We’ve all been hearing a great deal about how competitive the real estate buying arena could be for 2017. Homebuyer competition is expected to be strongest this year in Boston, Denver, San Francisco, and Seattle neighborhoods. Why? Well, the key factor in creating fierce competition in the housing market is based upon low inventory that is continuous. When there is a supply of homes that is good for six months, this is successful at signaling a market that is truly balanced between both sellers and buyers. However, home supplies in the majority of metro areas that are in the top 30 competitive neighborhoods have been hovering closer to only a one to two month supply annually.
In fact, in the main neighborhoods nationwide that are the absolute most competitive, rapidly escalating prices, major bidding wars, and lightening quick sales aren’t the exception anymore, but they are actually the rule. A number of buyers have started realizing that their dream home could be way out of reach in today’s real estate market. They’re also finding that they often have to compromise or make numerous concessions regarding a number of important factors, including the home’s location, pricing, or even whether the home is a fixer-upper or move-in ready. These things may seem like no big deal on those HGTV shows like “Property Brothers” or “Fixer-Upper”, but for some buyers, they can be quite daunting. Many are unwilling to take on any renovations and want only a completely move-in ready home with no impending projects. Unfortunately, those are the homes that are the most in demand and are snapped up very quickly by buyers.
And, in many cases, some prospective homebuyers are resorting to waiving their inspection contingency and/or already having their home loan pre-approved by their lender, thereby making their offer almost as strong as an all-cash offer. Although, pre-approval is a good negotiating tool, waiving an inspection can prove to be a risky undertaking. Home inspections are a very important part of buying a home and serve to protect buyers from getting in over their heads with a home that could turn out to be a money-pit. Still, in a highly competitive market, buyers are resorting to waiving their right to inspection in order to compete with other buyers.
So, which specific neighborhoods across the U.S. are projected to be the most competitive in 2017? Here are a few insights into what will determine the top competitive neighborhoods for the coming year:
Redfin utilized five factors for their analysis of 27 metro areas. Multiple listing services’ transaction data, as well as public records from those areas, were used. It was required that all neighborhoods have a minimum of 50 homes that were successfully sold from 1/1/16 to 12/5/16 to be included. In addition, only sales of single family homes, condos, and townhomes were included. These are the five factors used for the analysis:
- The median days on the market,
- Median sale price growth year-over-year thru December 5,
- Average ratio of list price to selling price,
- Percentage sold above the asking price,
- Percentage of all-cash home sales.
Ten of the 30 most competitive neighborhoods in the country were located in Seattle and included Factoria, Woodridge, and the University District, all of which were in the top ten. Next up, the Boston area had eight that ranked and included Prospect Hill in Somerville and Washington Square in Brookline. Denver also had seven neighborhoods ranked in the top 30. They included West Pleasant and Lakeside, both in Golden, CO. There were three neighborhoods in San Francisco on the list, but L.A. and D.C only had one each on the list. So, here’s a full list of the top ten most competitive neighborhoods for homebuyers:
- Factoria (Bellevue) Seattle, WA- Average asking price- $352,500
- University District (Seattle) Seattle, WA- Average asking price- $559,000
- Washington Square (Brookline) Boston, MA- Average asking price- $945,000
- Prospect Hill (Somerville) Boston, MA- Average asking price- $635,000
- Inner Richmond (San Francisco) San Francisco, CA- Average asking price- $1,900,000
- Dolores Heights (San Francisco) San Francisco, CA- Average asking price- $1,895,000
- Woodridge (Bellevue) Seattle, WA- Average asking price- $708,500
- Lakeside (Wheat Ridge) Denver, CO- Average asking price- $370,000
- West Adams (Los Angeles) Los Angeles, CA- Average asking price- $550,688
- Brickyard Road-Queensgate (Bothell) Seattle, WA- Average asking price- $324,000
So, what exactly makes Factoria in Bellevue, WA, the neighborhood that was successful at earning the distinction of being the absolute most competitive 2016 neighborhood for homebuyers? The Redfin ranking was based upon a number of competitive indicators, which include the neighborhood’s 2016 annual price growth, the percentage of homes selling for better than the asking price, and how quickly the homes became effectively under contract. For Factoria, typical homes had a buyer within just seven days and a whopping 62 percent of them ended up being sold for an amount that was higher than the asking price.
And, low inventory has been cited as a major challenge for home buyers. In fact, during 2016’s second quarter, there was a record high hit when it came to the average sale-to-list price ratio. Some buyers are even resorting to making multiple offers on different houses in the hope of getting one of them. Often, when a buyer considers this particular approach, it comes as a purely emotional response to losing out on another home offer, so it’s not really recommended. In addition, bidding wars are on the increase as buyer demand keeps rising based on the limited inventory.
Is there any relief in sight for potential home buyers? Well, Redfin is predicting that inventory will start recovering slightly during 2017, however, since no supply increase in more affordable housing has been seen in the past eight months, they are projecting that the majority of the coming year’s increase will be in the expensive sector of the real estate market. This means that a shortage of starter homes could result in weak sales growth.
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