He offered cash and more than the asking price, but he didn’t get the house. Here’s why.

Did you hear the one about the homebuyer who was offering cash and was willing to pay above asking price for a Lexington home?

He didn’t get the house.

Why? His cash was in his Individual Retirement Account, which would have taken three weeks to convert. He lost the house, in the $160,000s, to another buyer who was also paying above asking price in cash and could close in two weeks.

That anecdote, from Lexington Realtor Larry Newsome, shows how tight the housing market has become in Central Kentucky.

“We came in second behind a more than full price offer,” Newsome commented.

The general rule of thumb in area real estate is that an adequate supply of homes to have on hand is six months’ worth.

For Fayette County in February — the most recent month for which Lexington-Bluegrass Association of Realtor statistics are available — there were what Realtors considered two weeks of inventory in the $140,000-$159,999 price range including 22 three-bedroom homes and three four-plus bedroom homes.

More inventory was available for higer priced homes, but more than six month inventory was only available in those homes costing $500,000 and up, a price range not considered an entry point for many first-time homebuyers.

In Madison County, February numbers reflected less than six months’ supply in almost all price categories less than $300,000. Realtor Amanda Stepp Marcum, who works primarily in Madison County, said she used to be able to find 10-20 houses to show prospective buyers at any price point.

And now?

“There’s maybe five,” she said.

John Groft, manager of Re/Max Creative Realty and president of LBAR, said that ripples from Lexington’s lack of inventory spread throughout the region, including Madison, Bourbon, Scott, Jessamine and Woodford counties.

Back in the late ‘90s, the area suffered a few tight years in housing inventory, Biller said. After the 2008 recession, the Lexington market bottomed out in 2011-2012.

But then the buyers, backed with a stronger economy, came back, and homes started to enter the market, he said. The problem now is supply.

“We’re struggling right now with inventory,” Groft said. “We’re all impacting each other when Fayette’s down. ... And sellers are hesitating to put their houses on the market because there’s nothing for them to purchase.”

So, what’s a buyer to do? Groft suggests being patient, and flexible about finding a house inside Fayette County. He worries that new companies bringing employees into the area may be unable to house those workers.

“You have to have people who are willing to commute,” Groft said. “Sellers are benefiting with the higher sales prices and interest rates are still historically low. ... We just need more homes.”

In Fayette County, part of the reason for the scarce house supply is that Lexington’s city policy has tended toward protection of farmland over increasing new residential development, with infill likely to be more scattered and done in smaller numbers of units.

“The rules we’ve put in place to protect the horse industry are important,” said Remax sales associate Norm Biller. “But one consequence ... is constraint of supply.”

While there are still new houses being built in Lexington, the numbers are not big.

Some builders are adding to the supply. Developments including the Fairways at Andover are building new houses, as is the behemoth Masterson Station development, Summerfield off Winchester Road and Garden Meadows off Greendale Road.

Even if a developer began planning a new neighborhood today, Biller said, it could take four-six years “before we started to see rooftops.”

A variety of factors are driving home buyers into the market: Interest rates creeping up from historic low rates and the arrival of millennial buyers who have been delaying their first home purchase.

“In the short run, you have people who have been thinking about it for a while. You’re seeing some of those buyers hop off the fence,” Biller said.

But it’s not just a matter of having buyers into the market. The timing has to be right for sellers, too.

In a seller’s market, sellers get to be more choosy about their own timing: whether they have another home lined up to move into when their current homes sells, and how long the closing process should take to make their transition most convenient.

“Sometimes the terms are more important than the price,” said Marcum. “It’s just made people gun shy to list their house.”

The housing furor isn’t neighborhood-specific, according to Realtor Amy VanWinkle with Lexington’s Keller Williams Realty. It’s price-point specific: buyers learning new ways of buying houses, sometimes with cash and putting in sometimes as many as 6-8 contracts, just to get a single home.

“You’re looking at things going off the shelves that day,” said VanWinkle. “Sometimes I don’t even get a sign in the yard. Everything under $180,000, we’re looking at bidding wars going on.”

Some buyers may find themselves buying a home that needs a bit of work. Marcum, the Madison County Realtor, said that she has her sales team comb the aisles at Lowe’s so they can advise clients on how much minor fixes, such as lighting, cost.

For that awareness of how minor fixes to a home can change its looks in a big way, real estate professionals have HGTV to thank: Chip and Joanna Gaines’ show “Fixer Upper” is often cited as an inspiration to those who want to put a modern gloss on a house with potential (shiplap, Joanna Gaines’ preferred material, not included).

Until the supply of houses increases, Biller said buyers can’t wait to take a weekend jaunt out to look at a house that caught their eye.

“A buyer really needs to get out and see a hot new listing the day it comes on the market. We’re not scheduling it for the weekend when you have time off work. We want to get them in there as quickly as possible.”

This story was originally published April 6, 2018 at 12:05 PM with the headline "He offered cash and more than the asking price, but he didn’t get the house. Here’s why.."