When Halstead Property real estate broker Barry Silverman held the first open house for a one-bedroom apartment in Manhattan's Greenwich Village on a Sunday in March, it turned out to be the last showing.
"One hundred and forty people came. They were lined up," he said.
The next day Silverman had 14 offers. All but two topped the $890,000 asking price.
After reviewing their financials, Silverman asked the rivals for their "best and final offer," explaining that he had received many offers.
A slew of new bids arrived. The seller accepted an all-cash offer of $970,000.
"I didn't expect it to go that high," Silverman said.
Bidding wars! Though real estate agents don't like to call them wars, buyers are bidding up prices above list price to snag scarce properties across popular neighborhoods of New York City and beyond.
Multiple offers above asking price are becoming the norm in other pockets across the country from Miami to San Francisco as buyers compete for tight supply, caused in part by owners who are hesitant to sell this early in the recovery.
In April, listed existing-home inventory nationwide was 13.6% below a year ago, the National Association of Realtors reported on Wednesday. The national median existing-home price for all housing types was up 11% from a year earlier to $192,800.
"Buyer traffic is 31% stronger than a year ago, but sales are running only about 10% higher," NAR chief economist Lawrence Yun said in the report.
Citing "limited choices and multiple bidding," the NAR said the median price in the West was up 17.5% from a year earlier to $263,600.
Sales in the Northeast were up about 5% from April 2012, as was the median price.
Brushing '5 Million' Mark
Had it not been for low inventory and tight credit, existing-home sales would easily be well above the 5-million-a-year pace, the NAR said. Sales in April grew to a seasonally adjusted annual rate of 4.97 million units nationwide from March's upwardly revised 4.94 million.
San Jose and San Francisco are seeing sales contracts top list prices by at least 2% and in some sub-markets there by 8%, according to research from online real estate marketplace Zillow (Z).
In some Atlanta markets, sales contracts are being signed at 6% above the list price and in some Dallas metro markets at 3% above the asking price, according to Zillow.
Beyond The Bubble
Is it 2006 all over again? Not really, real estate experts say.
During the bubble, easy credit and speculators flipping properties fueled a buying frenzy that drove prices up. Credit is tighter now.
But a combination of several factors now come into play, including ultralow mortgage rates, low inventory, rising rents and a new sense of confidence that the economy and job market are on the mend, observers say.
"That is a powerful aphrodisiac for buying," Silverman said.
While the 800-square-foot Greenwich Village apartment he sold for $80,000 above list price may seem overpriced, it's in a desirable building and a coveted neighborhood. "But the most important thing about it was that it was available," Silverman said. "It is a very, very tight market.
Listing inventory in Manhattan fell by 34.4% year to year in the first quarter, according to research from Douglas Elliman Real Estate. Across the East River in on-the-rise Brooklyn, inventory dropped 45.4%.
It was the steepest drop in Manhattan in 12 years and the lowest inventory level in Brooklyn in the five years Elliman has been tracking data there.
Meanwhile, the median price of homes in Brooklyn rose 14.4%. In Manhattan, it was up nearly 6%, according to Elliman.
"There is just so little inventory everywhere. It's feeding into this frenzy and driving up prices," said Sofia Song, vice president of Streeteasy.com, a real estate research firm. "A lot of buyers are entering the market now because they feel they will be priced out.
Property broker Madeline Williamson of Douglas Elliman is feeling the heat in Brooklyn.
"Prices have completely changed. It started about three months ago," she said.
Homes Sell Without Staging
One of Williamson's listings, for a dated one-bedroom fixer-upper in Brooklyn Heights, sold recently for $40,000 over the $460,000 asking price. And that was even before a crumbling ceiling was fixed and the unit painted to make it more presentable for showings.
"I told people we wouldn't show it until it was fixed. People begged to see it (anyway)," she said.
"The combination of higher rents and the ability to purchase and pay less in your mortgage payment than rent has really stirred buyers who have been sitting on the sidelines," Williamson said.
In hot South Florida coastal markets around Miami, which has had its share of booms and busts, low inventory is also a problem.
"Bidding wars started about eight months ago," said agent Robin Katz of Keller Williams Realty in Miami Beach. "We're further along in our recovery.
One single-family home in the Mid-Beach neighborhood of Miami Beach that listed as a short sale for $659,000 ended up going to a buyer for $907,000, she says.
"The agent priced it low and got a lot of action. Ultimately, the bank got a lot of money," Katz said.
The problem of tight inventory won't get resolved until more homes go on to the market and enough new construction is readied for sale, real estate experts say.
"Hopefully with the increase in prices people will consider putting their places on the market again," Song said.
Thousands of new condominiums are expected to hit the Miami market, but most of them are targeted to the high end of the market. In New York, new construction hasn't made up for the supply shortfall — and most of it is also targeted to the super-rich of the world.