For five months, Monica Barnes has been trying to buy a home in downtown Salt Lake City.
She recently offered $370,000 for one listed at under $350,000. She sweetened the deal with an escalation clause to show she was willing to up her bid if someone else came in higher.
It wasn’t enough. Another buyer put up $395,000 and guaranteed to cover any gap if the appraisal value came in higher. So Barnes is back to scouting out new listings, trying to get her offer in first.
“You look at places, and it is basically a cattle call,” she said. “With the way things are right now, cash is king. And we’re all just here punching above our weight and hoping one of our hits will land.”
Housing markets across the country have exploded in the past year. The 5.64 million sales of existing homes in 2020 were the most since 2006, according to the National Association of Realtors. The median listing price nationally was $353,000 in February, a 13.7 percent increase from a year earlier, according to Realtor.com.
The competition to buy homes is intense in part because few are on the market. Inventory last month was down 48.6 percent year-over-year, eclipsing January’s dramatic 42.6 percent drop.
Low mortgage rates are fueling demand, as are work-from-home policies that untether prospective buyers from their commutes. Locals in markets unaccustomed to this unprecedented freedom — from Salt Lake City to central Indiana to the midcoast of Maine — are finding themselves outbid by wealthy transplants conditioned to paying more per square foot.
These dynamics have triggered the fierce bidding wars exasperating buyers such as Barnes and are raising long-term concerns about affordability in markets where salaries and other costs of living can’t keep pace with the housing market.
“The people that were coming to those areas were coming from the West Coast, more expensive areas,” said Selma Hepp, deputy chief economist at real estate data firm CoreLogic. “They are already used to high prices. They were able to bid higher.”
In a January report, Redfin found that nine out of 10 housing offers made in Salt Lake City faced competition, the highest “bidding-war rate” of the 24 metro areas in the analysis. Brian Babb, an agent with Equity Real Estate who has been helping Barnes find a home, said it is now typical for a single listing there to get more than two dozen offers.
“This year you don’t need an open house,” he said. “You could put it up on a Tuesday, let people see it for 48 hours, and you have 30 offers.”
“It’s definitely harder for buyers now, especially for local buyers,” he added.
According to Norada Real Estate Investments, a firm that coordinates property investments, the median home price in Salt Lake County last year was $378,411, a 10.5 percent increase from 2019. The number of home sales jumped 5.5 percent.
Another of Babb’s clients, April McCafferty, moved from San Diego to Salt Lake City during the pandemic to be closer to her family, thinking she would only be in Utah for six months. But she just closed on a home, sealing the deal by offering nonrefundable earnest money (a good-faith deposit), making a significant down payment and providing a reference letter about herself to the seller.
“It was a little bit of a roller coaster for me,” she said. “We had 25 offers on our home, and they chose us.”
James Cosgrove, a sales-side broker for Keller Williams, saw his business in midcoast Maine screech to a halt last April.
“I’m 65, and I’m thinking this is a heck of a way to end my career,” he said. “I’ll be broke.”
But by the end of May, a surge of interest had hit Lincoln County. For years, locals had watched younger generations leave for better job markets. But with the shift to remote work, the lack of employment in the area has become less of a deterrent.
Before the pandemic, Cosgove said, buyers’ main concerns were property taxes and heating costs. Now they just want broadband.
“You don’t need the logging mills to come back,” he said. “You just need to wire the whole state for high-speed internet.”
CoreLogic reported that Maine’s median home price in January was 15.3 percent higher than a year ago. Of the state’s 16 counties, Lincoln had the largest increase, according to the Association of Maine Realtors: an astonishing 32 percent, rising to $301,500 from $228,250.
Affordability, a concern even prior to the pandemic, has become a bigger worry. In nearby Rockport, city officials recently voted to repeal certain restrictions on accessory dwelling units, sometimes called granny flats, to create more affordable rentals as costs in the area rise, the Bangor Daily News reported.
The influx has raised questions about whether formerly static areas can handle the growth. Cosgrove said some towns have started talking about increasing school capacity. Local contractors have struggled to find enough skilled tradespeople to meet heightened interest in new development.
Carl Ripaldi lives in Los Angeles but now owns three properties in Maine: a six-unit apartment building in Camden, a house in Freeport and an oceanfront home in Bristol that he bought in September. He plans to live in Maine full time, renting out whichever house he isn’t staying in.
He said Maine’s short-term rental market changed dramatically last year.
“Covid had a lot to do with it, escaping from New York,” he said. “Because of Covid, it was a really, really hot rental market.”
Amber Shelton and her husband have seen the Indianapolis market transform in the past year. In October 2019, they started looking for a “forever home” for their growing family but felt no sense of urgency: They saw homes that had been listed for several weeks. Some properties they visited multiple times.
In February 2020 they made an offer, but when the seller wanted more money, they took a break from their search. A few weeks later, the seller came back looking to renegotiate, but they declined. Then Indianapolis went into lockdown.
A year later, with just a few months left on their lease, the couple started looking again. It was immediately clear that they needed a new strategy. They looked at six houses and offered $10,000 to $20,000 above the asking price for all of them. In one case, they were one of 60 competing buyers.
Shelton views listings differently now.
“I saw a house on the market for two weeks and thought, ‘What is wrong with this house?’” she said. “It is like night and day.”
According to the Indiana Association of Realtors, the median home price in Marion County, which includes Indianapolis, has increased 18.3 percent in the past year to $182,250. Shelton’s agent, Jill Thompson of Redfin, noted that some sellers are less motivated to move forward on deals because they fear being unable to quickly find their next home.
Last year, Shelton only bid on houses she felt emotionally invested in. At this point, she and her husband simply ask themselves if they can see themselves living in a home for the next five to six years.
“Now there is a question of, Can we get housing?” she said. “That was never a thought.”