Multiple offers for homes are becoming the norm (again) in many California real estate markets. It is the result of shrinking inventory, cash-in-hand investors, and gradually improving economies.
Multiple offers. Bidding wars. Offers above the asking price. It seems like the California housing market has been down this road before, in the not-too-distant past. And here we go again.
Real estate agents across the Golden State have reported signs of increased, and often fierce, competition for homes. Meanwhile, listing prices and sale prices are rising sharply in many cities.
If you’re getting a sense of déjà vu from all this, you’re not alone. Current conditions within the California real estate market are eerily reminiscent of the bubble days. Hopefully, we are not destined to repeat that history in full — the inflated home values, the rampant speculation, the subsequent collapse of the housing market.
Multiple Offers Becoming the Norm, Again
A recent survey conducted by the California Association of Realtors revealed a highly competitive marketplace. The survey was sent to 15,000 randomly chosen real estate agents across the state. A key finding: 57% of homes sold thus far in 2012 received multiple offers from buyers. That’s the highest percentage of multiple offers in more than a decade.
This was the norm during the housing boom. Buying a home in California during the first half of this decade meant standing in line, and often paying above the asking price. Of course, in the wake of the housing crisis, the market flipped and buyers had all the leverage. But now it’s flipping again.
It’s not the pattern that is so surprising here — it’s the speed at which it is happening. Let’s not forget the California housing market was in shambles just three years ago. You wouldn’t know it to look at today’s headlines.
It’s a supply-and-demand story. On the supply side, we are seeing a major decline in the number of homes for sale. What does ‘major’ mean in this context? Consider this. Out of the 146 metro areas included in Realtor.com’s Monthly Housing Summary, California cities took eight of the top ten spots for inventory reduction.
California Leads Nation in Inventory Reduction
Here are the ten U.S. cities where the number of real estate listings fell the most, over the last year or so: *
- Stockton, CA: -63%
- Sacramento, CA: -60%
- Oakland, CA: -57% (related story)
- Riverside-San Bernardino, CA: -43% (related story)
- San Jose, CA: -42% (related story)
- Fresno, CA: -41%
- Bakersfield, CA: -39%
- San Francisco, CA: -38%
- Seattle, WA: -38%
- Atlanta, GA: -37%
* This list is based on Realtor.com listing data for the 146 largest metro areas in the United States, for the period of September 2011 – September 2012. Percentages have been rounded to the nearest whole number.
Inventories are shrinking across the Golden State, as shown by the numbers above. Over on the supply side, we’ve seen a higher level of demand from investors and ‘regular’ home buyers alike. Both groups seem to feel that the worst of the housing crisis is behind us. They might be right, if home prices are any indication.
Real Estate Prices Rising Sharply in Many Cities
Given the supply and demand situation above, it should come as no surprise that home prices are rising across much of California. In fact, every major metro area in the Golden State has seen some level of appreciation over the last year.
According to DataQuick, a San Diego-based real estate data company, the median sale price for California homes rose 15.3% over the last year or so. The state has logged seven consecutive months of year-over-year price gains.
Listing prices are rising sharply in many cities, as well. Also known as the asking price, the median list price has risen in every major California city over the last year (according to Realtor.com). This is another area where the Golden State dominates the top-ten rankings.
Of the top ten U.S. metropolitan areas with the biggest gains in list prices, California had six. Santa Barbara experienced the largest gain (32%) of any metro area in the country. Other cities in the top ten included:
- San Francisco (+18%)
- San Jose (+17%)
- Sacramento (+14%)
- Oakland (+14%)
- Riverside (+13%)
Given the current dynamics on both the supply and demand side of the fence, we expect to see further price gains well into 2013.
There is no shortage of questions surrounding California’s real estate scene: How long can the current upward trends last? Is it sustainable growth this time around, or has speculation reared its head again? Are we partying on the deck of the Titanic, or can the ship stay afloat? Time will tell.
Disclaimer: This story contains forward-looking statements about home prices within this market. These statements should be viewed as an educated guess, and nothing more. They should not be construed as financial advice. We make no guarantees about the future of this housing market.