In the past whipsaw pandemic year, the U.S. real-estate market went from essentially shut down to an unprecedented rally. Today, increased demand has dwarfed the supply of homes coming on the market in many areas. The result is a severe inventory shortage spanning much of the country.
For this year’s Real Estate Guide, The Wall Street Journal partnered with Realtor.com to analyze inventory in luxury real-estate markets across the country. (News Corp, owner of The Wall Street Journal, also operates Realtor.com under license from the National Association of Realtors.)
Our data looked at more than 1,000 ZIP Codes with a median listing price of $750,000 and up, and compared average monthly inventory levels from the beginning of 2017 through the end of 2019 with those from March 2020 to February 2021. The results show that the most dramatic inventory drops occurred in vacation destinations, such as Cape Cod and the Jersey Shore, and exurbs of major cities that were once too far away for commuters.
On the other end of the spectrum, some luxury markets have seen significant increases in the number of homes for sale since the pandemic. Most of these are dense urban areas with a large proportion of condos and co-ops, or single-family houses on small lots: Several neighborhoods in Los Angeles saw large upticks in inventory, as did areas of New York City, San Francisco, Silicon Valley, Seattle and Boston.
In the many areas where inventory has shrunk, buyers are getting creative to make their offers stand out from the pack. Some buyers write a love letter to the seller, with photos and an explanation of the bidder’s plans for the house.
That strategy helped DJ and Lauren Bowser land a single-family house in the Miracle Mile neighborhood of Los Angeles. After getting outbid on three properties, they bid on a house listed for $1.299 million. Along with their offer of $1.485 million, they sent photos of their dog, Bear, and a letter explaining that Bear was an apartment dog who would love to have a backyard. It worked: They got the house for $1.4815 million (they got some seller’s credits) by beating out seven other offers, including one that was higher than theirs. The seller loved the photos of Bear, according to the Bowsers’ real-estate agent, the Agency’s Stephen Katz, who noted they also had a very strong offer.
But home seller Ashley Fleming discouraged buyers from writing love letters. She and her husband, Chris, listed their house in Bryn Mawr, Pa., on a Friday in early March, asking $899,000. They got nine offers, and by Sunday evening had a signed contract for over $1 million, all cash with no contingencies. She said she received two or three personal letters—one asking to see the house before it was listed on the market—and ignored them. "I have to say that the personal letter is a total dud," she said. "We had the attitude of, ‘show us the money, because that’s what’s really going to get you the house.’ "
In areas with higher inventory, however, selling a home is what takes creativity.
In Los Angeles, single-family homes priced under $2 million are selling quickly, agents said, but condos and pricier homes take longer to sell. Julie Stevens, 54, founder of a line of low-calorie cocktails called BeTini, listed her six-bedroom house in Santa Monica for $5.8 million in August 2020. The house had been sitting on the market for months, with multiple price cuts, when she hired a new agent, Rochelle Atlas Maize of Nourmand & Associates. While touring the house, Ms. Maize was inspired when she saw a projector screen in the basement with lighting to go with it. She hatched a plan to stage the house with TikTok and Instagram influencers in mind, then let them film at the house free to generate publicity. Dubbed "Hype House West," the house got multiple offers and is now in escrow for $5.175 million, just under its most recent asking price of $5.299 million. The buyer saw the house on social media, Ms. Maize said.
To help buyers and sellers navigate this strange new world, we offer a look at some of the communities with the lowest inventory compared with pre-pandemic norms, explore the reasons why these areas are so hot, and introduce you to some buyers and sellers who have successfully completed a home sale in these communities.
Cape Cod, Mass.
This peninsula has always been a popular vacation and retirement destination for New Englanders. But demand for Cape Cod homes has skyrocketed during the pandemic, as people flock here in search of rural surroundings and ocean access, said local real-estate agent Paul Grover of Berkshire Hathaway Home Services Robert Paul Properties. The Cape is easily reachable by car at a time when air travel is still fraught, he said.
But Cape homeowners aren’t selling. "They’re using the home, or the family is using the home, more than they had been," Mr. Grover said.
