The spring home buying season is well underway and bidding wars are breaking out on San Diego’s streets. People trying to land a home while interest rates remain relatively low are up against limited choices and considerable competition. This is most evident in the western regions of the nation and San Diego is no exception.
A seller’s market is defined as a market which has more buyers than sellers resulting in higher prices due to an excess of demand vs. supply. In San Diego, the lack of current inventory is attributable to various reasons including homeowners who are underwater, meaning they owe more than the home loan balance.
Selling may still be unrealistic for even those who are above water due to down payments, real estate commissions, taxes and other fees associated with the sale of a home. Having at least 20 percent positive equity in a home is important for those who are selling to move to a home of equal or greater value.
I recently interviewed Curt Toyer, broker/owner of The Metropolitan Group in San Diego who offered this insight: “San Diego has had double digit price increases and huge sales increases over the past year. In fact, the largest price increases since 2007! Sales are up more than 9 percent from a year ago. There are several reasons for this, including what I think might be the most important, and that is consumer confidence. The stock market is going crazy, the Fed is keeping rates low and employment numbers are improving sending the signal to all of us that things are definitely looking up. Buyers have been sitting out the housing market for several years creating a demand that is now driving prices.
“Sellers have also been sitting out the market waiting for it to come back. Those that are now jumping in are finding that things are pretty rosy with so much demand and very little inventory. There is so much competition between buyers; some are removing their appraisal and loan contingencies to incentivize the seller to accept their offer. While I don’t recommend this except under unique circumstances, I understand how difficult it is for buyers to keep making offers and losing out.
“Some people are concerned that it’s too fast and we’re headed for another bubble. I don’t believe that personally and I think things will slow down once more sellers discover they can get a good price for their home and the time is right to list. The stronger the supply of inventory we have, the slower prices will increase.
“It helps that short sales and foreclosures are way down also, which was part of what was keeping prices down. Finally, unless lenders start acting crazy again by offering subprime and no documentation loans, no down payment loans, etc., I think we’ll be just fine.
“Remember, we’re still not back to the prices from 2006 and it’s going to take a while for that to happen.”
If now is your time for purchasing a home, patience is the key. Homebuyers may now have to compete with multiple buyers for a desirable home. Be prepared to offer above asking price in many circumstances.
If you are selling a home, take advantage of the current trend. Buyers often make full price cash offers and in many cases release contingencies early which could otherwise delay a closing.
Ron Monigold is a Licensed Real Estate agent and a Certified Real Estate Appraiser. He is a member of the National, California, and San Diego Association of Realtors. You can reach Ron at The Metropolitan Group @ 619.990.4631 or at ronmetro@cox.net. DRE License # 01865841.
