Multiple Offers and Bidding Wars Abound
When Debora Brown-Parker put her three-bedroom Long Beach home on the market recently, she expected it to sell fairly quickly. The tidy, 1,200-square-foot house was perfect for a first-time buyer, her agent told her, and because it was fairly priced in a tight market, it was bound to attract interest.
What she didn’t expect was a request to see the house 20 minutes after it was listed. The eager buyer showed up that evening with her family and made an offer almost immediately. Six competing offers quickly followed, overwhelming the first-time seller, who hadn’t counted on such a flurry of activity.
“I had no idea the market was this crazy,” said Brown-Parker, a 44-year-old flight attendant, who asked her agent to take the house off the market until she could decide which offer, if any, to accept. “We were offered $4,000 over our asking price, but we just couldn’t handle all that bidding.”
Real estate experts say the frenzy closely resembles the market of the late 1990s and 2000, when demand for a limited inventory fueled bidding wars and home prices soared.
Agents from Ventura to Riverside report that homes in all price ranges are being snatched up nearly as soon as they’re listed. The perceived threat of rising interest rates and a trend toward acquiring solid assets, rather than depending on the stock market, has buyers turning to the real estate market, a traditionally conservative investment.
“It’s hot, hot, hot!” said Barbara Shoag, an agent at Re/Max College Park Realty in Long Beach. “Low interest rates have been very appealing to first-timers, especially, but also to every other buyer out there.”
Brown-Parker and her husband, Erwin Parker, are trying to sell not one but two homes. They are in escrow on the sale of a Rancho Cucamonga home, which Parker bought before the couple married 10 years ago. It sold in six weeks, after attracting three offers.
Brown-Parker, who ended up declining the earlier offers, said they now will re-list the Long Beach home for $10,000 more than the original $180,000 asking price. And they probably will get it.
“I think this strong market has surprised everyone,” said Shirley Tenger, an agent at Prudential California Realty in Glendale. “Anyone who was thinking about buying has been buying, even as prices continue to go up.”
In Los Angeles County, the median price of existing homes surged 15.1% to $259,000 in March, up from $225,000 a year ago, according to figures supplied by DataQuick Information Systems of La Jolla. In Orange County, the median price rose 11.6% to $357,000.
The lack of available houses, especially in the entry-level market, has pushed many first-time buyers into condominiums, which recently have seen a surge of activity. In March, Los Angeles County condominium sales rose 15%, Orange County, 10.7% and San Bernardino saw a 12% increase over a year ago, according to DataQuick.
Sales volume on Los Angeles’ Westside is higher than it was at the 2000 peak, said Randy Freeman, a Prudential John Aaroe agent in Pacific Palisades. “Nearly every entry-level listing on the Westside is seeing a huge number of multiple offers.”
That is good news for those selling their homes, but first-time buyers all over the Southland are feeling the squeeze, agents said.
In Los Angeles County, the affordability index, which measures the percentage of households able to afford the median home price, fell to 33% in February, from 38% a year earlier.
Orange County posted the lowest affordability in Southern California at 30%.
Longtime renters Christi and Tim O’Leary of Pomona consider themselves lucky after bidding on a three-bedroom, two-bathroom home with a pool in Pomona, for which they paid $231,100--$4,000 more than the list price.
The 1,700-square-foot fixer was perfect for the couple and their three children, Christi O’Leary said, but seemed a near-impossible dream when they made their offer.
“We really wanted that house, so we bid higher, just assuming someone else would outbid us,” she said.
“The market time out here is normally about 15 days for properties under $400,000,” said Barbara McClelland, the O’Learys’ Century 21 Citrus Valley Realty agent. “But I just sold three properties in less than four days at or above the list price.”
One of the forces driving the current housing boom is the perception that there still is steam in the economy, despite the gloomy forecast painted last year during the market cool-off, said Nima Nattagh, an analyst with FNC Inc., a consultant to the mortgage industry. “The overall positive economic climate now is going to override any negative impact as a result of interest rates going up,” Nattagh said. “The overall picture for the housing market is very good.”
The average interest rate on a 30-year, fixed-rate mortgage with one point in March was virtually unchanged, at 6.84%, from a year ago, according to National Financial News Services, which tracks such data. Average rates last week hovered around 7%.
Looming higher interest rates and an already saturated market have resulted in a slight decline in mortgage refinancings nationwide, said Doug Duncan, chief economist at the Mortgage Bankers Assn. of America.
With rates expected to rise to between 7.5% and 8% by early next year, the volume of refinancings is expected to diminish further, Duncan said.
“Remember, though, that 7.5% is still a very good rate,” Duncan said. “Housing will continue its role of supporting the recovery.”
While overall applications are down compared with last year, average daily loan applications in March grew 16% over last year at Countrywide Home Loans.
Home purchase loans grew 56% to $6.7 billion in March over last year, while refinancings rose 56% to $8.5 billion, according to the lending giant headquartered in Calabasas.
Real estate experts say that the threat of climbing interest rates has only pushed reluctant home buyers into the market, however, not discouraged them.
“People who have been sitting on the fence are now jumping in,” said Scott Reed, an agent at Strada Properties in Newport Beach. “And they should. Product that was $450,000 two years ago is now in the high $600,000s. The demand is just too great.”
