Home sales in 2017 showed nearly one-quarter (24.1 percent) of buyers paid more than the asking price, netting sellers an additional $7,000 on average over their initial offering price.
The share of homes selling above list price has grown considerably since the beginning of the housing recovery in 2012, when 17.8 percent of sales closed above asking price, according to a new Zillow analysis. As the market has continued to recover, the share of above-ask sales has risen in each of the past three years compared to the year prior.
In Chicago, the share of sales above listing price in 2017 increased by five percentage points to 18 percent in 2017 compared to the 13 percent in 2012. Developing a 2.6 percent median for homes paid for over the listing price in 2017 at an average of $5,100.
A combination of factors is contributing to sellers’ windfalls, including limited supply and high demand, demographic shifts, a strong economy and a worsening shortage of homes that are actually available to buy, especially at entry-level. Young adult renters are increasingly feeling confident enough to buy, transitioning away from renting as they move up the career ladder and start families, further increasing the buyer population.
Low interest rates have also buoyed buyers’ budget, raising limits on what they can afford and may be willing to pay.
“Low interest rates and strong labor markets with high-paying jobs have allowed home buyers in some of the country’s priciest housing markets to bid well over asking price,” said Zillow Senior Economist Aaron Terrazas. “In the face of historically tight inventory, buyers have had to be more aggressive in their offers. We don’t expect this inventory crunch to ease meaningfully in 2018, meaning buyers will be facing many of the same struggles this year.”
The housing market in general is very competitive, putting sellers in the driver’s seat. High competition among buyers means homes sell quickly, with the typical U.S. home selling in 80 days — including the time it takes to close on the sale after an offer is accepted.
Fierce competition means buyers may not win a home on their first bid and instead need come back with a sweeter offer. The typical buyer spends more than four months home shopping and has to make multiple offers before one is accepted, according to the 2017 Zillow Group Consumer Housing Trends Report.
But despite the widespread competition, the old rules still apply in a majority of areas, in which an asking price was generally seen as a starting point at which to negotiate a price down and not up. While a quarter of U.S. homes sold last year did ultimately fetch more than was asked, almost two-thirds — 65.9 percent — sold for below their asking price, while another 10 percent sold for exactly what they were listed for.