Across the nation, real estate markets are experiencing tight inventories in the midst of increasing demand for homes. The once abundant supply of homes, especially foreclosures has virtually vanished.
Potential home buyers and small investors must compete with international buyers—62% of who pay cash for all transaction according to the National Association of Realtors (NAR). Institutional investors and private equity funds also have the bankroll to pay cash and even bid up the price in some markets as they purchase properties by the hundreds.
Multiple Bids - The Norm
These dynamics have created a high demand coupled with low supply for homes in many areas of the country. This has led to bidding wars and appreciating homes prices. Values have appreciated at the fastest pace since the housing market bubble burst in 2007. Homeowners lost an average of 34% of their home value by 2012. In some markets, home prices declined as much as 60%.
Many home owners have regained some of their lost value. Some have decided to stay put or refinance into a low-interest rate home mortgage.
Many who decide to sale, and have equity in their homes, receive multiple offers to purchase. The real estate brokerage Redfin reports that 75% of the offers received by their clients in March were counteracted with competing bids compared to 56% in the last part of 2011.
California Hot Real Estate Markets
California probably has the hottest residential market in the nation. In February, the Inland Region, which includes Riverside and San Bernardino counties, experienced a 45% drop in inventories, from 15,120 to 8,113. Home listings have stayed in a range of 6,900 and 7,500 units since December 2012.
According to data, 90% of the homes sold in Sacramento, San Francisco and Southern California receive competing offers. Kurt Vogt, the manager of 14 Coldwell Banker offices in the Sacramento area states, "the only question is not whether a new listing will get multiple bids but how many it will get."
One home in Elk Grove, California listed for $129,000. The homeowner received 62 separate offers and sold eventually the house for more than $150,000.
Florida’s Housing Market
In Florida, South Miami broker associate Debbie Preston describes the demand for housing in this way: “Things are just crazy right now. If people are pricing homes fairly, they are getting sold. Our inventory is very low,” said Preston.
From February 2012 to February 2013, from February 2012 to February 2013 condominium values skyrocket to a median price of to $165,000 in the Miami-Dade area. It’s a 6% increased over January median price based on data reported by the Miami Association of Realtors and the local Multiple Listing Service.
The price of a single-family home increased 10.9% to $194,000 over the same period. One real estate agent reports that the inventory level for homes in the “affordable” $200,000 price range has fallen to a one-month supply.
Bidding wars in other cities
Other cities are also experiencing intense bidding for 66% of the properties listed for sale, including Seattle, Boston, New York and Washington, D.C. High-price real estate is also drawing heavy competition.
For example, in Cambridge, Massachusetts, two condominium units listed for $800,000 each and were marketed as an opportunity to combine them into a single home. The broker ceased taking names after two-hundred and fifty bidders were placed on the list. Both units sold to a single bidder for $2,000,000 within two weeks.
This scenario of rising demand for housing and low inventories is playing out in market across the country. The National Association of Realtors reports that in February, year-over-year inventory decreased 19.2%. Traditionally, more homes are listed for sale during the spring, but the NAR anticipates continued supply problems, which may push prices even higher.
Some economists predict that home prices will increase 10% because of the inventory shortage. Expect the intense bidding to continue for available real estate listings.