Real-Estate Frenzy Overwhelms Small-Town America: ‘I Came Home Crying’
Buyers far from big cities lose out to investors and deep-pocket rivals in places where properties until a year ago offered affordable entry to the middle class
By | Photographs by Michelle Gustafson for The Wall Street Journal
May 20, 2021 7:59 am ET
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Dominic Pollock, still in his work boots, stood on the lawn of a 1960s-era three-bedroom house for sale in the former steel town of Bethlehem, Pa., 60 miles north of Philadelphia. It was listed at $250,000.
“I really, really like it,” Mr. Pollock told his real-estate agent Danny Hazim, a buddy from high school in neighboring Allentown, Pa. Groups of other interested buyers huddled nearby and whispered to their agents in urgent tones, casting sly glances at rivals.
Mr. Pollock, 25 years old, was willing to go above the asking price. He and his fiancée, Brooke Terplan, 26, had made more than 20 offers on houses over nine months. Each time, they were outbid.
S&P Case-Shiller national home-price index, adjustedfor inflationSource: S&P Dow Jones Indices via Federal Reserve Bank of St.LouisNote: January 1987 = 100
2000'05'10'15'2090100110120130140150160170
The couple had hoped to land a home by their wedding this week and begin a life together. Mr. Pollock lived with his brother, and Ms. Terplan, a labor-and-delivery nurse, lived with her parents.
Like many would-be buyers, they braced for disappointment.
Home prices in the U.S. have shot up in the past year, driven by limited supply, record-low interest rates and buyer demand. Bidding wars have spread from such high-profile locations as Palm Beach, Fla., and the suburbs outside New York City to smaller cities and towns, including long-neglected locales where properties typically sat on the market for months.
Brooke Terplan and her fiancé, Dominic Pollock, at an open house in Whitehall, Pa.
Local buyers bid against one another as well as against investors who now comprise about a fifth of annual home sales nationally. Online platforms such as BiggerPockets and Fundrise make it easier for out-of-town investors to buy real estate in smaller cities across the U.S., said John Burns of California-based John Burns Real Estate Consulting.
Often, Mr. Burns said, “the cash flows are better in the Tulsas and Allentowns of the world” for those seeking to rent out properties. In the fourth quarter of 2020, nearly a fifth of homes sold in the Allentown area were bought by investors, according to Mr. Burns’s data.
The median listed price for a house jumped 24% in January from a year earlier in the metropolitan area surrounding Allentown, the Rust-Belt city whose decline was memorialized in a 1982 Billy Joel song, according to data from Realtor.com. It was the same in such spots as Martin, Tenn., a small city 150 miles from Nashville, where the median asking price went up 159% over the same period; in Kendallville, Ind., about 30 miles outside Fort Wayne, it climbed 56%.
The average price for a house in the Allentown metro area, which includes Bethlehem, was about $225,000 a year ago, Mr. Campbell said. It has since shot past $270,000 in a market so hot that open houses trigger traffic jams, and properties sell in 48 hours.
Median listing price, change from a year earlierSource: Realtor.comNote: Three-month moving average
%Kendallville,Ind.Martin,Tenn.U.S.2020'21-20020406080
Many homeowners want to sell while prices are high but hesitate for fear they won’t find an affordable place to move. Housing supplies can’t meet demand.
In Bethlehem’s 18018 ZIP Code, the average monthly number of homes for sale has fallen 65% in the past year to 25 from 2017-2019 levels, according to Realtor.com. ( News Corp, owner of The Wall Street Journal, operates Realtor.com under license from the National Association of Realtors.)
Buyers feel pressure to make snap decisions, and some forgo routine home inspections for fear of losing to another bidder. “If you’re a buyer, this is the most frustrating time,” said Jonathan Campbell, vice president of DLP Realty in Bethlehem. The local market, he said, is outpacing the mid-2000s housing boom.
With the exception of a few urban markets, including Manhattan and San Francisco, the U.S. is seeing “a chronic shortage of inventory, heavy sales volume and prices rising at levels wildly ahead of income growth,” said Jonathan Miller of New York-based Miller Samuel Real Estate Appraisers and Consultants. The Case-Shiller U.S. National Home Price NSA Index reported a 12% annual gain in February, a figure seen only a few times in the history of the index, said Craig Lazzara, a managing director at S&P DJI.
The ranch-style house where Mr. Pollock stood with Mr. Hazim on Kensington Road had been listed a day and already had several offers. It was 1,900 square-feet with a full bathroom and two half baths. The sellers would only take bids until 11 p.m. the following day.
Mr. Pollock, who installs fire sprinklers, agreed to submit an offer of $270,500, adding $20,500 to the asking price. To sweeten the deal further, he waived his right to an inspection of the plumbing, roof, foundation or any other part of the house.
“We will know by tomorrow,” his agent, Mr. Hazim, told him.
First home
Old blast furnaces at the long-defunct Bethlehem Steel plant rise over the Lehigh River, 90 miles west of New York City. The city of Bethlehem and neighboring Allentown were major industrial centers until a wave of factories moved overseas in the 1980s and 1990s.
