California, in regards to the housing sector, continues to set itself apart from the rest of the country. In the second quarter of 2013, the Golden State harbored six of the top 10 markets leading the U.S. in recovery. Subsequently, nearly half of the homes sold in California this year went for more than their asking price. The market resulting from these sales may be attributed to bidding wars, as multiple buyers compete over individual subject properties. Ultimately, increasing list prices continue to portray California as a sellers’ market.
According to a survey released by the California Association of Realtors (C.A.R.), 49.5 percent of the homes sold within the state went for more than the owner anticipated. Of particular interest, however, is the encouraging trend this represents. 49.5 is almost double the number of similar sales in 2012, when only 25.9 percent of homes sold for more than their asking price. By comparison, it was almost triple that of 2011.
The 2013 Annual Housing Market Survey, responsible for the figures above, also acknowledged the impact of multiple offers. Distinctly void of anything resembling a sizable inventory, California is home to some of the most intense bidding wars. As a result, 72 percent of the sales consisted of multiple offers. This is a significant increase from 2012’s 57 percent. It was the highest incidence of multiple officers in at least 15 years. For each home that sold at a higher amount, there were an average of 5.7 offers compared to 4.2 offers last year and 3.5 in 2011.
The survey provides encouraging information for anyone looking to sell a home in the near future. “Sellers are more upbeat about the housing market and are more comfortable with their financial situation. As the real estate industry and the economy continue to recover, many sellers regained confidence in owning a home since the Great Recession,” said C.A.R. President Don Faught. “The number of home sellers planning on repurchasing, in fact, increased to the highest level since 2007, which suggests that repeat buyers could be the driving force in the housing market in 2014.”
While distressed homes play a critical role in the investment industry, they remain the most competitive part of the California housing sector. Distressed properties are, therefore, a major reason for all of the bidding wars occurring in California. Ninety-one percent of real estate owned (REO) properties, short sales and foreclosures, attracted multiple offers. Seventy-one percent of REOs received more than one offer last year.
With multiple offers being made on distressed listings, it was surprising to see cash transactions decrease. For the first time in eight years, cash sales declined as only 25 percent of buyers used cash. By comparison, approximately 30 percent of all transactions last year used cash. As 2014 draws closer, analysts familiar with the market expect cash to be used less frequently into the new year.
Investors remain an active component of the California market, accounting for 19 percent of sales, up from 16 percent the previous year and more than double the investor market at the beginning of the last decade. At the same time, the share of first time buyers fell to 28 percent from 36 percent. It was the third decline in the last four years.