Final 2009 “Over-bidding” Stats

Westcoe Realtors, Riverside California…One of the many trends we began tracking in 2009 was the huge disparity in the process of purchasing (and selling, for that matter) “affordably” price homes vs. homes in a higher price range.  We randomly took the $350,000 price level as our dividing line, and began statistically comparing those two, distinct markets…and boy did we discover some differences…differences that we have reported here almost every month.

Well…we now have the final years tally for comparison, and it completely bears out the fact that in our Riverside area (and Inland Empire area as well), we really are a “tale of two markets.”

For the entire year of 2009, there were 5,168 properties that closed escrow in the Riverside area at a price range of $350,000 or less.  Of those closings, 3,379 were at a price that was “equal to or greater” than the original list price.  Or, in percentages, 65% of all homes below the $350,000 price level sold at a price at least equal or greater than the list price.  That is a huge percentage of homes that were possibly “overbid” by frantic buyers wanting to take advantage of the lower pricing of the last year.  This is not new, as we have blogged many times this past year about the frenzied, manic, and fast-paced market for entry level homes in the Riverside area.

It should also be noted that is you just look at the figures for the past 6 months of 2009, the percentage of overbids rises from 65% to 71%…indicating a trend caused by the lack of housing inventory.  Overbidding is on the rise, and since it was 73% for the month of December, it looks like it is here to stay for a while.

Now…contrast these figures above with those from the “higher” priced level above $350,000.

For this higher price range, the figures change dramatically.  In all of 2009, there were only 570 homes that closed escrow above the $350,000 level, and of those only 50% (283) were overbid…which is still a large overbidding percentage, but albeit from a much smaller pool of sales.  In fact, only 10% of all closings in 2009 occured at this higher range.

If you total the two categories together for an overall percentage of overbid closings, the combined number is 64%…still a massive number in any type of real estate sales market.

So what does all this mean?

It means that our “entry level price range” market is on fire…a huge number of sales, and an even larger number of potential buyers who are not afraid of real estate as an investment in the future since they are willing, at a 65-71% rate, to pay more than list price for a home.  Statistics such as these are the reason we are very bullish on the future of real estate in our area.  Remember, the average home in this price range has multiple offers (which leads to the overbidding)…which means that for every sale, there is at least one other person/family (the “losing” bidder who is still in the market to purchase a home.

This is why, as real estate professionals, we go crazy when the major banks hoard their foreclosures for bookkeeping purposes (or because they are horribly inefficient, take your pick), because at least in the Riverside area, we have willing buyers for almost all of what they have to sell…they just need to get their housing inventory to the market.  This is why we stump repeatedly for the banks to let loose with their repossessions and let us clear them out of the marketplace.  

For the ”higher level” price range over $350,000, things are a little different.  Yes, there are still overbids on the foreclosures in this price range too, but as a general rule, this market is a little slower, and not a frenzied as the lower price level.  It is still active, but it only represents 10% of the total sales in Riverside.  It will improve in time, but not until the banks sell-off all their excess foreclosures…because the only way the higher end market begins to appreciate and get stronger sales numbers is when sellers of the lower price homes use their sales equity to purchase the higher priced homes…and those lower priced sellers have no equity because the majority of them are banks, who are obviously not going to repurchase a higher priced home.

In the end, this market will run it ’s course in time, but the magic question is….how long will it take?  There are guesses galore with all the pundits and real estate “experts”, so who knows when that date will happen…but one thing for sure is that it cannot happen until the banks get out of the real estate homeownership business…a sight we would all like to see happen soon.