Going, Going, GONE!
February 8, 2022
When a record low number of available homes is matched with fierce pent-up demand, it results in an auction where homes sell immediately and for more than their asking prices.
Selling Above the Asking Price
It is common for homes that are just placed onto the market to receive dozens of offers to purchase, pushing up home values at a rapid pace.
Current demand is at 1,683 pending sales. Demand is 413 higher than the active listing inventory. The three-year average for demand prior to COVID was 2,160, significantly lower than the three-year average for the active inventory of 4,843 homes, 2,683 lower to be exact. That illustrates how demand is normally a lot lower than the supply, not the other way around, as is shown in the chart above.
When demand outstrips the supply, it indicates that it is an insane, outrageous, red-hot housing market where buyers are pit against each other and Darwinism ensues, survival of the fittest. In today’s market, typically the buyer that is most qualified with a great job, large bank account, strong credit score, willing to remove contingencies, and bend to a seller’s every whim is the victor. That includes offering more than the asking price. In January, 60% of all closed sales in Orange County sold above their asking price. And, it is not isolated to the lower end. If a home is priced right, regardless of price range, a bidding war follows.
The auction-like atmosphere will continue if inventory remains at ultra-low levels. Higher rates are not yet deterring buyers from purchasing, but if they continue to rise, it will be a totally different story down the road.
A WARNING TO SELLERS: Carefully pricing a home is crucial to obtaining the best outcome regarding price and terms. Pricing at or slightly above the last comparable pending or closed sale will expose the home to the largest buyer pool. The auction that follows will have buyers competing against each other to achieve success. This results in sales prices above their asking prices, and in many cases, way above their asking prices. Stretching the initial asking price considerably above the comps may still result in achieving the ultimate goal in selling; HOWEVER, it will be at the expense of not obtaining the highest and best price and terms.