When Grant Fry spotted a listing one night for a four-bedroom house in Orange that seemed to be exactly what he was seeking, he knew he had to move fast. He showed up at the home the next day: “We were here. Bam.” He submitted an offer five hours later, at the full asking price of $479,000.
The seller’s photos weren’t even up on the MLS yet.
“I kept hearing about bidding wars,” said Fry, 51. “I did not want to get into that.” He said he was successful “by staying on top of the listings. They change every day.” In addition to online searches, he drove as much as 45 miles a day looking at houses.
With an extreme shortage of homes on the market in Orange County and many places around the nation, homebuyers have been swarming homes for sale and open houses, driving up prices and pretty much leaving any dream of scoring a “deal” in the dust, real estate agents say.
In Huntington Beach, Realtor Bill Smith describes an open house that “looked like a carnival. There was almost no parking on the entire block.”
In Rancho Santa Margarita, Realtor Cindi Powalski saw more than 50 people attend her open house. A loan officer worked on site. The four-bedroom house, which got several offers, found a buyer that day.
In Ladera Ranch, real estate broker Brian Doubleday sold a five-bedroom home listed for $888,000 in less than a week, at full price. “The demand was outrageous,” says Doubleday, co-owner of IML Real Estate. “All the properties right now, you get a tremendous amount of response right away.”
The same scenario is playing out around the country, with inventory shrinking by 19 percent over the past year, according to a report last week by Zillow.com. In California, it was down 38 percent, the Zillow analysis shows.
“First-time homebuyers are being squeezed out of the market by falling inventory and the rapid influx of investors looking to buy basic homes to rent out to the growing population of people who have recently been foreclosed upon,” said Stan Humphries, Zillow chief economist.
Nashville real estate broker Brian Copeland told Inman.com that his agents are being “brutally honest” with buyers, advising them not to even bother to look at houses unless they’re ready to make an offer that day. “We sold two (homes) off of buzz ,” he said.
‘OUR MARKET’S CRAZY’
In Orange, Fry, who works for the county, nabbed the 1,309-square-foot house on Hamilton Avenue, a standard sale, for $470,000, renegotiated from his initial $479,000 offer after the appraisal came in lower.
“We had looked for weeks,” said his Realtor, Rob Peterson of Coldwell Banker Beachside. “We knew that this home was going to sell very quickly.”
Peterson said of his client, “He went through all the frustrations that buyers are having. Anything under $500,000, it’s truly a battle to get someone into one of those homes. You have to be very aggressive in terms of searching and presenting offers.”
Glenn Kelman, CEO of Redfin.com, says a poll by the Seattle-based online brokerage shows a big reason that inventory is so low: “We believe the main problem is not, as conventional wisdom would have it, that people can’t sell because they’re underwater on their mortgage. The problem with sales volume is that most homeowners just don’t want to sell. And why would they? Most sellers believe prices will only get better over the next two years.”
Banks that have repossessed residential properties are releasing them onto the market relatively slowly. Investors are buying those homes, but many are listing them for rent as they, too, wait for the market to improve, rather than flipping them for resale.
Also, some Realtors say there’s a shortage of move-up sellers.
“Our market’s crazy because we’ve got all these buyers, and the rates are down, but unfortunately, there’s a lot of people who can’t afford to sell and move up,” said Smith, of Huntington Beach Realty.
In Orange County, the expected market time – the theoretical time it would take to sell all for-sale homes at the current buying pace – was just 39 days as of late September, an inventory low not seen since May 2005, says Steve Thomas, who analyzes housing in Orange County. “A balanced market has an expected market time right around five months,” he says. “At just 39 days, it is a deep seller’s market.”
The Orange County town with the fastest-selling homes, according to his report, is Portola Hills. It would take nine days to sell all for-sale homes there at the current buying pace. A year ago, that area was at 1.14 months.
Thomas recorded Laguna Beach as the slowest market to sell a home, at 4.76 months for the whole supply. Still, a year ago, that city was at nine months.
THE PERFECT STORM
A forecast by the California Association of Realtors has home prices rising for the third year in a row in 2013, reaching the highest level in four years.
“The market has improved moderately over the past year, and we expect that to continue into 2013,” a CAR statement quoted association President LeFrancis Arnold as saying. “Sales would be even higher if inventory were less constrained in REO-dominated markets, particularly in the Central Valley and Inland Empire, where there is an extreme shortage of available homes.”
Inman.com says: “Nearly every major market (in the country) has seen double-digit declines in inventories of for-sale listings, making multiple-bid situations common.”
Smith described an open house for a short sale that pulled in some 50 people in about a half hour and was expected to elicit more than 30 offers in a day, undoubtedly driving up the price. “Purchasing a ‘steal deal’ isn’t happening right now in Huntington Beach and surrounding beach cities,” he wrote on his Facebook page. “The days of lowball offers and other demands by buyers are history for now. It is definitely a seller’s market.”
Powalski, a real estate agent with Prudential California Realty in Mission Viejo, has answers for sellers who wonder about prices rising and whether they should wait to put their homes on the market.
“I explain to my clients that buyers are out in great numbers right now,” she says. “Serious buyers usually continue looking through the holidays, especially this year since the interest rates are so incredibly low.”
Doubleday, of Ladera Ranch, notes there were other periods when there was a rush to buy property, but not at these rates: “It’s like the perfect storm.”
Interesting how the same conditions break out in different areas at the same time.