Lancaster’s February housing market is a challenge, but ‘don’t fear the bubble,’ Realtor says

“Inventory continues to be the big story with residential real estate as we enter 2021,” Tom Blefko wrote in an email.

Blefko, president of the Lancaster County Association of Realtors, said active listings – at 410 for February – are lower than at any time in the past five years. The data in the Lancaster County report is from Bright MLS, with the caveat that it may not reflect all activity in the geographic region.

February closed sales were up 2.3% over last year in the county, rising from 342 to 350. However, pending sales, a sign of future activity, were down 16.5%, from 492 in February 2020 to 411 in February 2021.

“I don’t believe this is because buyers aren’t buying,” Blefko wrote. “It’s just that there aren’t enough homes on the shelf to pick from.”

Right now, it’s a combination of pent-up demand coming out of the COVID-19 pandemic and sellers still reluctant to list their homes on the market, he said.

“Because of the lack of supply, many buyers are finding themselves competing with multiple buyers to get into a home,” Blefko wrote. “It is not unusual for listing agents to receive 10-20 offers on a property the very first day it goes on the market. This high demand has caused the average sold-price-to-original-list-price ratio to peak at over 100%. The high demand, low inventory market is also pushing the median sold price to $236,000, which is (up) over 10% from last year.”

Blefko also recorded a video on why he doesn’t believe there’s reason to fear a new real estate bubble, which some consumers are concerned about. For one thing, there was an overabundance of inventory prior to the 2006-07 bubble, much of that caused by a glut of new construction. It’s a very different story today.

Mortgage lenders also are more stringent in their qualifying standards now, he said.

In addition, Blefko took on the argument that houses are getting too expensive to purchase. He said there are three components to this: home prices, wages and mortgage rates.

Fifteen years ago, prices were high, wages were relatively low and stagnant, and mortgage rates were 6%. Today, prices are high, wages are rising, and mortgage rates are at historic lows, hovering at 3%, he said.

The percentage of median income required to buy a median-priced home is 10% less today than it was in 2006, Blefko said. And more than half of homes in the U.S. today have greater than 50% equity. “That is unheard of,” he said.

“So overall, while we’re in a challenging market with low inventory,” Blefko said, “I personally don’t see a bubble on the horizon.”

Low inventory, low interest rates drive Lancaster County home sales

As a year like no other comes to an end, Lancaster County residential real estate activity remains healthy across the board.

Home sales in November were up 2.3% from a year ago, and other measurements continue to be strong, according to figures provided by Tom Blefko, president-elect of the Lancaster County Association of Realtors. The uptick in settled units was from 527 to 539.

The data is from Bright MLS, with the caveat that it may not reflect all activity in the geographic region.

“The residential real estate market in Lancaster County continues to be a bright spot in the local economy,” Blefko said in an email.

For example, the average sale price last month was $266,721, which is 12.2% more than in November 2019. It was the third consecutive month of double-digit appreciation rates. “There is a lot of talk within industry circles about these increases possibly causing the real estate market to overheat, which would lead to a meltdown similar to what the industry experienced in 2006-2007,” he wrote.

Today, experts agree that economic conditions are very different from what they were on the eve of the Great Recession.

“According to CoreLogic, the average homeowner’s equity increased $9,800 this past year, which is a far cry from what was going on over a decade ago,” he continued.

Also, homebuyers today go through much harder mortgage qualification standards, so they’re in a more secure financial position, Blefko said.

When it comes to units sold, listing Inventory and median days on the market, “the analysis of these numbers mirrors what was going on in October,” he wrote. Listing inventory increased 12.7% compared to last November. But median days on the market fell from 14 days to seven, a sign that inventory is being snapped up quickly.

“We are still experiencing a shortage of homes at virtually all price points,” Blefko said. “Sellers that are realistic about their price are receiving multiple offers and putting their homes under agreement in about a week.”

Incredible, shrinking mortgage interest rates are an incentive to buyers. The average rate for a Freddie Mac fixed-rate, 30-year mortgage was 2.77% in November, down from 3.7% a year ago.

