California April Sales and Prices, Higher Than Ever

 Inventory, Inventory, Inventory. There's less of it, and yet.... not everything is selling within 7 days. If you are interested in selling or buying and would like more in depth information about the current market in Southern California for residential properties, just contact me via phone or text. 

Why there are fewer homes on the market has more than one possible answer, but this shortage has grown since 2012, back when 6 months inventory was more the norm, not 1.6 months. 

Last September, Long Beach had 2 months supply of homes on the market, in April 2021 it was 1.1 months.  And this is the time of year when we traditionally see much higher inventory.  In the last 7 days, 79 homes and condos came on the market, but 77 closed in the same period, and 120 went into escrow.  So the new listings are not keeping up with the overall sold volume.  

To help the situation for some reluctant sellers, the passage of Proposition 19 can assist for certain age 55-and-over sellers, or disabled, or natural disaster victims, who want to minimize a change in their property taxes if they choose to move.   Or, if you plan on relocating, study in advance the areas that may be economic advantage to move to. And for certain sellers, a purchase with a reverse mortgage can be an option.  Selling first before buying is the most optimal for sellers, but if you  can't, you want to make sure that finding a new property is a #contingency in the contract with the buyer.

Buyers who are willing to accept a property that needs some work that fits in their budget may actually be able to find the right home.  Some of those properties have been sitting on the market for a while longer and without the fierce competition of multiple bids.  And feel free to use the property search tool on the site below.

 For more market information about your area of interest, please contact me via phone, text or email.

 Julia Huntsman, REALTOR, Broker | www.juliahuntsman.com | 562-896-2609 | California Lic. #01188996

Buyers Feeling Squeezed in This Market, or "What is an Escalation Clause"?

With multiple offers, lowered inventory, and 15 minute showings, buyers have been under considerable competition and pressure so far in 2021.  In order to "weed out" the offers, sellers have been making certain requests, or buyers with several times losing out experiences have voluntarily been relinquishing their standard contingencies.  How?  By upping their offer price (even $100,000 over list price), shortening physical inspection time periods (i.e., 17 day to 10 days, or less), removing appraisal contingencies (putting their deposit at risk if they back out over a low appraisal), as examples.  

Another form of competition is an "escalation clause".   This is where the buyer offers, or the seller counter offers, to automatically increase the price by a certain amount, say $1,000, over any other offer. Of course, without any other language added, the buyer could be forced into paying $1,000 over another bidder offering $50,000 over list price--can the buyer really afford that? Well, what if the buyer puts in a "not to exceed" a certain price?  But now the seller know that buyer's maximum bid, and could use it as leverage to obtain higher amounts from other buyers.

If the buyer offers a "floor price" or $1,000 over the highest offer, the buyer may end up paying a higher price if no other offer matches the buyer's floor price.

To not blindly make offers using one of the above methods, the buyer should include language in their offer or counter offer that "the buyer  receive a copy of the highest offer (upon acceptance) and that the buyer has a right to contact that other buyer or their agent to verify that they made a bona fide offer," or words to that effect.

But California Association of Realtors cautions buyers about making offers with escalation clauses, stating that the enforceability of such offers is not 100% assured, and the buyer is advised to obtain legal advice prior to making such an offer.

For a the complete Guide, please contact me by phone or email.

Julia Huntsman, REALTOR, Broker | www.juliahuntsman.com | 562-896-2609 | California Lic. #01188996

A Strong Percentage of Homes Are Selling Above Asking Price

In January, 2021, over 56% of homes statewide sold over the asking price.  This is according to a Southern California April presentation by a California Association of Realtors economist as shown in the slides to the right.

The over-asking statistics may vary in areas, so for example, in a combined look at 180 sales of condos and houses between 4/8 and 4/15 in the 10 cities of Bellflower, Cypress, Harbor City, Long Beach, Carson, Torrance, Lakewood, Lomita, San Pedro, and Signal Hill*:

71% (approx.) or 127 homes out of 180 sold over asking.  

7% (approx.) or 12 homes sold at original list price.

19% (approx.) or 35 homes sold under original list price.

In lower prices starting at $300,000, the increase may be $900 to $15,000; in the $500,000 range the increase in closing price grew in some cases to over $50,000 higher, and in the $1,000,000+ category it may $150,000 higher.  However, one single family home listed in Long Beach for $595,000 recently closed at $700,000. 

For sellers such overbids may help them more easily into their next purchase, but for the huge number of first time buyers looking for opportunity with very low interest rates, there is much frustration. On many properties, multiple offers abound, often 15-20 offers from which the seller may pick, sometimes outright, sometimes countering back to a select group of buyers.

In a March 2021 Google Consumer poll, 64% of sellers thought it was a good time to  sell, while 28% of buyers thought it was a good time to buy. In 2020 however, 44% of buyers had more than a 20% down payment, and obviously many of them have the ability to bid some much higher prices to beat out the competition.  This leads to another issue:  appraisals.  Not all overbid prices are appraising, leading buyers to come up with more money, and how some are doing this is detailed in this article about the appraisal gap.

Who's not buying so much? Rental property investors, as COVID issues came to the frontline.

What will make the situation easier in the future?  Rising interest rates, more housing inventory, and an ongoing improving economy.
 

*as reported in CRMLS 

Julia Huntsman, REALTOR, Broker | www.juliahuntsman.com | 562-896-2609 | California Lic. #01188996