Home buyers in small-town markets are being frustrated as well-funded investors beat them to the post, snapping up more and more of the few properties listed for sale there.
The Wall Street Journal relates the frustration of Dominic Pollock from Bethlehem, Pa., who said he and his fiance have so far viewed more than 50 houses in the city and made offers for at least 20 in the last nine months. And yet, not a single offer was accepted, as they found themselves outbid again and again, despite offering more than the asking price on most occasions.
Just last week the couple bid $20,500 above the list price of one home, also waiving the right to a home inspection to make their offer stand out. But it wasn’t enough, and theirs was one of 13 other bids on the home that were rejected.
Pollack’s fiance Brooke Terplan said that frustration over their inability to buy a home before they got married had left her in tears.
“A couple people told us that it was going to be tough,” Pollock added. ”But we couldn't even fathom what we'd walk into.”
Bidding wars have become commonplace all over small-town America, the Journal said, replicating what has happened in many bigger markets. And it often leaves locals at a big disadvantage, as they cannot compete with wealthier investors.
The Journal said investors are drawn to smaller towns due to the lower prices and taxes on properties there. In addition, they can also realize greater cash flow by buying homes in smaller towns and renting them out than they would in bigger cities.
Cash-rich investors are able to offer an all-cash deal, and will also waive the inspection. Some may even make “sight unseen” offers within days of the property being listed. Individual home buyers cannot do the same.
Small-town home prices have risen fast over the last year too, pricing out many local buyers. For example, in Allentown, Pa., the median list price in the area grew buy 24% in January compared to one year ago. And in Martin, Tenn., a small town around 150 miles away from Nashville, prices there rose by an astonishing 159% over the same period. It’s a similar story in much of the country, the Journal reported.
It means that buyers need to make a quick decision if they want to have any chance of competing.
“If you’re a buyer, this is the most frustrating time,” said Jonathan Campbell, vice president of DLP Realty in Bethlehem.