Today, both the New York Times and the Wall Street Journal declared "bidding wars are back" (seriously, word for word!). According to the WSJ, 71% of the SoCal-area bids Redfin's real estate agents have made so far this year have faced competition. But don't get too worked up--this is not about frothing-at-the-mouth buyers so much as it is about there being so few houses up for sale. Redfin reported last week that inventory in LA was down 16.7% in March over February, and down 38.7% over March 2011. The only LA-area city that had higher inventory in March than in February: Beverly Hills, with .4% growth (a total of one house). However, over March 2011, inventory in Bev Hills is still down 29.8%. According to the WSJ, LA only has a 4.7 month supply of housing ("Real-estate agents consider a market balanced when there is a six-month supply of homes for sale").
Meanwhile, the number of sales in LA was up 24.6% in March over February, "making it one of the most active months in the last year for home sales." But, like we said, this is not a buyers gone mad situation--the WSJ notes that "Competitive bidding in the current environment isn't producing huge price increases or leaving sellers with hefty profits, as occurred during the housing boom." Median prices for single family houses in LA were only up .6% over March 2011 and up 5% over February (to $355,000); condos were up 5.5% over February (to $290,000).
So what's the deal with these declining inventories? The WSJ thinks it's 1) sellers taking their houses off the market to wait for prices to go up; 2) investors swooping in (often with cash offers) and getting all the good stuff; and 3) the foreclosure shadow inventory--potentially "hundreds of thousands" of bank-owned, still unlisted houses.
· Is This a Housing Market, or a Soviet Grocery Store? [Redfin]
· Stunned Home Buyers Find the Bidding Wars Are Back [WSJ]