Falling Head Over Heels Too Fast!

Good Afternoon! Hearts are breaking as many buyers learn the hard way to not get emotionally attached to a home until it is theirs.

 Buyers’ Broken HeartsWith multiple offers, only one buyer wins.

Gone are the days where buyers scrutinize the market and slowly isolate the perfect home.  They can no longer wait a week before preparing an offer to purchase.  Buyers can no longer take their time and gingerly approach the market.  Those tactics only work during a buyer’s market.  For homes priced below $1 million, 71% of the active listing inventory and 92% of demand, it is a seller’s market with tremendous competition, multiple offers, and offer prices often at or even over the asking prices. And, the lower ranges are as hot as molten lava.  For homes priced between $250,001 and $500,000, the hottest range, the expected market time is an eye-popping 24 days.  With expected market times below one month, competition is so fierce that many homes generate over 10 offers.  Not only do homes sale for their full asking prices, often many are sold to buyers with “all cash offers.”  When 10 offers are generated, nine buyers have to be told the disappointing news, that they did not get the home.  By the time that new buyers to the market write their first offer to purchase, they have already spent countless hours researching available homes and local real estate conditions on the Internet.  They may have seen a half a dozen homes as well.  Typically, they bring in an offer to purchase after falling head over heels for a home.  They mentally place their furniture in the home.  They start making a list of everything that they would like to do to the home after the sale is closed: paint, carpet, tile flooring, new landscaping, wood molding, etcetera.   They can visualize living in the home, raising their families, barbecuing in the yard.  HOWEVER, the odds are stacked against each and every buyer that falls in love with the same property.  When 10 offers are written on the same home, there’s only a 10% chance of success.  In those terms, it is not very encouraging.  The end result is broken heart after broken heart.  Buyers learn the hard way that they should not put the cart before the horse.

So, how should a buyer approach the market with offers to purchase homes?  Although extremely hard to do, the best bet is for buyers to pull the emotion out of purchasing.  Buyers should create a wish list for their ideal home and then wait for the right property to be placed on the market.  When that does occur, buyers need to be ready to pounce.  They may have to do this over and over again until they finally achieve success.  The good news is that there are plenty of similar properties built throughout Orange County.  Buyers will not be hurt in the process of isolating their home when they are keeping their emotions in check.  As soon as a buyer achieves success and a seller accepts their offer, it is time to celebrate and flip on the emotional switch.  Then, it is okay for a buyer to become emotionally invested in their soon to be home, mentally placing their furniture and coming up with their “to do” lists.

The Active Listing: The listing inventory dropped to its lowest level since the beginning of May 2005.

I am nothing short of amazed at how far the active listing inventory has dropped and how it has shown absolutely no signs of letting up.  In the past two weeks, the inventory has shed an additional 164 homes and now totals 5,314.  That’s the largest two week drop since the end of April.  The lowest the inventory has been in the past decade dates back to March of 2005, when the active listing inventory bottomed at 4,912 homes.  That’s only 400 fewer than today!  I am both shocked and mystified by these numbers.  The downturn in housing had been marked by a number of surprises, twists and turns.  Why should a recovery be any different?  I do not know of a single analyst, economist, or expert that forecasted record low inventories.  For perspective, there were 6,006 additional homes on the market a year ago, more than double.  And, there were almost 3,000 more homes on the market at the beginning of 2012 compared to today.  From here, the active listing inventory’s descent will start to slow.  Demand will start to soften a little at the end of summer as kids start heading bag to the classroom.  In turn, the inventory should stop its drop.  I will be amazed if the record low inventory reached in 2005 will be matched in 2012, but that’s what this year has been all about, full of amazement.

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