Multiple offers: a blast from the past.
In the world's on-going attempt to prove my theory that the average person's vision of tomorrow is that it'll be exactly like today, only more so, the re-appearance of multiple offers has been greeted by buyers not just with consternation but with shock and awe. So says the Wall Street Journal in its April 27 article "Stunned Home Buyers Find The Bidding Wars Are Back".
And the bidding wars aren't back in this area alone. "From California to Florida, many buyers are increasingly competing for the same house", says the Journal. However, the Journal errs when it claims that "competitive bidding in the current environment isn't producing huge price increases". Let's see what Mr. Chart has to say about that.
No, don't adjust your TV set. You're really looking at year-over-year appreciation of 14 to 15 percent in Palo Alto and Los Altos and 5 to 6 percent in Burlingame and Mountain View. That paltry 3 percent Santa Clara shows is misleading, since that's the one city on the chart with many neighborhoods hit hard by REOs and short sales. I know of one light and bright "Grandma's house", a regular sale in one of the better Santa Clara neighborhoods, that just went into contract yesterday at a price at least 10 percent higher than it would have sold for earlier this year, let alone early last year.
But the Journal is right about low inventory's effect. Or is it? Let's ask Mr. Chart.
Here's new listings for the period 1/1 to 3/31 for the years 2005 through 2012 for those same five cities. I've stopped at 3/31 because this April saw a glut of inventory...well, call it a mini-glut...well, call it hardly anything at all, but it got one agent I saw on tour so excited that he leaned out his car window and shouted "inventory's comin'" as he drove past. No, none of these cities were swimming in inventory early this year, but Los Altos had 17 percent more this year than last, and I don't remember anyone complaining about low inventory last year. Mountain View inventory was virtually identical between the two years, and Burlingame inventory dropped by just eight houses this year, usually not enough for anyone to notice. And Palo Alto had virtually the same number of homes for sale in early 2010 as it did in early 2012. Only Santa Clara inventory was way down.
While the Journal can't bring itself to say it, the real difference this spring has been demand, at least in this area.
"Inventories are declining for a number of reasons", says the Journal. "Some sellers, unwilling to accept prices that are still down from their peak by one-third, are taking their homes off the market in anticipation of higher prices down the road." Sure, in some areas, but in Palo Alto and Los Altos prices are near or above their early 2008 peak. Okay, how about this: "Meanwhile, investors have been outmaneuvering consumers for the best properties, often making cash offers that are quickly accepted by sellers." Again, sure, in heavily depressed markets like East Palo Alto, but in Palo Alto those cash buyers aren't investors—it is to laugh, at these prices—they're consumers.
And, of course, no article on real estate's recovery would be complete without a solemn warning that a flood of bank-owned homes could send us back to Stone Age prices. Except that foreclosures have been a rare event in places like Palo Alto and Los Altos.
And, of course, no article on real estate's recovery would be complete without a Palo Alto vignette to shock the nation and make us homies swell with pride, in this case a buyer "who had her 'aha moment' when touring a fifty-year-old house that needed extensive remodeling [I've heard Palo Alto has one or two of those...]. The house, listed at $1.1 million [...especially in that price range], received nearly 10 offers [how can a house get nearly 10 offers? get 9.8 offers?] and eventually went under contract for more than $1.3 million to a buyer who hadn't even viewed the property [because he didn't have to: it's a teardown]." To this buyer, it's a sign The End Is Near: "There are only going to be so many buyers who are in such a hurry; we're hoping it'll top off soon."
How often have I heard that fond hope over the years? A hope whose expression has gotten to be kind of an annual ritual around here.