“The past couple of months we’ve seen new rate floors shattered,” he wrote. “To say ‘historic’ is an understatement. While homebuyers today may find it difficult to find a property because of low inventory levels, when they do put a home under agreement, they can take advantage of interest rates that we’ve never seen before.”

“Agents should not assume that buyers know what an interest rate of 2.77% means to their bottom line so do the numbers for them,” Blefko advised.

Compared with last year, he said, getting approved for a $250,000 mortgage is $126 less expensive per month and $45,000 less for the life of the loan.

Rapid pace of Lancaster Co. home sales shows no sign of slowing

It’s been months since Gov. Tom Wolf eased the most severe COVID-19 real estate restrictions, but home sales in Lancaster County still haven’t slowed down.

In October, 590 houses sold across the county, compared with 553 in October 2019, a 6.7% increase. The data comes from Bright MLS, with the caveat that it may not reflect all activity in the geographic region.

Tom Blefko, president-elect of the Lancaster County Association of Realtors, explained some of the numbers in an email.

On the average sales price, which climbed 12.1%, from $235,738 to $264,293, he wrote: “While these appreciation rates are great for sellers, they do cause a little indigestion because we don’t want the market to overheat and melt down.”

But that’s unlikely to happen because other factors point to a healthy real estate market, Blefko said.

As for the number of homes listed, inventory rose 8.5%, from 620 last October to 673 in October 2020, which is good news, he said. However, there’s still a shortage of houses at nearly all price points. And those that sell do so very quickly, with median days on the market down to just seven. “This can be attributed to the pent-up demand of buyers who had to sit on their hands during the COVID-19 pandemic shutdown of the real estate industry,” Blefko wrote.

“As soon as the state allowed buyers and sellers to conduct in-person business again, the flood gates opened up and they haven’t closed yet.”

Mortgage interest rates are a big incentive to buyers right now. The Freddie Mac average monthly commitment rate on a 30-year fixed-rate mortgage was 2.83% last month.

“These unprecedented low rates continue to entice buyers to put up with losing many multiple, competing-offer situations just so they can take advantage of the rates,” he said. “Agents should not assume that buyers know what this low rate means to their bottom line so do the numbers for them.”

For example, compared with last year, obtaining a $250,000 mortgage is $118 less expensive per month, and over $42,000 less over the life of the loan, Blefko noted.

Absorption rates also point to a strong sellers’ market. This is the rate at which available homes are sold in a specific real estate market and price range during a given period. It’s calculated by dividing the number of available homes by the average number of sales per month. The rate represents the number of months it would take

to clear out available inventory if no other homes came on the market.

The numbers from October show homes in six price ranges under $300,000 with absorption rates of one month or less.

Even the $500,000-plus range, with an absorption rate of four months, qualifies as a sellers’ market because it’s less than six months, which is the cutoff.v

New map on tap: Realtors adapt to broader listing system

A map showing Bright MLS’s coverage area that spans across six states (Submitted)

Real estate professionals have been making what they describe as a rocky but necessary transition to a new system for listing homes for sale in eastern Pennsylvania.

The system – called Bright MLS and covering parts of six states – replaces systems that operated largely at the county level.

The larger database of homes is a welcome change and has spurred greater regional collaboration, Realtors said. But it has come with technical glitches and other challenges, including long wait times in the beginning for customer support and difficulty in finding the right information.

“There is definitely an adjustment period when a large system conversion takes place,” said Anne Costello, president of the Bucks County Association of Realtors, which switched to Bright MLS last year. “With almost 4,000 members, we saw, and to be honest, are still seeing, varying levels of tech expertise and frustration as our members adjust to the Bright MLS system. I was one of those people who did vote for it thinking it was better for our members.”

The system’s heaviest users have been among the most vocal, but they also are learning and adapting to the new system, which has become more responsive, said Costello.

“Less frequent Realtor users will understandably adapt more slowly… but I believe we will all get there,” she said.

