A Real Estate Reckoning
This year looks as if it will be especially brutal. In most markets, supply continues to evaporate. Overall inventory decreased over the last 43 straight months, and the number of available starter homes was down 14.2 percent year over year in the first quarter of 2018.
Slim pickings mean this spring and summer, traditionally the high points for sales, will see even more potential buyers making bids—since some have already been at it for months—and driving up prices. A recent study conducted in early March found that 40 percent of current buyers have been searching for more than seven months.
Today’s shortage stems from the atypical recovery from the 2008 housing crisis. Since 2012, most markets have seen years of inadequate housing starts, rising prices, and increasing crowds of buyers the national average home price has appreciated every single quarter since 2012.
This price appreciation makes bidding and buying seem all the more dramatic. The market in San Francisco for example isn’t more competitive than it has been over the last few years. The stakes just keep getting higher.
It’s the same kind of excitement and fervor we had in 2015; things now cost an additional 20 percent. What we thought was a ridiculous price in 2015 would be a fantastic deal today.
The competitiveness of the last few years may be the new normal. These same forces are at play in here in the Los Angeles markets.
Mostly focused on residential listings in Echo Park, Los Feliz, and the San Fernando Valley. LA territory includes many neighborhoods traditionally seen as rich in smaller starter-home inventory. Nearly every house of that size and price range moves in two weeks, often receiving multiple offers and closing 10 to 12 percent over ask.
More buyers, angling for a smaller pool of starter homes, are willing to pay above asking and make all-cash offers to show they’re serious and simply stop the cycle of bidding and rejection.