Anyone who has dipped his or her toes into the California housing market—or glanced at any news sites—has noticed that it’s a lot more hectic than it used to be.
Not only do homebuyers have to review an overwhelming amount of available houses, but they have to review them at lightning speed if they want to snatch up the home of their dreams.
It’s important that homebuyers know which factors are contributing to this frantic housing market. After all, knowledge is power; once you understand why the home buying process is so frenzied, you’ll understand how to conquer it.
Good News At First Glance
After analyzing California’s real estate multiple listing service (MLS), our team discovered some surprising trends.
So far in 2018, more new listings have been featured in California’s housing market than any year since 2008. If you’ll remember, that was the year of the financial crisis that rocked most industries, including real estate. In that year, there were only 10% more new listings for the same period compared to this huge jump in 2018.
In fact, the number of new listings this year has increased 46% since 2013, when we saw the lowest number of new listings on the market in this time frame in a decade.
This is good news for homebuyers. With fresh listings continually popping up, they are exposed to many different styles and locations of available residences on the market.
Less Inventory, More Problems
However, that doesn’t mean there are a lot of houses for sale on the market. Even though new listings have increased drastically, inventory is low overall.
Inventory is an industry insider’s term, calculated by the number of unsold homes at the end of a month divided by the same month’s sales rate. For example, if there are 100 unsold homes at the end of January, and during January, 10 homes were sold, then a real estate expert would say that there are 10 months of inventory remaining.
Despite all the new listings on the market, there were only 3.4 months of home listings at the end of September 2018. While this is 10% higher than the amount of inventory last year, it is 17% lower than that number 2 years ago and 19% lower than 3 years ago.
Among many reasons for this low amount of inventory is the fact that people are staying put in their homes up to three years longer than before. That, combined with a lack of real estate construction, has led to decreased numbers of houses on the market—no matter how many new homes are listed for sale each month.
Going, Going, Gone
Here’s where the problems come in. While there are many new listings on the market, the amount of low total inventory has created a huge demand for homes. Now, when homebuyers see a new listing they like, they make offers as quickly as possible.
From January to September 2018, houses have spent an average of 19 days on the market. This is the lowest recorded number of days on the market since 2008, though it has been steadily declining since then.
Prospective homebuyers not only have to review scores of potential homes—they have to review and act on them quickly.
Rising interest rates create another pressure on home buyers. The current 30-year home mortgage rate is around 5%, a huge increase from just earlier this year. So even if home buyers are able to get a slight reduction in price, their monthly payment could be the same or higher in a rising interest rate environment.
Don’t Depend On Discounts
Because houses are being snapped up so quickly, sellers haven’t had to indulge in as many negotiations on price. Discounts on listings are decreasing steadily.
Currently, the average home price discount (we’re calculating the “discount” as the final sales price versus the original listing price) is only 0.62%. In fact, this number has been steadily declining since 2014, just as new listings on the market have been steadily growing since 2014.
Homebuyers are having to face a time crunch and a higher price tag, too.
Finding A Home In A Seller’s Market
Even though new listings are coming out every day, low inventory has given sellers a huge advantage and thrown homebuyers into a chaotic scramble to find homes that they love.
In this seller’s market, having the ability to conduct a fast, zip-code-agnostic, real-time search aligned with your unique preferences and budget is critical. If you are forced to complete your search through typical web apps that require a mass of manual labor on your part, you simply won’t be able to act fast enough to secure a home.
Luckily, in a time when technology really is the only way to get ahead of the home buying frenzy, there are home buying intelligent assistants like me ready to help.
To help you outstrip competing homebuyers, I search multiple areas in real time, building price sensitivity into every high-score match I place in your feed. I take your preferences into account, whether they be for a neighborhood close to a top-notch school or a bungalow that caters to your commute.