Orange County Housing Report: Bidding War
February 8, 2021 / By Steven Thomas
When a home hits the market, it is greeted with throngs of buyers and so many offers to purchase that a bidding war ensues.
Multiple Offers: It is not uncommon for homes marketed FOR-SALE to procure 5, 10, 15, or even more offers to purchase within a few days of coming on the market.
Charity auctions can be very entertaining. There is always something that nearly everyone wants. An Italian villa, a gourmet chef for a week, a ski chateau in the Rocky Mountains, all garner plenty of attention. After scouring all the details, attendees strategize and settle on their maximum bids. The auctioneer starts the bidding low to capture everyone’s attention. Paddles are eagerly raised one after the other. There is so much interest that the auction transforms into a bidding war. The value soars upward until it finally slows, and a winning bidder is revealed. The final price is typically a lot more than many of the bidders were originally willing to pay.
That in essence is what is occurring daily in the real estate trenches. Homes that hit the market are instantly greeted with plenty of buyer interest and a stream of showings. In no time multiple offers follow. Buyers are pitted against each other and a bidding war develops. Yes, in many cases that means that a buyer must be willing to pay higher than the asking price to be the winning bidder. Many homes ultimately sell for more than their asking prices.
There are a lot of reasons the market is exceptionally hot today. The leading factor is record low mortgage rates. Another factor is the lack of available homes to purchase. There are fewer homes coming on the market right now because it is still the Winter Market. The vast majority of homeowners opt to “wait until the spring” to market their homes. With demand so hot, many homes are not available to purchase because they are in escrow. With more escrow activity, the supply diminishes. Also, fewer homes came on the market in January compared to the 5-year average, 9% less, or 266 missing FOR-SALE signs. That may not be a ton of missing signs, but it is adding to the problem.
In breaking down the inventory by price range, the lack of available homes to purchase is fairly uniform across the board. There are 1,512 fewer homes on the market compared to last year. In fact, the current inventory is at 2,493 homes, the lowest level since tracking began in 2004. To say that there are not enough available homes to satisfy current demand is an understatement. It is unprecedented.
In looking at demand levels by price range in Orange County, there is not much of a change below $750,000. Yet, it is important to note that despite demand being nearly the same in the lower ranges, it is matched up against far fewer available homes. Demand above $750,000 is considerably higher. Luxury homes continue to be extraordinarily hot as well.
A Tip to Sellers: The best strategy to obtain the top dollar for a home is to carefully price a home according to its Fair Market Value. This current market may be incredibly hot, especially below $1.25 million, that stretching the asking price and even overpricing a home may still result in eventually achieving the ultimate goal in selling; HOWEVER, it will be at the expense of leaving money on the table. Stretching the asking price and overpricing results in fewer offers to purchase and not being able to properly tap into the auction-like atmosphere in selling a home today.
Like a charity auction, there is a lot of buyer interest in today’s housing market. Paddles are eagerly raised one after the other in the form of offers to purchase. There is so much interest that the pseudo-auction atmosphere transforms into a bidding war. The value soars upward until a winning bidder is revealed. Wise sellers will take advantage of this market.