For quite some time, home buyers have been facing bidding wars on a very regular basis. Many home buyers and potential sellers are wondering how long the bidding wars are expected to last.
Just like with any product or service, the law of supply and demand impacts home prices. Any time that there is less supply than the market demands, prices increase.
In many areas of the country, including Southern California, the supply of homes for sale in the starter and trade-up home markets is so low that bidding wars have ensued, and the busy spring-buying season is just around the corner.
CoreLogic recently conducted an analysis on national home prices at the time of sale for their January 2018 MarketPulse Report and found that a third of homes sold for at least list price. Their report found: “The share selling above list price was almost three times the trough in January 2008 and represented more than one-fifth of total sales.”
Many markets in the western part of the country and around major cities are experiencing higher shares of homes selling above list price.
San Francisco had the largest share of homes—76 percent—that sold for at least the list price, and Seattle and Los Angeles followed with 63 and 51 percent, respectively, according to the CoreLogic report. Miami had the lowest share—16 percent—of homes selling at or above the list price.
Increased demand during the spring and summer months, the traditionally busier seasons for real estate, will no doubt influence how many homes continue to sell over list price.
This should not be seen by sellers as permission to overprice their homes, though. Buyers are becoming more and more educated, especially those who have been searching for their dream homes for a while now while waiting for new inventory to come to market.
For home sellers, the best strategy is to price a home either just at or slightly below the going price. Home buyers who sense that a property represents a good value are more likely to make bids above the list price, particularly in areas where there’s extremely low inventory. For home buyers, bidding wars are likely to be a reality for quite some time so it’s important to have a clear idea of what market values are in the area and how much the upgrades or condition issues ought to impact the final sales price. A seasoned Realtor can provide comparable sales and offer guidance on pricing.
The bottom line is that without a large wave of new listings coming to market, buyers will continue competing with each other for the homes that are available.
If you are thinking of selling your home, now may be the time to do so before more competition comes this spring.