After several years of an oversupply of homes on the market and an undersupply of qualified buyers, the tables have turned for the Bay Area’s housing market. It may be hard for some consumers to believe, but our local housing market has bounced back in a big way over the past year or two. Eager buyers are once again out in force ready to purchase their next home. But ironically, the only thing stopping them is a serious shortage of homes for sale!
We’ve come a long ways from the recessionary days when homes sat on the market for many months or even a year or longer waiting for a buyer. Today, properties are once again being snapped up quickly, often with multiple offers due to the shortage of inventory. While this imbalance is frustrating some would-be buyers, it is also creating a great opportunity for savvy homeowners who have gotten the message that now may be the best time in many years to sell their home.
In the Bay Area, inventory levels are down more than 62 percent from a year ago in some areas. This comes as the economy gains momentum and the job market and the financial markets improve – all providing more ready cash and incentives for buyers to purchase. The result is that there are more offers for good homes for sale. Sellers are getting higher prices and properties are moving faster than they have in years.
As a result of this shortage of homes for sale in the Bay Area, we are back to seeing offers with no contingencies in some cases, and buyers making offers on several properties before they actually get into contract on one. Multiple offers of $100,000 to $200,000 over asking price is not unusual in some prime neighborhoods. In one extreme example, there were 28 offers on one property that sold over listing price by 20 percent.
The Bay Area isn’t alone. According to the California Association of Realtors, the state’s overall housing inventory declined in February, with the unsold inventory index for existing, single-family detached homes decreasing to 5.3 months, down from a revised 5.7 months in January and down from the 7.5-month supply in February 2011. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.
Adding to the strong buyer demand are record-low interest rates. Interest rates fell to historic lows again in April. Thirty-year fixed-rate mortgages averaged 3.87 percent, down more than 1 percent from a year ago, according to Bankrate.com. Fifteen year fixed rates dropped to 3.11 percent and adjustable-mortgage interest rates were 2.73 percent in April.
To be sure, the housing market is once again coming alive. Real estate agents are seeing 80-100 visitors at some open houses, multiple offers are no longer exception, but the rule in many communities, and buyers are showing a sense of urgency perhaps out of concern that record low interest rates could be heading higher before long. Some recent comments from our local managers:
Sellers need to sense the same pent up demand, excitement and urgency in the market that buyers have sensed for the past year. They need to take the long postponed leap to list their homes for sale now.
Simply put, there just aren’t enough homes on the market to meet the tremendous demand from buyers. And this is true in all price segments, from small starter homes and condos right up to multi-million-dollar Previews properties.
The days of buyers being only interested in distressed properties at bargain basement prices are over. Homebuyers are pounding the pavement looking for good, well-maintained properties at fair prices in every segment of the housing market.
The real estate market has always come down to two simple factors: the law of supply and demand, and consumer confidence. Right now, both of those are creating a sellers’ market here in the Bay Area. Consumers are feeling more confident as the economy picks up steam and the stock market turns in strong gains in 2012. Clearly, the scales of supply and demand are tipping heavily in favor of sellers today.
Smart, strategic homeowners understand all this, and they’re making their moves right now – not six months or a year from now. They’re the ones getting multiple offers for their home because there just isn’t a lot of competition for buyers’ attention. They’re out there now, before everyone else joins the “house party” and tips the scales back in favor of buyers once again.
If you’ve been thinking about selling your home, now is the time. I’m happy to answer any questions you may have, and to help you get the very best possible price for your home while demand is so strong.