Nancy Edmonds Hanson
The hottest real estate market in decades presents a dickens of a challenge for people looking to buy a home in Moorhead and its neighbors.
This may be the best of times for sellers, but it’s the worst of times for home-buyers. The supply of modestly priced homes seems far tighter than in past years, according to statistics gathered by the Fargo-Moorhead Area Association of Realtors. The number of homes on the market is far lower than it was at this time in 2020, particularly in the more affordable range; from $50,000 all the way up to $250,000, the number for sale in each category is down from 52% to 70%. More expensive houses – listed at prices up to more than $1 million – are down in numbers, too, by 25% to 50%.
Meanwhile, prices are up. The median sale price has risen 17%. according to the association’s data. The average list price of $295,000 in May 2021 compares to $260,000 12 months earlier. Even so, they are selling faster, much faster: The median number of days a house remains on the market is 20 this year, compared to 76 in 2020 – a breathtaking decrease of 74%.
Moorhead Realtor Kim Schlotfeldt observes a number of factors that have come together, fueling the housing market in what some might call a perfect storm. “With Covid, people didn’t take a vacation last year. Some spent that time remodeling and making their homes more attractive. At the same time, they’re staying in their homes longer, so there’s not as much inventory.
“Covid relief payments mean many Americans have a substantial amount of cash in their pockets. For a family of four, that’s $5,000. How long does it normally take to save that much? Together with low interest rates” – around 3% on a 30-year conventional mortgage – more are in a position to purchase a home.”
Those who are putting their homes on the market today are often seeing buyers literally lining up with full-price offers … or better. Kim tells of one property she listed a month ago. “The list went out online at 3:30. Within 20 minutes, four potential buyers were showing interest.” She explains that Realtors can set a client up to be notified by email as soon as a new listing pops up. “By the end of the evening, I’d had five showings. We got four offers within the first four hours.”
The crush of would-be buyers has slowed down the services that are needed between having an offer accepted and closing the deal, and that too adds stress to the situation. Sellers and their real estate agents generally collaborate on setting the asking price – an optimistic number. The flurry of interest means that offers are coming in at more than the amount of the listing. But unless the buyer has cash for the purchase, a lender must approve the amount of a conventional loan – requiring a professional appraisal, and opening another can of worms.
Appraisals aren’t generally completed until a week or two before the closing, which is scheduled at least 45 days out from the time a purchase agreement is written. If that appraisal comes in below the listing price and the offer, it marks the maximum the bank will lend. That means the buyer may have to come up with considerably more cash.
Janet Seifert of Moorhead has run into that roadblock. “I’ve been looking for a home for the last several years,” the office manager says. “There aren’t a lot of houses in my price range, and in this crazy market, they’re selling for more than the appraisal says their worth.”
After a great deal of looking, she found one that fit her perfectly. “In five minutes, I’d fallen in love and said, ‘I want to make an offer,’” she recalls. “But by that time, the number of offers was in the double digits.” She did make that full-price offer, stretching as far as she could. “But nearly every house in my price range is going for more,” she says. “Together with over $8,000 in closing costs, I couldn’t go any higher.”
She even went so far as to write a heartfelt letter to the sellers – but to no avail. “I don’t know if I’ll ever get into my own house,” she reflects now.
Toby and Maria Kramer’s story had a happier ending, but it took extraordinary luck to get there. The couple and their three children moved from Pueblo, Colorado, for Maria’s job with the West Fargo Library. Like many potential home buyers, Toby scoured the internet for listings. “I was glued to what was happening online,” he reports. But they had little luck. “We made two offers, including one in writing. It was $5,000 above list,” he says. “But they had multiple offers, too.
“We had no idea how much we’d be outbid. They ended up taking one that was $40,000 higher.”
It took a special tip to match the Kramers with their new home. Kim, their Realtor, saw a notice for an estate sale and dug deeper. The resident was moving into a care facility. The home was a good fit, and the location was perfect. The result: “We were able to make an offer before the house even went on the market.” The Kramers offered more than the house’s appraised value. After some negotiation back and forth, they finally closed the deal and were able to make their move north – sight unseen.
That search for their next home took almost twice the four weeks Toby and Maria had anticipated. “It was mostly because the home inspectors were so backed up that they couldn’t handle the job in a more timely way,” he says. “But in the end it all worked out. Without finding our house here, my wife would have had an awfully long commute.”