Home sellers in Western cities are feeling the thrill of power in the first quarter of 2015, according to agents serving these markets who participated in a survey of nearly 700 Redfin agents. The number of Redfin agents in the West reporting “sellers have all the power” in their markets notably jumped 12 percentage points over the same period last year. This is a change in direction from what we saw last year, when sellers were suffering from lower confidence.
The waning seller power of 2014 was all about less intense buyer demand, but this year, demand is back in force in the West. Nine out of 10 offers written by Redfin agents in Oakland, San Jose and San Francisco encountered competition from another buyer in February, according to the Redfin Real Time Housing Market Tracker. Inventory declined by double digits year over year this February in major Western markets such as Portland, Denver, Oakland and Seattle. With interest rates holding steady below 4 percent, high buyer demand and low inventory have created a surging seller’s market in the West.
In the South, the Midwest and the Northeast, Redfin agents tell us the picture more closely resembles last year. While the market remains tilted in favor of sellers, it’s beginning to show some signs of balance. This is undoubtedly due to the improving inventory situation across many of the markets in these regions, reported by Redfin earlier this year. Additionally, buyers are more thoughtful and patient about the process than in past years.
In other findings, this month’s survey showed:
- first-time homebuyers do more housing market research and have higher-paying jobs than in previous years, giving them greater competitive advantage in 2015; and
- millennials are primarily interested in single-family homes close to the city center — high expectations for such a financially challenged demographic.
“In January of this year we saw the biggest increase in first-time buyers requesting home tours since 2012,” says Redfin Chief Economist Nela Richardson. “The balance of power is improving for buyers in many markets across the U.S., but first-time buyers are still entering a housing market with fewer homes for sale in their price range than three years ago, especially in Western cities. Buyers will have to adjust their expectations and aggressively shop for homes they can actually afford.”
Sellers Overtake Buyers in the West, Lose Ground in Other Regions
Fifty percent of agents in the West reported “sellers have all the power” over negotiations in their market, up from just 38 percent one year ago. This is especially true in metros hardest hit by an ongoing inventory crunch, such as Oakland, San Francisco and Boulder.
“There’s no question that sellers are totally in charge right now in Boulder,” said Redfin agent Greg Goldstein. “Between the unprecedented drought of homes for sale and incredible demand brought on by the surging Boulder jobs market, sellers are calling the shots, and that probably won’t change anytime soon.”
At the same time, fewer agents reported that sellers had all the power in other regions, compared with last year. That dropped by:
- 8 percentage points in the South;
- 11 percentage points in the Midwest; and
- 11 percentage points in the Northeast.
Millennials Want to Live Downtown, Don’t Care About Being Close to Family
The vast majority of Redfin agents reported that millennials want single-family homes close to city centers; these tend to be the most expensive and hotly contested properties. They also don’t place much value on being close to Mom and Dad. Just 1 percent of agents reported millennials prioritize living near their family, revealing a stark disconnect between the home-buying priorities of boomers and their progeny.
“Millennial homebuyers, many of whom are buying their first home, often have their sights on spacious, single-family homes near urban areas, close to where they work and play,” said Lindsay Milkovich, a Redfin real estate agent in Los Angeles. “It’s very challenging finding an affordable home on the West Coast that fits this bill. I spend a lot of time helping my clients locate a home they love that won’t also break the bank.”
First-time Homebuyers Challenged to Find Homes in Their Price Range
Forty-nine percent of Redfin agents report a lack of affordable homes for sale as the single greatest challenge for first-time buyers. Most new listings on the market are in higher price ranges than many can afford, according to a recent Redfin report. These survey results confirm two facts about today’s housing market:
- more inventory of affordable housing is still desperately needed in many markets; and
- first-time homebuyers must keep their expectations in check if they want to make the transition from renters to homeowners.
First-Time Buyers Do More Research, Are Better Equipped to Compete
As competition for housing remains high, first-time homebuyers have had to up their game in order to compete. In addition to saying that these buyers conduct more extensive housing market research than in previous years, Redfin agents overwhelmingly report that first-timers are highly educated and boast higher incomes than in the past.
Homebuyers will face stiff competition this spring and need to move quickly once they find a home they like, certainly if they are shopping in Western cities. Downloading the Redfin app and saving a search will instantly notify homebuyers when a new home hits the market that meets their needs. This feature puts buyers first in line and adds significant advantage in the improving but still seller-dominated market.
If you are thinking about buying or selling a home soon, get in touch with a Redfin real estate agent today to discuss how you can compete in today’s market.
About the Survey
This survey was conducted between March 10 and 13, and respondents included 707 Redfin agents and partner agents. Respondents spanned 57 markets in the U.S., including West: Albuquerque, Boulder, CO, Colorado Springs, Denver, Fresno, Los Angeles, Las Vegas, Orange County, CA, Phoenix, Portland, Riverside-San Bernardino, CA, Sacramento, San Diego, San Francisco, Seattle, Tuscon, Ventura County, CA; South: Atlanta, Austin, Baltimore, Charlotte,Dallas – Fort Worth, Columbia, SC, Fort Lauderdale, Greenville, SC, Hampton Roads, VA, Houston, Jacksonville, Memphis, Miami, Nashville, Orlando,Raleigh, San Antonio, Southwest Florida, St. Louis, MO, Tampa, FL, Washington, D.C., West Palm Beach, FL; Midwest:Chicago, Detroit, Indianapolis, Madison, Milwaukee, Minneapolis-Saint Paul; Northeast: Allentown, Boston, New Jersey, New York City (Bronx and Queens), Philadelphia, Rhode Island, Richmond, VA, Upstate New York.