The property in question was a “fixer-upper,” listed with an “as-is” price tag of $950,000.
In addition to requiring fresh paint, the kitchen, bathroom, and some of the floors were in need of updates, according to listing agent Stephen Haw.
However, the less-than-ideal condition of the house did not deter buyers, as a bidding war ensued for this three-bedroom, one-story home in West Torrance. When escrow closed on May 19, the property sold for $1.05 million, surpassing the asking price by $100,000.
“At present, the supply of available houses on the market is extremely limited,” remarked Haw, a broker with Keller Williams Realty in Palos Verdes. “There are more potential buyers than available houses for sale.”
This situation is becoming increasingly common in Southern California’s housing market, with bidding wars and sales above the asking price becoming the norm this spring.
Recent data from CoreLogic reveals that home prices have risen since the beginning of the year, although there was a slight dip in May, and they have not fully recovered from the losses incurred in the latter half of 2022.
In May, the median price of a home in Southern California stood at $715,000, representing a 0.3% decrease from April following three months of consecutive gains.
Despite this, the median price remains 3.8% lower than last year’s figure for May, and $35,000 below the record-high median price of $750,000 reached in April 2022.
Nevertheless, the Southern California housing market continues to be highly competitive for a select group of buyers who can afford the inflated prices and increased loan payments, despite rising inflation, mortgage rates, and impending recession concerns.
“Due to the scarcity of available homes for sale, we anticipate a continued month-to-month increase in prices for the next few months,” stated Jordan Levine, chief economist at the California Association of Realtors. “Even with reduced demand from homebuyers, California still has more homebuyers than available homes.”
Meanwhile, home sales remain stagnant, having declined year-over-year for the 18th consecutive month, according to a report from CoreLogic released on July 5.
In May, a total of 16,350 homes changed hands across the six-county region, representing a 25.7% decrease compared to May 2022.
This figure marks the second-lowest home sales tally for a May in the past 35 years.
The scarcity of inventory and the decline in home sales are undoubtedly impacting the incomes of industry professionals.
“We’re holding on, but there’s certainly a decline from last year,” revealed Dionne Veronin, an agent with Compass Real Estate, who recently hosted an open house in Huntington Beach. “I’ve had several buyers withdraw from the market, waiting for home prices or interest rates to drop. … Those who don’t have an urgent need to buy are biding their time.”
With approximately 80% of U.S. homeowners currently paying interest rates of 4% or less on their mortgages, many “locked-in” owners are hesitant to put their homes up for sale.
Data from online brokerage Redfin indicates that Southern California had fewer than 25,000 homes listed for sale in May, marking the fifth-lowest total in the past 11 years.
Consequently, individuals capable of affording a mortgage rate of 6.4% or making cash transactions found themselves in fierce competition for the limited supply of homes available this spring.
According to Redfin, the time it takes for homes to sell and the number of price reductions have been steadily decreasing since the beginning of the year.
In May, nearly 48% of homes in Southern California sold above the asking price on average, up from 25% in January, as reported by Redfin.
As an example, a small, one-story house in Mission Viejo, requiring paint, new flooring, and an upgraded kitchen, originally listed for $875,000. Nevertheless, it went into escrow for $75,000 above the asking price after receiving six offers.
Listing agent Sheree Brock from Better Homes and Gardens Real Estate Champions attributed the high demand to the property’s desirable features such as high ceilings, attractive views, access to Lake Mission Viejo, and proximity to an elementary school.
Brock stated that bidding wars are typical for sought-after homes like this due to the limited inventory.
“To succeed in buying, you need to be highly assertive,” emphasized Brock.
An open house held in Huntington Beach on June 24 for a corner house listed at $949,000 saw a steady stream of interested buyers. Despite needing paint and new floors, the property had a contract within three days, as reported by Redfin.
“For entry-level homes, if you find one, you need to make an offer immediately because it won’t be available for long,” advised Diane Van Korlaar, an agent with HomeSmart Evergreen Realty, who visited the open house while searching for rental properties with her daughter-in-law.
Haw, the Torrance agent, believes that more buyers are willing to re-enter the market despite the current 6.4% or higher mortgage rates.
“It seems like everyone has adjusted to the 6% interest rate,” stated Haw. “Thirty years ago, the average interest rate was at least 6.75%, so 6% is now considered the new normal.”
Below is a breakdown of May home prices and sales by county, along with the annual percentage changes:
- Los Angeles County: Median fell by 6.3% to $800,000; sales down 24.3% to 5,154 transactions.
- Orange County: Median fell by 4.8% to $1 million; sales down 22.3% to 2,304 transactions.
- Riverside County: Median fell by 3.6% to $556,500; sales down 26.0% to 3,323 transactions.
- San Bernardino County: Median fell by 4.0% to $480,000; sales down 29% to 2,209 transactions.
- San Diego County: Median fell by 3.3% to $812,250; sales down 26.1% to 2,717 transactions.
- Ventura County: Median rose by 1.2% to $804,500; sales down 32.0% to 643 transactions.
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