick cash offers for homes, expanded into the Midlands with Columbia as one of six new markets the company entered this this month. Founded in 2014, Opendoor offers what it calls a ‘one click’ approach for homeowners. People can go to the company’s website, download quick information and pictures, and receive an offer for their Opendoor home within days in many cases.
Opendoor then puts the house on the market.
“Selling to Opendoor provides a lot of certainty in the process for the seller,” said Jon Enberg, regional general manager of Opendoor.
“They don’t have to worry about a deal breaking down or the closing date, and we take responsibility for making repairs or improvements to the home when we buy it.
“It takes a lot of risk out of the process for a seller. “
Another new cash option in the Midlands is Ribbon, a company headquartered in New York and Charlotte. Through what it calls “RibbonCash offers,” the company supports potential mortgage-eligible buyers with cash so they can speed up offers on homes.
Cash collateral allows the buyer to enter the home and the seller to get their money faster, and the buyer then has up to six months to take out a mortgage. The company also works with real estate agents who want to expedite a sale with a cash offer.
“There has been a huge wave of institutional and business buyers in this market, with businesses quickly buying homes, turning them into rental properties or reselling them, and in this type of market, an everyday family is the loser, ”said Shaival Shah, co-founder and CEO of Ribbon.
“With our approach, we automatically give ordinary buyers the opportunity to bid all cash on a home and give them a chance in this competitive market.”
Whether buyers and sellers choose one of these tech options or go the more traditional route, trends suggest the market is going to stay competitive for quite a while.
The financial conditions motivating buyers are unlikely to change until at least next year, according to Jan Hadder, regional vice president of the builders division of Silverton Mortgage’s Columbia office.
Hadder noted that interest rates are expected to stay low, with the Federal Reserve not forecasting any major interest rate fluctuations until 2022.
Currently, interest rates on a 30-year fixed rate mortgage hover around 2.8%.
First-time buyers may also benefit from a recent announcement from the Federal Housing Association regarding student loan debt and its impact on potential homebuyers. The FHA recalculates how student loan debt will be calculated when determining debt-to-income ratios for mortgages.
The new policy allows lenders to use the actual amount of a borrower’s monthly student loan payment in the underwriting process, which is generally lower than the previous requirement to use 1% of the borrower’s total balance. .
“This recalculation is an effort to remove barriers and provide better access to affordable financing for creditworthy people with student loan debt, which has a disproportionate impact on people of color and could make a big difference to many. people who were waiting for the right time to try and buy a home, ”Hadder said.
This article first appeared in the July 19 print edition of the Columbia Regional Business Report.