I’ve sold four houses over the last three years and it seems each year the market has become more competitive, but in 2020 it reached unprecedented levels. That is great news for sellers like me, but it is forcing buyers to make split second decisions on the biggest purchase of their life. A few weeks back I came across an article in the Wall Street Journal (WSJ) that detailed the stories of several individuals that got caught up in the 2020 housing frenzy who are now regretting that decision.
In August of 2020, housing sales in the United States reached a 14-year high according to the National Association of Realtors. Despite the economic uncertainty of the pandemic people were spending a lot more time in their home or apartment, and many decided with low interest rates it was a good time to upgrade. At the same time there was a group of people that decided to wait to sell, which reduced inventory. The combination of low interest rates and low inventory forced many to rush decisions and not be as thorough for fear of losing out on yet another house. Many waived inspections or skipped normal due diligence that has historically been part of the home buying process.
With more people able to work remotely they are relocating to be closer to family, or to fleeing the high prices of certain cities. Two of the people referenced in the WSJ article relocated from New York to California – one to LA and the other to the Bay Area; both extremely competitive markets. The first was a 30-year-old graphic designer that spent $600,000 to buy her home in LA’s Koreatown after being outbid on seven other houses. In her case, she did have an inspection that revealed toxic black mold and asbestos; but decided to move forward anyway after spending five to six months looking. Unfortunately, after sleeping in her new home for just a few nights she realized she hated the house. She ended up selling the home a few months later. This cost a lot of money after paying for repairs, realtor fees and transaction charges.
The second family was a young couple with a toddler and baby on the way. They moved from Brooklyn to be closer to family in California. Eventually, the family decided to purchase a home in the Bay Area. They lost out on a couple houses before finding a four-bedroom home with a $1.89 million price tag. Their bid was roughly a $100,000 over asking price to get the house. The couple closed on the house in November of 2020. When they began moving in a few weeks later they found one side of the house was peppered with 90 holes caused by acorn woodpeckers (a known problem in the neighborhood). The owner admits the home buying process became emotional and they dropped their level of due diligence. They trimmed nearby trees in an effort to keep the woodpeckers away, but the only permanent solution is to replace the wood siding with cement for a cost of $150,000.
A third family in the article purchased a Westhampton Beach, NY home. The buyers waived the inspection to make their offer more attractive in the middle of a bidding war. After closing they found an infestation of wasps and decided it was unsafe for their young children and decided to sell just a few months after moving in. Here is a link to the complete article: These People Rushed to Buy Homes During Covid. Now They Regret It. - WSJ.
There are countless other stories like these. I watched a video this morning about the Phoenix housing market. They mention a house that went on the market a few weeks back. There were 50 showings and 31 offers during the first day. They attribute their hot housing market to a lot of the same reasons we cited earlier but did mention bank or investor-owned homes is another factor in the low inventory.
A survey conducted by Seattle-based start-up Flyhomes in 2020 showed some alarming results. Nearly a quarter of the 1,000 people surveyed reported having buyer’s remorse, and 56% said their must haves changed significantly from the start to the end of the process. One in three said the home they purchased did not meet their original wish list. So what were the regrets:
36% spent more than they were comfortable with, while 20% felt like they overpaid for their home.
Over half said their new home required unexpected repairs or maintenance.
A quarter said property taxes were too high.
1 in 5 say they were not happy with the location.
See Survey Says: Homebuyer Regrets (And How to Avoid Them) - The Living Room (flyhomes.com) for the complete survey.
The big question is how long can this continue? Experts say the housing market has plenty of demand, so supply is going to dictate where prices go from here. Lawrence Yun, Chief Economist for the National Association for Realtors, said this in 2020, “Home prices are rising in most parts of the country and in most price segments because of the lack of supply. Record low mortgage rates are providing opportunity for buyers to lock-in low monthly mortgage payments for future years. The median home price for the country as a whole could easily rise by 10% cumulatively over the next two years.” Others are not so sure. As the risks from the pandemic decrease and social conditions improve it could lead to increased inventory which will drive the prices lower. See the January report from CoreLogic where they predict 3.3% increase from January 2021 to January 2022. Home Price Insights - CoreLogic
Extract’s customers have been impacted greatly by the low interest rates and hot housing market. We work with hundreds of County Recorders/Register of Deeds across most US states. They’ve seen an explosion in recording volumes. I spoke with one customer whose volume doubled in the last six months.
We work with these customers to automate processes like indexing and redaction so public records can be made available more quickly. In Orange County, we helped reduce the public access wait time from 6-12 days down to 48 hours. If you’d like to learn more about our software, please reach out.
About the Author: Troy Burke
With 30 years of experience providing clients with stellar service and strategic solutions for growth and development, Troy is committed to ensuring his customers receive the highest quality solution, training and support with every implementation. He frequently speaks on the topic of redaction and is actively involved with National Association of Court Management, Property Records Industry Association and several other government organizations.