Each home buyers situation is a bit different, but I will tell you what I tell all the buyers I work with on how I would proceed if I were in their shoes!
Right now the inventory hasn’t been this low for over 12 years, and this has created a lot of demand. To top it off, prices are appreciating every month (and in some cases, every sale), and interest rates, although still historically low, are predicted to rise to the low 4%’s by the end of this year and start of 2014. This combination has created a frenzy and now buyers want to buy a home before prices go too high and interest rates rise. Homes are selling so quickly right now that it doesn’t even give the inventory a chance to grow, and that is one of the main reasons why the demand is extremely high.
“The buyers who are getting their offers accepted amongst the multiple buyer situations are the ones that are the most flexible.”
Not only in terms of price, but also with what they are looking for. What I tell my buyers is that if the home has 7 out of the 10 things you are looking for, it’s probably something you want to jump on, especially since there isn’t a lot to choose from. When it comes to value, here is where the major problem is in my opinion. For the last 7 years, buyers have been submitting offers based off of logic, and recently closed comparable sales. Everyone wanted a good deal. Now the market has shifted and so has the buyer mindset for the most part. Now, buyers are simply looking for a home, and a good deal isn’t an issue any longer because it is just so rare, especially in the Irvine area of Orange County. Homes are selling for more than what recently closed homes are selling for, so it becomes an issue of "VALUE".
“The Value of a home isn’t what buyers have paid in past months, it is now what a buyer is willing to pay for a home.”
The longer it takes a buyer to catch on to this new trend the more it will cost them. Many buyers are simply chasing the market and offering just under what others are willing to offer, and they keep losing out. The trend in the market is quite simple. If a home sells in a specific neighborhood for a certain price, you can almost guarantee that a similar type home that is put on the market after this sale will be listed for more, and will ultimately sell for more, and so on and so on, so the sooner you can find the right home, the more cost effective it will be for you both in the long run.
Let me give you a specific example. Last year in June, I had a client submit an offer on a condo in Woodbridge for $415,000, and I told him if he really liked it, he should go $430,000 but he wanted a good deal. Well he didn’t get the home, and it ultimately sold for $428,000 to the highest bidder. Now fast forward to January of this year. The same exact model, on the same exact street, not as upgraded as the one he lost, was listed for $515,000. He offered $525,000 and still got out bid. In retrospect it is clear that if he would have been flexible last year and offered a bit more, he would have already been a home owner and would have been able to take advantage of the appreciation of close to $100,000 in less than 1 year, but because he was looking for a good deal, he is still looking for a home, and now has to pay over $100,000 more for the same floor plan if he wants to get it. I’d rather you pay a bit more now and get into a home you really like versus paying a lot more later and maybe even settling on something that is not as ideal.
Homes are selling for more than what the recent comparables are dictating, so it is my job to make sure we submit an offer based on this new market. In addition, because the selection is so low, the "perfect home", although it exists, is just not out there. Something else to keep in mind, the "perfect" homes are selling for a premium with higher competition, so if you were to find a home that wasn’t perfect but you could make it your own in the future, that may be a good option for you.
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Posted on Irvine Orange County Real Estate Market News