In August 2020, Noreen and Rich Clifford started looking for a retirement home in Dennis, about midway down the Cape peninsula, where they had vacationed for years and have family. The couple had always planned to retire on Cape Cod, but were in no rush to sell their home in the Boston suburb of Braintree until their daughter called in August to tell them her best friend wanted to buy their house. "We looked at each other and said, ‘let’s do it,’ " Ms. Clifford recalled.
When house-hunting on the Cape, the couple looked at roughly 50 houses. "It was like a frenzy," said Mr. Clifford, 66, a retired police officer. "That’s the only way to describe it."
They had had no luck by the time they closed on the sale of the Braintree house in November, so they stayed in a friend’s vacation home in Dennis for several months while continuing their search. Ms. Clifford resorted to putting notes in the mailboxes of houses they liked, asking if the owners would consider selling. One homeowner responded to her note, telling her he had received five other unsolicited offers.
In March, they landed a three-bedroom house in East Dennis listed at $780,000. They offered $810,000. The inspection revealed a failed septic system. The Cliffords bought the home with the failed septic in exchange for a price reduction. They ultimately paid $790,000, moving in on April 5. Their original budget had been $750,000, recalled Mr. Clifford, "and I thought that was stretching it."
The Jersey Shore has seen inventory dry up: The community of Normandy Beach saw a 79% inventory drop, according to Realtor.com data.
Like Cape Cod owners, Jersey Shore owners are using their homes, says Jeffrey Childers of Childers Sotheby’s International Realty in Normandy Beach. Gary Greendale, one of Mr. Childers’s clients, and his girlfriend, Linda Rivera, started looking for a waterfront vacation home on the shore in the spring of 2020, thinking they would land something in time for summer.
But, said Mr. Greendale, 56, who works in finance in Manhattan, "some of the areas we looked at, we’d be paying all-time record high levels. We got kind of discouraged."
He started looking farther south, where prices are lower but the drive from his primary home in North Caldwell, N.J., would be longer. Finally, he nabbed a house in Bayville, N.J., with a dock on a lagoon asking $735,000. He paid $785,000 for the property, and purchased the seller’s Bayliner XR7 powerboat. They closed in January, roughly nine months after starting their search.
Bayville is about one hour and 20 minutes from his home—farther than he wanted—but he’s pleased to have finally found something. "I’m looking forward to bringing our family out on the boat," he said.
Since the pandemic, Sun Valley’s isolation and natural beauty have made it a magnet for professionals no longer tethered to working in an office, according to local real-estate agent Janine Bear. As a result, Sun Valley’s 83353 ZIP Code saw a drop in inventory of 67%.
Salt Lake City residents Ryan and Nora Peterson bought their three-bedroom Sun Valley vacation condo in 2018 for $695,000 and spent about $200,000 remodeling it. They were using it less as their children got busier with sports and other activities. When Sun Valley home prices climbed during the pandemic, they decided to sell. They listed it with Ms. Bear for $1.15 million, got nine offers and sold it within three days for $1.515 million in cash. The purchasers, from Florida, had never even seen the condo until the day before closing, Ms. Peterson said.
Priest Lake, Idaho
Over the past year, city dwellers working remotely have relocated to the tiny towns along Idaho’s Priest Lake, which include Priest Lake, Nordman, and Coolin, where inventory has dropped by 67%, according to Realtor.com data. Local real-estate agent Kara Williams of Priest Lake Realty says buyers are drawn not only by the rural surroundings and natural beauty of the lake, but because the area had fewer pandemic restrictions than California and Washington state. Restaurants were open and so was the small local school. "A lot of people that had second homes already were moving here so kids could be in school in person," she said.
Exurbs of Washington, D.C.
Exurbs of major cities—towns beyond the inner ring of suburbs—have seen major inventory decreases since the pandemic. This effect is particularly pronounced outside Washington, D.C., in areas such as Howard County, Md., and Fairfax County, Va. The area has a strong economy due to Amazon and other tech companies, and with buyers looking for more space amid the pandemic, small towns such as Glenwood, Md., and Fairfax Station, Va., have quickly seen their inventory evaporate. Inventory fell 67% in Glenwood and 65% in Fairfax Station, according to Realtor.com data.
