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Pace of bidding wars picks up as homebuyers compete for fewer listings

July 6, 2023

The house was a fixer, selling for $950,000 “as is.”

In addition to needing fresh paint, the kitchen, the bathroom and some of the floors needed to be updated, listing agent Stephen Haw said.

That didn’t stop buyers from getting into a bidding war over the West Torrance house. By the time escrow closed on May 19, the one-story, three-bedroom home had sold for $1.05 million, or $100,000 over the asking price.

”Right now, the supply of houses for sale is very limited,” said Haw, a broker with Keller Williams Realty in Palos Verdes. “There are more buyers than houses for sale on the market.”

The West Torrance house is increasingly typical of Southern California’s overall housing market, with bidding wars and deals for more than the asking price becoming more commonplace this spring.

Newly released CoreLogic figures show home prices are up since the start of the year, although they dipped slightly in May and have yet to recover fully from losses in the last half of 2022.

The median price of a Southern California home — or price at the midpoint of all sales — was $715,000 in May, down 0.3% from April after three months of gains. That’s still 3.8% below the median in May 2022 and $35,000 below the all-time high of $750,000 reached in April 2022.

Nevertheless, Southern California‘s housing market remains extremely competitive for those few buyers able to afford high prices and higher loan payments — despite inflation, high mortgage rates and threats of a recession.

“We expect prices to continue to rise on a month-to-month basis for the next few months because of the shortage of homes for sale,” Jordan Levine, California Association of Realtors chief economist, said in a recent statement. “Even with reduced homebuyer demand, California still has more homebuyers than homes to put them in.”

Meanwhile, home sales remain low, falling on a year-over-year basis for the 18th month in a row, CoreLogic reported Wednesday, July 5.

The six-county region saw 16,350 homes change hands in May or 25.7% fewer than in May 2022, CoreLogic figures show.

That’s the second-lowest tally for a May in records dating back 35 years.

The lack of inventory and the drop in home sales is definitely having an impact on industry incomes.

“We’re hanging in there, but things are definitely down from last year,” said Dionne Veronin, an agent with Compass Real Estate who was minding a Huntington Beach open house last month. “I’ve lost several buyers (who) pulled out of the market, just waiting for home prices to come down or for interest rates to come down. … Anyone who doesn’t have to buy is waiting in the wings.”

With 80% of U.S. home borrowers paying 4% or less on their current mortgage, “locked-in” owners are unwilling to put their homes up for sale.

Figures from online brokerage Redfin show Southern California had fewer than 25,000 homes for sale in May, the fifth-lowest total in the past 11 years.

As a result, those who could afford a 6.4%, 30-year mortgage rate or pay cash were competing for a limited supply of homes this past spring.

According to Redfin, the time it takes for homes to sell and the number of price drops have been falling steadily since the start of the year.

An average of almost 48% of Southern California homes sold above the asking price in May, up from 25% in January, Redfin figures show.

In Mission Viejo, a small, one-story house went into escrow last month at $75,000 over the asking price after getting six offers.

In need of paint, new flooring in an upgraded kitchen, the 1,300-square-foot house originally listed for $875,000, but sold for $950,000 all cash, said listing agent Sheree Brock, of Better Homes and Gardens Real Estate Champions.

One reason, Brock said, is the home has high ceilings, pretty views out the back, access to Lake Mission Viejo and an elementary school within walking distance.

With inventory so low, bidding wars are typical for desirable homes like that one, she said.

“You have to get aggressive on the buying, big time,” Brock said.

A slow but steady trickle of buyers arrived at a Huntington Beach open house on June 24 to view a corner house listed for $949,000. It needed paint and new floors, but still was under contract three days later, according to Redfin.

“For entry-level homes, if you find one, you put an offer in because it won’t last long,” said Diane Van Korlaar, an agent with HomeSmart Evergreen Realty who stopped by the open house with her daughter-in-law while shopping for rental properties.

Ha, the Torrance agent, believes more buyers are willing to re-enter the market despite this year’s 6.4%-plus mortgage rates.

“It seems like everybody is used to the 6% interest rate,” Ha said. “Thirty years ago, the average interest rate was (at least) 6.75%, so 6% is going to be the new normal.”

Here’s a county-by-county breakdown of May home prices and sales, with annual percentage changes:

—Los Angeles County’s median fell 6.3% to $800,000; sales were down 24.3% to 5,154 transactions.

—Orange County’s median fell 4.8% to $1 million; sales were down 22.3% to 2,304 transactions.

—Riverside County’s median fell 3.6% to $556,500; sales were down 26.0% to 3,323 transactions.

—San Bernardino County’s median fell 4.0% to $480,000; sales were down 29% to 2,209 transactions.

—San Diego County’s median fell 3.3% to $812,250; sales were down 26.1% to 2,717 transactions.

—Ventura County’s median rose 1.2% to $804,500; sales were down 32.0% to 643 transactions.

Orange County Register

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Pace of bidding wars picks up as homebuyers compete for fewer listings

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