In the center of Allentown, population 121,000, Victorian row houses once occupied by middle-class families were divided into low-cost apartment rentals. The city’s downtown has recently been redeveloped, but crime remains a common complaint, said Mr. Hazim, 25, who grew up there.
Healthcare and universities are now major employers in the region, which is known as the Lehigh Valley. Much of the area is still farmed. The road a few minutes drive outside of downtown Allentown is flanked by cornfields, and the air smells of manure.
From left, Dominic Pollock, Brooke Terplan and real-estate agent Danny Hazim about to tour a house in Bethlehem, Pa.
Mr. Pollock and Ms. Terplan grew up a few houses apart in an Allentown subdivision called Midway Manor. They started dating when they were 21. It was on New Year’s Eve 2016, at the pub where Mr. Pollock still tends bar on weekends. Someone asked if he was going to kiss Ms. Terplan at midnight, and he did.
The couple started looking for a house around the time they got engaged in August. They needed a place with room to start a family. Ms. Terplan said she wants to get pregnant as soon as they marry. “She really wants the American dream, the white picket fence, the two dogs out back,” Mr. Pollock said.
SHARE YOUR THOUGHTS
Have you or family members been caught in the real-estate frenzy, either as a buyer or a seller?Join the conversation below.
They had been saving for years and planned on making a 10% down payment when they started looking. “A couple people told us that it was going to be tough,” Mr. Pollock said, “but we couldn’t even fathom what we’d walk into.”
Before the pandemic, home prices in the Lehigh Valley began at around $15,000 for a mobile home and went to $400,000 for a two-story house in a newer subdivision. Historic homes in the West End of Allentown sold for as much as $450,000. For years, buyers had their pick, Mr. Hazim said.
After the first round of pandemic lockdowns eased, real-estate offices reopened last June, Mr. Hazim said, and agents noticed a shift in the market right away.
First, there were fewer home listings than normal because of Covid-19 fears. “No one wants to list their house because no one wants random people coming in,” he said of the scariest period. “You never know who has it.”
Supply also was down because the government’s mortgage forbearance program sharply reduced home foreclosure sales. At the same time, Mr. Hazim said, demand for homes ballooned.
A Lehigh Valley Health Network facility in Allentown, Pa.
Investors are attracted to the Lehigh Valley, Mr. Hazim said, because home prices and taxes are low relative to market-level rents. He recently worked with a New York City-based investor who bought a single-family house in the town of Northampton, about 20 minutes from Allentown.
Buyers far from big cities lose out to investors and deep-pocket rivals in places where properties until a year ago offered affordable entry to the middle class
By | Photographs by Michelle Gustafson for The Wall Street Journal
May 20, 2021 7:59 am ET
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Listen to this article
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Dominic Pollock, still in his work boots, stood on the lawn of a 1960s-era three-bedroom house for sale in the former steel town of Bethlehem, Pa., 60 miles north of Philadelphia. It was listed at $250,000.
“I really, really like it,” Mr. Pollock told his real-estate agent Danny Hazim, a buddy from high school in neighboring Allentown, Pa. Groups of other interested buyers huddled nearby and whispered to their agents in urgent tones, casting sly glances at rivals.
Mr. Pollock, 25 years old, was willing to go above the asking price. He and his fiancée, Brooke Terplan, 26, had made more than 20 offers on houses over nine months. Each time, they were outbid.
S&P Case-Shiller national home-price index, adjustedfor inflationSource: S&P Dow Jones Indices via Federal Reserve Bank of St.LouisNote: January 1987 = 100
2000'05'10'15'2090100110120130140150160170
The couple had hoped to land a home by their wedding this week and begin a life together. Mr. Pollock lived with his brother, and Ms. Terplan, a labor-and-delivery nurse, lived with her parents.
Like many would-be buyers, they braced for disappointment.
Home prices in the U.S. have shot up in the past year, driven by limited supply, record-low interest rates and buyer demand. Bidding wars have spread from such high-profile locations as Palm Beach, Fla., and the suburbs outside New York City to smaller cities and towns, including long-neglected locales where properties typically sat on the market for months.
Brooke Terplan and her fiancé, Dominic Pollock, at an open house in Whitehall, Pa.
Local buyers bid against one another as well as against investors who now comprise about a fifth of annual home sales nationally. Online platforms such as BiggerPockets and Fundrise make it easier for out-of-town investors to buy real estate in smaller cities across the U.S., said John Burns of California-based John Burns Real Estate Consulting.
Often, Mr. Burns said, “the cash flows are better in the Tulsas and Allentowns of the world” for those seeking to rent out properties. In the fourth quarter of 2020, nearly a fifth of homes sold in the Allentown area were bought by investors, according to Mr. Burns’s data.
