Low inventory puts housing market in a frenzy

For days after the contract was signed, Realtor Kelly Allen turned away others who simply got to the house too late.

With the supply of metro Atlanta houses as low as it’s ever been, the competition among potential buyers is fierce. The average number of days a house is on the market fell to 79 in March, down 27 percent from four years earlier, according to data from the Atlanta Board of Realtors. Many houses are going much faster and are under contract within a week of being listed. Realtors say there are once again bidding wars.

Some house hunters are even resorting to unusual means: They're knocking on the doors of homes that aren't for sale, asking residents if they would be willing to consider an offer.

And it’s working.

Realtors are also selling homes for clients before they even go on the market, making deals that keep those houses from ever being listed.

“It feels like a circus act,” said Danielle Coats, lead agent for Redfin. “This is not a buyer’s market at this point.”

The cause is low inventory, the result of more buyers coming into the market as they see prices rise, and sellers who are still underwater holding on to their homes. The trend is exacerbated by fewer foreclosures, and investors who bought houses in bulk to hold them as rental properties.

And it feeds on itself: as people who are thinking of selling see the difficulty they might have finding a home to move into, they keep their own houses off the market.

Housing is inherently local, and residences in some areas are selling faster — and with more competition — than others. But even in the less-desirable markets, the competition is heating up.

“This is happening in places that were totally dead 12 months ago,” said Eugene James, Atlanta regional director of Metrostudy. “The ‘C’ markets from yesterday are the ‘B’ markets from today. It’s slowly changing because of supply and demand.”

For sellers like Quirk, it’s good news. She made a tidy profit on the home she’s lived in for eight years, selling it for her asking price with little hassle. Sales prices are rising, with metro Atlanta prices up 16.5 percent year-over-year in February, according to the latest data from the S&P/Case-Shiller home price index.

But it means buyers like Buckhead resident Kate Senter are often disappointed.

Senter and her husband bid $30,000 above the asking price for a Buckhead home they’d fallen in love with. At the time they made their bid, there were already four or five offers. At the end of the day, there were 14. Theirs didn’t come close.

“Things are just going so quickly,” Senter said. “I fell in love with the house, but you can’t let yourself get your hopes up. There’s definitely a sense of urgency from buyers.”

Most buyers don’t fathom how quickly they have to act — and how decisively — until they’ve already lost a home, or several, said Valerie Russell, a broker with Atlanta Real Estate Consulting. She advises clients to bid $5,000 or more above the asking price, in most cases, if they want to win a property.

“You have to scramble and compete for houses,” said Shanna Bradley, a Realtor with Atlanta Fine Homes Sotheby’s International. “Buyers are willing to pay more right now, because they don’t have anywhere to go.”

In some cases, Bradley said, clients have made offers on homes before they’ve seen them. If they dally — like Anya Parkhurst did — they lose out.

Parkhurst was looking for several months and finally found her perfect house in Grant Park, after it had been listed for three days. She saw it on a Friday afternoon. But, by the time she went to make an offer that evening, it was already off the market.

“I made a decision on the spot to make an offer, and it still wasn’t fast enough,” she said. “I felt attached, but it was all a waste. It’s like you put your whole future life in it, but it was taken away from you in 10 minutes.”

Parkhurst and her husband won a bid on a Smyrna home, but she said the whole situation was stressful. She prefers to take her time when making major decisions.

As more people seek an edge in their home search, though, time becomes shorter. Bradley and other Realtors said they have clients who have been looking and cannot find houses that meet their specifications. When that happens, Bradley said, she uses her network to ask colleagues if she can see a home that hasn’t yet been added to the area’s Multiple Listing Service.

Often, she said, those homes are sold before anyone else even knows they’re for sale. The phenomenon is known as pocket listings.

“We never put it on the market,” Bradley said. “Networking and word of mouth are valuable right now.”

Bradley estimated that a quarter of the houses she’s sold this year were never listed. Cynthia Baer, a Realtor with Keller Williams Realty Metro Atlanta, said she’s seen several sales go through before a house has hit the market.

When that happens, she said, it can be problematic.

The seller may not get the best possible price for the property. Interested buyers will never know that a home was for sale. And if a house is never listed, its sale can’t be taken into account by appraisers for future sales in a neighborhood, Baer said.

With the market as heated as it is, some potential homeowners are skipping for-sale homes all together. Instead, they’re looking for homes they like, then trying to convince owners to sell them.

Sometimes, Baer said, it’s home builders that are doing the asking. With supply so tight, there’s room to build new houses, or add on to old ones. At the end of the first quarter, housing starts were up 60 percent, said James, with Metrostudy.

Scattered reports show that, in some cases, individual buyers are convincing residents to sell homes they didn’t plan to. Baer estimated that 10 percent of the time, people who are approached by potential buyers will sell houses they didn’t plan to put on the market.

“We’re having to get more creative,” she said. “It’s a bit of a different world right now.”