A dramatic decline in listings creates more competition
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Think of an asking price for a home listed on the market as a ballpark figure, a mere suggestion. Then, be prepared to pay more — sometimes tens of thousands of dollars more.
Almost two of every three homes sold for more than the listing price in March, as buyer demand easily exceeded the number of homes on the market, according to the California Association of Realtors. Active listings plummeted 51% in March compared to a year ago, the third consecutive month of 50%-plus declines in homes on the market.
The booming buyer demand coupled with the dramatic decline in listings is creating a competitive market and generated a record percentage of homes selling for more than the posted price.
‘The rocket fuel pushing prices higher’
The red-hot market — where homes entered escrow in a record-low eight days in March — has greatly affected home prices and sales.
Statewide home sales dipped 3.5% to a seasonally adjusted 446,410 units in March compared to February, but up 19.7% from March 2020. However, the Covid pandemic and the subsequent lockdown abruptly hit the economy and the housing market in March 2020, so the comparison — and the increase in sales — is a bit exaggerated this year.
Home sales have declined three consecutive months, falling to the lowest level since July 2020. Fewer listings are the cause, not declining consumer demand.
All seven regions except the Central Valley (Bakersfield to Sacramento) reported double-digit gains in sales compared to a year ago. The Bay Area had a 35% increase in sales, while the Central Coast — Santa Barbara to Santa Cruz — finished in second place at 32%.
“A lack of homes for sale is creating unprecedented market competition, leading to a record share of homes selling above asking price in March,” says CAR president Dave Walsh, vice president and manager of the Compass San Jose office. “With more of the state’s Covid-19 restrictions being lifted in the coming months as we move into the spring home-buying season, we should see home sales improve as more prospective home-sellers feel comfortable listing their homes for sale.”
Perhaps, but the demand could still easily outpace listings for several months or even longer, say industry experts. And above-listing offers will likely continue. The average buyer paid about $16,700 more than the listing price in March.
Seven regions, seven price records
The competition among wanna-be buyers increased the median home price to a record $758,900 in March, an 8.6% gain compared to February — and up 23.9% from a year ago. The annual percentage price gain was the highest since October 2013 and was the eighth consecutive month of double-digit increases.
“While intense home-buying interest is the engine that continues to drive housing demand, a shortage of homes for sale is the rocket fuel pushing prices higher across the state,” Walsh says.
All seven major regions, from Imperial Beach to Yreka, posted home-price records in March, with the Central Coast leading the way with a 26.4% increase to $871,840. Four other regions had 20%-plus price increases from a year ago, including the Inland Empire (Riverside and San Bernardino counties) and Los Angeles at 24.1% and 22.2%, respectively (see chart below for more details).
The Bay Area was the priciest region in the state at $1.23 million — with five counties topping $1 million — while the Far North was the least expensive at $350,000. Lassen County is the most affordable at $252,000.
“The market sentiment is drastically different today compared to a year ago at the onset of the pandemic,” says Jordan Levine, CAR vice president and chief economist. “With the U.S. economy positioned to grow at the fastest pace since the early 1980s and mortgage rates trending down again in the past week, consumer confidence will improve further. So, in the coming months, we should continue to see a solid bounceback from last year as the market maintains its momentum.”
Work from (lake) home
Buyers able to work from home continue to head to the state’s resort communities, from Big Bear to South Lake Tahoe.
Sales for those two communities along with Lake Arrowhead are up at least 50%, and Mammoth Lake sales were up 16.7% in March compared to a year ago, according to the California Association of Realtors.
Lakefront living has numerous benefits, including lower prices than much of the state. You know, sell that too-small fixer-upper in the Bay Area for $1 million-plus and purchase a home in one of the state’s resort communities.
For example, Bear Lake and South Lake Tahoe’s median home prices were about $540,000 in February, up 26% and 35% from a year ago, respectively, according to CoreLogic. Lake Arrowhead home prices surged 45% to $596,000.
Still, the prices are significantly lower than the statewide median of almost $760,000 in March.
Longtime business journalist-turned-communications executive who enjoys reporting on residential real estate in his spare time.