By Nick Timiraos
Today the Journal writes about a surprising phenomenon happening in a growing number of neighborhoods across the country: the return of competitive bids for houses.
As we wrote last week, inventory has fallen sharply in many markets—and in that way, they reflect more a sign of the trauma that has been inflicted on housing markets coast to coast.
Many sellers “believe that time is on their side, that if they wait, things will only get better,” said Glenn Kelman, chief executive of real-estate brokerage Redfin Corp., on the WSJ’s News Hub. Others have their properties sitting on the market for months at a time because they haven’t faced up to the fact that prices are much lower than they were just five years ago.
This sounds like the makings of an artificial improvement, one that could be easily reversed if more inventory hits the market. But Mr. Kelman said he isn’t that worried about an increase in listings. “I actually think it would help the market,” he says, because “there’s just not enough homes to buy.”
So does this mean you can sell your house tomorrow at any price you want? Of course not. Right now, sellers are “going to get multiple offers, if it’s priced right,” said Mr. Kelman (emphasis added).
It’s difficult to generalize about real estate (as Developments also noted this week). Real estate is hyper-local, and bidding wars will be that way, too. They’re happening more often in desirable neighborhoods, including those with good public schools.
But real-estate agents say that homes in many communities that are listed at today’s market values are finding multiple offers—a sign of improving demand, if not price.
It’s easy to dismiss real-estate executives as natural cheerleaders for real estate, but Mr. Kelman has a track record for calling it as he sees it.
In June 2010, he describe the U.S. housing market as the “fat man that can’t get up,” during an interview with CNBC. “The U.S. government has modified loans, extended tax credits, lowered interest rates. We’ve fired a lot of our guns, and at this point the market is just going to have a long slow period of decline.”
In October 2010, Redfin sent an email to every registered user and active customer in Seattle warning that “the market needs to drop another 10% over the next 12-16 months.” And again last March, he warned customers that “it isn’t going to get better any time soon.”
While demand has clearly improved, he remains worried about rising interest rates. Mortgage applications for home purchases are flat compared to one year ago despite today’s record low mortgage rates. The implication: low rates haven’t done as much as you might expect to improve demand, and all of the recent improvement could disappear if and when rates rise.
“The market is very sensitive to interest rates,” said Mr. Kelman. “So if rates go very high or if the whole macroeconomic situation, especially employment, gets soft, you’re going to see softness in the market.”