Final 2009 Statistics on “Overbidding”

Westcoe Realtors, Riverside California…As the final statistics on the 2009 real estate market are now available, one of the most remarkable trends during this past year was the practice of buyers  “overbidding” the prices of the properties they were attempting to purchase.   In fact, due to the relative barren waste of available properties for sale as the banks continued to hoard their repossessions (see previous blog posts), the process of overbidding became the norm, as potential buyers were forced to compete with other buyers for the low number of properties available. 

However, it is one thing to talk about this “overbidding” issue caused by all this competition, but in our case, we can back it up with numbers.

For the entire year of 2009, in the Riverside area, there were 5,738 homes that closed escrow…and a whopping 64% (3662 homes) closed escrow at a price “equal to or greater than the original list price.”  This means that over 6 of every 10 homes were involved in some type of buyer competition that caused the ultimate buyer to offer higher for the home than the original list price.  Pretty amazing for a “down” real estate market.

When you break down the above statistics by price, the numbers are even more telling.  Most people are aware that the entry level price range is a very active market, with the higher price ranges slightly softer…but by how much?

Well…for homes that closed escrow at $350,000 or less, the percentage remains fairly close at 64%…and for homes priced above the $350,000 mark, the percentage of homes that closed at a price equal to or greater than the list price is at 50%…still a remarkable percentage for the higher priced homes.

However, when you look at the last 6 months of 2009 as a separate group, the percentage for the entry level homes (below $350,000) jumps to 71%, indicating an upward trend that will certainly carry into 2010.  The higher range held steady at 51%.

What do all these numbers mean for anyone who is trying to purchase a home in 2010?

First, understand what you are getting into.  If you are an entry level buyer, you will be competing with a lot of other people who are trying to do the same thing as you are, so come prepared.  If your goal is to purchase a repossessed home for 70 cents on the dollar like the guy with lei around his neck on the 2:00 am television infomercial, it probably won’t happen here in Riverside.  Detroit maybe, or some other area of the country where demand is down, but not here.  However, if you understand that this will be a process, and that patience will eventually get you where you want to be, then jump in…because prices and interest rates are extremely favorable for you at the moment.

Secondly, understand that this imbalance between supply and demand will continue until the banks stop hoarding their repossessions and start letting them loose on the market.  We have no clue when, or if, this will happen…but simple economics dictates that limited supply and large demand will lead to a frenzied market…so fasten your seat belt and accept it for now.

Of course, you can always choose to sit the market out and wait for it to become more balanced, and less frenzied…but you run the risk of higher prices when that happens, and higher interest rates as well…because the pressure on both to rise is measurable.  Even now, in many areas, prices for homes have stabilized, and are starting to trend up just a little from the levels seen only 6-12 months ago.

In the end, the choice is yours if you are thinking of buying…but for our money, take a large dose of patience and jump in, because the price and loan you get today will be well worth it tomorrow.

Take care, and let us know if there is any issue you would like to see addressed in our blog.