Tag: buyers market

Are Bidding Wars in Orange County Over?

The quantity of bidding wars in California and nationally simply continues to fall. Is this just a blip in a healthy housing market or something else?

Based on recent data from Redfin, only 12 percent of buyers went through a bidding war in May. This represents a 52 percent decline from the previous year. That is a big difference.

According to Daryl Fairweather, chief economist at Redfin, the decline probably won’t last very long because mortgage rates fell to yearly lows in June.  Lower interest rates makes it more affordable for buyers to own a home.

It mainly depends on affordability and if the home is priced right instead of too high. Redfin claims they’ve noticed an increase in the numbers of home buyers searching for a home. They just aren’t making many offers.

Where bidding wars dropped off most
Bidding wars fell by 65 percent in San Francisco, which is the most of any city since June of 2018. However, once you dig into the data, approximately 28 percent of all offers in San Francisco had a bidding war last month. This number reflects homes with price points of $1 million and under.   Buyers became more discerning and bid up less for homes above $1.25 million.

Buying a house: How to deal with tough competition
The next city was San Jose with only 19 percent of offers having a bidding war in June. That’s a decrease of over 60 percent from June 2018.

In other California cities the rate of sales slowdown is smaller, but still considerable: San Francisco is lower by 15%; Los Angeles has dropped by 7%, Orange County and San Diego are slower by 6% and Riverside-San Bernardino is off by 5%.

Lots of listings today are contingent on the sellers locating an acceptable replacement property. Moreover, there’s numerous offers that come in with contingencies from the buyers on selling their property too.

As of the end of June 2019, the inventory of homes for sale in Orange County is 9,013 vs. 7,887 in June 2018.

From ReportsonHousing, Here’s how this homebuying lack of interest looks at the county level: recent results vs. a year ago and the five-year average for this time of year.

  1. Orange County: 1,771 listings added this year — compared to an average 2,335 increase — bringing the supply of homes to 7,600. This represents 19% more inventory in a year.
    Escrows of 2,548 — down 2% in a year.
    Times it takes to sell? 89 days vs. 73 a year earlier.
  1. https://www.ocregister.com/2019/07/11/rush-to-sell-by-southern-california-homeowners-puts-listings-at-5-year-high/

Less Bidding Wars for Orange County Home Buyers

When two or more buyers make offers on the same property it’s considered a bidding war. The seller usually accepts the highest and best offer among the multiple buyers along with terms they like as well. Over recent years this was the typical situation in Orange County depending on the price point. That’s when the housing market was unquestionably in a seller’s market and the inventory of homes was lower.

This is fantastic news for potential buyers. They no longer have to be concerned with competing against as many as 20 offers when the seller’s market was at its peak. In addition, there’s more homes for sale to pick from, and mortgage interest rates have been recently dropped. This is becoming a great time to buy a home.

The findings of a February 2019 report by Redfin reveals:

  • Only 13 percent of offers written by Redfin buyer’s agents were in a bidding war. That number represents a 53 percent drop from the previous year.
  •  In every market where Redfin agents serve home values decreased.
  • California housing markets that had the largest percentage declines in home bidding wars were: San Francisco (-64%); Los Angeles (-57%).
  •  One major California city is still among the most competitive and that’s San Diego; yet only one out of five offers by a Redfin agent had buyers that were involved in a multiple offer situation. That number is down by more than fifty-percent versus a year ago 1.

Meanwhile, since January 2019 housing supply has been increasing.

  • According to the most recent RE/MAX National Housing Report, sales of homes have declined for six straight months and is the biggest increase in ten years.
    • RE/MAX analyzed 54 different markets and it showed an average inventory rise of 6.4 percent.

On March 26th, additional evidence of home sales slowdown came out when the S&P CoreLogic Case-Shiller index showed home prices in Los Angeles and Orange counties rose 2.9% in January from a year earlier, but that was substantially lower than other months 2.  In Orange County, sales dropped 17.1% and prices fell 1.4% to $700,000.

What is occurring is actually quite natural according to experts. Through the past few years, home prices went up quickly until they reached a price level  that many buyers became unwilling to pay the high prices. Meanwhile, interest rates were rising and topped out in November 2018. Homes started getting less and less offers and did not sell as quick.

Inventory of homes is also climbing due to buyers sensing the market is near a top, and people don’t want to buy at the peak.

What does this data mean for home buyers?
It’s actually good news if you’re shopping for a home.  There is less pressure for home buyers to accept a house without their desired features such as a large kitchen, a true bedroom with a closet, two-full baths, or a two-car garage.

