“Bubble Watch” digs into trends that may indicate economic and/or real estate market troubles ahead.
Buzz: Homebuyers are so eager to join the pandemic era’s feeding frenzy that 1,368 California homes sold in the first half of 2021 at least $500,000 above the listing price. If you think that’s high, 96 sold for $1 million more than what sellers’ initially sought.
Source: An analysis of sales prices compared with initial asking prices by Zillow, which tracks the nation’s 50 largest metropolitan areas.
The trend
Ponder the buying binge’s intensity among the upper crust this way: Six California metros accounted for 65% of all the half-million-above-asking-price sales nationwide and 44% of the deals where the listing price was too low by $1 million or more.
The dissection
Let’s first break down the California metro results, comparing second-quarter overpayments with the previous quarter. This was clearly a spring fling, and to be fair, it’s a timeframe during which house hunting traditionally intensifies.
San Francisco: 657 sales a half-million or more above list in the spring quarter — up 363% from the winter quarter. Million-plus misses? 36 spring vs. two in the winter.
San Jose: 283 half-million above — up 342% from winter. Million-plus? 12 in spring vs. three in winter.
Los Angeles-Orange County: 99 half-million above — up 83% from winter. Million-plus? 17 in spring — same as winter.
Inland Empire: 10 half-million above — down 17% from winter. Million-plus? Three vs. none.
San Diego: 27 half-million above — up 80% from winter. Million-plus? Three — same as winter.
Sacramento: Three half-million vs. 2 in winter. Million-plus? None.
And the rest of the nation? Spring saw 591 sales a half-million above ask — up 180% from winter. Million-plus misses? 90 in the spring vs. winter’s 45.
Another view
Folks who can afford $500,000-plus for a house — no less pay a half-million above a seller’s ask — are a rare breed in most of the nation. So Zillow’s research also peeked at how the homebuying binge forced house hunters to pay up with another metric: The share of all sales that sold for 30% or more above any list price.
Let’s start with the national stats showing 1.4% of all spring sales were 30% above list, up from 0.9% in winter. Clearly, it was an accelerating trend. And in California?
San Francisco: 7.4% of all spring sales vs. 3.8% in winter.
San Jose: 2.2% spring vs. 1.4% in winter.
Riverside: 1.5% spring vs. 0.8% in winter.
Sacramento: 1.2% spring vs. 0.8% in winter.
Los Angeles-Orange County: 1.1% spring vs. 0.6% in winter.
San Diego: 0.8% spring vs. 0.5% in winter.
Huge overpayments seem to be a Bay Area fad. And if nothing else, that NorCal buying pattern hints at an end to whatever possible “exodus” may have occurred from the region in the pandemic era’s early days.
Other crazy-price towns? Buffalo (6.2% of sales); Austin (5.3%); Memphis (3.2%) and Seattle (3.1%).
Lowest shares? Houston, New Orleans and San Antonio at 0.4% of sales.
How bubbly?
On a scale of zero bubbles (no bubble here) to five bubbles (five-alarm warning) … FIVE BUBBLES!
Yes, it’s a small slice of activity. Still, I’ll let you pick why it’s a worrisome trend …
It’s THIS hot: You know the ol’ supply vs. demand. Sadly, one important byproduct of the interaction of those two economic forces — price — seems to be ignored as the market is dominated by FOMO (that’s “fear of missing out” to my non-hipster readers).
Buyers are HOW crazy: The fairly utopian view that housing is a ticket to wealth has been amplified by historically low mortgage rates. So buyers ignore the overall price tag and just scramble to make the monthly house payment. Will the same house hunter exuberance — and cheap money — exist when today’s buyers may want to sell in a few years?
Prices are juiced THIS often: It’s an age-old tactic: List a home below what the market will likely pay and that initial “bargain” creates a feeding frenzy. Nothing wrong with this sales trick, though it tosses doubt on the “reality” of all this bidding war talk.
HOW many pricing goofs: I’m amused by real estate pros bragging how they just sold a client’s home for some large amount above the asking price. Could that suggest the listing was priced far too low — a possible agent error that could have otherwise cost the seller significant money? These overpayment metrics and anecdotes translate to a more worrisome notion: Even frontline “experts” know prices are too high.
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com
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August 19, 2021 at 11:45PM
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Bubble watch: 1,368 California homes sold for $500,000-plus over list price - OCRegister
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