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57% of homes on market now getting multiple offers
High demand, shortage of homes making California housing more competitive

by Jeb Bing

Favorable home prices and record-low interest rates, combined with high demand and a severe shortage of available housing, have created a highly competitive housing market in California with nearly six in 10 home sales receiving multiple offers.

In its "2012 Annual Housing Market Survey," the California Association of Realtors reports that 57% of home sales received multiple offers in 2012, the highest in at least the past 12 years. Each home received an average of 4.2 offers, up from 3.5 offers in 2011.

Lower priced homes, typically real estate-owned (REO) or short sales, attracted more multiple offers than equity sales. Seven of 10 REO sales and short sales received multiple offers, while only half of equity sales received more than one offer.

"Well-qualified buyers are recognizing the once-in-a-generation opportunity to purchase a home in California and are jumping into the market," said CAR President LeFrancis Arnold.

"However, the fierce market conditions have forced many buyers to compete with all-cash offers and investors, setting off multiple offers and bidding wars, making it even more difficult for first-time buyers to become homeowners," he added.

The competitive housing environment led to more properties being sold at or above the list price, with 41% of homes selling without a markdown from the asking price, the highest since 2005 and up from a long-run average of 32%.

Additionally, homes sold faster in 2012, with equity sales selling in 32 days compared with 67 days in 2011. REOs took 30 days to sell compared with 50 days in 2011, and short sales took 90 days compared with 141 days in 2011, reflecting the still-difficult process.

Other key findings from CAR's "2012 Annual Housing Market Survey" include:

* Nearly one-third (30%) of all home buyers paid with all cash in 2012, more than triple what it was in 2001, when nearly 9% of buyers paid all cash.

* Demand for investment properties and second homes remained strong in 2012. Sixteen percent of sales were to investors, and 7% were to buyers who purchased a second or vacation home. The remaining 77% purchased the home as a primary residence.

* International buyers made up 5.8% of sales in 2012, relatively unchanged from 5.7% in 2011. Buyers from China, Canada, India and Mexico made up the vast majority of international buyers at 39.1%, 13%, 8.7%, and 8.7%, respectively.

* While still below the long-run average of 39%, the share of first-time buyers rose from 34.2% in 2011 to 35.8% in 2012, thanks to improved housing affordability resulting from low interest rates and affordable home prices.

* First-time buyers were attracted to distressed properties because of their lower price point. Forty percent of all first-time buyers bought either an REO or short sale in 2012, down from 44.3 in 2011. The decrease was primarily due to a shortage of inventory of distressed properties.

* Reflecting tighter lending standards, very few home buyers have a second mortgage. The share of home sales with a second mortgage has fallen dramatically from a high of 43.4% in 2006 to 1.8% in 2012.