Home auctions have gained momentum over the past year amidst a pumped-up housing market with meager inventory and historically high demand in many places. For sellers, home auctions provide high market prices and cast a wide net for ideal buyers. For buyers, auctions create a well-needed sanctuary to the craze of finding your perfect home in a national housing shortage.
Auctions allow both sellers and buyers to see what is happening on a particular piece of real estate as it unfolds. For all parties involved, home auctions provide transparency, urgency, and a broad range for people looking to sell or buy the property of their dreams.
What has driven such high demand and low inventory?
As the pandemic has created significant uncertainty, the housing market has been in a state of frenetic change. Demand significantly outpaces supply rising from historically low mortgage interest rates and a drastic shift to remote work, which has created more interest in purchasing properties with at-home workspace. At the same time, supply has dwindled significantly.
According to a recent New York Times article, we are currently seeing about half the available home listings nation-wide compared to this time last year. In contrast, home prices have appreciated incredibly, up nearly 13% nation-wide compared with January 2020. These circumstances have created a hotbed for bidding wars. In Redfin’s survey of metropolitan areas, it ranked the following regions for rates of competing offers:
- Salt Lake City at 90%
- San Diego at 78.9%
- Bay Area at 77.1%
- Denver at 73.9%
- Seattle at 73.8%
The market shrinkage stems from a combination of factors. A massive halt on building projects from a building sector still weaker than before the 2008 housing crisis has left consumers with fewer new-to-market options. People who would have typically sold have stayed put due to the pandemic, especially older folks who would have moved to group homes and placed their houses on the market. The contracted economy has created a standstill of sorts, hindering folks from taking on higher mortgages and providing a stopgap with mortgage forbearance. All of these factors have kept a high percentage of standard inventory in gridlock.
The cost of construction is also diminishing the availability of new inventory. For example, lumber prices are more than 130% more than they were at this same time last year. Recent increases in oil prices are also escalating building material costs, which impacts all new developments. In addition, there is a national shortage of building-skilled workers. These conditions drive an increase in construction costs, resulting in fewer new homes being built, delays for those in construction, and higher prices for the resulting product. As a result, the demand for existing homes is even higher.
The logistics of selling a home have also impacted supply. People aren’t too keen on having loads of strangers moving through their homes during traditional open houses or inspections. And many homeowners more susceptible to the virus are choosing to hold off on the rigamarole of face-to-face interactions with potential sellers
And finally, we have the snowball effect. People who don’t fall into any of the above categories and otherwise would have sold are seeing a market freeze and deciding to wait until the dust settles.
How Home Auctions Create a Calm in the Storm
Home auctions can buoy you during turbulent times like these. Auctions allow people to buy and sell properties remotely, a safeguard to a business that generally works face-to-face. They allow for more transparency in price for both the general market as well as with competing offers. With over 56% of buyers facing bidding wars in traditional real estate, auctions circumnavigate hidden prices, keeping everything out in the open.
How to Make Home Auctions Work for You
So how can you use home auctions to work to your advantage? At Luxea, we want both our sellers and buyers to have the most market advantage, one that encourages all parties involved and leaves a sense of security and transparency in the process.
Buyers should get all their ducks in a row early. If possible, see properties the moment they hit the market. Have all of your paperwork ready, including pre-approval letters for your mortgage. Also, know your end-of-the-line budget so that you can control the sense of disappointment if you see the home you’re vying for go above your top-level price. Again, the benefit to an auction is that you see this in real-time instead of getting up your hopes on a home only to learn that you’ve been outbid.
Our online platform shows you where your offer stands compared to other bidders, as well as access to an array of unique properties. It creates buyer premiums as low as 5% and never greater than 10%, opening bid incentives, and no set cost, which would price out some potential buyers.
Sellers can list their properties to have far reach and get you the best market price. Our agents work to provide bidding metrics with real-time feedback and no punitive fees for deciding not to sell.
In a market that has been in serious flux since the start of the pandemic, we want to offer some sense of ease and assurance that we can help you whether you are looking to sell or buy.