OC Housing Market Update: How long will the bidding war last?
The following article includes views from Reports on Housing by Steven Thomas, economics expert and experienced real estate executive, and is not a reflection of the opinions, views, or predictions of Nuvision and its representatives.
When a home hits the market, it’s now common for it to quickly receive dozens of purchase offers. This is because demand is outpacing supply.
Active inventory, though it has increased by 190 homes over the past few weeks, is at a record low. Demand, on the other hand, has increased by 257 pending sales over the past two weeks.
Record-low inventory is now the driving force for demand, not low rates.
Since the pandemic began in March 2020, mortgage rates hit 17 record lows, reaching the lowest during January 2021 at 2.65%. Recently, rates have been going back up, rising from 3.05% on December 23rd, 2021, to 3.55% on February 3rd, 2022. So what is driving demand?
Rates are no longer the primary driver. Now, it’s a record inventory shortage. The market started off this year with 954 homes and has only risen to 1,426 homes. Compare that to the three-year average from 2017-2019 (prior to the pandemic) when there were 4,843 homes on the market, and you’ll realize just how low inventory has dropped.
At 1,683 pending sales, current demand is outstripping supply.
Record demand is creating an auction-style market.
With so many buyers and so little inventory, the competition is intense. Options are limited, meaning it’s the extremely qualified buyers with the most money, best credit scores, and the willingness to pay beyond what the seller asks who come out ahead.
The high demand is creating an auction-like environment where prices can skyrocket unbelievably fast. Every potential buyer who engages drives the price up. This is how the housing market has always worked in Australia, with homeowners hiring an auctioneer to manage the bidding process. But here in the United States, homes are not purchased this way. The current market pace and results, however, are making it feel very similar.
Need help navigating this market? Learn how at our webinar on Wednesday, February 16th at 10 AM.
In a market like this, it’s easy to make mistakes. Sellers may think it’s a good time to raise the asking price. It’s not. Keeping your price just at the last comparable closed sale will yield the best response from buyers, generating more interest and sparking a bidding war. This is how sales prices rise above the asking price, not by initial overpricing.
If you want to hear more tips like this on navigating the market, we invite you to join us at our February 16th Housing Market Webinar. Steven Thomas, who puts together the monthly Orange County Housing Report, will join Nuvision mortgage expert Mike Sternquist to break down the current market state and answer your questions.
This is your opportunity to interact directly with the experts who know the market best. To find more information or to register, visit the event page here.