Low inventory and low interest rates lead to a spike in Delaware home prices. It's a seller's dream.
Home prices in Delaware have skyrocketed in the past year, in some places, higher than the record-setting national average.
In the United States, the median existing-home sales price in March rose by a record 17.2% from a year ago to a historic high of $329,100, according to the National Association of Realtors.
Some neighborhoods in the First State are eclipsing that, said Jeff Kralovec, Realtor with the J. Kralovec Realty Group at Berkshire Hathaway Home Services Fox & Roach.
In Middletown's Willow Grove Mill, he said, three-bedroom, 2½-bath town houses were selling in the range of $230,000 to $240,000 last year, but one sold in March for $300,000 after being listed for four days. That’s a jump of 25% to 30.4%.
Home price increases in the Darley Green neighborhood in Claymont are near the national figure, Kralovec said.
"Last year a three-floor town house was barely getting $305,000 or $310,000 and now we have one listed for $350,000 with significant interest," Kralovec said. That’s an increase of 12.9% to 14.8%.
Thirty-eight homes have sold in the neighborhood in the past year.
"They are really well-built homes, and it's a diverse community. A lot of buyers are coming down from Philadelphia," Kralovec said.
In Hockessin, a home of about 5,000 square feet in Hockessin Chase sold for about $550,000 in June 2020. Last month, a similar style and size home in the same neighborhood sold for $607,000, an increase of about 10.4%.
"We've had homes in Hockessin priced in the low to mid-$600,000s selling in a day or two with multiple offers," he said.
Near Smyrna, a house north of Garrisons Lake that sold for $310,000 in September 2019 just resold for $389,000, said Edna Givens, Realtor with Burns & Ellis in Dover. That’s about a 25.5% increase in 18 months.
Still, Givens said Kent County is the most affordable county in Delaware with a median home sales price of $249,000.
“The average increase is up about 8% from last year,” she said.
Supply of homes for sale shrinking
What are some of the reasons for the rapid price growth?
"It’s a perfect storm," said Kralovec. "Along with low-interest rates, there's a low inventory of homes for sale. Almost everyone who owned a home refinanced and so they’re comfortable, they’re saving money and they don’t want to sell their home right now."
There’s also been a slowdown in home construction.
“Homebuilders are telling buyers that a home ordered today won’t be finished until 2022. In some cases they’re quoting 18 to 24 months," Kralovec said. "It’s because of lack of supplies. The cost of materials is significantly higher, and a lot of trades are booked out. For example, if you want to get your bathroom or flooring done, it will probably be weeks before someone is available."
He said conditions should change when supply chain problems in the home building industry are resolved and the effects of the pandemic decrease with vaccinations.
"As people get more comfortable going out again and kids go back to school, more families will start selling homes again," he said.
Givens said the pandemic led to families reexamining what they needed in a home.
“People found not only themselves working from home, but most family members,” she said. “They realized, ‘We need more space.’”
The combination of demand, low-interest rates and a low supply is driving prices up.
“It has become difficult to find homes,” Givens said. “When I started selling real estate in the late 1980s, we used to show buyers 10 to 12 homes before they bought one. Now we are writing six offers before we can get one accepted. With escalation clauses, homes are selling over asking price.”
Delaware has always been enticing due to low property taxes, she said.
“We are close to beaches, fishing, boating, Philly, New York and D.C., which makes day travel easy,” she said. “We need listings. It is definitely a good time to sell.”
According to the National Association of Realtors, housing inventory in March of 1.07 million units was down by 28.2% compared with the level a year ago, 1.49 million.
Properties typically remained on the market for 18 days in March, a record low, down from 20 days in February and from 29 days in March 2020.
Foreclosures and short sales represented less than 1% of sales in March, equal to February but down from 3% in March 2020.
"Consumers are facing much higher home prices, rising mortgage rates and falling affordability; however, buyers are still actively in the market," said National Association of Realtors chief economist Lawrence Yun in a press release. "The sales for March would have been measurably higher had there been more inventory.”
According to Freddie Mac, the average interest rate for a 30-year fixed-rate mortgage was 3.08% in March, up from 2.81% in February.
Although rates have risen, Yun said they are still at a favorable level and the economic outlook is promising.
"At least half of the adult population has received a COVID-19 vaccination, according to reports, and recent housing starts and job creation data show encouraging dynamics of more supply and strong demand in the housing sector,” he said.
According to the real estate website Zillow, the typical home price appreciation is between 3% and 5% per year, but “home value appreciation in different metro areas can appreciate at markedly different rates than the national average.”
“While there is no true, universal ‘normal’ rate of appreciation for the housing market, we are able to compare home values to historical rates of home price appreciation to see differences in the home value appreciation over time,” according to Zillow.
From February 2020 to February 2021 in Delaware, home values jumped about 10.3%, according to the Zillow Home Value Index, which measures the typical value for homes in the middle of the range from the 35th to 65th percentile.
Ben Mace reports on real estate and business stories. Reach him at firstname.lastname@example.org.