Increased Competition Drives SoCal Home Buyers to Escalate Bidding
The Southern California housing market is experiencing a surge in buyer competition, resulting in nearly half of the sales exceeding the asking price. The limited supply of homes, with listings reaching an all-time low in 11 years, has led to intense bidding battles despite inflation, high mortgage rates, and economic uncertainties. According to Jordan Levine, the chief economist of the California Association of Realtors, the shortage of homes for sale will continue to drive prices upward in the coming months. Even with reduced demand from homebuyers, the number of willing buyers still surpasses the available housing inventory in California.
Signs of intense buyer competition are evident as homes spend fewer days on the market and price reductions become less common compared to earlier this year. In May, almost half of the home sales in Southern California were above the initial asking price, a significant increase from 25 percent in January. This marks a turnaround from the previous summer when prospective buyers appeared less eager to compete for homes.
Although the median home price in Southern California is $35,000 below last year’s record high of $750,000, experts predict that it will make a rebound. In May, the median price of a Southern California home was $715,000, a slight decrease of 0.3 percent compared to April and 3.8 percent lower than the same time last year.
However, home sales continue to stagnate, falling for the 18th consecutive month on a year-over-year basis. In May, the six-county region recorded only 16,350 home sales, a significant decrease of 25.7 percent compared to May 2022 and the second-lowest number of May sales in 35 years, as reported by CoreLogic.
The scarcity of homes for sale has resulted in a low number of for-sale listings, which were 44 percent below average in May. This has created a competitive market for those who can afford a 6.4 percent, 30-year mortgage rate, or pay in cash. Diane Van Korlaar, an agent with HomeSmart Evergreen Realty, advises that for entry-level homes, if one becomes available, buyers must act quickly as they are unlikely to stay on the market for long.
Despite the overall decline in home prices across the region, sales have plummeted by double digits. In Los Angeles County, the median price has fallen by 6.3 percent to $800,000, while sales decreased by 24.3 percent to 5,154 homes. Similarly, Orange County witnessed a 4.8 percent decrease in median price to $1 million, with sales down by 22.3 percent to 2,304 homes.
In summary, the Southern California housing market is characterized by intense buyer competition, a shortage of inventory, and rising home prices. The limited supply of homes for sale continues to drive prices upward, making it crucial for prospective buyers to act swiftly when desirable opportunities arise.