Kaushik Mukerjee and Preeti Vasishtha faced stiff competition when they set out to buy a home last spring. The couple, who live in Northern Virginia and have an 8-year-old son, were looking for a home in a good school district, but they lost out to other bidders on two houses before their offer on a townhouse stuck. “In one case we competed against 10 other offers, and the home sold for $20,000 above list price,” Mukerjee says. Ultimately, the couple paid $502,000—slightly above list price—for a 2,000-square-foot, three-bedroom townhouse in Burke, Va.

Kody Henderson, a 26-year-old first-time home buyer, also grappled with a hyper­active market when he looked for a home in the Seattle area. He struck out on three before he snagged a three-bedroom single-family house for $465,000 in Burien, Wash., last November. “I kept getting beat by cash offers that were usually above list price,” says Henderson. “It was frustrating.”