Early indications suggest that this year will continue the trend of many buyers competing over fewer homes and multiple offers.
Uncertainty reigns with coronavirus and election year
As the spring selling season rapidly approaches, the market is starting to reveal some early trends, even before the numbers come in.
To get an early read on where things may be heading, we looked at some of our closed transactions and spoke to a fellow agents about what they’re seeing on the ground as the busy season nears.
We learned that homes aren’t appreciating at notable rates, sellers are continuing to look for quick closes and considering off-market transactions, and inventory remains down.
Some homes aren’t appraising
In just the last two weeks, we’ve seen 15 instances of homes not appraising for the contracted offer price. In past seasons, we’d see approximately one each month, so this is a clear outlier that can potentially increase in the spring selling season.
An appraisal issue arises when the mortgage lender orders an appraisal for the home its borrower put an offer on and its valuation comes in under the contracted amount. If there is an appraisal contingency in place, the buyer and seller can negotiate the difference but the buyer maintains the right to cancel the contract. If there is no appraisal contingency in place, buyers either have to bridge the gap between the offer price and the amount the lender will put toward the home with cash or cancel the transaction while potentially risking their good faith earnest deposit amount.
Because low inventory and high demand has made the East Bay market extremely competitive, most buyers in recent years make offers with no contingencies. Carefully reviewing comps with an agent and preparing to cover a larger delta than normal is recommended.
The uptick in homes not appraising also could suggest that East Bay home price appreciation may be slowing, which could mean that sellers will have to temper their expectations this year. It could also just reflect lenders extending extra caution in the face of a U.S. presidential election year, which often breeds market uncertainty.
Homes not appraising does not mean that these homes don’t sell. In some cases, buyers find a way to come up with extra money; in other cases, sellers move to another interested buyer. Every transaction that had an appraisal issue successfully closed despite it.
Sellers are looking to move fast
Sellers are signaling a desire to move particularly fast this year. Looking ahead, this to the growing uncertainty related to the looming coronavirus threat in addition to it being an election year
So far in 2020, we have seen an uptick in sellers looking to sell their home off the market, whether it be for simplicity, speed or the ability to forego the financial commitment in prepping up the house for full-blown marketing.
Several of our sellers this year already have proactively told us that they’re open to selling their homes before prepping, moving, staging and entering into the MLS. Not all their reasons are the same, but this number is abnormally high this year.
Inventory is still down
This has been a steady refrain over the last few years: the number of East Bay homes for sale is still greatly inadequate to demand. Both Richard and Pollard say they see the low-inventory trend continuing into 2020.
Early indications suggest that this year will continue the trend of many buyers competing over fewer homes and multiple offers. This will help fuel steady price appreciation, but potentially not at the rates of recent years, as some agents suspect many East Bay areas are starting to approach a price ceiling.