In the last couple of months, the majority of homes that we’ve brought to market have had multiple offers, with a concentration in the price segments below about $1.2M. The swift change in the market tide has caught buyers off-guard, since it represented such a profound shift from the past several years. In spite of the bidding wars, there is a moderation and grounding to them that we did not see in the frenzy of the market heights in 2004-2005.
With about 5-6 multiple offer transactions to look back upon as a listing agent over the last couple of months, none of the buyers over-paid for the homes purchased, and none of them had any issues with bank appraisals. With clear memories of the recent, painful real estate downturn, buyers are bidding cautiously and armed with information on relative value — careful to not pay more for a property than it is worth. My frame of reference spans price points beginning around $750,000, up to and including a property priced at about $1.9M. The latter experience occurred last weekend with 4 offers for an extraordinary Orinda property on 2 acres with its own Cabernet vineyard! In case you are curious, just click here.
So, what’s driving this behavior? Aside from a rising stock market, encouraging economic data, a market that most see has having hit bottom, and essentially free money (after adjusting for inflation) — we are experiencing a case of severe inventory shortage. As of today, there are 153 active properties on the market in Lamorinda and 131 pending in escrow — so, just over one month’s available inventory. For realistic sellers, its a great time to be on the market. For buyers… a bit more challenging. Let’s compare our market to other parts of the country.
According to recent Wall St. Journal article, “Stunned Home Buyers Find the Bidding Wars are Back”, Chicago is sitting at over 9 months of inventory, San Francisco and Washington, DC are each at 3.4 months of inventory, and the heart of California foreclosures — Sacramento — is down to about 1.5 month!!! The multiple offer environment is not unique to our world of Lamorinda real estate, but the demand for housing here is certainly stronger than in most areas of the country. As reported in the WSJ, the online brokerage RedFin has stated that 84 percent of its agents have found themselves writing offers in a competitive environment across the Bay Area, and 71 percent in southern California.
There are certainly some potential headwinds ahead for the housing market, however the diversified strength of the local economy will mitigate the strength of them, if they start to blow. All of these facts reinforce why this is such a special place to live… a belief clearly shared by many who are actively competing to call Lamorinda their home, too!