High demand and low supply are putting upward pressure on early-2013 home prices. With conditions too good to ignore – and the holiday season no longer an excuse for doing so – returning single-family buyers are adding to the already frenetic pace of San Luis Obispo County real estate activity in 2013.

“I have noticed a handful of buyers of mine that have been sitting and sitting and are coming alive, especially in February” said Monica Chudgar of Patterson Realty, the Scenic Coast Association’s Realtor of the Year in 2012.

Questions about home loans? Feel free to ask anything! Call 805.543.LOAN or email us.

“I must have heard from five or six clients that are contacting me and saying, ‘I want to do something, let’s sit down and get going.'”

There were 2,844 San Luis Obispo County single-family residential home sales in 2012, which was the highest single-year total since 2005 (3,256). All numbers are according to local real estate statistics aggregator Keith Byrd on his website SloCountyHomes.com.

The higher volume of home purchases came after home prices hit an 8-year low. In 2012, the San Luis Obispo County median home price rose by 7.01% to $395,000, but still remains about 33% below the 2006 peak of $587,000.

Low mortgage rates, discounted home prices, and loan programs for first-time buyers have expanded the eligible base of property owners. So far in 2013, these borrowers are finding that there are fewer and fewer properties to compete over.

“When I sit down and chat with my clients, I try to set an expectation for them,” said Chudgar. “I say, one, that there is low inventory and, two, that there is high demand.”

With low inventory and high demand, prices are getting pushed up during the bidding phase, especially for homes priced on the lower end. For example, REO properties, which are bank-owned and often discounted, sold at 103.97% of the original listing price.

“I am prepping my clients to be patient,” said Chudgar. “There are multiple offers on properties that priced on the lower end and in better condition.”

The median sales price for single-family residential properties in January of 2013 was $402,000, a 3.3% year-over-year increase from the January 2012 total ($389,000).

SLO County Home Sales (Jan 2013)Despite the declining inventory, the 2013 sales pace is higher through one month than from the previous year. There were 145 single-family residential sales in January 2012 and 158 in January 2013. Paso Robles (30), Arroyo Grande (24), and Atascadero (23) led the County market for highest sales totals to begin the year.

The number of homes on the market increased from 3 months in December 2012 to 5.1 months in January 2013, according to Chudgar, but this is still below the “healthy” balance of 6-months.

“We tend to have a smaller number of listings in general than areas like LA or the Bay Area, making it hard to establish solid trends. So, small shifts from 3 to 4 to 5 months in supply are not unusual, and therefore I tend to rely more on ‘more than or less than’ the 6 month benchmark of balance,” said Chudgar.

Looking forward in 2013, “something has to give.” The real estate market is imbalanced – demand is outpacing supply. To balance the market, we will need to see correction on either the supply or demand side.

On the supply side, we could see more homeowners put their house on the market. Home values (and sales prices) are increasing and this situation could be attractive to sellers that have been waiting for the right moment.

SLO County Foreclosures (2013)Foreclosure activity is no longer a likely source for inventory. About 22% of San Luis Obispo County mortgages are underwater, or are more than their home is worth, according to Zillow. But, these borrowers have weathered the economic downturn, and with the positive real estate market outlook, are more likely to keep current on payments. Just 7% of these mortgages were delinquent.

On the demand side, Chudgar laid out a handful of scenarios that could help balance out the market.

“I’m not in favor of it, but a raise in rates would push people out of the market,” said Chudgar. “If prices keep getting upward pressure, that would also push out a portion of people.”

“How long can we sustain this pace? People are bidding up $10,000, $20,000, $30,000 over asking price. I have clients bidding on a house with 12 other offers. It can’t continue at this pace. The market will have to cool down in some way.”

For now, Chudgar advises that the best way for potential buyers to deal with the market is to show “show how serious you are.” Put in a strong offer at or above asking. Also try to “get creative” in areas like deposit amount. Still, it is “hard to get much stronger” when competing with a cash buyer.

Be prepared on the mortgage side as well. Potential buyers might also want to pre-qualified so that they know how much they can afford and how high they are willing to go.

Give Central Coast Lending a call at 805.543.LOAN to schedule a free, confidential, and honest assessment of your finances. Central Coast Lending offers the best service and lowest rates around, so that you can close escrow cheap, quick, and easy.

 


Central Coast Lending is a mortgage broker and direct lender based on the Central Coast of California in San Luis Obispo County. Call 805.543.LOAN or email us here to set up a free pre qualification.