The median listed price for a house jumped 24% in January from a year earlier in the metropolitan area surrounding Allentown, the Rust-Belt city whose decline was memorialized in a 1982 Billy Joel song, according to data from Realtor.com. It was the same in such spots as Martin, Tenn., a small city 150 miles from Nashville, where the median asking price went up 159% over the same period; in Kendallville, Ind., about 30 miles outside Fort Wayne, it climbed 56%.
The average price for a house in the Allentown metro area, which includes Bethlehem, was about $225,000 a year ago, Mr. Campbell said. It has since shot past $270,000 in a market so hot that open houses trigger traffic jams, and properties sell in 48 hours.
Median listing price, change from a year earlierSource: Realtor.comNote: Three-month moving average
%Kendallville,Ind.Martin,Tenn.U.S.2020'21-20020406080
Many homeowners want to sell while prices are high but hesitate for fear they won’t find an affordable place to move. Housing supplies can’t meet demand.
In Bethlehem’s 18018 ZIP Code, the average monthly number of homes for sale has fallen 65% in the past year to 25 from 2017-2019 levels, according to Realtor.com. ( News Corp, owner of The Wall Street Journal, operates Realtor.com under license from the National Association of Realtors.)
Buyers feel pressure to make snap decisions, and some forgo routine home inspections for fear of losing to another bidder. “If you’re a buyer, this is the most frustrating time,” said Jonathan Campbell, vice president of DLP Realty in Bethlehem. The local market, he said, is outpacing the mid-2000s housing boom.
With the exception of a few urban markets, including Manhattan and San Francisco, the U.S. is seeing “a chronic shortage of inventory, heavy sales volume and prices rising at levels wildly ahead of income growth,” said Jonathan Miller of New York-based Miller Samuel Real Estate Appraisers and Consultants. The Case-Shiller U.S. National Home Price NSA Index reported a 12% annual gain in February, a figure seen only a few times in the history of the index, said Craig Lazzara, a managing director at S&P DJI.
The ranch-style house where Mr. Pollock stood with Mr. Hazim on Kensington Road had been listed a day and already had several offers. It was 1,900 square-feet with a full bathroom and two half baths. The sellers would only take bids until 11 p.m. the following day.
Mr. Pollock, who installs fire sprinklers, agreed to submit an offer of $270,500, adding $20,500 to the asking price. To sweeten the deal further, he waived his right to an inspection of the plumbing, roof, foundation or any other part of the house.
“We will know by tomorrow,” his agent, Mr. Hazim, told him.
First home
Old blast furnaces at the long-defunct Bethlehem Steel plant rise over the Lehigh River, 90 miles west of New York City. The city of Bethlehem and neighboring Allentown were major industrial centers until a wave of factories moved overseas in the 1980s and 1990s.
In the center of Allentown, population 121,000, Victorian row houses once occupied by middle-class families were divided into low-cost apartment rentals. The city’s downtown has recently been redeveloped, but crime remains a common complaint, said Mr. Hazim, 25, who grew up there.
Healthcare and universities are now major employers in the region, which is known as the Lehigh Valley. Much of the area is still farmed. The road a few minutes drive outside of downtown Allentown is flanked by cornfields, and the air smells of manure.
From left, Dominic Pollock, Brooke Terplan and real-estate agent Danny Hazim about to tour a house in Bethlehem, Pa.
Mr. Pollock and Ms. Terplan grew up a few houses apart in an Allentown subdivision called Midway Manor. They started dating when they were 21. It was on New Year’s Eve 2016, at the pub where Mr. Pollock still tends bar on weekends. Someone asked if he was going to kiss Ms. Terplan at midnight, and he did.
The couple started looking for a house around the time they got engaged in August. They needed a place with room to start a family. Ms. Terplan said she wants to get pregnant as soon as they marry. “She really wants the American dream, the white picket fence, the two dogs out back,” Mr. Pollock said.
SHARE YOUR THOUGHTS
Have you or family members been caught in the real-estate frenzy, either as a buyer or a seller?Join the conversation below.
They had been saving for years and planned on making a 10% down payment when they started looking. “A couple people told us that it was going to be tough,” Mr. Pollock said, “but we couldn’t even fathom what we’d walk into.”
Before the pandemic, home prices in the Lehigh Valley began at around $15,000 for a mobile home and went to $400,000 for a two-story house in a newer subdivision. Historic homes in the West End of Allentown sold for as much as $450,000. For years, buyers had their pick, Mr. Hazim said.
After the first round of pandemic lockdowns eased, real-estate offices reopened last June, Mr. Hazim said, and agents noticed a shift in the market right away.
First, there were fewer home listings than normal because of Covid-19 fears. “No one wants to list their house because no one wants random people coming in,” he said of the scariest period. “You never know who has it.”
Supply also was down because the government’s mortgage forbearance program sharply reduced home foreclosure sales. At the same time, Mr. Hazim said, demand for homes ballooned.
A Lehigh Valley Health Network facility in Allentown, Pa.
Investors are attracted to the Lehigh Valley, Mr. Hazim said, because home prices and taxes are low relative to market-level rents. He recently worked with a New York City-based investor who bought a single-family house in the town of Northampton, about 20 minutes from Allentown.
