Pricey Markets Mean Homebuyers Can’t Afford To Dream

February 26, 2016

Everyone loves to look at things they can’t afford with that maybe-one-day look in their eyes. It is good to have aspirations and it is fun to dream, but some of the pricier, more competitive markets in the U.S. are taking away the possibility for homebuyers to dream about a more expensive house.

For example, in Denver in 2014, the median price for listings viewed on Redfin was $359,000, but the median listing price for the city was $285,000. That’s a 26 percent difference. So far in 2016, the median price for viewed listings is $379,000 and the median listing price is $337,000, a difference of only 13 percent, reports Bloomberg.

So what gives? Have people become so pessimistic and disenchanted that they feel dreaming has become nothing more than a waste of time? Well, not exactly. In the past, people would start their search for a new home beyond their target price with the idea of offering less than the listing price. If a buyer wanted to spend $300,000, they might look at a $330,000 house and make a low offer to start the negotiating.

But now, in super-competitive markets where bidding wars are the norm, if a person wants to spend $300,000 on a new home, they might start their search at $280,000 with the thought that they will have to raise that offer up to $300,000.

Buyers may not have become more pessimistic, just more realistic.

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