Most people will laugh at this, but believe it: bidding wars are returning, plain and simple. Those who choose to ignore this warning may lose the opportunity to purchase a house.
In the first quarter of 2012, bidding wars were occurring regularly on houses at the price range of from $150,000 to $350,000. Now that many of those houses have been purchased and overall inventory of available housing is declining to the lowest levels in years, bidding wars are moving up in the pricing scale to $400,000 to $650,000 and sometimes higher.
This is an emerging trend and one that needs to go out as an alert to everyone who is considering a near-term home purchase.
Real-estate agents in Southern California are reporting a rise in the cases of frustrated buyers who have lost out in their bidding attempts, even when making all-cash, full-price offers.
Inventory levels have fallen dramatically — by as much as 60 percent or more from three years ago. With lower inventory, there are fewer selections available. Buyer demand is on the rise, as evidenced by increased monthly sales volume. So, we are playing a game of musical chairs — with expensive housing.
First, understand there is a lot of pent-up demand. Many people are waiting anxiously for signs of economic recovery — the problem is whether they will know how to recognize those signs. Many key metrics already indicate a recovering real-estate market.
If you have ever experienced or witnessed thousands of people standing in line at a Wal-Mart just prior to Christmas, positioning themselves to be among the lucky few to buy a limited supply of a new product, you are somewhat acquainted with the psychology and effects of the herd mentality. Many potential homebuyers who not long ago were convinced the economy would see a double-dip recession are stunned to learn that prices are on the rise.
What about all the short sales and foreclosures that haven’t hit the market yet? Won’t that drive supply up and prices down? UNLIKELY! The inventory of distressed home sales is shrinking and banks will likely drip the remaining distressed properties onto the market so they, too, will benefit from a bidding war game.
Okay, so say you are a buyer and you have experienced the disappointment of losing out to the bidding wars. What do you want to do? You could continue to search on your own, but the problem with that is you are doing all of the work in a misguided fashion, and likely relying on do-it-yourself techniques that cause you to lose time, money and opportunities. You could rely on chance or fate to guide your decisions. The problem there is that, unless you are already highly successful, that strategy probably hasn’t served you well.
Real estate is a service industry, so seek a qualified professional. Whatever you do, try to stay clear of those Internet real-estate database sites, which may be misleading. The information is often outdated by weeks, and pricing estimates are usually less reliable for areas like La Jolla. Hire a competent real-estate agent who will work for you and help map out a plan. An aggressive agent will find the right homes, get you to quickly view the property and make an attractive offer ahead of your competition. It’s your choice — buy now and possibly purchase at a lower point in the market, or defy the experts and find yourself praying for the next recession.
Do you have a question about real estate in San Diego? Send your inquiries to Cschevker@san.rr.com. We will respond directly to you, and those questions that have a broader public appeal will be published along with our next column in La Jolla TODAY.