Howard County residents Dave and Tracy Duvall started looked for a new home this winter. They were living in Laurel, Md., but wanted a larger home closer to their children’s private school. Before the pandemic, Mr. Duvall, 42, commuted to Silver Spring, Md., for his job but now has to go to the office only about half the time. "The commute to work became secondary," he said. "We were looking for views that were woods and nature rather than another set of windows."
After several months of searching with Creig Northrop of Northrop Realty, they found a five-bedroom house on an acre of land in Howard County’s Ellicott City, where one ZIP Code was down 53% from pre-pandemic inventory levels. The home was listed at $950,000 and the Duvalls were determined to get it, so they bid $100,000 over the asking price with an open-escalation clause, meaning they would top any other offer. They also waived the home inspection and offered to pay all the out-of-pocket costs for closing. The house was listed on a Thursday and there were 15 offers by Saturday night, but the Duvalls’ offer was accepted.
King County, Wash.
Inventory in Seattle’s eastern suburbs has dwindled since the pandemic, according to Windermere Real Estate agent Karl Lindor. Small towns such as Carnation—where inventory dropped 65%, according to Realtor.com—were once considered too far from the city by many commuters but are suddenly more desirable, drawing buyers priced out of closer-in suburbs like Sammamish and Issaquah, he said.
- PRICE CORRECTLY: Sellers may not think they have to pay attention to pricing in the country’s many hot markets, but it is still important to price a house correctly, said Jessie Simmons, a Coldwell Banker agent in Chelan, Wash. Buyers and their agents have access to lots of pricing information and they likely won’t touch a house that seems wildly overpriced. Such a house can sit on the market and require price cuts, which reinforces buyers’ perception that there is something wrong with the property.
- REMOVE OBJECTIONS: To maximize the sale price of a home, Westchester County real-estate agent Betsy Ronel advises getting rid of as many "perceivable objections" from the home as possible before listing. Paint kitchen cabinets white and remove wall-to-wall carpeting, which tends to turn off buyers, she advises. Most importantly, make sure the house does not smell of pets or cigarettes. If needed, hire someone to deep-clean the home. "A house must smell clean," she said. "If not, the buyers will knock the price way down in their head.
Kristian Erickson and his girlfriend, Cori Walters, each owned a townhouse in Issaquah when they started looking to buy a home together. Concerned about finding the type of house they wanted in Issaquah, they started looking farther east and north. When they saw a 5-acre property with a view of the Cascades, a barn and a soccer field in the small town of Fall City, they fell for it immediately. The property was listed for $1.182 million. There were 13 bidders: Mr. Erickson and Ms. Walters got it for $1.451 million, waiving their home inspection and appraisal contingency. Ms. Walters also wrote a letter to the sellers describing how much they loved the property and how they planned to use it. "Images of kids playing soccer late into the summer night with friends laughing around a bonfire are stuck in our heads," she wrote.
Essex County, Mass.
Essex County, on the North Shore of Boston, has been popular during the pandemic because of its sought-after school districts and proximity to the ocean, said agent Jack Brown of Sagan Harborside Sotheby’s International Realty. In the Essex County town of Lynnfield, inventory plummeted 63%, according to Realtor.com.
The Flemings experienced the hot market firsthand when they found out they would be relocating from Philadelphia to Boston for Mr. Fleming’s job. The family started looking at houses outside Boston starting in January, zeroing in on the Essex County town of Andover, where inventory has dropped 42%. They made offers on several houses but were outbid.
They didn’t want to rent an apartment, so they changed real-estate agents, hiring Andover-based Peggy Patenaude of William Raveis Real Estate, and increased their budget to $1.5 million. They bid on a five-bedroom house with a pond that was asking $1.599 million, which was out of their price range. They waived all contingencies and were flexible about their closing date, but made an offer that was just under the asking price. They got it, for $1.555 million. "It’s such a relief," said Ms. Fleming. She still hasn’t seen the house in person, although her husband has.