 A bigger map

Introduced in 2016, Bright MLS aims to provide real estate professionals with expanded property information across a wider territory through one multiple listing service, or MLS. Prior to the move, many Realtor associations operated their own MLS system.

Bright MLS covers 40,000 square miles in eastern Pennsylvania, as well as Delaware, Maryland, New Jersey, Virginia and Washington, D.C. Based in Maryland, it is one of the largest home listing services in the nation.

The cost to use the new system varies based on where Realtors operate. Costello, a Realtor with Century 21 Veterans in Newtown, said her association members are paying about $113 per quarter, which works out to $150 more per year than they were paying previously.

With the real estate landscape changing, the real estate organizations that formed Bright felt it was imperative to work together to enhance their leverage and bargaining position, Chris Finnegan, a spokesperson for the organization, wrote in an emailed response to questions.

Bright developed a transition plan for each MLS organization with the end goal of having all 95,000 subscribers on the Bright platform by the end of 2018. The Bucks County association, The Reading-Berks association, and the Schuylkill County association converted in late 2018.

“With Bright, we had an opportunity to provide more information across a broader footprint to real estate professionals,” Finnegan said.

Regarding feedback from members on the initial rollout, Finnegan said: “This is not unusual when a number of people who are used to different systems switch to another. We take feedback from our subscribers very seriously and are dedicated to getting any issues that present themselves addressed as soon as possible.”

A single subscription

The Realtors Association of York and Adams Counties joined Bright MLS in October 2017 and is a shareholder in the program, giving it a voice on Bright’s board of directors, said the association’s president, Heather Kreiger.

“We really found benefit in the fact with all the associations coming together,” Kreiger said. “Just the access to the data alone is one of the biggest benefits. For me, I don’t have to subscribe to all these different MLS’s. I don’t have to pay separate fees, learn different rules and regulations.”

Bright makes it easier to collaborate with other Realtors, said Kreiger, a brokerage advisor for ROCK Commercial Real Estate LLC in York. She declined to disclose the cost for joining but said the cost varies based on the area where a broker works.

The system has not been without its hiccups, she said. But, she added: “In any transition, there’s always going to be some hiccups; however, they have made significant progress making the system better.”

The progress also was noted by Richard Boas Jr., president of the Lancaster County Association of Realtors, which transitioned to Bright MLS in October 2018.

“That was the best, strategic long-term decision for us,” Boas said. “It’s greatly improved. The one thing I noticed is there’s a lot more networking among agents. I’ve noticed that Realtors will cross the county lines a lot more. I do see that as an excellent advantage.”

The cost – about $200 per year – also is comparable, he said, noting that agents with business in different counties no longer have to pay dues for multiple services.

“It makes it easier for agents to help their clients buy and sell real estate,” Boas said, acknowledging that some agents are not happy with the new system.

But for real estate professionals, he said, regional MLS consolidation appears to be where the industry is going.

Among the holdouts is the Greater Lehigh Valley Realtors. It voted not to join the listing service, largely because Bright’s geographic coverage was not sufficient for Realtors doing business in Monroe and Carbon counties and in western New Jersey, according to the association’s CEO, Justin Porembo.

“We had a lot of independent discussions with our brokers here and our board,” Porembo said. “The members felt like it wasn’t time. We would have had members who needed to belong to multiple MLS’s.”

The association also did not want to be on the ground floor of a new system, said Christopher Raad, associate broker at Harvey Z. Raad Realtors in Allentown. He was president of GLVR in 2016 when the group was deciding whether to join Bright MLS.

“We felt that there was going to be a very sharp learning curve,” Raad said.

The new system made more sense for associations whose services were entirely within the Bright MLS footprint, he added.

“The theory and the concept is very, very good,” Raad said. “It’s just making sure it’s practical to work and to keep the functions of the local marketplace moving along.”

Finnegan said Bright MLS is open to discussing the geographic coverage issues in places like the Lehigh Valley.

“We’d welcome any discussion about how to help alleviate the burden of multiple MLS systems that subscribers in these bordering regions need to join in order to serve their clients,” he said.