A few months ago, Jon Moorman began searching for a two-bedroom condominium in Cambridge and Somerville, keen on dumping his pricey Allston rental apartment to become a first-time home buyer.
Moorman was ready to commit to a mortgage, but he wasn’t prepared for the competition — a flood of people like him vying for a limited number of homes in the $300,000 to $500,000 price range. The software engineer lost out on two properties before expanding his search to Jamaica Plain, where he secured the right to buy a condo by bidding 12 percent above the asking price.
“We started out offering our best and final offer,” said Moorman, 23, who plans to marry in the summer. “I didn’t want to let this one get away.”
It’s a common pattern this spring: There are too many potential buyers and too few sellers, resulting in bidding battles in many Boston-area neighborhoods. And that, in turn, is starting to drive up prices overall.
“I was working in the [last housing] boom. I remember it being a little crazy, but not like this,” said Barbara Hakim, a real estate agent with Coldwell Banker Residential Brokerage who recently closed a deal on a home in Brookline Village that attracted 25 offers in less than a week. “We didn’t have this many buyers going nuts.”
Real estate specialists attributed the surge in would-be buyers to historically low mortgage rates and rising consumer confidence as the Massachusetts economy slowly blossoms. The house-hunting frenzy is a good sign, they said, but until more people decide it’s finally time to sell, no one expects the market to really take off.
In the meantime, would-be buyers in places such as Cambridge, Somerville, Newton, Boston, and Brookline are padding their offers by tens of thousands of dollars and making concessions — such as waiving their right to a home inspection — to better their chances of getting to sign on the dotted line.
Other buyers are agreeing to flexible closing dates, or allowing homeowners to rent back properties while they look for new places to live. Some are even resorting to sentimentality — sending family photos and personal letters to sellers to explain why a particular home would be perfect for them.
Houses that not long ago would have remained on the market for many months are now moving in days. But because not enough of them were up for grabs in February, the number of sales fell by 5 percent — to 2,246 statewide — marking the first drop in more than a year, said the Warren Group, a Boston firm that tracks real estate activity. At the same time, the median price rose by 12 percent, to $275,000, compared with February 2012.
While bidding battles are more common in affluent communities, housing economists said the pressure of rising prices will prompt more frustrated buyers to expand their searches to lower-cost cities and towns, helping to boost the state’s housing market as a whole.
“What you are seeing is the first action of a good strong market,’’ said Karl E. Case, a retired Wellesley College economics professor and cofounder the S&P/Case-Shiller Home Price Indices, a widely respected measure of US home sales. “When demand starts to come back, it comes back in the quality areas where there are amenities, good schools — and then, as those prices get pushed up, people get pushed out.”
That could already be happening to some prospective buyers in choice neighborhoods from South Boston to Weston. The online brokerage Redfin.com reported that about 89 percent of Cambridge deals it has been involved with this year have included multiple bids, compared with 68 percent during the same time last year.
Redfin market manager Alex Coon said many sellers are accepting offers only from people who can pay at least 20 percent upfront, and some prefer cash-only transactions. He said one of his agents recently helped a buyer place a winning bid on a Cambridge home that was $80,000 over the $550,000 listing price.
“We are seeing the emergence of the crazy,” Coon said.
“We have plenty of stories of people going absurd amounts” over the asking price and still not getting the home, he said.
Sam Schneiderman, president of the Massachusetts Association of Buyer Agents, said realistically priced homes inside Interstate 495 are generating about four to nine offers. Despite the pressure on buyers, Schneiderman cautions them to retain the right to inspect a property or get their deposit back if they don’t get approved for a mortgage. He said a big part of his job lately has been to calm anxious buyers who fear being left out.Continued...