Heightened Housing Market Conditions in 2013
More properties were sold above their asking price with the heightened housing market conditions of the first half of this year, as tight supply conditions continued to heat up market competition in the first half of 2013, according to the CALIFORNIA ASSOCIATION OF REALTORS®’ (C.A.R.) “2013 Annual Housing Market Survey.”
Nearly half (49.5 percent) of all homes sold in 2013 were sold above asking price, nearly twice the share in 2012 (25.9 percent) and triple the share in 2011 (16.6 percent). The 2013 figure was more than twice the long-run average of 18 percent during the past 20 years. For homes that sold above the list price in 2013, the median premium paid over the list price was 4.8 percent, unchanged from 2012.
For the third consecutive year, an increasing number of home sellers – nearly half – planned on purchasing another home in the future.
“Sellers are more upbeat about the housing market and are more comfortable with their financial situation. As the real estate industry and the economy continue to recover, many sellers regained confidence in owning a home since the Great Recession,” said C.A.R. President Don Faught. “The number of home sellers planning on repurchasing, in fact, increased to the highest level since 2007, which suggests that repeat buyers could be the driving force in the housing market in 2014.”
The shortage of housing supply intensified further this year, leading to heightened market competition and more multiple offers, with more than seven of 10 home sales (72 percent) receiving multiple offers in 2013, up from 57 percent in 2012. The 2013 figure was the highest in at least the past 15 years, with each home receiving an average of 5.7 offers, up from 4.2 offers in 2012 and 3.5 offers in 2011.
The distressed market continued to be the most competitive segment of the market, with more than nine in 10 (91 percent) real estate-owned (REO) properties attracting multiple offers, an increase from 71 percent in 2012. The short sale market was less intense than the REO market, but still three quarters of all sales received more than one offer, a jump from 66 percent in 2012. Close to seven of 10 equity sales received multiple offers in 2013, a surge from 51 percent in 2012.
Other key findings from C.A.R.’s “2013 Annual Housing Market Survey” include:
• The share of all cash buyers decreased for the first time after seven years of continuous increase. More than a quarter of all home buyers paid with all cash in 2013, triple what it was in 2001, when the share was 8.8 percent. The share of all cash buyers continued to stay well above the long-run average of 15.1 percent since 1998.
• Overseas buyers were increasingly interested in owning property in California. The share of international buyers rose for the third year in a row, up from 5.8 percent of total sales in 2012 and 5.7 percent in 2011 to 8 percent in 2013. More than half (57%) of all international buyers bought the property as a primary residence, while almost one-third (31%) of them purchased the property as an investment. Buyers from China, Mexico, and Canada made up the vast majority of international buyers at 34 percent, 15 percent, and 10 percent, respectively.
• Investors were very active in California’s housing market, creating high demand for investment properties during the first half of 2013. Nineteen percent of total sales went to investors in 2013 compared to 16 percent in 2012. The demand for investment properties has grown significantly since 2000 as many bargain properties became available during the housing downturn. At the beginning of the past decade, the share of sales pertaining to investment home buyers was only 7 percent, but has nearly tripled since then.
• As investors and first-time buyers competed intensely for lower-priced properties, the share of first-time buyers fell again in 2013 to 28 percent, after inching up slightly to 36 percent in 2012 and was well below the long-run average of 38 percent. It was the third decline in the last four years since the share of first-time buyers peaked at 47 percent in 2009, when home buyer tax credits fueled the demand for entry-level homes.
• Bargain hunting investors competed directly with first-time buyers looking for more affordable homes in the distressed market. More than a third of all properties (34 percent) purchased by investors were either short sales or REO/foreclosures.