The chatter among agents in the spacious, sunny work area of the NP Dodge Real Estate office in Elkhorn doesn’t focus on the global economy, the Brexit fallout, or what Janet Yellen and the Federal Reserve might or might not do about rate hikes. They are too busy writing up contracts and swapping stories about how fast a listing sold in what continues to be a robust housing market.
“We’re seeing multiple offers on one home, like we had 20 years ago,” says Nancy Bierman, who manages 120 agents in the office at 204th Street and West Dodge Road. “Homes are selling above asking price. We’re seeing more cash buys, and homes are going very quickly, selling in one day.”
Homeowners now include millennials, the biggest generation ever to come into the marketplace. They’re moving into all areas of the metro, not just west Omaha.
“The urban market, Omaha’s core, seems to be really strong,” says Jeff Royal, president of Dundee Bank. “Young professionals want to live closer to older, established neighborhoods with more character like Benson, Blackstone, Dundee, Field Club, even south of Old Market in Little Italy.”
What’s driving Omaha’s housing frenzy? Chronically low 30-year, fixed-rate mortgages, now below 3.5 percent, tell part of the story—one that has benefited everyone involved in real estate, from brokers to builders to bankers.
“It’s a good time to be a buyer,” says Royal. “We’re seeing an uptick not only in mortgage applications, but refinancing as well,” which follows a strong national trend. Figures from the Mortgage Bankers Association show applications have been running more than 21 percent higher than last year—a far cry from the darkest days of the Great Recession of late 2007-2009.
“That was bad,” John Caniglia says bluntly. The owner of John Caniglia Homes, builders of higher-end custom homes, remembers buying a few foreclosures and flipping them just to stay afloat. “We started to see a perk up in 2011, even in the $450,000 range, when interest rates were really low. Then the tight regulations on borrowing money started to ease and we’ve been rolling along every year since, even our apartment and office development.”
The experience of that recession made Caniglia and other developers highly skittish to build on spec—building before you have a buyer—which explains an equally huge factor in Omaha’s hot market: a lack of existing homes. According to Omaha Area Board of Realtors statistics, the 2,600 homes on the market this spring represented a 16 percent drop from 2015, and a whopping 56 percent drop from 2011, when 6,000 residences were available. In addition, the median price of existing homes rose 7 percent over the past year, to $155,000.
“Many baby boomers looking to downsize are finding they have to pay more for less square footage because of the median prices going up, so they’re staying put and their houses aren’t available,” says NP Dodge sales associate Therese Wehner, explaining another piece of the housing crunch equation.
This classic scenario of low supply and high demand has tossed homebuyers into a whirlwind.
“When a house under $150,000 comes on the market, it’s like throwing raw meat into a lion’s cage,” quips Carole Souza, associate broker at NP Dodge. “You have it on the market and within four or five hours you’ve got 10-15 showings. Before the day is done you have at least one offer, sometimes more.”
But the downside of quick decision-making often leads to headaches for all involved.
“We’re seeing an increase in buyer’s remorse,” explains Souza. “They win the battle, but lose the war sometimes.”
The number of sales contracts that fall apart keeps rising. Wehner noticed, over a two-day period in early July, 19 houses that previously sold went back on the market. Three hours later, when she checked again, the number had risen to 21. Sales agents concede it is getting tougher and tougher to seal the deal.
“The buyer rushes into something, they sleep on it and decide, ‘Well, I really like the first house I saw better,’ and then they look for an out,” says Wehner. “And I’m telling you, when that happens, the emotions from the buyers and the sellers can run very, very high.”
Well-trained real estate agents will make sure their client asks all the right questions up front before making any decision. Sometimes they’ll suggest a simple, but effective, gesture to win a bidding war.
“A listing agent told me my client got the house because of the ‘sappy’ letter my client wrote to the homeowners saying, ‘I love how you took care of your home and I will love it, too,’” says sales associate Kori Krause. “Letters can work.”
The health of the real estate industry always depends on the big economic picture, especially as a presidential election looms. As John Caniglia says, “We builders pretty much spend our whole life worrying.” But with less than two months’ worth of housing inventory available and high demand, experts expect the Omaha market to continue its amazing run for the next three to five years.
Visit federalreserve.gov/releases/h15 for more information. B2B