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With so many buyers and so few homes, the real estate scene is thriving along the Main Line. But can this seller’s market last?
In the midst of a late-winter storm, Derek Donatelli donned his hat and gloves, shoveled his driveway and drove through swirling winds to a home in West Chester that had just come on the market. His client, a determined house hunter, met him there, braving icy roads in hopes of avoiding a blizzard of competitors. “It meant my client had a shot at the house because 20 other people weren’t going to be looking at it in the middle of a snowstorm,” he says.
Fast forward to spring, when “For Sale” signs traditionally pop up on lawns like daffodils. For now, prospective sellers are sitting on the sidelines, reluctant to show their homes until the pandemic subsides. Meanwhile, buyers desperate to move are bidding up prices, dropping contingencies, and waiving home inspections. “It’s a terrible conversation to have to call someone and tell them there were 30 other people who wanted a house, and they didn’t get it,” says Donatelli, who leads the Donatelli Group at eXp Realty in West Chester.
Simply put, there are far more buyers than sellers in this region, and the pandemic has fueled a dramatic shift in consumer trends. Buyers are clamoring for suburban locales, home offices, outdoor living spaces and swimming pools. Many are compromising on condition, taking on homes that need serious updating. Others are willing to sweeten the deal by paying both the buyer’s and seller’s share of the transfer tax.
For a property in Drexel Hill, Donatelli recently organized a virtual tour with 84 would-be buyers. “We sold it for $25,000 above the asking price without anyone ever setting foot in the house,” he says. “We’ve had sight-unseen sales before a house even goes on the market.”
One young couple with two children was bursting at the seams in their townhouse in Media, where both spouses were working remotely and the kids were attending classes via laptop. Their home sold in a weekend, but the couple was outbid on two of the only three houses available in their school district.
Determined not to lose out again, they wrote a letter to the seller, asking him to choose them because they love the neighborhood and would cherish the house. The couple waived the home inspection. They bid $20,000 over the asking price, giving up their vision of such niceties as stainless steel appliances and a luxurious master bathroom. It worked. “The kitchen wasn’t updated, the bathrooms weren’t updated, but they were still willing to pay a premium to stay in the same school district,” Donatelli says.
Everywhere, buyers are putting away money they would’ve spent on travel, vacations and other events waylaid by the pandemic. A physician was able to borrow against her projected future income. Two nurses who had to cancel plans for a formal wedding used the money they’d saved for the reception to bid $45,000 over the asking price for their first home. Others are taking advantage of the COVID moratorium on penalties for withdrawing money from an IRA. To make home ownership more accessible, the Pennsylvania Association of Realtors is advocating for a first-time buyer savings account program as an incentive to save toward the purchase of a house. Money saved would qualify as a deduction on state income tax returns.
Prices Still on the Rise
Often, the most desirable homes are snapped up before they even make the multiple listing service. A 5,000-square-foot house near Ardmore’s Linwood Park that had been renovated from top to bottom sold for $950,000 before the paint was dry. In Bryn Mawr, nine competing bidders pushed the price of a home with a new roof, open-concept kitchen and master bathroom into the mid-$600,000s—$22,000 over asking price. In Narberth, an 1,800-square-foot house within walking distance of an elementary school sold for $740,000. That’s $411 a square foot.
In Kennett Square, where median time on the market is a scant five days, home prices are up 19 percent over last year, according to statistics from Tri-County Suburban Realtors and Bright MLS. In Tredyffrin Township, the median price is now $540,500, up 18 percent. West Chester’s median price has spiked to 17 percent, with available homes lasting just a week on the market. Prices in Radnor and Media are up 11 percent.
Demand is sparked, in part, by low mortgage rates. The increased ability to work remotely is also whetting buyers’ appetites for larger homes in suburban locations. “Many buyers who are telecommuting are seeking home features that could function as a space to use for working from home, such as a basement or a den,” says Keller Williams Montgomeryville’s Joshua McKnight, who’s also chairman of Tri-County Suburban Realtors.
“It’s a terrible conversation to have to call someone and tell them there were 30 other people who wanted a house and they didn’t get it.”
— West Chester-based realtor Derek Donatelli
Buyers from New York and Philadelphia are propelling a mini boom in the sale of $1 million-plus homes. Shirley Booth recently listed homes at $1.275 million and $1.35 million. Both were under contract within five days. “Two years ago, I would’ve told the seller to expect to be on the market up to 180 days,” says the agent with Berkshire Hathaway HomeServices Fox & Roach in Media. “Now I advise everyone, no matter what their price is, to clean up and pack everything up because they may have to be out in 45 days.”
Buyers are spending top dollar on homes owned by retirees intent on adding to their nest eggs. “One seller is building a cottage,” says Booth. “Some are moving to their beach houses or second homes.”
Some sellers who sold well above listing prices will go down and their dollars will go further. But when will that be? Booth has been in real estate for 35 years and remembers the housing bubble bursting in 2007–2008. “Right now, baby boomers don’t want people coming through their house because of COVID,” she says. “When everyone gets the vaccine, a lot of them will start listing and prices are bound to go down.”
Later in 2021, when businesses reopen and daily activities resume, another wave of buyers will enter the market just as more sellers are listing their homes. At least that’s the prediction from Daryl Fairweather, chief economist at Redfin, the online real estate firm. There should be a more balanced market, without sharp spikes in prices—although the volume of home sales will continue to boom.
Back With Mom and Dad
In the meantime, many would-be buyers— including those who’ve already sold their homes—are bunking with family. “I tell young couples to get their house sold and go live with Mom and Dad so they can compete,” says Booth.
Booth’s maternal instincts are on overdrive in guiding her buyers through an intensely complex and competitive market. She wants them to find a home that will make them happy—and she doesn’t want them to be unhappy if prices drop precipitously and more houses come on the market.
“I tell young couples to get their house sold and go live with Mom and Dad so they can compete.”
— Media-based realtor Shirley Booth
Myrna Josephs also prides herself in developing close relationships with clients. The Montgomery County-based realtor recently counseled a prospective buyer of a home built in the 1930s not to forgo a home inspection. “There are too many things that can go wrong with a house that’s almost 90 years old,” says Josephs, an agent with Berkshire Hathaway HomeServices Fox & Roach in Spring House.
She advised one young couple with a toddler and a baby on the way to pass on a house that was clearly too small for their growing family. “In two years, they would have to move again,” she says.
Montgomery County realtor Myrna Josephs advised a young couple with a toddler and a baby on the way to pass on a house that was clearly too small for their growing family. “In two years, they would have to move again,” she says.
The couple immediately sold their condo in Philadelphia for full price and set their sights on Lower Merion, where the wife grew up. To be more competitive, they’ve upped their budget to $850,000 and are willing to do some work on a house. They’ve bid on four homes, making offers up to $45,000 over the asking price. They’ve been beaten every time—most recently by a competitor paying cash. In the meantime, they’re staying with the in-laws.
Each time a house comes on the market, Josephs whisks them in for a showing. Recently, a house popped up with four bedrooms and a big kitchen—just what the couple is looking for. There’s just one problem: It’s next to a cemetery. “We’re taking a look,” Josephs says.