Market conditions are in your favor get a home soon
Many experts agree: If you qualify, make the most of today’s housing market prices and purchase a home since multiple offers are way down. Real estate is a long-term investment.  So if you come across the house you want, do it now.

Then again, make sure you’re in the right financial position to take advantage. Know what’s on your credit report and make sure there’s not any errors. Get pre-approved for a mortgage prior to searching for a home. Use an experienced real estate agent to achieve your goal.

Sources:
1. Orange County market slowdown – https://www.ocregister.com/2019/03/27/market-slowdown-lingers-as-february-home-sales-drop-12-corelogic-reports/
2. SoCal Home Prices: https://www.latimes.com/business/la-fi-southern-california-home-prices-20190327-story.html

How to Challenge a Low Home Appraisal in Orange County

In a seller’s market, scenarios with multiple offer commonly increase the purchase price more than any comparable homes sold in the neighborhood.  This explains why in those situations many sellers are concerned their sales price may be affected by a low appraisal. In a buyer’s market, when prices are dropping, sellers have anxiety that the appraisal will come in low.

As of Sept. 6, market time to sell a home in Orange County analyzed by the Southern California News Group reached 98 days vs. 64 in 2017 and an average 76 days from 2012-2017. With this metric exceeding 90 days, by ReportsOnHousing’s logic, the conditions for a “seller’s market,” no longer exist. It has become a more balanced market in relation to supply and demand.

A low appraisal can be the result of one of the following:

Declining home values due to a buyer’s market; a larger inventory of homes with few buyers.

Neighborhood declines due to a large amount of foreclosed homes or short sales

Seller or agent priced the home too high

A newbie appraiser who failed to recognize local influences on value.

Appraiser did not consider pending home sales, which may have warranted higher value

Appraiser used comparable sales from the wrong neighborhoods. Example; Laguna Beach and Mission Viejo or San Juan Capistrano and Dana Point.

Sometimes when an appraisal is performed, mistakes take place, which provides you the opportunity to correct them. Here are seven methods to dispute a low home appraisal:

  1. Request a Copy of the Appraisal Report
    Seller don’t automatically get to see or review the appraisal inspection report unless you request it. Federal law allows the mortgage lender to provide a copy of the report to only the buyer (or person paying for it), based on information from the Bureau of Consumer Financial Protection. In order to get a copy, you should contact the buyer’s agent or buyer if there is no agent.
  1. Examine the Details of the Report
    Errors happen and can be very simple yet obvious mistakes. As an example, the appraiser might have checked the box for two bathrooms versus three, the actual number, or not give you value for double pane windows when all the other comps were given value. Check the data and if you find a wrong data point it out and fight it.
  1. Provide Updated Comps
    The appraiser will rely on recent local comparable properties sales data to value your property. It’s totally possible that a home can increase in value after it was appraised. Get your real estate agent involved and do some digging to find out if this holds true for your home.
  1. Make Sure You Have Permits
    If you made improvements such as a bonus room for additional living space but failed to get a building permit, most appraisers will not give you value for this. Keep detailed records of permits you have from the county or city for inconsistencies.

Related: How to Get a Home For Less Than it’s Really Worth

  1. Get Your Real Estate Agent to Meet With the Appraiser
    Make sure your agent is fully prepared with the comparable sales and listings and is aware of any improvements to your property that warrant your home’s valuation. If the realtor and appraiser are using different properties for valuation, sometimes the final appraised value will be detrimentally different as well.
  1. Contest an Appraiser Who Doesn’t Know the Area
    Every neighborhood and community has their own set of characteristics, which is why it’s very important your appraiser is familiar with your specific area. If an appraiser lives 60 to 100 miles out of the area, he or she may not be the best person to determine your home’s value. Inquire with the buyer’s agent about this fact.
  1. Renegotiate the Contract Price
    If the seller really needs to close on this home to buy another, sometimes they will become more flexible on the buyer not paying the whole difference in value.

An example, is say the appraisal value difference is $15,000, a seller may agree to accept $7,400 in cash and lower the price by $7,500.  Or if there’s a listing agent, they reduce their commission a little to facilitate the deal closing.

  1. Buyer May Cancel the Transaction
    A lot of purchase contracts include a loan contingency and appraisal contingency clause. If the appraisal comes in low or if the buyer fails to qualify for a mortgage to buy the property at the agreed-upon terms in the contract, the buyer can cancel the contract and get their earnest money deposit back. So, you may want to have a flexible seller before the buyer starts thinking of cancelling.