August 2020 shaped up to break records: heat, wildfires, real estate days on market, and now home prices. The California Association of REALTORS released their August home sales and price report and announced that, “California’s median home price broke the $700,000 mark for the first time, reaching $706,900 in August, a 6.1 percent jump from July’s $666,320 and 14.5 percent from $617,410 in August 2019.”*(C.A.R.).
Inside that quote are 3 very relevant stats:
Median Home Price was $706,900
Prices increased 6.1 percent from July 2020 to August 2020
Prices increased 14.5 percent from last August to this year
What does that news blurb tell us about our California real estate market?
There is the obvious: that prices have increased. But prices are not arbitrary and if the list price was too high for what buyers felt comfortable paying, then homes would not close at that price. Price is a function of supply and demand. How much are home buyers demanding (demand) and how many homes are there for home buyers to choose from (supply)?
We have talked for years about the California housing shortage and low inventory. Those themes resurface today. Historically low interest rates make a mortgage attractive. Yet simultaneously “lenders continued to tighten their standards, resulting in the tightest mortgage credit availability in six years, according to the Mortgage Bankers Association (MBA).”**
Prices are high
Interest rates are low
Homes are few
Think in high, low, few. Real estate is always local and the Southern California real estate market is tracking with these statistics. Locally what our office is seeing is that when a listing hits the market instead of receiving 1-2 showing requests the first weekend, it might be 10 requests and 5 offers. Properties in popular neighborhoods are receiving dozens of offers and then bidding wars with seller counter offers of “highest and best” go out.
When we work with sellers, we are focused on getting them the highest price to the most motivated buyer so that the escrow closes in the time frame they need it to.
When we work with buyers, we want to advocate for them in competitive markets to get their offer accepted. We also want to educate them that removing contingencies has risks. A buyer might not want to remove their inspection contingency and loan contingency upfront because they actually might want to cancel if something comes up in a home inspection.
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